Fractional Currency 
At the beginning of the Civil War, the North was faced with a colossal increase in government spending, a government that was hesitant to levy new taxes, and bad news from the front. By the end of 1861 both banks and the government stopped issuing coins. The public's confidence in the government was shaken, and they increasingly hoarded half dollars, quarters, and dimes. So extreme was the hoarding that one house in New York City is said to have collapsed from the weight of the coin stored there.
For a time merchants and others issued tickets, due bills, and other forms of private obligations so they could make change. Then, in what one student of these times regards as panic, Congress authorized the use of postage stamps for change. Physically, this observer commented, these glue-coated bits of paper were the worst form of currency ever used by a civilized people. Congress later approved a modified stamp called postal currency, happily without glue on the back. Finally, in October 1863, Congress authorized fractional currency which was eventually issued in 3, 5, 10, 15, 25, and 50 cent denominations.
The second of the four issues of fractional currency proved to be the most controversial. For one, it was the issue in which the 3 cent denomination was introduced, and doubt was expressed as to the need for it. There was also an outcry because the portrait of a division chief of the Bureau of Engraving and Printing appeared on the 5 cent note. The controversy reached the floor of Congress and resulted in the passage of a law that remains in effect today prohibiting the use of a portrait of any living person on a security of the United States. The division chief bore the brunt of the criticism despite the fact that the likeness of Francis E. Spinner, the then very much alive Treasurer of the United States, appeared on the 50 cent note.
In time, people learned to use the small pieces of paper, and silver coins were all but forgotten. This occurred even though the small notes wore out rapidly, became ragged and filthy, and were frequently returned for redemption. Fractional currency continued to be issued until February 1876. The total placed in circulation was more than $368 million.