Federal Reserve note is the official name for the kind of banknote used in the United States, more commonly known as dollar bills.
Federal Reserve notes are legal tender currency notes. They are issued by the Federal Reserve Banks and have replaced United_States_Notes which were once issued by the Treasury Department. The authority of the Federal Reserve Banks to issue notes comes from the Federal Reserve Act of 1913. A commercial bank belonging to the Federal Reserve System can obtain Federal Reserve notes from the Federal Reserve Bank in its district whenever it wishes. It must pay for them in full, dollar for dollar, by drawing down its account with its district Federal Reserve Bank.
Despite no longer being issued by Treasury Department, Federal Reserve notes must be signed by the Treasurer of the United States and the United States Secretary of the Treasury before becoming legal currency.
Federal Reserve Banks obtain the notes from the United States Bureau of Engraving and Printing (BEP). It pays the BEP for the cost of producing the notes, which then become liabilities of the Federal Reserve Banks, and obligations of the United States Government.
Congress has specified that a Federal Reserve Bank must hold collateral equal in value to the Federal Reserve notes that the Bank receives. This collateral is chiefly gold certificates and United States securities. This provides backing for the note issue. The idea was that if the Congress dissolved the Federal Reserve System, the United States would take over the notes (liabilities). This would meet the requirements of Section 411, but the government would also take over the assets, which would be of equal value. Federal Reserve notes represent a first lien on all the assets of the Federal Reserve Banks, and on the collateral specifically held against them.
Federal Reserve notes are not redeemable in gold, silver or any other commodity. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. They have no backing other than the "full faith of the US government" (i.e., the government's ability to levy taxes to pay its debts). In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.
The one dollar bill
The first one dollar bills were produced in 1957. They are made of a cotton and linen blend, with red and blue minute interwoven silk fibers.
Front side
The front side contains, apart from the picture, the United States Treasury Seal. It consists of a scale on top, symbolizing a balanced budget; a carpenter's square in the middle, a tool used for an even cut; and the Key to the United States Treasury at the bottom.
Back side
The back side is covered with symbols and hints on numerology. A common interpretation follows.
The two circles together make up the Great Seal of the United States, which was first used in 1782. The pyramid is dark to the west, a largely wild and unexplored part of Northern America in these days. The separated cap of the pyramid, carrying the all-seeing eye, symbolizes that the United States are still far from finished, but with god's help, this can be achieved. The latin writing ANNUIT COEPTIS (=God has favored our undertaking), emphasizes this. NOVUS ORDO SECLORUM (=A new order has begun) is a reminder of the recent separation from Great Britain. The Bald Eagle in the other circle does not wear a crown, relating to the same event. In addition, the unsupported shield in front of the eagle symbolizes the new country's ability to stand on its own, unified by congress, which is symbolized by the white bar on top of the shield. The eagle's beak says E PLURIBUS UNUM (=From many, one). It holds an olive branch and arrows in its claws, symbolizing "we want peace, but are ready to fight".
The number thirteen, symbolizing the 13 original colonies (13 stripes on the flag), shows up over and again:
Source: modified from US Treasury Dept.