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President Lincoln signs the Loan and Treasury Act, creating a national paper currency

Abraham Lincoln, Brady image, 1863, detail
02/26/1862
President Lincoln signed the Loan and Treasury Bill recently passed in Congress.  Besides authorizing borrowing to fight the war, it regularized the issue of United States government banknotes, up to the value of $150 million, in the denominations of five dollars and up.  These were to become the national banknote currency and legal tender for all debts, except customs duties, including interest payments on the national debt.  (By John Osborne) 
Source Citation: 
Frank Moore, ed., The Rebellion Record: A Diary of American Events, with Documents, Narratives, Illustrative Incidents, Poetry, Etc. (New York: G.P. Putnam, 1862), IV: 41. 

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