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The First Bank of the United States was a bank chartered by Congress on February 25, 1791.[1]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.

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.

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 In addition, the value and exchange rate was almost always outdated or unknown by the party agreeing to receive it, especially the further it moved away from the coast; and, thanks to distances, primitive roads, and absence of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.

One of three

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.

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.

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 insisting on these conditions the Bank of the United States might technically possess $500 thousand 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.

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 rewarding 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]

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.


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.

Southern congressman feared the burdens of this proposed excises tax would fall disproportionaly heavy on the South, where, declared Jackson, “hard liquor was a necessity of life.”[5]

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.”[6]

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.

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 Randolf 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,

“…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…”[7]

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…[8]
    [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.


In 1796, Oliver Wolcott, Jr. who had taken over the position of Secretary of the Treasury from Hamilton, who had retired a year earlier, 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 raise taxes. Wolcott advised the first choice. Congress quickly agreed. Hamilton objected, believing that the dividends on that stock had been involably pledged for the support of the sinking fund to retire the debt.[9] Hamilton tried to organize opposition to the measure, but was unsuccessful.

The Bank of the United States was to be housed in Philadelphia, Pennsylvania, one of the largest cities in the English speaking world of the eighteenth century. Located in Carpenters’ Hall for several years when that city was the capital, it was designed by Samuel Blodgett and James Windrim. Its charter expired in 1811. It followed the Bank of North America and it was succeeded by the Second Bank of the United States. The building was listed as a National Historic Landmark on May 4, 1987.

Hamilton’s ghost

It is believed by some that the ghost of Alexander Hamilton haunts the building. In the days that followed Hamilton’s death in 1804, several people believed to have seen him in the bank. After it’s closing in 1811, the bank was sold to Stephen Girard who had the building blessed by a Catholic priest. After this, there were fewer sightings of Hamilton, but there have still been sporadic encounters through the years leading to today. [2]

See also

History of central banking in the United States
Four Pillars of Alexander Hamilton

External links

Hamilton’s opinion
Jefferson’s opinion
Record of the Debate


  1. ^ National Register Information System. National Register of Historic Places. National Park Service (2006-03-15).
  2. ^ McDonald, Forrest, Alexander Hamilton: A Biography (W.W. North & Co. 1979) p. 194)
  3. ^ Report on the Bank, in Syrett, ed., Papers, 7:326-28
  4. ^ Further Report on Public Credit, ibid., 7:226
  5. ^ McDonald, Forrest, Alexander Hamilton: A Biography, (W.W. Norton & Company) p. 198
  6. ^ McDonald, Forrest, Alexander Hamilton: A Biography, (W.W. Norton & Co. New York 1972) p. 199.
  7. ^ Washington to Hamilton , February 16, 1791, in Syrett, ed. Papers 8:50-51
  8. ^ Ibid. 8:98
  9. ^ Ibid

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