Its
establishment was championed by Alexander Hamilton, the
Treasury Secretary, in order to handle the massive
Revolutionary war debt and to create a standard form of
currency. When the 20 year charter was up, Congress
would be required to approve or deny renewal of its
charter.
First Bank of the United States: Alexander
Hamilton
The American Currency
History started in the Colonial Era, before the Revolutionary
War.
In 1790 Alexander Hamilton, the Treasury Secretary started to
formulate plans for the First Bank of the United States. He wanted
this to be a centralized institution, similar to the Bank of
England. The federal government would own 20% of the stock and have
two seats on the board of directors. The federal government would
also have the right to inspect the books at any time. But, like the
Bank of England of the time, it would otherwise be owned by its
stockholders. The First Bank of the United States, a National Bank,
was chartered for a term of 20 years, by the United States Congress
on February 25, 1791. The Bank bill stated that a "bank of the
United States" shall be granted limited legal rights in order to
manage the national finance, to obtain loans for the federal
government in case of sudden emergencies, and to promote trade and
industry. The National Mint was then
established and authorized by the Coinage Act of April 2, 1792
and also established the
silver dollar as the unit of money and lawful tender in the United
States of America.
First Bank of the United States:
The Charter
The First Bank of the United States was issued a twenty-year charter
running from 1791 to 1811, after which time it would be up to the
Congress to approve, or deny, renewal of the bank and its charter.
First Bank of the United States:
The State Banks
The First Bank of the United States, the National Bank, it was not
solely responsible for the nation's supply of bank notes. It was
responsible for only 20% of the currency supply - the state banks
accounted for the rest. It was the envy of state banks because,
although a commercial enterprise, it received all of the
government’s deposits including foreign customs duties, it could
make more loans and receive more interest payments. States were free
to charter however many intrastate banks they wished.
Opposition to the First Bank of the United States
There were many opponents to the First Bank of the United States,
notably Thomas Jefferson and James Madison. The opposition was that
centralization of power, moving away from private banks was
dangerous to a sound monetary system. It was also seen to be of
primary benefit to the business interests in the commercial north,
not the agricultural interests of the South. It was believed that it
benefited the wealthy at the expense of the American population. Jefferson and his supporters also argued that
the creation of such a bank violated the Constitution, as the
creation of a Bank of the United States or a government mint were
not listed among the expressed powers allowed to the federal
government.
Purpose of the First Bank of the United States
The Purpose
of the First Bank of the United States was to act as the federal
government’s fiscal (financial) agent:
-
Collect
tax revenues
-
Transfer
money
-
Ensure the
government's funds were secure
-
Make loans
to the government
-
Make loans
and accept deposits of private citizens
-
Pay the
bills of the government
-
Pay the
interest payments to European investors
-
Interest
rates were capped at 6%
Facts about
First Bank of the United States
The following fact sheet contains interesting facts and information
on First Bank of the United States.
Its twenty year charter ran from February 25,
1791 to January 24, 1811. Plans were initially formulated in
1790 by Alexander Hamilton, secretary of the treasury
The charter was signed into law by President George Washington
on February 25, 1791
It began operations at the temporary premises at Carpenters’
Hall in Philadelphia on December 12, 1791
In 1792 it opened branches in Baltimore, Boston, New York,
Charleston
The United States government owned 20% of its capital but
private investors owned the rest - it was still a privately held
banking corporation.
The bank started with capitalization of $10 million - $2 million
was held by the government and the remaining $8 million by
private investors
The institution was answerable to the US Treasury and Congress
and subject to Treasury Department inspection
The institution comprised of 25 directors, including some
senators and congressmen
The first president of the institute was Thomas Willing, who had
been president of the Bank of North America
It was the only banking institute permitted to have offices
across the nation.
When making loans the borrower either had their account credited
or were given “banknotes, redeemable in specie”
First Bank notes were the only ones accepted for payment of
federal taxes.
Foreigners were allowed to be First Bank of the United States
stockholders, but were not be allowed to vote
After 20 years in existence, the charter for renewal was
defeated by one vote. The bill to re-charter failed in the House
of Representatives on January 24, 1811.
Stephen Girard purchased the premises and most of the stock in
the First Bank of the United States and opened his own bank,
later known as Girard Bank
The need to open the
Second Bank of
the United States arose when the
War of 1812
erupted
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