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 suddenly fell almost ...

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 laws of the United States, and the leading countries of Europe. The ...

. On May 27, 1908, the bill passed the

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, mostly on a

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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

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but also almost any

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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 corporate charter, charter, bank regulation ...

. 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. Congress modified and extended the law in 1914 when

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and other foreign creditors demanded immediate payments in

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

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

World War I World War I or the First World War (28 July 1914 – 11 November 1918), also known as the Great War, was a World war, global conflict between two coalitions: the Allies of World War I, Allies (or Entente) and the Central Powers. Fighting to ...

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

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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 "J ...

appeared in

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and assured the public that ample stocks of emergency

banknotes A banknote or bank notealso called a bill (North American English) or simply a noteis a type of paper money that is made and distributed ("issued") by a bank of issue, payable to the bearer on demand. Banknotes were originally issued by commer ...

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. After Dem ...

of December 23, 1913 took effect in November 1914, when the 12

regional bank A regional bank is a depository institution, such as a bank, savings and loan, or credit union, which is larger than a community bank and operates below the state level, but not so large that it would operate either nationally or internationall ...

s 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."

References

External links

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

References

Further reading

External links