Aldrich–Vreeland Act

The Aldrich–Vreeland Act was passed in response to the Panic of 1907 and established the National Monetary Commission, which recommended the Federal Reserve Act of 1913.

Aldrich–Vreeland Act

Other short titles	National Bank Circulation Act of 1908
Long title	An Act to amend the national banking laws.
Nicknames	National Bank Laws Amendment of 1908
Enacted by	the 60th United States Congress
Effective	May 30, 1908
Citations
Public law	Pub.L. 60–169
Statutes at Large	35 Stat. 546
Codification
Titles amended	12 U.S.C.: Banks and Banking
U.S.C. sections created	12 U.S.C. ch. 2 § 104
Legislative history
Introduced in the House as H.R. 21871 by Edward B. Vreeland (R–NY) on April 20, 1908 Committee consideration by House Finance, Senate Finance Passed the House on May 14, 1908 (185-145) Passed the Senate on May 15, 1908 (47-20) Agreed to by the House on May 27, 1908 (166-140) and by the Senate on May 29, 1908 (35-8) Signed into law by President Theodore Roosevelt on May 30, 1908

On May 27, 1908, the bill passed the House on a mostly party-line vote of 166–140, with 13 Republicans voting against it and no Democrats voting for it.[1] On May 30, it passed in the Senate with 43 Republicans in favor and five Republicans joining 17 Democrats opposed. President Roosevelt signed the bill that same night.[2]

The act also allowed national banks to start national currency associations in groups of ten or more, with at least $5 million in total capital, to issue emergency currency. These bank notes were to be backed by not just government bonds but also just about any securities the banks were holding. The act proposed that this emergency currency had to go through a process of approval by the officers of these national currency associations and then distributed by the Comptroller of the Currency.

However, it is possible that because there was a 5 percent tax placed on this emergency currency for the first month it was "outstanding" and a 1 percent increase for the following months it was "outstanding," no bank notes were issued. Another possible explanation that the emergency currency was never issued might have been that it was unnecessary.[3]

Congress modified and extended the law in 1914 when British and other foreign creditors demanded immediate payments, in gold, of amounts which would ordinarily have been carried over and paid through exports of commodities.

Senator Nelson W. Aldrich (R-RI) was largely responsible for the Aldrich-Vreeland Currency Law and became the Chairman of the National Monetary commission. The co-sponsor of the legislation was Rep. Edward Vreeland, a Republican from New York.

A usage of the law occurred at the outbreak of the World War I in 1914 when the first great financial panic of the 20th century befell the world, necessitating the closure of the New York Stock Exchange. Secretary of the Treasury William Gibbs McAdoo appeared in New York City and assured the public that ample stocks of emergency banknotes had been prepared in accordance with the Aldrich–Vreeland Act and were available for issue to the banks. As of October 23, 1914, $368,616,990 was outstanding.

The Federal Reserve Act of December 23, 1913, took effect in November 1914 when the 12 regional banks opened for business. Ultimately the emergency currency issued under the Aldrich-Vreeland Law was entirely withdrawn.