GROWTH OF THE NATIONAL BANKING SYSTEM 
in the United States, whereas in the same month of the final year of 
the period, bank note circulation was $722,000,000, or 19.49, of the 
total money in the United States. 
The year 1918 is taken as the termination of this period in the 
national bank system’s history, because that year marked the passage 
of the Federal Reserve Act which had such a far-reaching influence 
on the entire system and which altered it in so many essential fea- 
tures. For many years it had been obvious to close students of 
finance that the nation’s banking system, splendid as it was in many 
respects, contained many defects, and that the whole might be so 
altered that the individual banks could be of even greater service to 
their particular communities and to the country at large. 
During the few years just preceding the passage of the Federal 
Reserve Act, careful and comprehensive studies of banking in the 
United States were made by various competent agencies. Probably 
the most exhaustive of these inquiries was that followed by the 
National Monetary Commission, which, after the most diligent labor, 
presented a plan for the entire reorganization of our banking system. 
This plan, generally known as the Aldrich scheme, was not adopted 
by Congress, but the Congress which came in after the election of 
1912, turned its attention forthwith to that banking plan which was 
ultimately embodied in the Federal Reserve Act. 
The National Monetary Commission, in its report, had detailed 
seventeen criticisms of American banking. This body of criticism 
provides a splendid commentary on our whole banking structure— 
national, state and private—before the passage of the Federal Re- 
serve Act; it gives, moreover, a vivid picture of the causes from 
which the Reserve Act arose. A summarization of the list of the 
Monetary Commission’s criticisms follows, and is included here be- 
cause it gives, in the briefest way possible, matter that is essential 
to the understanding of national banking. 
Reserves 
1—There was no provision for concentrating the cash reserves of the banks and 
for their mobilization and use in times of need; 
9— Inadequate federal and state laws restricted the use of bank reserves, thus 
decreasing lending power; 
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