History Of The National Banking Acts

The National Banking Acts basically required all banks to issue bank notes that were backed by US government bonds. Before than any bank that issued their own banknotes and be used as currency. The level of confidence that people have in these private bank issued banknotes varied. If there is a high level of confidence in a banknotes from a well-known bank such as Wells Fargo then an item that cost a dollar would only cost a banknotes with a face value of one dollar.
Banknotes from a bank that was known for dealing in risky investments were not as welcome and that one dollar item would cost a dollar and $.25 worth of those banknotes. It could be imagined that some of the best forex trading occurred domestically with the exchange of one bank's banknotes for another.
National banks also could issue demand deposit liabilities. Since demand deposits weren't insured and banks had some risk of failure, demand deposit liabilities, like individual banknotes before them, were often discounted when they were used to finance transactions. Furthermore, banks were still subject to failure if they issued too many demand deposits relative to the amount of reserves in the form of cash deposits they held at other banks that were available to meet deposit withdraws. Similar to how a trader receives his forex trading tips through the newswire likewise business owners received news on the stability of banks so they knew which banknotes to not accept.
this problem was aggravated by the fact that the National Banking Act let some banks account deposits held at other banks as part of their reserves. This pyramiding of reserves meant that many banks could run short of reserves simultaneously. Could this problem happened again today? Of course not. Because the Fed will just print more money.