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PART #3 “Understanding ”

Author: Gloria Henderson Education Get Real FINANCIAL LITERACY: - “The Money Trail” 21

Understanding Money

U.S. Paper Currency Characteristics Today, there are three classifications of U.S. paper currency in use – Notes, United States Notes, and Silver Certificates. Ninety-nine percent of the total value of the notes in circulation are Federal Reserve Notes. The rest of the notes in circulation are United States Notes and Silver Certificates, which are normally found in personal collections of numismatists (collectors of currency and ) and rarely seen in circulation. The United States Notes and Silver Certificates are no longer produced by the Bureau of Engraving and Printing.

The designation of the classification to which the note belongs appears on the upper center of the face located above THE UNITED STATES OF AMERICA in very small print on the $5 bills seen below. Each type is identified by the distinctive color of its Treasury seal and serial numbers. The Treasury Seal and Serial Numbers on the Federal Reserve Notes - , on the United States Notes - red, and on the Silver Certificates - .

Federal Reserve Note United States Note Silver Certificate

Each denomination has a prescribed portrait and back design selected by the Secretary of the Treasury. The portraits on the: $1, ; $2, ; $5, ; $10, ; $20, ; $50, Ulysses S. Grant; and $100, . Notes of the $500, $1,000, $5,000, and $10,000 denominations have not been printed for many years and are being withdrawn from circulation. The portraits appearing on these notes are: $500, William McKinley; $1,000, ; $5,000, ; and $10,000, Salmon Chase. All of the portraits on the U.S. Currency are former Presidents of the United States, except for two: Benjamin Franklin and Salmon P. Chase. Benjamin Franklin, a Founding Father of the United States, 6th President of Pennsylvania, U. S. Minister to France and Sweden, U.S. Postmaster General, a scientist and inventor. Salmon P. Chase was Senator and Governor of Ohio, U.S. Treasury Secretary under Abraham Lincoln, and the sixth Chief Justice of the United States. Is It Illegal to Deface/Copy/Burn U.S. Currency? Beware of what you can do and what you cannot do to U.S. currency. It’s yours and you can save it or spend it, but it is illegal to: counterfeit, photocopy/scan and print, deface, or burn U.S. currency. It’s illegal to print your own money and try to spend it on goods or services. Accidental damage to currency normally is not illegal; however, deliberate defacement is illegal. Federal law prohibits any action that mutilates, cuts, defaces, perforates, burns, or glues it rendering the bills to be unusable and consequences are harsh. It is okay to reproduce U.S. currency if you follow the guidelines established by the U. S. Secret Service. If you reproduce it in color, only one side is allowed. Also, a copy must be 150% larger than normal size or 75% of its normal size. NOTE: The U.S. currency used as examples in this unit are identified with a red “SPECIMEN” stamped on each.

2014 Education: Get Real!!! (Revised for TpT) – Arvada, CO

FINANCIAL LITERACY: - “The Money Trail” 22

What Happens to Damaged or Worn Out Money? United States currency is strong and durable, but it does wear out with constant handling. The note that is replaced the most is the $1 bill. There are over four billion $1 bills in circulation, and the life expectancy of each is approximately 18 months. Since larger denominations are handled less, they will last longer than the $1 bill.

Damaged $1 Bill Worn $1 Bill

All currency that is currently in circulation is customarily deposited into Federal Reserve Banks by the commercial banks in their region. Damaged or worn out notes are destroyed by Federal Reserve Banks during ordinary currency processing. The destroyed notes are replaced by new currency from one of 12 Federal Reserve Banks that are provided by the Bureau of Engraving and Printing. When a note is partially destroyed, the Treasury Department will replace it if more than one-half of the original note remains intact. Fragments of which are less than one-half of the original note may be exchanged only if the Director of the Bureau of Engraving and Printing is satisfied by the evidence presented that the missing portions have been completely destroyed. Damaged or mutilated notes should be taken to a bank for redemption. When partially destroyed currency is of questionable value, the fragments should be sent by registered mail to the Department of the Treasury in Washington DC. Federal Reserve System The Federal Reserve System (informally called the Fed) was created in 1913 with the passing of the . The Act established three key objectives: 1) Maximum employment, 2) Stable prices, and 3) Moderate long- term interest rates. Among other responsibilities, including conducting the nation’s monetary policy, the Fed is the central banking system of the United States. The structure of the Fed is composed of the presidentially appointed Board of Governors, twelve regional Federal Reserve Banks located in major cities throughout the U.S., numerous privately owned U.S. member banks, and various advisory councils. The Department of Treasury creates the currency, and it is an entity outside of the . As the central bank of the United States, the Fed serves as a banker's bank and as the government's bank: As the banker's bank, it helps to assure the safety and efficiency of the payments system.

As the government's bank, or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars. Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve

Seal of the Federal Reserve System

Federal Reserve Notes include this seal

2014 Education: Get Real!!! (Revised for TpT) – Arvada, CO

FINANCIAL LITERACY: - “The Money Trail” 23

Map of the twelve Federal Reserve Districts, with the twelve Federal Reserve Banks marked as black squares, and all Branches within each district (24 total) marked as red circles. The Washington DC Headquarters is marked with a star. (Also, a 25th branch in Buffalo, NY had been closed in 2008.)

Source: http://en.wikipedia.org/wiki/Federal_Reserve_System

Federal Reserve Banks Prior to Series 1996, each bears a regional seal at the left of the portrait. This seal, printed in black, bears the name of the issuing and the letter designating the Federal Reserve district in which that bank is located. Beginning in 1996 series Federal Reserve notes, a new universal seal (see the Federal Reserve Seal on page 2) represents the entire Federal Reserve System. A letter and number below the upper left serial number identifies the issuing Federal Reserve Bank. The table

Federal Reserve Bank Letter Number Boston, MA A 1 New York City, NY B 2 Philadelphia, PA C 3 Cleveland, OH D 4 Richmond, VA E 5 Atlanta, GA F 6 Chicago, IL G 7 St. Louis, MO H 8 Federal Reserve Bank Minneapolis, MN I 9 Regional Seal Kansas City, MO J 10 Chicago, Illinois #7 Dallas, TX K 11 San Francisco, CA L 12

2014 Education: Get Real!!! (Revised for TpT) – Arvada, CO

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Design Features for Series 1996 Issued Paper Money

In 1996, the United States began issuing currency with a new design and more security features. These features were integrated to make U.S. currency more secure against cutting-edge reproduction technology that could be used for counterfeiting and to make it easier for bankers, store owners/workers, and citizens to the new bills to recognize as genuine and real. Security features such as the security thread and microprinting are included in the new notes and have only changed a little.

The New Design The new currency maintained the same historical portraits and national symbols as the previous series notes, in addition to keeping the same color, size, and texture of the older bills. However, there are several new features that are unique to the series 1996 notes:

A larger, slightly off-center portrait that incorporates more detail. A watermark of the figure in the portrait seen when held up to a light. New serial numbers that consist of two prefix letters, eight numbers, and a one-letter suffix. The first letter of the prefix designates the series (for example, series 1996 is designated by the letter A). The second letter of the prefix designates the Federal Reserve Bank where the note was issued. A universal Federal Reserve seal rather than individual seals for each Reserve Bank. The security thread indicating the bill's denomination is now located in a different position on each denomination. The inscribed security thread in the 1996 series $20 and $50 also includes a flag. The security thread runs the width of the currency, on the $100 bill it has the words “USA 100” repeated over and over. Optically variable ink (OVI) or color-shifting ink changes from green to black in the number in the lower right-hand corner of the bill when viewed from different angles. Microprinting appears in different areas on each of the denominations. On both sides of the Federal Reserve note, the background of the portrait and back design incorporate fine-line printing that is difficult to resolve on digital imaging equipment.

Although all denominations of currency beginning with series 1996 have security features, the number of features will vary according to the note's denomination and series. However, the basic appearance of all denominations will not vary.

2014 Education: Get Real!!! (Revised for TpT) – Arvada, CO

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Important Features of U.S. Currency

The Federal Reserve Notes all have significant features, and most of the features are found on each note, but the location varies by denomination. As noted earlier, the Treasury Department has maintained the same portrait on the same denomination, but enlarged the portrait and added it as a watermark of the portrait on the bill. Other features that have not changed are the color, size, and texture of the older bills.

The 15 features listed in the table are identified on the sample bills shown below:

$20 Front (1996 Series) $20 Back (1996 Series)

$20 Front (1990-1995 Series) $20 Back (1990-1995 Series)

Article Source: http://www.secretservice.gov/know_your_money.shtml 2014 Education: Get Real!!! (Revised for TpT) – Arvada, CO