On May 17, 1781, Hamilton presented the plan of a bank to Congress, which was to be truly national, and “created avowedly to aid the United States.” Its name was to be the Bank of North America, with a subscription of $400,000 in gold and silver, and its notes, payable on demand, to be receivable for duties and taxes in every State. Congress approved the plan, and Morris, then Superintendent of Finance, published it, with an address showing its advantages to the government and people, then suffering from the ill effects of a depreciated currency.
The Bank of North America was organized November 1, 1781, and began business January 7, 1782. It creditably fulfilled its mission “to aid the United States,” and, after the expiration of its charter, became a State institution. In 1864 it entered the national banking system, though retaining its old name. This bank was followed by the Bank of New York, which began business June 9, 1784, and by the Massachusetts Bank, which began business July 5, 1784.
First United States Bank.—This institution grew out of the recommendations of Alexander Hamilton, and formed a part of his scheme of strengthening the public credit and bringing about a closer union of States. His plan was incorporated into a bill which passed the Senate January 3, 1791, and the House, January 20, 1791. Washington signed it February 25, 1791. The bill was hotly opposed as unconstitutional by Secretary of State Thomas Jefferson, Attorney-General Edmund Randolph, and in general by representatives from the Southern States.
The capital of the bank was fixed at $10,000,000, one fifth of which was to be subscribed by the government. The remainder was subscribed by individuals, and two hours after the opening of the books the capital was oversubscribed to the amount of 4000 shares. The central bank was located at Philadelphia, and afterwards branches were established in New York, Boston, Baltimore, Washington, Norfolk, Charleston, Savannah, and New Orleans. Business was first opened in Carpenters’ Hall, Philadelphia, December 12, 1791. In July, 1797, the site was removed to a new building on Third Street, below Chestnut, and it remained there till the dissolution of the bank, with the exception of a brief removal to Germantown in 1798, during the epidemic of yellow fever. Though this bank proved a profitable enterprise for the government, it failed to secure a renewal of its charter in 1811, chiefly because so many of its shares had passed into foreign hands.
THE GIRARD BANK, PHILADELPHIA.
(Second Site of First United States Bank.)
Early State Banks.—From 1790 to 1811 the number of State banks increased from four to eighty-eight; their circulation from $2,500,000 to $22,700,000; their capital from $2,500,000 to $42,610,000. In the same time the metallic circulation of the country rose from $9,000,000 to $30,000,000. These banks failed to meet the monetary necessities of the War of 1812, and in 1814 practically all of them south of New England suspended specie payments. Their notes were poured out in all denominations from six cents upward, and, with coin redemption stopped, they depreciated rapidly. This led to great financial distress in 1818–1820, and to excessive bank failures. The seriousness of the general situation, and the declining credit of the government, led to the establishment of the second Bank of the United States.
Second Bank of the United States.—In October, 1814, Secretary Dallas laid a report before Congress, in which he deprecated the uncertain amount and value of the paper currency. “There exists,” he said, “at this time no adequate circulating medium common to the citizens of the United States. The moneyed transactions of private life are at a stand, and the fiscal operations of the government labor with extreme inconvenience.” He then recommended as the remedy the establishment of a national banking institution. A bill, based upon Dallas’s plan for such an institution, failed of passage in the House in 1814, and again in 1815, though passed by the Senate. It was, however, finally passed in an amended form, but was vetoed by President Madison.
On December 24, 1815, Mr. Dallas laid before Congress another plan for a national bank. A bill was framed authorizing such an institution, with a capital of $35,000,000, $7,000,000 of which were to be subscribed by the government, the central bank to be at Philadelphia, with power to establish branches, payments to be made in specie at all times unless otherwise authorized by Congress. This bill passed both Houses of Congress, and was signed by President Madison, April 10, 1816. When the subscription books of this bank were closed, it was found that the subscriptions fell short of the authorized $35,000,000 by $3,000,000, which amount was taken by Stephen Girard.