The reaction does not wait for the new administration. On March 2, 1861, two days before Lincoln's inauguration, the Morrill Tariff is one of Buchanan's last signed Acts. This act intending to revive the industrial activity surcharges imports and authorizes the government to create bonds. It thus puts an end to the previous proceeding of the Treasury to redeem any debt in specie payment.
One of the first financial initiatives of the Lincoln administration is the creation of a loan note pre-printed in value and duration based on the Morrill Act. The first issues are a 60-day note with three denominations and 6% interest and a two-year note with four denominations and an interest of 6% per annum.
The release related to the Morrill Act was limited to $ 10 million, to be compared with the $ 64 million of the public debt. The Lincoln administration understands the benefits of the Treasury's issuance of paper money and the development of an operational circulation will be extremely rapid.
The Act of July 17, 1861 authorizes an emission of $ 250 million, of which $ 50 million may be interest-free. The Act of August 5, 1861 defines the conditions of this operation. The new note excluding an interest is the Demand Note. Easy to use for any financial transaction, the Demand Note is the first modern federal bill.
The note with interest is indeed not interrupted by the Act of July 17 : three-year notes are created with coupons for phased payments. To differentiate them from the other Treasury Notes, they are designated as Interest Bearing Note, this wording being also applied a posteriori to the notes issued under the Morrill Act.
Bearers did not have a reason to hoard such notes which quickly gave them a little money, especially in that period of civil war. Only two units issued under the Morrill Act survive, both at $ 50 for two years after date. One of them is kept in a government institution.
The other example is thus the only one of its whole category in private hands. It was dated August 9, 1861 in handwriting by the clerk and signed by the bearer. It was sold for $ 605K by Heritage-CAA in May 2001 and for $ 370K including premium by Heritage in May 2005. A comment in the 2005 catalog warned very fairly that the 2001 result was impossible to reach again by that date.
This Interest Bearing Note graded Very Fine 25 by PCGS is estimated $ 300K for sale by Stack's Bowers in Philadelphia on August 16, lot 2021. Its image is shared by Wikimedia.
SOLD for $ 1.02M including premium