The Bank of the United States

Hamilton submitted a report to Congress in December 1790, outlining his proposal for creating a national bank

Alexander Hamilton, first Secretary of the Treasury Hamilton (Federalist Party) argued a national bank was necessary for the nation's credit, and to conduct the financial business of the United States government

The President, Directors and Company, of the Bank of the United States is commonly known as the “First Bank of the United States” It was a national bank

Under Hamilton’s national bank plan, the number of votes was to be determined by the size of each shareholder’s investment

The proposed national bank would have a maximum ratio of loans to specie {pronounced spee-she} which was gold or silver

The other provision was that the government would own 20 percent of the U.S. bank

Purposes of the Bank of the U.S 1. Federal fiscal and monetary power 2. The federal mint 3. Excise taxes

U.S. Bank Duties Issuing paper money(banknotes or currency) Providing a safe place to keep public funds

U.S. Bank Duties Offering banking facilities for commercial transactions Acting as the government’s fiscal agent in collecting tax revenues

Thomas Jefferson was afraid that a national bank would create a financial monopoly that would undermine state banks

Even with the opposing voices and much debate in Congress, Hamilton’s bill cleared both the House and the Senate in the winter of 1791

Hamilton delivered to the president a lengthy (ca Hamilton delivered to the president a lengthy (ca. 15,000 words) refutation of his fellow cabinet members’ arguments President George Washington signed the bill

It was chartered for a term of twenty years Chartered by the United States Congress on February 25, 1791 It followed the Bank of North America, the nation’s first de facto central bank

The Bank of the United States also accepted deposits from the public and made loans to private citizens and businesses

The First Bank’s charter required it to seek approval from Congress before making loans to any state or to foreigners in order to protect the interests of the U.S. Constitution

At its initial public offering (IPO), the First Bank did not directly sell shares for immediate delivery, but rather “scrips,” (or receipts) which cost $25 each

There was speculation which contributed to the First Bank scrip bubble of 1791 and the Panic of 1792 The public survived each financial crisis

Unlike modern central banks, the Bank of the United States did not officially set monetary policy Unlike state banks, First Bank notes were the only ones accepted for payment of federal taxes

When the First Bank opened, the country had only three other banks In contrast, there were 101 state banks in the country when the First Bank’s charter expired in 1811

Without the First Bank, the government had to rely more heavily on state banks to help finance the war The United States had debt from a war with England, soaring prices, and devalued money from rising inflation

1816, President James Madison signed the bill that would create the second Bank of the United States

Brief Banking History Feb. 25, 1791-1811 First Bank of the United States Apr. 10, 1816 - 1836 Second Bank of the United States

Mar 6, 1819 McCulloch v. Maryland, Supreme Court case ruling state banks cannot interfere with federal institutions

1836 Economic depression Jan 1, 1861 Investment banking firm which helps finance north during the civil war Feb. 25, 1863 Congress approves the National Bank Act

Dec. 23, 1913 The Federal Reserve Act sets up a new system of federal banks October 24, 1929 The Great Depression begins in the U.S. Mar 6, 1933 Bank Holiday closes all of the nation’s banks

Jun 18, 1933-1999 Glass-Steagall Act separates commercial and investment banking; FDIC Aug 9, 2007 Global Financial Crisis leads to increased regulations and reforms

2007 Global Financial Crisis Banks overextend their abilities to make loans and assume debt Housing market bubble leads to the housing market crash giving us foreclosures, high unemployment and the Great Recession (2007-2009) Worst financial event since the Great Depression

The First Bank building is now registered as a National Historic Landmark in Philadelphia, Pennsylvania It is located in Independence National Historical Park