George Washington's Secretary of the Treasury, Alexander Hamilton, suggested that the United States would benefit from the formation of a national bank along the lines of the Bank of England. He was convinced that the bank was both proper and constitutional, being allowed by the tenth amendment (not at that time even ratified) because it was an appropriate means, albeit not specified, to achieve the goals of the federal government.
Jefferson strongly disagreed, both as a matter of financial policy and due to his interpretation of the tenth amendment. Jefferson pointed out that nowhere in the constitution was authority given to the federal government to charter a bank. This debate over reserved powers would be continued by others for more than a century.
Washington adopted the arguments offered by Hamilton. The First Bank of the United States was given a 20-year charter in 1791. Its equity capital was $10 million, of which $2 million was contributed by the federal government and the balance by private shareholders. It was governed by a board of 25 directors, of whom five were chosen by the federal government. The bank's headquarters were in Philadelphia. The original bank building was restored for the Bicentennial in 1976 and can be toured today.
The bank had branches in other cities and played a valuable role in the commerce of the young nation. However, it was constantly under attack from the Jeffersonian Democrats who prevented its charter from being renewed in 1811. However, the financial stress of the War of 1812 showed the need for the bank, and the Second Bank of the United States was chartered after the end of the war.
After Alexander Hamilton spearheaded a movement advocating the creation of a central bank, the First Bank of the United States was established in 1791.
The First Bank of the United States had a capital stock of $10 million, $2 million of which was subscribed by the federal government, while the remainder was subscribed by private individuals. Five of the 25 directors were appointed by the U.S. government, while the 20 others were chosen by the private investors in the Bank.
The First Bank of the United States was headquartered in Philadelphia, but had branches in other major cities. The Bank performed the basic banking functions of accepting deposits, issuing bank notes, making loans and purchasing securities. It was a nationwide bank and was in fact the largest corporation in the United States. As a result of its influence, the Bank was of considerable use to both American commerce and the federal government.
---- Selected Quotes ----
Quotes regarding First Bank of the United States.
By Alexander Hamilton
Every power vested in a government is in its nature sovereign, and includes by force of the term a right to employ all the means requisite...to the attainment of the ends of such power.
Opinion on the Constitutionality of the Bank of the United States, 1791
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