First Bank of the United States

First Bank of the United States: Sectional and Political Controversy

First Bank of the United States: Political Parties Emerge

Identification: Federally chartered, quasi-private central bank
Date: 1791-1811
Significance: The First Bank of the United States helped stabilize the finances of, pay the debts of, and establish international credit for the fledgling nation’s federal government. The debate over its existence shaped the course of constitutional law and led to the founding of the United States’ first two political parties.

Independence from Great Britain brought the United States and its constituent states considerable debt. The amount of state and national debt increased under the Articles of Confederation. The lack of a stable national currency further undermined the new nation’s international credibility. After the adoption of the Constitution, Congress in October, 1789, asked Secretary of the Treasury Alexander Hamilton to study the problem and create a report on the nation’s credit. Hamilton’s Report on the Public Credit, January, 1790 advocated establishing the credit of the United States by assuming responsibility for the debts of the Articles of Confederation government, the debts incurred during the Revolutionary War, the foreign debt principally owed to France, and the debts of the states. The report recommended chartering a national bank that would be responsible for issuing a national currency and levying protective tariffs to raise revenue.

Further Reading

• Chernow, Ron. Alexander Hamilton. New York: Penguin Press, 2004. Thorough and meticulously documented biography of the first major figure in American financial history. Offers new information about Hamilton’s ancestry, his personality, and his relationships with other Founders.
• Cowen, David Jack. The Origins and Economic Impact of the First Bank of the United States, 1791-1797. New York: Garland, 2000. Drawing on previously untapped evidence, this close study of the First Bank of the United States explores the bank’s origins, its shifting policies, and its strong impact on the nascent national economy. 
• Ferguson, E. James. The Power of the Purse: A History of American Public Finance, 1776-1790. Durham: University of North Carolina Press, 1961. Study of American financial history that reveals how important Hamilton’s measures were in saving the country from“currency finance” and creating an environment favoring economic growth and stability. 
• Gordon, John Steele. Hamilton’s Blessing: The Extraordinary Life and Times of Our National Debt. New York: Walker, 1997. Study revealing the long history of American national debt and showing how it originated with Hamilton’s ideas that a national debt could create a vital economy. 
• Moulton, R. K., comp. Legislative and Documentary History of the Banks of the United States from the Time of Establishing the Bank of North America, 1781, to October, 1834. 1834. Reprint. Clark, N.J.: Law book Exchange, 2008. Reprint of a valuable early nineteenth century collection of contemporary documents on the creation and operation of the two early national banks. Especially useful for its documentation of contemporary opinions about the banks. 
• Wright, Robert E., and David J. Cowen. Financial Founding Fathers: The Men Who Made America Rich. Chicago: University of Chicago Press, 2006. Illuminating study of the contributions to American financial history made by Hamilton and his successors, including Albert Gallatin, Stephen Girard, and Nicholas Biddle. A valuable study of early banking institutions that is suitable for both beginning and advanced students.

See also: Second Bank of the United States; Constitution, United States; Federal Reserve; Federal monetary policy; Supreme Court and banking law.