First Bank of the United States explained

First Bank of the United States
Type:Public–private partnership
Industry:Banking
Founded:1791
Fate:Liquidated
Successor:Second Bank of the United States (federal)
Girard Bank (building)
Hq Location:Philadelphia, Pennsylvania, U.S.
Key People:George Washington

The President, Directors and Company of the Bank of the United States, commonly known as the First Bank of the United States, was a national bank, chartered for a term of twenty years, by the United States Congress on February 25, 1791. It followed the Bank of North America, the nation's first de facto national bank. However, neither served the functions of a modern central bank: They did not set monetary policy, regulate private banks, hold their excess reserves, or act as a lender of last resort.[1] They were national insofar as they were allowed to have branches in multiple states and lend money to the US government. Other banks in the US were each chartered by, and only allowed to have branches in, a single state.

Establishment of the Bank of the United States was part of a three-part expansion of federal fiscal and monetary power, along with a federal mint and excise taxes, championed by Alexander Hamilton, first Secretary of the Treasury. Hamilton believed a national bank was necessary to stabilize and improve the nation's credit, and to improve handling of the financial business of the United States government under the newly enacted Constitution.

The First Bank building, located in Philadelphia, Pennsylvania, within Independence National Historical Park, was completed in 1797, and is a National Historic Landmark for its historic and architectural significance.

Background

See also: Bank of North America. Alexander Hamilton was the first Secretary of the Treasury. In addition to the sponsoring a national bank, Hamilton's other measures were an assumption of the state war debts by the U.S. government, establishment of a mint and imposition of a federal excise tax. The goals of Hamilton's three measures were to:[2]

In simpler words, Hamilton's four goals were to:

Proposal

According to the plan put before the first session of the First Congress in 1790, Hamilton proposed establishing the initial funding for the First 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 did not have $2 million, proposed that the government purchase the stock using money lent to it by the bank; the loan to be paid back in ten equal annual installments.[5] 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 scrip, etc.[6]

Unlike the Bank of England, the primary function of the bank would be to issue credit to the government and private interests, for internal improvements and other economic development, per Hamilton's system of Public Credit. The business 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.[7]

There were other, non-negotiable conditions for the establishment of the First Bank of the United States. Among these were:[8]

To ensure that the government could meet both the current and future demands of its governmental accounts, an additional source of funding was required, "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... an additional $38,291 was needed to cover deficiencies in the funds that had been appropriated for existing commitments."[10] 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. Local opposition to the tax led to the Whiskey Rebellion.

Opposition

Hamilton's bank proposal faced widespread resistance from opponents of increased federal power. Secretary of State Thomas Jefferson and James Madison led the opposition, which claimed that the bank was unconstitutional, and that it benefited merchants and investors at the expense of the majority of the population.

Like most of the Southern members of Congress,[11] Jefferson and Madison also opposed a second of the three proposals of Hamilton: establishing an official government Mint. They believed this centralization of power away from local banks was dangerous to a sound monetary system and was mostly to the benefit of business interests in the commercial north, not southern agricultural interests, arguing that the right to own property would be infringed by these proposals. Furthermore, they contended that the creation of such a bank violated the Constitution, which specifically stated that Congress was to regulate weights and measures and issue coined money (rather than mint and bills of credit).[12]

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 an excise tax to finance it) would likewise glide through, and in their 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."[13]

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 utilize the authorized powers of the government implied under the law 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. Another argument came from James Madison, who believed Congress had not received the power to incorporate a bank or any other governmental agency. His argument rested primarily on the Tenth Amendment: that all powers not endowed to Congress are retained by the States (or the people). Additionally, his belief was that if the Constitution's writers had wanted Congress to have such power, they would have made it explicit. The decision would ultimately fall on President George Washington, following his deliberate investigation of the cabinet members' opinions.[14]

Presidential approval

George Washington initially declared that he was hesitant to sign the "bank bill" into law. Washington asked for the written advice and supporting reasons 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. Hamilton, who, unlike his fellow cabinet members, came from New York, quickly responded to those who claimed incorporation of the bank unconstitutional. While Hamilton's rebuttals were many and varied, chief among them were these two:

On February 25, 1791, convinced that the constitution authorized the measure, Washington signed the "bank bill" into law.

On March 19, 1791 Washington appointed three Commissioners for the taking of subscriptions for this new bank: Thomas Willing, David Rittenhouse, and Samuel Howell.[16]

Willing was later elected as President on October 25, 1791, until he resigned due to ill health on November 10, 1807. The bank's Philadelphia branch opened its doors on December 12, 1791.[17] Willing was succeeded by David Lenox, serving until the expiration of its charter on March 4, 1811.

Expiration of charter

After Hamilton left office 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 by 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. Hamilton tried to organize opposition to the measure but was unsuccessful.

In 1816, the bank was succeeded by the Second Bank of the United States.

Purchase by Girard

After the charter for the First Bank of the United States expired in 1811, Stephen Girard purchased most of its stock as well as the building and its furnishings on South Third Street in Philadelphia and opened his own bank, later known as Girard Bank. Girard hired George Simpson, the cashier of the First Bank of the United States, as cashier of the new bank, and with seven other employees, opened for business on May 18, 1812. He allowed the Trustees of the First Bank of the United States to use some offices and space in the vaults to continue the process of winding down the affairs of the closed bank at a nominal rent.[18]

Over its early history the bank was known as "Girard's Bank,"[19] or as "Girard Bank" [20] or also as "Stephen Girard's Bank" or even the "Bank of Stephen Girard." Girard was the sole proprietor of his bank, and thus avoided the Pennsylvania state law which prohibited an unincorporated association of persons from establishing a bank, and which required a charter from the legislature for a banking corporation.[21]

Bank building

Nrhp Type:nhl
First Bank of the United States
Location:120 S 3rd Street
Philadelphia, Pennsylvania
Built:1797
Architect:Samuel Blodgett,
and James Hoban
Architecture:Greek Revival
Added:May 4, 1987
Refnum:87001292

The First Bank of the United States was established in Philadelphia, Pennsylvania, while the city served as the national capital, from 1790 to 1800. The bank began operations in Carpenters' Hall in 1791, some 200 feet from its permanent home.

Design of the bank building is credited to Samuel Blodgett, Superintendent of Buildings for the new capital in Washington, DC.,[22] although it has also been attributed to James Hoban.[23] [24] It was completed in 1797 and was the first building specifically for the new federal government.[25]

The First Bank of the United States has received various designations as a historic building. It was included in Independence National Historical Park when the park was formed in 1956. The building's architecture was studied by the Historic American Buildings Survey in 1958.[23] With the rest of Independence National Historical Park, it was listed on the National Register of Historic Places on October 15, 1966, and the bank was then declared a National Historic Landmark on May 4, 1987. It is described in the landmark designation as an early masterpiece of monumental Classical Revival design.[26]

The building has been closed to the public since the 1970s.[27] Until about 2000, the building housed offices for Independence National Historical Park. A proposal to have it house the collection of the Philadelphia Civil War Museum was abandoned when funding from the state of Pennsylvania was not forthcoming.[28]

In June 2023, Independence National Historical Park received $22 million from the Great American Outdoors Act to renovate the building and develop a museum about the early American economy, planned to open in 2026.

See also

Further reading

External links

Notes and References

  1. Web site: The First Bank of the United States | Federal Reserve History . www.federalreservehistory.org . 2023-01-07 . 2021-07-01 . https://web.archive.org/web/20210701024608/https://www.federalreservehistory.org/essays/first-bank-of-the-us#:~:text=Unlike+modern+central+banks,+the,did+not+hold+their+reserves. . live .
  2. Book: Bailey, David M. Kennedy, Lizabeth Cohen, Thomas A. . The American pageant : a history of the Republic . 2006 . Houghton Mifflin Co. . Boston . 0618479279 . 193–95 . 13th.
  3. Web site: Alexander Hamilton's Fiscal Program 1791–1793 . Blinn College . Blinn.edu . November 13, 2014 . September 26, 2002 . https://web.archive.org/web/20020926031539/http://www.blinn.edu/ . live .
  4. Web site: Alexander Hamilton's Financial Program . Digital History . November 13, 2014 . December 25, 2015 . https://web.archive.org/web/20151225140001/http://www.digitalhistory.uh.edu/disp_textbook.cfm?smtID=2&psid=2973 . live .
  5. Book: Founders and Finance, Harvard U. Press . October 15, 2012 . Belknap Press . 9780674066922 . 2021-10-27 . 2021-10-27 . https://web.archive.org/web/20211027184034/https://www.hup.harvard.edu/catalog.php?isbn=9780674066922#:~:text=The . live .
  6. The First Bank of the United States: A Chapter in the History of Central Banking
  7. Book: McDonald, Forrest . Alexander Hamilton: A Biography . W.W. North & Co. . 1979 . 194–95.
  8. Book: Kaplan, Edward . The Bank of the United States and the American Economy . ABC-CLIO . 1999 . 9780313371523 . 26.
  9. Report on the Bank, in Syrett, ed., Papers, 7:326–28
  10. Further Report on Public Credit, 7:226
  11. Coblenz . Michael . The Fight Goes on Forever: 'Limited Government' and the First Bank of the United States . Southern Illinois University Law Journal . 2015 . 39 . 408 . October 21, 2016 . July 26, 2023 . https://web.archive.org/web/20230726012040/https://search.ebscohost.com/login.aspx?direct=true&db=edslex&AN=edslex526A16FB&site=eds-live&scope=site . live .
  12. Westley . Christopher . The Debate Over Money Manipulations: A Short History . Intercollegiate Review . Fall 2010 . 45 . 1–2 . 3–11 . February 28, 2011 . July 27, 2011 . https://web.archive.org/web/20110727091145/http://www.mmisi.org/ir/45_1-2/westley.pdf . live .
  13. Book: McDonald, Forrest . Alexander Hamilton: A Biography . W.W. North & Co. . 1979 . 194.
  14. [John Marshall]
  15. Washington to Hamilton, February 16, 1791, in Syrett, ed. Papers 8:98
  16. Book: Hamilton, Alexander . Papers of Alexander Hamilton. Vol VIII 1781 – July 1791 . 1961 . Columbia University Press . New York . 211.
  17. Book: Carruth, Gorton . Encyclopedia of American Facts and Dates . HarperCollins . 1993 . 0062700456 . 9 . 111.
  18. Book: Wilson, George . Stephen Girard . Combined Books . Conshohocken . 1995 . 249 . 0-938289-56-X.
  19. Web site: Girard's Bank . May 2, 2009 . LOC Authorities . Library of Congress.
  20. Book: Konkle, Burton Alva . Thomas Willing and the First American Financial System . University of Pennsylvania Press . 1937 . Philadelphia, PA . 199–200.
  21. Book: Wilson, George . Stephen Girard . Combined Books . Conshohocken . 1995 . 249–250 . 0-938289-56-X.
  22. Web site: 1984 National Register Nomination . 2010-02-20 . 2012-08-05 . https://archive.today/20120805074202/http://www.nps.gov/history/history/online_books/butowsky2/constitution5.htm . live .
  23. James Hoban and the First Bank of the United States . Matthew . Baigell . Journal of the Society of Architectural Historians . 28 . 2 . 1969 . 135–36 . 10.2307/988511 . 988511.
  24. Book: American architecture 1607–1976 . Marcus Whiffen . Marcus . Whiffen . Frederick . Koeper . 125 . Cambridge . MIT Press . 1981 . 0262231050 . registration .
  25. Web site: The Great American Outdoors Act deposits $22 million in the First Bank of the United States - Independence National Historical Park . 2023-07-10 . National Park Service . en . 2023-07-10 . https://web.archive.org/web/20230710234013/https://www.nps.gov/inde/learn/news/the-great-american-outdoors-act-deposits-22-million-in-the-first-bank-of-the-united-states.htm . live .
  26. Web site: NHL nomination for First Bank of the United States. National Park Service. March 20, 2017. October 22, 2020. https://web.archive.org/web/20201022210626/https://npgallery.nps.gov/NRHP/GetAsset/NRHP/87001292_text. live.
  27. Web site: Alexander Hamilton's bank to become a museum of the American economy . 2023-07-10 . WHYY . en-US . 2023-07-10 . https://web.archive.org/web/20230710234016/https://whyy.org/articles/philadelphia-independence-park-alexander-hamilton-first-bank-museum-of-american-economy/ . live .
  28. Web site: ราคาบอล ส คืออะไร แทงบอลแล้วเจอราคานี้ จะเล่นยังไง . Cwurmuseum.org . 2023-01-07 . 2023-01-07 . https://web.archive.org/web/20230107162817/https://cwurmuseum.org/ . dead.