Federal Reserve Note

Not to be confused with Federal Reserve Bank Note.

A one-dollar bill, the most common Federal Reserve Note

Federal Reserve Notes are the currently issued banknotes of the United States dollar.[1] The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 1913[2] and issues them to the Federal Reserve Banks at the discretion of the Board of Governors of the Federal Reserve System.[2] The Reserve Banks then circulate the notes to their member banks,[3] at which point they become liabilities of the Reserve Banks[4] and obligations of the United States.[2]

Federal Reserve Notes are legal tender, with the words "this note is legal tender for all debts, public and private" printed on each note.[5] The notes are backed by financial assets that the Federal Reserve Banks pledge as collateral, which are mainly Treasury securities and mortgage agency securities[6] that they purchase on the open market by fiat payment.

  1. ^ O'Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, N.J.: Pearson Prentice Hall. p. 255. ISBN 0-13-063085-3.
  2. ^ a b c 12 U.S.C. § 411
  3. ^ Bryan A. Garner, editor, Black's Law Dictionary 8th ed. (West Group, 2004) ISBN 0-314-15199-0.
  4. ^ 12 U.S.C. § 415 Section 415 describes circulating Federal Reserve Notes as liabilities of the issuing Federal Reserve Bank.
  5. ^ 31 U.S.C. § 5103
  6. ^ See weekly H.4.1 reports, "Collateral Held against Federal Reserve Notes"