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In
his function as Secretary of the Treasury, Alexander Hamilton stood also
behind the First Bank of the United States, which was chartered in 1791
despite fierce opposition of the new Republican party and notably Secretary
of State Thomas Jefferson and congressman James Madison, both future US
presidents. Thomas Willing, the merchant partner of Robert Morris and
president of the Bank of North America headed the First Bank of the United
States in its first years. With a capital of $ 10 million, the Philadelphia
based First Bank of the United States was America’s largest corporation and
it soon became a vital financial institution. As the only bank with a
federal charter, it opened branches in Boston, New York, Baltimore and
Charleston South Carolina. Although it had not the powers of a modern
central bank, the First Bank of the United States led the banking system of
the early Republic as it could issue as much as $ 10 million in dependable
notes and serve as a clearing house for state chartered banks through its
branches. These also spread to Norfolk Va, Washington, Savannah and New
Orleans. Thanks to the influence of Treasury Secretary Albert Gallatin, the
First Bank of the United States even survived the administrations of
Republicans Thomas Jefferson and James Madison, formerly fierce opponents to
the bank’s chartering, until its charter expired in 1811. Although Gallatin
had in the meantime persuaded president Madison to support the
re-chartering, the leading Republicans in both houses of Congress prevented
it. Albert Gallatin was in charge of the Bank’s liquidation, which involved
the selling of its branches to the most influent state banks. The head
office in Philadelphia was taken over by Stephen Girard, then the richest
man in America and a large shareholder of the Bank, who used it as the basis
of his non-chartered private Girard Bank, injecting a capital of 1'200'000
$.
Private
banking houses, like the Girard Bank in Philadelphia, emerged generally as
the result of the specialization of wealthy shipping merchants on the
financial transactions related by the trading business. The major such
houses included Prime, Ward & King in New York as well as Alexander Brown
and his sons, who established a network of private banking houses in
Baltimore, Philadelphia, New York and Liverpool. These private bankers were
at the top of America’s wealth scale : Stephen Girard being the richest man
in the country, Nathaniel Prime one of the five richest men in New York and
the Browns among the country’s wealthiest families. Private bankers were
also the chosen representatives of their great European equivalents :
Barings, represented by Girard in Philadelphia and by Thomas Wren Ward in
Boston; Rothschild, represented by immigrant August Belmont in New York or
Lizardis of Paris, whose American agent was Edmond Forstall in New Orleans.
The
liquidation of the First Bank of the United States happened at a difficult
moment when the country due to its engagement in the War of 1812 once more
required vast financial resources. Unable to get enough subscriptions for
several war loans, the government was eventually assisted by a group of
wealthy merchants, including Stephen Girard and John Jacob Astor, who
financed $ 10 million and placed it among their fellow merchants and
business partners. The precariousness of government finance during the war
and the post war recession convinced the Republican government under James
Madison, to re-establish a national bank. Thus was created the Second Bank
of the United States in 1816, with Stephen Girard as a big subscriber and
one of the government appointed directors.
Bankers I
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