When a bank opened, they were allowed by the United States Government through a charter to print their own paper money. This was to help the country get the monetary system up and running.
But when a bank went out of business, the money that it produced became no good. With the country being on the gold and silver standard (which means paper money could basically be traded in for silver or gold coins that equaled the face value of the paper money), it was impossible to take the money in to redeem it.
So how did businesses and other banks know that a bank had gone out of business? The most common method was to check a list of out-of-business banks, also called “broken banks.” But many banks folded before they could be added to the list, leaving some businesses with worthless money in exchange for goods and services.
Because it was so problematic, the banking system stopped printing money—it became the job of the BEP (which is the Bureau Of Engraving And Printing). This early form of printing paper money created two types of collectibles—“Broken Bank” Notes and Obsolete United States paper money!