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| Other short titles | National Bank Circulation Act of 1908 |
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| Long title | An Act to amend the national banking laws. |
| Nicknames | National Bank Laws Amendment of 1908 |
| Enacted by | the60th 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 | |
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TheAldrich–Vreeland Act was a United States law passed in response to thePanic of 1907 which established theNational Monetary Commission.
On May 27, 1908, the bill passed theHouse, mostly on aparty-line vote of 166–140, with 13Republicans voting against it and noDemocrats voting for it.[1] On May 30, it passed in theSenate with 43 Republicans for the act and five Republicans joining the 17 Democrats against it. PresidentRoosevelt signed the bill that same night.[2]
The act also allowednational banks to start national currency associations in groups of ten or more, with at least $5 million in total capital, to issue emergency currency. The bank notes were to be backed by not onlygovernment bonds but also almost anysecurities the banks were holding. The act proposed that the emergency currency had to go through a process of approval by the officers of the national currency associations before they were distributed by theComptroller 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 was that it was unnecessary.[3]
Congress modified and extended the law in 1914 whenBritish and otherforeign creditors demanded immediate payments ingold in amounts that would ordinarily have been carried over and paid throughexports ofcommodities.
SenatorNelson 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 RepresentativeEdward Vreeland, a Republican from New York.
A usage of the law occurred at the outbreak ofWorld War I in 1914 when the first greatfinancial panic of the 20th century befell the world, necessitating the closure of theNew York Stock Exchange.Secretary of the TreasuryWilliam Gibbs McAdoo appeared inNew York City and assured the public that ample stocks of emergencybanknotes 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.
TheFederal Reserve Act of December 23, 1913 took effect in November 1914, when the 12regional banks opened for business. Ultimately, the emergency currency issued under the Aldrich-Vreeland Act was entirely withdrawn.
Economist Laurence J. Laughlin criticized the legislation, arguing that the authors of the bill have "a lack of expert knowledge in regard to banking."[4]
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