On August 4, 1914, at the opening of the Great War and the consequent disturbance of financial conditions, the Federal Reserve Act and the Aldrich-Vreeland Act were further amended. By these amendments the Secretary of the Treasury was given power to suspend, whenever he deemed it desirable, the limitations of the law which prescribed that additional circulation, secured otherwise than by bonds of the United States, could be issued only to those national banks which had circulating notes outstanding, secured by the deposit of United States bonds to an amount not less than 40 per cent of the capital stock. He could also suspend the limitation that the total issue of additional notes could not exceed $500,000,000, and that the total issue of any bank could not exceed the amount of its unimpaired capital and surplus, the maximum issue of any bank being also fixed at 125 per cent of its unimpaired capital and surplus. The privileges of the amended acts were also extended to state banks and trust companies which were members of the federal reserve system.

The Aldrich-Vreeland Act thus amended was put into immediate effect. The record is best told by the following statistical statement:

Emergency Circulation, 1914-1915 (In Millions)

U. S. Bonds on Deposit

Issue Value of

Miscellaneous

Securities

Circulation Secured by:

Total Circulation Outstanding

U.S. Bonds

Miscellaneous

Lawful Money

1914

Jan. 31..

$741.6

....................

$736.6

....................

$17.8

$754.0

Feb. 28 ..

741.4

....................

736.6

....................

16.7

753.2

Mch. 31 . .

740.6

....................

735.4

....................

16.6

752.0

Apr. 30 . .

741.2

....................

736.2

....................

15.6

751.8

May 31 . .

740.8

....................

735.4

....................

16.1

751.6

June 30..

740.8

....................

735.5

....................

15.1

750.7

July 31..

740.2

....................

735.2

....................

15.7

750.9

Aug. 31 . .

743.3

$126.9

735.9

$126.2

15.4

877.5

Sep. 30. .

744.5

344.8

737.1

325.0

15.8

1,077.9

Oct. 31 ....

744.7

365.2

739.7

361.1

20.6

1,121.5

Nov. 30. .

744.6

272.5

740.5

270.1

101.4

1,111.9

Dec. 31 . .

744.4

152.7

720.3

150.8

168.5

1,039.7

I9I5

Jan. 31 . .

742.0

68.5

723.2

67.3

191.7

982.2

Feb. 28 . .

737.9

32.2

716.8

31.1

190.1

938.0

Mch. 31 . .

736.1

I5.1

718.9

15.1

165.4

899.5

Apr. 30 . .

736.1

6.7

722.2

6.5

139.0

867.8

May 31 . .

736.1

2.5

725.7

2.5

112.1

840.3

June 30..

735.0

.7

725.3

.7

93.2

819.3

July 31 . .

735.6

.2

723.6

.2

80.8

804.6

Aug. 31 . .

735.5

.2

722.9

.2

70.6

793.8

Sep. 30..

735.6

.2

722.8

.2

63.8

768.7

Oct. 31..

735.1

.2

722.7

.2

56.9

779.9

Nov. 30. .

731.5

.0

720.6

.0

55.7

776.4

Dec. 31 ...

730.3

....................

719.6

....................

51.8

771.3

The additional circulation authorized and secured by commercial paper represented 57 1/2 per cent of the total authorized; by miscellaneous securities, including industrial bonds, and other securities, mainly city and town notes and warrants, 28 per cent; by state, county, and municipal bonds, 14 per cent; and by notes secured by warehouse receipts, 1/2 per cent.

Although there were between 7,500 and 7,600 national banks in active operation at this time, and 45 national currency associations organized, the membership of these associations was but 2,197, and of that number only 1,363 took out additional circulation. All the states of the Union except Maine and Wyoming were included in one or more of the currency associations, but in nine of the states not a single national bank applied for additional circulation, and of the authorized issue 80 per cent was for banks in the reserve city associations, the amount for New York City banks being $144,975,960.

The tax collected on this additional circulation for the fiscal year 1914-1915, which practically covers the period of the issue, was $2,977,066.73. As the tax was not applied until the notes were actually put into circulation, many banks took out notes for which they had no immediate need and held them in their vaults against emergency.