The Civil War economy catalyzed a shortage of United States
coinage—gold and silver coins were hoarded given their intrinsic
bullion value relative to irredeemable paper currency at the time. In late 1861, to help finance the Civil War, the U.S. government borrowed gold coins from New York City banks in exchange for
Seven-thirties treasury notes and the New York banks sold them to the public for gold to repay the loan. and banks in
New York City stopped redeeming
paper money for
gold and
silver. In the absence of gold and silver coin, the premium for
specie began to devalue paper currency. After the New York banks suspended specie payments (quickly followed by Boston and Philadelphia) the premium on gold rose from 1–3% over paper in early January 1862 to 9% over paper in June 1862, and created significant disruption across businesses and trade. Alternate methods of providing small change included the reintroduction of
Spanish quarter dollars in
Philadelphia, refusing to provide change (without charging a premium for providing silver coins), Postage (or postal) currency was the first of five issues of
US Post Office fractional paper money printed in 5-cent, 10-cent, 25-cent, and 50-cent denominations and issued from August 21, 1862, through May 27, 1863. Spinner proposed using postage stamps, affixed to
Treasury paper, with his signature on the bottom (see illustration below). Based on this initiative, Congress supported a temporary solution involving fractional currency and on July 17, 1862, President Lincoln signed the Postage Currency Bill into law. The design of the first issue (postage currency) was directly based on Spinner's original handmade examples. Some varieties even had a perforated stamp-like edge. While not considered a
legal tender, postage currency could be exchanged for
United States Notes in $5 lots and were receivable in payment of all dues to the United States, up to $5. Subsequent issues would no longer include images of stamps and were referred to as Fractional Currency. Despite the July 1862 legislation, postage stamps remained a form of currency until postage currency gained momentum in the spring of 1863.
Second and subsequent Issues In 1863, Secretary Chase asked for a new fractional currency that was harder to counterfeit than the postage currency. The new fractional currency notes were different from the 1862 postage currency issues. They were more colorful with printing on the reverse, and several anti-counterfeiting measures were employed: experimental paper, adding surcharges, overprints, blue endpaper, silk fibers, and watermarks to name a few.
Fractional currency shields which had single-sided specimens were sold to banks to provide a standard for comparison for detecting counterfeits. Postage and fractional currency remained in use until 1876, when
Congress authorized the
minting of fractional silver coins to redeem the outstanding fractional currency. ==Issuing periods and varieties==