What is regarded as most important to the development of an open discount market for the country is the so-called "acceptance corporation." Prior to the passage of the Federal Reserve Act, the banking institutions of this country operated under the National Bank Act or under the various State laws. These several laws imposed limitations upon the activities of State or Federal chartered banks. For example, a national bank was prohibited from having any liabilities in excess of its unimpaired capital paid in, other than to its stockholders for its capital stock, to its depositors for its deposits, or to persons who might hold its notes of issue, or drafts or bills drawn against money on deposit to the credit of the national bank or due to it. State laws imposed similar restrictions upon State institutions.

The acceptance of time drafts drawn upon banks and payable in the United States was hardly possible, and, as a result, letters of credit to finance the importation or exportation of merchandise were not issued by American banks. Foreign banking business was financed principally by the larger American banking institutions which maintained correspondents in the principal cities abroad. Through these means, banks in the United States were able to issue credits in terms of foreign currency.

Prior to the passage of the Federal Reserve Act, most of the international business and finance was carried on through London, and sterling exchange was almost the exclusive medium used by the American banker and merchant in the financing of their foreign trade.