Monetary Reform and the Redemption of National Bank Notes, 1863–1913

It is well known that contemporary critics of the National Banking System complained about its failure to meet peak demands for currency. Less often discussed are complaints about the system's inability to remove excess notes from circulation during periods of slack demand for currency—a problem that critics attributed to the lack of an effective redemption mechanism. Beginning in 1864, important attempts were made to reform redemption arrangements, both privately and through legislation, and redemption reform was a key component of the “asset currency” movement to deregulate note issue. This article examines the motives and outcomes of redemption reform efforts up to the passage of the Federal Reserve Act, which substituted a discretionary control over the currency stock for the automatic elasticity that the asset currency movement had originally sought.