Thursday, May 02, 2013

What was a Bank Note Reporter?

After the failed Continental Currency of the 1770s and before federal bills were reintroduced in 1861, thousands of banks issued their own paper money.

At first only banks that had been granted a charter by their state's legislature were allowed to issue notes, but a booming economy caused the number of banks seeking charters to grow faster than state legislatures could handle. The result was that many states adopted "free banking" laws.

Free banking allowed any bank to issue notes as long as they had deposited with a state authority a designated amount of government bonds that covered the amount of notes that they issued. The idea was that if a bank should fail, the state would sell the bonds to cover the notes that were issued.

This mix of competing bank notes backed by the institutions that issued them caused a real headache among merchants and bankers when it came to accepting the notes. Each institution's notes tended to trade at a discount to face value based on the perceived financial health of the bank.

To help merchants and bankers with these problems, publications known as Bank Note Reporters began circulating. These typically contained tables arranged by state and bank that gave the current discount rate of the note.

In addition, counterfeit notes were very common so that Bank Note Reporters also described known counterfeit notes to help merchants avoid accepting bad notes.


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