This consists of notes issued by banks on the credit of their general assets, without special regulation by law.

With such a form of note we have had until 1914 no experience in the United States since 1866, at which time a federal tax of 10 per cent on state bank notes made their issue unprofitable.

Since the passage of the Federal Reserve Act we have temporarily two kinds of national-bank notes, the old bond-secured notes, in use since 1863 (very different from the typical form),[10] and the new kind of Federal reserve notes very nearly typical in character but issued only by the Federal reserve banks, not by individual banks.
A bank, by the issue of notes, puts into circulation as money its own promises to pay.

The customer, in borrowing money or in withdrawing deposits or cashing checks and drafts from other banks, is paid with the bank's notes instead of with standard money.

These notes may be returned to the issuing bank either to be redeemed in specie or to be paid in some other form of credit, such as deposits or exchange.