The Issue Of A State Charter

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Beginning in 1837 and lasting from 1865, banks in the United States could issue their own currency with no regulations placed on them by the federal government. When a state charter was issued, it detailed the activities that the bank could conduct as well as what it was not able to conduct. Some of these activities include the interest rates they could charge for various types of loans, the reserve ratio, and the necessary capital ratio (States in Charge). Once a bank was chartered by the state it could issue its own currency. Issuing currency was not just limited to the banks now there were many other industries that could as well such as the railroad industry. These issues of banknotes created some major problems. One problem was that because of the different currency there was different sizes and designs on them which made them confusing to read at times. Another problem was that many of the notes traded at a discount, this means that it trades for less than its face value. The amount that the note would be discounted was determined by two key factors. The first was the distance between the issuing bank and the paying bank. The second was the perception the paying bank had about the issuing bank. To try to bring some standard to this, printers would publish banknote reporters. These banknote reporters would allow businessmen to have a better way of measuring the value of the currency that was out there (Philadelphia). Even though there were these banknotes it was still
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