On May 30, 1908, the Aldrich-Vreeland Act was passed in order to provide emergency circulation, the need for which had been severely felt during the panic the previous year. By this act ten or more national banks, which individually had an unimpaired capital and surplus of not less than 20 per cent and collectively an aggregate capital and surplus of at least $5,000,000, were permitted, with the approval of the Secretary of the Treasury, to form voluntary associations known as "national currency associations." Not more than one such association could be formed in any city, the uniting banks were to be located in a contiguous territory, and no bank could belong to more than one association. Each association was given a corporate entity and was to be managed by a board consisting of one representative from each bank, and its business was to be done by duly appointed officers.

For the purpose of obtaining additional circulation, any bank belonging to such an association, which had notes outstanding secured by the deposit of United States bonds to an amount not less than 40 per cent of its capital and had its capital unimpaired and a surplus of not less than 20 per cent might deposit with and transfer to the association, in trust for the United States, such securities as were satisfactory to the directors of the association. The officers of the association then might make application to the Comptroller of the Currency, for an issue of circulating notes. The Comptroller would forward the application to the Secretary .of the Treasury with such recommendations as he might think proper. If the Secretary judged the business conditions in the locality demanded additional circulation, and if he were satisfied with the character and value of the securities offered and that the lien of the United States on the securities so deposited and on the banks composing the association was amply sufficient for the government's protection, he might then direct the issue to the association, on behalf of such bank, of additional notes to an amount fixed at his discretion. This amount, however, could not exceed 90 per cent of the cash value of the municipal securities and 75 per cent of the other securities deposited, but in any event no bank could be authorized to issue notes based on commercial paper in excess of 30 per cent of its unimpaired capital and surplus. Commercial paper was defined as including only notes representing actual commercial transactions, which, when accepted by the association, bore the names of at least two responsible parties and had not more than four months to run.

All the members of these various national currency associations were jointly and severally liable to the United States for the redemption of such additional circulation, and the government took a lien on the securities deposited and the total assets of the member banks. As among the several banks composing an association each bank was liable only in the proportion that its capital and surplus bore to the aggregate capital and surplus of all such banks. The association was empowered to call at any time for additional securities or commercial paper, and to require the exchange of other securities. In case a member failed to comply with this demand the association had power to sell at public sale the securities and paper on hand and deposit the proceeds with the United States Treasury for the redemption of the additional circulation, and if the proceeds of this sale were insufficient to redeem the circulation the association could recover in court from the bank and have the benefit of the government's lien on the bank's assets.