Demand
Notes

After Abraham Lincoln took the office of President in March of 1861, several sessions of Congress addressed the likelihood that the country would soon be divided by war. The Congressional acts of July 17, 1861 and August 5, 1861 authorized a National Loan of $250,000,000 to finance this war. $50,000,000 of this sum would be issued as non-interest bearing treasury notes that were receivable in payment of public dues. Because these notes were "payable on demand", they became known as Demand Notes. They were issued in three denominations: $5.00, $10.00 and $20.00. They were issued "Payable on Demand" by the assistant Treasurers in five different locations: New York, Philadelphia, Boston, Cincinnati and St. Louis.

Unlike some earlier issues of Treasury Notes (including the 6% Interest Bearing Treasury Notes issued under the same congressional acts) which had a different color back for each of the denominations, all three denominations of the Demand Notes and each of the five denominations of the 7-3/10% Interest Bearing Treasury notes issued under these Congressional acts have a vividly green colored back. The circulating Demand Notes were very quickly termed "greenbacks".

The Act of July 17, 1861, Chapter V, Section 9 states "The faith of the United States is hereby solemnly pledged for the payment of the interest and redemption of the principal of the loan authorized by this act." Because they backed by a promise and not actual specie or coin and they bore no interest, acceptance was initially met with reluctance from banking institutions. To alleviate this problem, the Secretary of the Treasury declared that all Demand Notes could be exchanged for gold coin until December 28, 1861. Around the same time, specie payment was suspended by most banking institutions so these notes had the same value as gold, although they could no longer be exchanged for it. When the Legal Tender notes of March 10, 1862 were issued without specie backing, the Demand Notes, still in par with gold, started trading at premiums.