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
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