<P> Federal Reserve Banks obtain the notes from the 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 . </P> <P> 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 assume the notes (liabilities). This would meet the requirements of Section 411, but the government would also assume 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 . </P> <P> Federal Reserve notes are not redeemable in gold, silver or any other commodity, and cannot be exchanged for the collateral held against them . This has been the case since 1933 . The notes do not have value for themselves, but for what they will buy . In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy . </P> <P> Like all U.S. currency, United States Notes were produced in a large sized format until 1929, at which time the notes' sizes were reduced to the small - size format of the present day . </P>

What does the red seal on us currency mean