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Encyclopedia > First Bank of the United States
First Bank of United States
(U.S. National Historic Landmark)
The First Bank of the United States east facade.
Location: Philadelphia, Pennsylvania
Coordinates: 39°56′53.25″N, 75°8′48.45″W
Built/Founded: 1797
Architect: Blodgett Samuel
Architectural style(s): Early Republic, Other
Added to NRHP: May 04, 1987
NRHP Reference#: 87001292 [1]
Governing body: National Park Service

The First Bank of the United States was a bank chartered by the United States Congress on February 25, 1791. The charter was for 20 years. The Bank was created to handle the financial needs and requirements of the central government of the newly formed United States, which had previously been thirteen individual colonies with their own banks, currencies, and financial institutions and policies. For other uses of terms redirecting here, see US (disambiguation), USA (disambiguation), and United States (disambiguation) Motto In God We Trust(since 1956) (From Many, One; Latin, traditional) Anthem The Star-Spangled Banner Capital Washington, D.C. Largest city New York City National language English (de facto)1 Demonym American... This article or section needs additional references or sources to improve its verifiability. ... Image File history File links Metadata Size of this preview: 800 × 600 pixelsFull resolution (4000 × 3000 pixel, file size: 2. ... Nickname: City of Brotherly Love, Philly, the Quaker City Motto: Philadelphia maneto (Let brotherly love continue) Location in Pennsylvania Coordinates: Country United States State Pennsylvania County Philadelphia Founded October 27, 1682 Incorporated October 25, 1701 Mayor John F. Street (D) Area    - City 369. ... This article is about the U.S. State. ... A typical plaque showing entry on the National Register of Historic Places. ... May 4 is the 124th day of the year in the Gregorian calendar (125th in leap years). ... Year 1987 (MCMLXXXVII) was a common year starting on Thursday (link displays 1987 Gregorian calendar). ... The National Park Service (NPS) is the United States federal agency that manages all National Parks, many National Monuments, and other conservation and historical properties with various title designations. ... For other uses, see Bank (disambiguation). ... Type Bicameral Houses Senate House of Representatives President of the Senate President pro tempore Dick Cheney, (R) since January 20, 2001 Robert C. Byrd, (D) since January 4, 2007 Speaker of the House Nancy Pelosi, (D) since January 4, 2007 Members 535 plus 4 Delegates and 1 Resident Commissioner Political... is the 56th day of the year in the Gregorian calendar. ... 1791 (MDCCXCI) was a common year starting on Saturday (see link for calendar) of the Gregorian calendar (or a common year starting on Tuesday of the 11-day-slower Julian calendar). ...


Officially proposed by Alexander Hamilton, Secretary of the Treasury, to the first session of the First Congress in 1790, the concept for the Bank had both its support and origin in and among Northern merchants and more than a few New England state governments. This same proposal was eyed with suspicion by the representatives from the Southern States, whose chief industry, agriculture, did not require centrally concentrated banks, and the feelings of states' rights and suspicion of Northern motives ran strong. Alexander Hamilton (January 11, 1755 or 1757[1]—July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. ... The United States Secretary of the Treasury is the finance minister of the Federal Government of the United States. ... This page meets Wikipedias criteria for speedy deletion. ... This article is about the region in the United States of America. ...

Contents

A paradise for speculators

In the last decade of the eighteenth century the United States had just three banks but more than fifty different currencies in circulation: English, Spanish, French, Portuguese coinage, script issued by states, cities, backwood stores, and big city enterprises. The values of these currencies were wildly unstable, thereby making it a paradise for politically indifferent currency speculators who thrive on uncertainty. In addition, the value and exchange rate was almost always outdated or unknown by the party agreeing to receive it, especially the farther it moved away from the coast; and, thanks to distances, primitive roads, and absence of communications technology, values were not only unknown but unknowable as well.


Supporters of the bank argued that if the nation was to grow and to prosper, it needed a universally accepted standard coinage and this would best be provided by a United States Mint, aided and supported by a national bank and an excise tax. Seal of the U.S. Mint Denver United States mint building The United States Mint primarily produces circulating coinage for the United States to conduct its trade and commerce. ... An excise is an indirect tax or duty levied on items within a country. ...


One of three

Bank facade
Bank facade

In 1791, the original Bank of the United States, sometimes referred to as "The First Bank of the United States", was proposed and brought into being under the aegis of the first Secretary of the Treasury Alexander Hamilton. Image File history File linksMetadata Download high-resolution version (1977x1350, 710 KB) File links The following pages on the English Wikipedia link to this file (pages on other projects are not listed): First Bank of the United States Metadata This file contains additional information, probably added from the digital camera... Image File history File linksMetadata Download high-resolution version (1977x1350, 710 KB) File links The following pages on the English Wikipedia link to this file (pages on other projects are not listed): First Bank of the United States Metadata This file contains additional information, probably added from the digital camera... Alexander Hamilton (January 11, 1755 or 1757[1]—July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. ...


Along with establishing a mint and an excise tax, the purpose of Hamilton's proposed bank was to:

  • Establish financial order, clarity and precedence in and of the newly formed United States.
  • Establish credit—both in country and overseas—for the new nation.
  • To resolve the issue of the fiat currency, issued by the Continental Congress immediately prior to and during the United States Revolutionary War—the "Continental".

A student of both the French finance minister Jacques Necker and his British counterpart Chancellor of the Exchequer Robert Walpole (in addition to his own extensive reading), Hamilton devised a bank for the whole of the country, not for just sections or states. Look up fiat in Wiktionary, the free dictionary. ... The American Revolutionary War (1775–1783), also known as the American War of Independence, was a war fought primarily between Great Britain and revolutionaries within thirteen of her North American colonies. ... It has been suggested that Continental Dollar be merged into this article or section. ... Jacques Necker Jacques Necker (September 30, 1732 – April 9, 1804) was a French statesman of Swiss origin and finance minister of Louis XVI. // Necker was born in Geneva, Switzerland. ... Robert Walpole, 1st Earl of Orford, (commonly known as Robert Walpole, or Sir Robert Walpole) KG, KB, PC (26 August 1676 – 18 March 1745) was a British statesman who is generally regarded as having been the first Prime Minister of Great Britain. ...


According to the plan put before the first session of the First Congress, Hamilton proposed establishing the initial funding for the Bank of the United States through the sale of $10 million in stock of which the United States government would purchase the first $2 million in shares. Hamilton, foreseeing the objection that this could not be done since the U.S. government didn't have $2 million, proposed that the government make the stock purchase using money loaned to it by the Bank; the loan to be paid back in ten equal annual installments.


The remaining $8 million of stock would be available to the public, both in the United States and overseas. The chief requirement of these non-government purchases was that one-quarter of the purchase price had to be paid in gold or silver; the remaining balance could be paid in bonds, acceptable script, etc.


By continuously insisting on these conditions the Bank of the United States might technically possess $500,000 in "real" money that it could, and would, make loans up to its capitalized limit of $10 million.[2] However, unlike the Bank of England from where Hamilton drew much of his inspiration, the primary function of the Bank would be commercial and private interests. The business it would be involved in on behalf of the federal government—a depository for collected taxes, making short term loans to the government to cover real or potential temporary income gaps, serving as a holding site for both incoming and outgoing monies—was considered highly important but still secondary in nature. Headquarters Coordinates , , Governor Mervyn King Central Bank of United Kingdom Currency Pound sterling ISO 4217 Code GBP Base borrowing rate 5. ...


There were other, nonnegotiable conditions for the establishment of the Bank of the United States. Among these were:

  • That the Bank was to be a private company.
  • That the Bank would have a twenty year charter running from 1791 to 1811, after which time it would be up to the Congress to renew or deny renewal of the bank and its charter; however, during that time no other federal bank would be authorized; states, for their part, would be free to charter however many intrastate banks they wished.
  • That the Bank, to avoid any appearance of impropriety, would:
  1. be forbidden to buy government bonds.
  2. have a mandatory rotation of directors.
  3. neither issue notes nor incur debts beyond its actual capitalization.
  • That foreigners, whether overseas or residing in the United States, would be allowed to be Bank of the United States stockholders, but would not be allowed to vote.
  • That the Secretary of the Treasury would be free to remove government deposits, inspect the books, and require statements regarding the banks condition as frequently as once a week.[3]

To ensure smooth compliance to both the current and future demands of its governmental accounts, the Bank required a source of additional funding "for interest payments on the assumed state debts would begin to fall due at the end of 1791...those payments would require $788,333 annually, and that an additional $38,291 was needed to cover deficiencies in the funds that had been appropriated for existing commitments."[4] For reasons unknown, Hamilton also lobbied for the bank to be located in Scotland, but his request was denied.


To achieve this, Hamilton repeated a suggestion he had made nearly a year before -- increase the duty on imported spirits, plus raise the excise tax on domestically distilled whiskey and other liquors. This was the origin of the Whiskey Rebellion. Washington leads his troops to western Pennsylvania (Metropolitan Museum of Art) The Whiskey Rebellion, less commonly known as the Whiskey Insurrection, was a popular uprising that had its beginnings in 1791 and culminated in an insurrection in 1794 in the locality of Washington, Pennsylvania, in the Monongahela Valley. ...


Opposition

Like most southern members of Congress, both in the Senate and in the House (indeed like most members of Congress in general) neither Secretary of State Thomas Jefferson nor Representative James Madison had any particular interest in two of Hamilton's tripartite recommendations: the establishing of an official government Mint, and the chartering of the Bank of the United States. They believed the south would not benefit from either a central mint or bank, as these were mostly to the benefit of business interests in the commercial north, not southern agricultural interests. But like their fellow southerners, Jefferson and Madison had a great deal of interest at stake in Hamilton's third recommendation: The matter of increasing the excise tax on imported and domestic spirits; that this money was to facilitate the operations of the Bank of the United States was, for the most part, inconsequential. Thomas Jefferson (13 April 1743 N.S.–4 July 1826) was the third President of the United States (1801–09), the principal author of the Declaration of Independence (1776), and one of the most influential Founding Fathers for his promotion of the ideals of Republicanism in the United States. ... James Madison (March 16, 1751 – June 28, 1836), was an American politician and the fourth President of the United States (1809–1817), and one of the Founding Fathers of the United States. ...


Southern congressmen feared the burdens of this proposed excise tax would fall disproportionally heavily on the South, where, declared Jackson, "hard liquor was a necessity of life".[2]


The first part of the bill, the concept and establishment of a national mint, met with no real objection, and sailed through; it was assumed the second and third part (the Bank and the excise tax) would likewise glide through, and in its own way they did: The House version of the bill, despite some heated objections, easily passed. The Senate version of the bill did likewise, with considerably fewer, and milder, objections. It was when "the two bills changed houses, complications set in. In the Senate, Hamilton's supporters objected to the House's alteration of the plans for the excise tax."[2]


To get the bank bill through the Congress, Hamilton struck a deal with several of its members to support their efforts to move the capital from Philadelphia to the banks of the Potomac.


Many Americans were concerned that a national bank would result in a "money-monopoly" increasing interest rates and harming the very business interests it was supposed to protect.


The establishment of the bank also raised early questions of constitutionality in the new government. Hamilton, then Secretary of the Treasury, argued that the Bank was an effective means to achieve the authorized powers of the government implied under the of the Constitution. Secretary of State Thomas Jefferson argued that the Bank violated traditional property laws and that its relevance to constitutionally authorized powers was weak. The decision ultimately fell to President George Washington. Thomas Jefferson (13 April 1743 N.S.–4 July 1826) was the third President of the United States (1801–09), the principal author of the Declaration of Independence (1776), and one of the most influential Founding Fathers for his promotion of the ideals of Republicanism in the United States. ... George Washington (February 22, 1732 – December 14, 1799)[1] led Americas Continental Army to victory over Britain in the American Revolutionary War (1775–1783), and in 1789 was elected the first President of the United States of America. ...


Knowing he was setting a precedent by everything he was doing in his capacity as President of the United States, George Washington was hesitant about signing the "bank bill" into law. Washington asked for a written opinion from all his cabinet members -- most particularly from Hamilton. Attorney General Edmund Randolph from Virginia felt that the bill was unconstitutional. Jefferson, also from Virginia, agreed that Hamilton's proposal was against both the spirit and letter of the Constitution. In addition, George Washington (February 22, 1732 – December 14, 1799)[1] led Americas Continental Army to victory over Britain in the American Revolutionary War (1775–1783), and in 1789 was elected the first President of the United States of America. ...

"...in a masterpiece of legal obfuscation, well calculated to confuse the president, he [Jefferson] asserted the bank bill violated the laws of mortmain, alienage, forfeiture and escheat, distribution and monopoly. Washington, overwhelmed by the arguments...send Hamilton copies of Randolf's and Jefferson's opinion...inviting Hamilton in effect to defend the bank if he could..."[5]

Hamilton, who, unlike his fellow cabinet members, hailed from New York, quickly set about laying to rest the arguments of those who claimed incorporation of the bank unconstitutional. While Hamilton's rebuttals were many and varied, chief among them were these two:

  • What the government could do for a person (incorporate), it could not refuse to do for an "artificial person", a business. And the Bank of the United States, being privately owned and not a government agency, was a business. "Thus...unquestionably incident to sovereign power to erect corporations to that of the United States, in relation to the objects entrusted [sic] to the management of the government."
  • Any government by its very nature was sovereign "and includes by force of the term a right to attainment of the ends...which are not precluded by restrictions & exceptions specified in the constitution...[6]

[NB: Italicized words, phrases those of original document.]


Jefferson, Madison, and the rest, Hamilton pointed out, had looked upon the creation of the Bank of the United States (and the excise tax that went with it) as an end rather than a means to an end.


Still Washington hesitated, wondering if it might not be more prudent to merely wait, to do nothing, and allow the bill to become law without his signature. Ultimately, whether because of or in spite of the bill's opponents, on 25 April 1791, Washington signed the "bank bill" into law. is the 115th day of the year (116th in leap years) in the Gregorian calendar. ... 1791 (MDCCXCI) was a common year starting on Saturday (see link for calendar) of the Gregorian calendar (or a common year starting on Tuesday of the 11-day-slower Julian calendar). ...

The First Bank of the United States in Philadelphia, Pennsylvania.
The First Bank of the United States in Philadelphia, Pennsylvania.

Image File history File linksMetadata Download high-resolution version (2304x1728, 1212 KB) Image of the First Bank of the United States. ... Image File history File linksMetadata Download high-resolution version (2304x1728, 1212 KB) Image of the First Bank of the United States. ...

Postscript

After Hamilton retired in 1795, the new Secretary of the Treasury Oliver Wolcott, Jr. informed Congress that due to the existing state of government finances more money was needed. This could be achieved either by selling the government's shares of stock in the Bank, or raising taxes. Wolcott advised the first choice. Congress quickly agreed. Hamilton objected, believing that the dividends on that stock had been inviolably pledged for the support of the sinking fund to retire the debt.[7] Hamilton tried to organize opposition to the measure, but was unsuccessful. Oliver Wolcott Jr. ...


The Bank of the United States was housed in Philadelphia, Pennsylvania, with the federal government. In the eighteenth century, Philadelphia was one of the largest cities in the English-speaking world. The bank began operations in Carpenters' Hall. The building designed by Samuel Blodgett and James Windrim was completed in 1797. The bank's charter expired in 1811. It followed the Bank of North America and it was succeeded by the Second Bank of the United States. For other uses, see Philadelphia (disambiguation) and Philly. ... This article is about the U.S. State. ... This article or section does not cite its references or sources. ... The Bank of North America was chartered in 1781 by the Continental Congress and opened on January 7, 1782, at the prodding of Finance Minister Robert Morris, and was rechartered in 1784. ... The Second Bank of the United States was a bank chartered in 1816, five years after the expiration of the First Bank of the United States. ...


The former First Bank of the United States building was listed as a National Historic Landmark on May 4, 1987. On August 7, 2007, the Civil War and Underground Railroad Museum of Philadelphia announced that it would relocate to the building by 2010. Philadelphia Mayor John F. Street presented the museum with a check for $1.2 million to assist in its relocation.[8] This article or section needs additional references or sources to improve its verifiability. ... is the 124th day of the year (125th in leap years) in the Gregorian calendar. ... Year 1987 (MCMLXXXVII) was a common year starting on Thursday (link displays 1987 Gregorian calendar). ... is the 219th day of the year (220th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... The Civil War and Underground Railroad Museum of Philadelphia (formerly the Civil War Library and Museum) is located at 1805 Pine Street in Philadelphia, Pennsylvania. ... John Franklin Street (born October 15, 1943) is the 97th Mayor of the City of Philadelphia. ...


See also

Philadelphia Portal

Liberty Bell; public domain. ... This article is about the history of central banking in the United States, from the 1790s to the present. ...

Further reading

  • Danzer, Gerald A.; J. Jorge Klor de Alva, Larry S. Krieger, Louis E Wilson, and Nancy Woloch. The Americans. ISBN 0-618-37716-6. 
  • Rothbard, Murray. History of Money and Banking in the United States. ISBN 0-945466-33-1. 

Murray Newton Rothbard (March 2, 1926 – January 7, 1995) was an influential American economist, historian and natural law theorist belonging to the Austrian School of Economics who helped define modern libertarianism. ...

External links

Wikimedia Commons has media related to:
First Bank of the United States
  • Hamilton's opinion
  • Jefferson's opinion
  • Record of the Debate

Image File history File links Commons-logo. ...

References

  1. ^ National Register Information System. National Register of Historic Places. National Park Service (2006-03-15).
  2. ^ a b c McDonald, Forrest (1979). Alexander Hamilton: A Biography. W.W. North & Co., 194. 
  3. ^ Report on the Bank, in Syrett, ed., Papers, 7:326-28
  4. ^ Further Report on Public Credit, ibid., 7:226
  5. ^ Washington to Hamilton , February 16, 1791, in Syrett, ed. Papers 8:50-51
  6. ^ Ibid. 8:98
  7. ^ Ibid
  8. ^ "Oldest Civil War museum gets a new home", MSNBC.com, August 7, 2007

  Results from FactBites:
 
First Bank of the United States - Wikipedia, the free encyclopedia (332 words)
The First Bank of the United States was proposed by Alexander Hamilton to relieve the war debt from the United States Revolutionary War, develop a national currency, and dispose of the western territories.
It followed the Bank of North America and it was succeeded by the Second Bank of the United States.
Secretary of State Thomas Jefferson argued that the Bank violated traditional property law and that its relevance to constitutionally authorized powers was weak.
EH.Net Encyclopedia: First Bank of the United States (2378 words)
The death of the Bank was another chapter in an ongoing debate between the early leaders of the country who were split between those who preferred a weak central government on the one hand and those who desired a strong central government on the other.
The chartering of a national economic institution, a Bank of the United States, marks the take-off of the Federalist financial revolution that began several years earlier with the signing of the Constitution.
The political die of the United States was cast with that document, and by 1792 the economic base of Federalism was in place, first with the Federal funding of national and state war debts, and second, with a sound national Bank in place to give coherence to the developing U.S. financial system.
  More results at FactBites »

 
 

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