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The Origins and Establishment of the First Bank of the United States

Published online by Cambridge University Press:  24 July 2012

H.Wayne Morgan
H.Wayne Morgan
Affiliation:
Teaching Assistant at Universityof California, Los Angeles
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Abstract

In the early days of the Republic, opposition to a national bank derived from fear, ignorance, and a basic cleavage of prophecy. To many persons banks were synonymous with speculation; others viewed them as “aristocratic engines” designed to advance the interests of the few over those of the many. Most important, however, was the discrepancy of viewpoints between those who envisaged an agricultural nation and those who already sensed the embryonic stirrings of a vast industrial economy. To the htter, a strong central bank seemed indispensable. The struggle to establish the First Bank of the United States emphasized the rural-urban cleavage that was to influence much nineteenth-century history. It was also a conspicuous early recourse to implied Constitutional powers, anathema to States' Rights defenders and a great hope of businessmen in a still feeble nation.

Type
Research Article
Information
Business History Review , Volume 30 , Issue 4 , December 1956 , pp. 472 - 492
Copyright
Copyright © The President and Fellows of Harvard College 1956

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References

1 For the complete text of Hamilton's message see Lodge, Henry Cabot (ed.), The Works of Alexander Hamilton (New York, 1904), III, 338–43.Google Scholar This was not the first such plan that Hamilton had drafted. In 1784 he drew up the constitution and petition for a state charter for the Bank of New York and ultimately sat on that bank's board of directors. Ibid., IX, 396–98; Schachner, Nathan, Alexander Hamilton (New York, 1946), 182.Google Scholar

2 Hamilton to Robert Morris (April 30, 1781), Works, III, 363–64.

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8 Clapham, The Bank of England, 18. The English were very impressed with the success that the Dutch had had with banking systems.

9 Hamilton, England, 223.

10 Randall, Henry John, The Creative Centuries (London, 1947), 335.Google Scholar

11 The bank's charter is outlined in Ford, W. C. (ed.), The Journals of the Continental Congress (Washington, 1934), XX, 545–46.Google Scholar The best discussion of the bank's trials and troubles is found in Jensen, Merrill, The New Nation (New York, 1950), 227–33.Google Scholar

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15 The bank was particularly important to many businessmen because of its services in rendering discounts and in making specie available. By virtue of the fact that it could control the amount of money out in loans in a given area the bank exerted a profound influence on agricultural prices. Bezanson, Anne, et al., Prices and Inflation During the American Revolution (Philadelphia, 1951), 260, 263, 301, 304.Google Scholar

16 Pennsylvania Gazette, March 3, 1784; cited in Jensen, The New Nation, 229.

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19 Ibid., 443.

20 Lodge listed this letter as one written to Robert Morris and dated it 1780. Recent scholarship has proved that it was actually written to Sullivan in 1779. Schachner, Alexander Hamilton, 97–101, 444, n46.

21 Worte, III, 332.

22 Ibid., 338–39.

23 Ibid., 360.

24 Ibid., 362.

25 Boyd, Julian P. (ed.), The Papers of Thomas Jefferson (Princeton, 1950), VI, 87–88.Google Scholar There is no indication that Jefferson actually received the letter but it was addressed to him and was obviously intended for him alone.

26 The Journal of William Maclay (New York, 1927), 345.

27 Clapham, The Bank of England, 81–89.

28 Journal, 357.

29 Ibid., 359.

30 Ibid., 360.

31 Ibid., 341.

32 Ibid., 358.

33 Annals of the Congress of the United States, First Congress, II, 1, 941.

34 Ibid.

35 Ibid., 1, 944–45; Hunt, Gaillard (ed.), The Writings of James Madison (New York, 1906), VI, 19–2.Google Scholar

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37 Ibid.

38 Ibid., 2,011.

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41 Annals, II, 1,953.

42 Ibid., 1,954.

43 Ibid., 1,956.

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48 At the time of the establishment of the Bank of the United States in 1791, only one state bank existed in the South, the Bank of Maryland, chartered in 1790. When the Bank of the United States charter expired in 1811, state banks had been established in Virginia, North Carolina and Kentucky. Branches of the Bank of the United States were eventually established in Boston, New York, Baltimore, Norfolk, Charleston, Savannah, Washington and New Orleans. Hawk, Emory Q., Economic History of the South (New York, 1934).Google Scholar For in formation on the operations of the Bank's branch offices see Wettereau, J. O., “Branches of the First Bank of the United States,” Journal of Economic History, II (Dec., 1942), 66–100.CrossRefGoogle Scholar

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50 James Madison, “Republican Distribution of Citizens,” National Gazette, March 5, 1792; reprinted in Works (Hunt ed.), VI, 97–98.

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59 Mason, E. C., The Veto Power (Boston, 1890), 25.Google Scholar

60 United States Statutes at Large, I, 191 ff. Other requirements included forbidding any person subscribing for more than 30 shares in one day between July 1 and Oct. 1, 1791; forfeiture of stock if the subscriber was unable to meet one of his payments; officers who permitted loans in excess of $100,000 were personally fiable for the full amount; the bank could not purchase public debt certificates but it could sell them; stock subscription opened on the first Monday in July, 1791, whereas Hamilton had requested that sale begin in April, 1791.

61 Bassett, John Spencer, The Federalist System 1789–1800 (New York, 1900), 39–40.Google Scholar

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63 Bassett, The Federalist System, 39–40. Coincidentally, the subscription to the Bank of England's stock had been equally rapid, the whole being taken in twelve days. Clapham, The Bank of England, 19.