Looking back to the outset of the 19th century, it is impossible to say that any real banking system had really been developed in the US. This is to say that, though there were roughly 120 private commercial banks that had been chartered by new state governments, the so-called system was scarcely organized. It was ad hoc in nature and directly linked to the merchant banking practices of the pre-independence period. The years preceding the turn of the century were important because they brought a central banking authority onto the scene. In 1789 the new federal government established a position for the Secretary of the Treasury. As we know, the first to hold this prestigious title was Alexander Hamilton. He accomplished a great deal in the 11 years leading up to the year 1800. Most notably his actions were largely responsible for the creation of the First Bank of the United States, which was given a charter in 1791. This thrust towards central banking was only to last 20 years, however. Up for review in 1811, the bank’s charter was not renewed.

This paper will argue that the failure to renew the First Bank of the United State’s charter was a direct result of the stron

Ultimately, Madison and Jefferson were successful in rallying this centralist effort to be a political monarchy. Madison claimed that the creation of such a central bank was unconstitutional, primarily because the constitution did not expressly allow for the United States government to create a bank or any other type of private corporation. Nevertheless, the plan was passed through Congress, with the north being distinctly in its favor, and the south being uniformly opposed.

In the final analysis, observing the first decade of the 19th century reveals that the banking system was basically in upheaval over the federal/state divide. Put another way, the decade was marked by the debate over central vs. state led banking. During the decade, the forces led by Alexander Hamilton were dominant, though consistently losing ground. The inordinate power bestowed upon Hamilton as the first Secretary of the Treasury, along with his ability to persuade Washington of his plan, allowed for the creation of a strong central bank that was efficiently run. Above all, Hamilton’s plan was to create a banking system that would allow the US to prosper, and gain integrity in the eyes of the international community. The operation of the First Bank of the US directly reflected these objectives. “The Bank carried a remarkable amount of liquidity. In 1809, for example, its specie/banknote ratio was about 40 percent (compared to a modern average reserve/deposit ratio of about 12 percent) making it probably the most liquid bank in the U.S. at the time. Despite the liquidity, the Bank was also profitable, earning most of its income through substantial loans to both government and private business. It helped to end several bank runs by transferring funds to banks in need of temporary liquidity”(Flaherty, 1997). As it turns out, the success of the bank was the factor that led to its demise. Roughly 20% of the bank notes in circulation throughout the United States belonged to the First Bank, making its money the closest thing to a national currency that existed. States were adverse to the relative power of this centralist institution, and based on the bitter conflicts between Madison and Hamilton over state vs. federal power, the bank itself became politicized. As state-led forces increased their popularity, it is wholly unsurprising that the First Bank of the US was one of the first things to go.

The Banking Controversy at the Turn of the 19th Century

Some topics in this essay:
Madison Jefferson, Bank England, United States', Secretary Treasury, Bank United, Jefferson Madison, Massachusetts York, Jefferson Hamilton, Credit’ Congress, Republican Party, banking system, 19th century, bank united, central bank, 18th century, secretary treasury, bank england, bank notes, madison jefferson, central banking, decade 18th century, decade 19th century, bank notes circulation, bank north america, creation bank united,