PAPER MONEY
We usually class all paper money as "bills."
There are three classes of bills, all quite different in their inception and meaning. These are—
1. National bank notes. 2. Treasury notes or "greenbacks." 3. Treasury certificates.
BANK NOTES
A national bank note is the guaranteed promise of some national bank to pay coin or its equivalent to any one presenting the note at the bank and asking to have the exchange made.
This exchange is called "redeeming."
If you examine a bank bill you will notice that it is drawn much like an ordinary business "demand" note, made payable to "bearer," and signed by the bank president and cashier.
For every dollar of its own sent out in the form of a bill by a national bank, the Government holds a dollar of the bank's collateral to guarantee the redemption of the note if the bank should fail.
National bank notes are received in all business transactions, because they are secured by the Government, yet there are cases in which even the Government will not receive them in payment of a claim, nor pay them out itself.