The Aldrich–Vreeland Act was a United States law passed in response to the

Panic of 1907 The Panic of 1907, also known as the 1907 Bankers' Panic or Knickerbocker Crisis, was a financial crisis that took place in the United States over a three-week period starting in mid-October, when the New York Stock Exchange fell almost 50% fro ...

which established the

National Monetary Commission The National Monetary Commission was a U.S. congressional commission created by the Aldrich–Vreeland Act of 1908. After the Panic of 1907, the Commission studied the Banking in the United States, banking laws of the United States, and the leadi ...

. On May 27, 1908, the bill passed the

House A house is a single-unit residential building. It may range in complexity from a rudimentary hut to a complex structure of wood, masonry, concrete or other material, outfitted with plumbing, electrical, and heating, ventilation, and air cond ...

, mostly on a

party-line vote A party-line vote in a deliberative assembly (such as a constituent assembly, parliament, or legislature) is a vote in which a substantial majority of members of a political party vote the same way (usually in opposition to the other political ...

of 166–140, with 13 Republicans voting against it and no Democrats voting for it. On May 30, it passed in the

Senate A senate is a deliberative assembly, often the upper house or chamber of a bicameral legislature. The name comes from the ancient Roman Senate (Latin: ''Senatus''), so-called as an assembly of the senior (Latin: ''senex'' meaning "the el ...

with 43 Republicans for the act and five Republicans joining the 17 Democrats against it. President Roosevelt signed the bill that same night. 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. The bank notes were to be backed by not only

government bonds A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity dat ...

but also almost any

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

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 the

Comptroller of the Currency The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all nationa ...

. 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.Wells, Donald. The Federal Reserve System: A History. Jefferson: McFarland and Company, 2004. Congress modified and extended the law in 1914 when British and other foreign creditors demanded immediate payments in

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...

in amounts that would ordinarily have been carried over and paid through

exports An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...

commodities In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. The price of a co ...

. Senator

Nelson W. Aldrich Nelson Wilmarth Aldrich (/ ˈɑldɹɪt͡ʃ/; November 6, 1841 – April 16, 1915) was a prominent American politician and a leader of the Republican Party in the United States Senate, where he represented Rhode Island from 1881 to 1911. By the 1 ...

(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 Representative

Edward Vreeland Edward Butterfield Vreeland (December 7, 1856 – May 8, 1936) was an American banker, businessman, and Republican politician who represented southern Western New York ( Allegheny, Chautauqua, and Cattaraugus counties) in the United States Hou ...

, a Republican from New York. A usage of the law occurred at the outbreak of

World War I World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...

in 1914 when the first great financial panic of the 20th century befell the world, necessitating the closure of the

New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...

Secretary of the Treasury The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...

William Gibbs McAdoo William Gibbs McAdoo Jr.McAdoo is variously differentiated from family members of the same name: * Dr. William Gibbs McAdoo (1820–1894) – sometimes called "I" or "Senior" * William Gibbs McAdoo (1863–1941) – sometimes called "II" or "Ju ...

appeared in

New York City New York, often called New York City or NYC, is the List of United States cities by population, most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the L ...

and assured the public that ample stocks of emergency

banknotes A banknote—also called a bill (North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issued ...

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 The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States. The Pani ...

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 Act was entirely withdrawn.

References

External links

Federal Reserve History: 1908-1912: The Stage is Set for Decentralized Central Bank
{{DEFAULTSORT:Aldrich-Vreeland Act 1908 in law United States federal banking legislation History of the Federal Reserve System National Monetary Commission 1908 in the United States 60th United States Congress Progressive Era in the United States

References

Further reading

External links