The Directors of it are purchasing with their Stock, instead of Bank notes, as I expected: in consequence of which, it must turn out to be a mere subscription of a particular sum of money for a particular purpose.
Paper credit never was long supported in any country, on a national scale, where it was not founded on a joint basis of public and private credit. An attempt to establish it on public credit alone, in France, under the auspices of Mr. Law, had nearly ruined the kingdom. We have seen the effects of it in America; and every successive experiment, proves the futility of the attempt. Our new money is depreciating almost as fast as the old; though it has, in some States, as real funds as paper money ever had. The reason is, that the moneyed men have not an immediate interest to uphold its credit. They may even, in many ways, find it their interest to undermine it. The only certain manner to obtain a permanent paper credit, is to engage the moneyed interest immediately in it, by making them contribute the whole, or part of the Stock, and giving them the whole, or part of the profits.
The invention of Banks, on the modern principle, originated in Venice. There the public, and a Company of moneyed men, are mutually concerned. The Bank of England unites public authority and faith with private credit: and hence we see, what a vast fabric of paper credit is raised on a visionary basis. Had it not been for this, England would never have found sufficient funds to carry on her wars: but, with the help of this, she has done, and is doing, wonders. The Bank of Amsterdam is on a similar foundation.
And why can we not have an American Bank? Are our moneyed men less enlightened to their own interest, or less enterprising in the pursuit? I believe the fault is in Government, which does not exert itself to engage them in such a scheme. It is true, the individuals in America are not very rich; but this would not prevent their instituting a Bank; it would only prevent its being done with such ample funds as in other countries. Have they not sufficient confidence in the Government, and in the issue of the cause? Let the Government endeavor to inspire that confidence, by adopting the measures I have recommended, or others equivalent to them. Let it exert itself to procure a solid Confederation; to establish a good plan of executive administration; to form a permanent military force; to obtain, at all events, a foreign loan. If these things were in a train of vigorous execution, it would give a new spring to our affairs; Government would recover its respectability, and individuals would renounce their diffidence.
The object I should propose to myself, in the first instance, from a Bank, would be an auxiliary mode of supplies; for which purpose, contracts should be made, between Government and the Bank, on terms liberal and advantageous to the latter. Every thing should be done, in the first instance, to encourage the Bank. After it gets well established, it will take care of itself; and Government may make the best terms it can, for itself.
The first step to establishing the Bank, will be to engage a number of moneyed men of influence to relish the project, and make it a business. The subscribers to that lately established, are the fittest persons that can be found; and their plan may be interwoven.
The outlines of my plan would be, to open subscriptions in all the States; for the Stock, which we will suppose to be one million of pounds. Real property of every kind, as well as specie, should be deemed good Stock; but at least a fourth part of the subscription should be in specie, or plate. There should be one great Company, in three divisions: in Virginia, Philadelphia, and at Boston; or two at Philadelphia and Boston. The Bank should have a right to issue Bank notes, bearing two per cent. interest, for the whole of their stock; but not to exceed it. These notes may be payable every three months, or oftener: and the faith of government must be pledged for the support of the Bank. It must therefore have a right, from time to time, to inspect its operations, and must appoint inspectors for the purpose.
The advantages of the Bank may consist in this: in the profits of the contracts made with Government, which should bear interest to be annually paid in specie; in the loan of money at interest, say six per cent.; in purchasing lives by annuities, as practised in England, etc. The benefit resulting to the Company, is evident from the consideration, that they may employ, in circulation, a great deal more money than they have specie in Stock, on the credit of the real property which they will have in other use. This money will be employed, either in fulfilling their contracts with the public, by which also they will gain a profit; or in loans at an advantageous interest, or in annuities.
The Bank may be allowed to purchase plate and bullion, and coin money; allowing Government a part of the profit. I make the Bank notes bear interest, to obtain a readier currency, and to induce the holders to prefer them to specie, to prevent too great a run upon the Bank, at any time, beyond its ability to pay.
If Government can obtain a foreign loan, it should lend to the Bank, on easy terms, to extend its influence, and facilitate a compliance with its engagements. If Government could engage the States to raise a sum of money in specie, to be deposited in Bank in the same manner, it would be of the greatest consequence. If Government could prevail on the enthusiasm of the people, to make a contribution in plate for the same purpose, it would be a master-stroke. Things of this kind sometimes succeed in popular contests; and, if undertaken with address, I should not despair of its success: but I should not be sanguine.