on a National Bank (1790)
Source: Document 82 in Hart, v. III, pp. 276-281.
state papers are the measure by which the value of all subsequent efforts on
the same subject is estimated. The law establishing the bank did not differ
from Hamilton's plan in any essentials, except that the life of the bank was
limited to twenty years. Bibliography: Bowker and Iles, Reader's Guide in Economic, Social, and Political Science, 35-37, 40-41;
Charming and Hart, Guide, §
establishment of banks in this country seems to be recommended by
reasons of a peculiar nature. Previously to the revolution, circulation
was in a great measure carried on by paper emitted by the several local
governments . . . . This auxiliary may be said to be now at an end. And
it is generally supposed, that there has been for some time past, a
deficiency of circulating medium . . . .
the supposition of such a deficiency be in any degree founded, and some
aid to circulation be desirable, it remains to inquire what ought to be
the nature of that aid.
emitting of paper money by the authority of government is wisely
prohibited to the individual states, by the national constitution; and
the spirit of that prohibition ought not be disregarded by the
government of the United States . . . .
other material differences between a paper currency, issued by the mere
authority of government, and one issued by a bank, payable in coin, is
this: that in the first case, there is no standard to which an appeal
can be made, as to the quantity which will only satisfy, or which will
surcharge the circulation; in the last, that standard results from the
demand. If more should be issued than is necessary, it will return upon
the bank. Its emissions . . . must always be in a compound ratio to the
fund and the demand: -‑ Whence it is evident, that there is a
limitation in the nature of the thing; while the discretion of the
government is the only measure of the extent of the omissions, by its
own authority . . . .
payment of the interest of the public debt, at thirteen different
places, is a weighty reason, peculiar to our immediate situation, for
desiring a bank circulation. Without a paper, in general currency,
equivalent to gold and silver, a considerable proportion of the specie
tit the country must always be suspended from circulation, and left to
accumulate, preparatory to each day of payment; and as often as one
approaches, there must in several cases be an actual transportation of
the metals at; both expense and risk, from their natural and proper
reservoirs, to distant places. .
it then as a consequence, from what has been said, that a national bank
is a desirable institution, two inquiries emerge‑Is there no such
institution, already in being, which has a claim to that character, and
which supersedes the propriety or necessity of another? If there be
none, what are the principles upon which one ought to be established?
There are at present three banks in the United States: that of North
America, established in the city of Philadelphia; that of
New‑York, established in the city of New‑York; that of
Massachusetts, established in the town of Boston. Of these three, the
first is the only one which has at any time had a direct relation to the
government of the United States . . .
directors of this bank, on behalf of their constituents, have since accepted
and acted under a new charter from the state of Pennsylvania, materially
variant from their original one; and which so narrows the foundation of
the institution, as to render it an incompetent basis for the extensive
purposes of a national bank . . . .
order of the subject, leads next to the inquiry into the principles upon
which a national bank ought to be organized.
situation of the United States naturally inspires a wish, that the form
of the institution could admit of a plurality of branches. But various
considerations discourage from pursuing this idea, . . .
wish, dictated by the particular situation of the country, is, that the
bank could be so constituted as to made an immediate instrument of loans
to the proprietors of land; but this wish also yields to the difficulty
of accomplishing it. Land is alone an unfit fund for a bank circulation.
1f the notes issued upon it were not to he payable in coin, on demand,
or at a short elate, ‑this would amount to nothing more than a
repetition of the paper emissions, which are now exploded by the general
voice. If the notes arc: to he payable in coin, the land must first be
converted into it, by sale or mortgage. The difficulty of effecting the
is the very thing which begets the desire of finding another resource;
and the former would not be practicable on a sudden emergency, but with
sacrifices which would make the cure worse than the disease. Neither is
the idea of constituting the fund partly of coin and partly of land,
free from impediments. These two species of property do not, for the
most part, unite in the same hands . . .
of public advantage suggest a further wish, which is, that the bank
could be established upon principles that would cause the profits of it
to redound to the immediate benefit of the state. This is contemplated
by many who speak of a national bank, but the idea seems liable to
insuperable objections. To attach full confidence to an institution of
this nature, it appears to be an essential ingredient in its structure,
that it shall be under a private, not a public direction, under the guidance of individual interest,
not of public policy; which would be supposed to be, and in certain
emergencies, under a feeble or too sanguine administration, would really
be, liable to being too much influenced. by public
necessity. The suspicion of this would most probably be a canker
that would continually corrode the vitals of the credit of the bank, and
would be most likely to prove fatal in those situations in which the
public good would require that they should be most sound and vigorous.
It would, indeed, be little less than a miracle, should the credit of
the bank be at the disposal of the government, if in a long series of
time, there was not experienced a calamitous abuse of it . . . .
far as may concern the aid of the bank, within the proper limits, a good
government has nothing more to wish for, than it will always possess;
though the management be in the hands of private individuals. As the
institution, if rightly constituted, must depend for its renovation from
time to time on the pleasure of the government, it will not be likely to
feel a disposition to render itself by its conduct unworthy of public
patronage. The government, too, in the administration of its finances,
has it in its power to reciprocate benefits to the bank, of not less
importance than those which the bank affords to the government, and
which, besides, are never unattended with an immediate and adequate
compensation . . . .
will not follow, from what has been said, that the state may not be the
holder of a part of the stock of a bank, and consequently a sharer in
the profits of it. It will only follow, that it ought not to desire any
participation in the direction of it, and therefore, ought not to own
the whole or a principal part of the stock . . . 
is one thing, however, which the government owes to itself and to the
community; at least to all that part of it, who are not stockholders;
which is to reserve to itself a right of ascertaining, as often as may
be necessary, the stake of the bank, excluding, however, all pretension
to control . . . .
therefore, ideas which, however agreeable or desirable, are neither
practicable nor safe ; the following plan for the constitution of a
National Bank, is respectfully submitted to the consideration of the
The capital stock of the bank shall not exceed ten millions of dollars,
divided equally into twenty-five thousand shares, each share being four
hundred dollars . . . Bodies
politic, as well as individuals, may subscribe.
The amount of each share shall be payable, one fourth in gold and silver
coin, and three fourths in that part of the public debt, which . . .
shall bear an accruing interest at the time of payment of six per centum
per annum . . . .
The subscribers to the bank and their successors shall be
incorporated, and shill so continue, until the final redemption of that
part of its stock which shall consist of the public debt.
The capacity of the corporation to hold real and personal estate, shall
be limited to fifteen millions of dollars, including the amount of its
capital or original stock . . . .
The totality of the debts of the company, whether by bond, bill, note,
or other contract, (credits for deposits excepted,) shall never exceed
the amount of its capital stock. In case of excess, the directors, under
whose administration it shall happen, shall be liable for it in their private
or separate capacities. Those who may have dissented, may excuse
themselves froth this responsibility, by immediately giving notice of
the fact and their dissent, to the President of the United States, and
to the stockholders, at a general meeting to be called by the president
of the bank, at their request.
The company tray sell or demise its lands and tenements, or may sell the
whole or any part of the public debt, whereof its stock shall
No loan shall be made by the bank, for the use or on account
the government of the United States, or of either of them, to an amount
exceeding fifty thousand dollars, or of any foreign prince or state;
unless previously authorized by a law of the United States . . . .
The affairs of the bank shall be under the management of twenty-five
directors, one of whom shall be the president . . .
None but a stockholder, being a citizen of the United States, shall be
eligible as a director . . . .
The bills and notes of the bank originally made payable, or which shall
have become payable on demand, in gold and silver coin, shall be
receivable in all payments to the United States.
The officer at the head of the treasury department of the United States,
shall be furnished from time to time, as often as he may require, not
exceeding once a week, with statements of the amount of the capital
stock of the bank, and of the debts due to the same, of the monies
deposited therein, of the notes in circulation, and of the cash in hand;
and shall have a right to inspect such general accounts in the books of
the bank, as shall relate to the said statements; provided that this
shall not be construed to imply a right of inspecting the account of any
private individual or individuals, with the bank.
No similar institution shall be established by any future act of the
United States, during the continuance of the one hereby proposed to be
It shall be lawful for the directors of the bank to establish offices,
whosesoever they shall think fit, within the United States, for the
purposes of discount and deposit only, and upon the same terms, and in
the same manner, as shall be practiced at the bank . . .
And lastly. The President of the United States shall be authorized to
cause a subscription to be made to the stock of the said company, on
behalf of the United States, to an amount not exceeding two millions of
dollars . . . borrowing of the bank an equal sum, to be applied to the
purposes for which the said monies shall have been procured,
reimburseable in ten years by equal annual installments; or at any time
sooner, or in any greater proportions, that the government may think fit
. . . .
combination of a portion of the public debt, in the formation of the
capital, is the principal thing of which an explanation is requisite.
The chief object of this is, to enable the creation of a capital
sufficiently large to be the basis of an extensive circulation, and an
adequate security for it . . . . But to collect such a sum in this
country in gold 
and silver, into one depository, may, without hesitation, be
pronounced impracticable. Hence the necessity of an auxiliary, which the
public debt at once presents.
part of the fund will be always ready to come in aid of the specie. It
will more and more command a ready sale; and can therefore expeditiously
be turned into coin if an exigency of the bank should at any time
require it. This quality of prompt convertibility into coin, renders it
an equivalent for that necessary agent of bank circulation; and
distinguishes it from a fund in land, of which the sale would generally
be far less compendious, and at great disadvantage . . . .
interdiction of loans on account of the United States, or of any
particular state, beyond the moderate sum specified, or of any foreign
power, will serve as a barrier to executive encroachments, and to
combinations inauspicious to the safety, or contrary to the policy of
limitation of the rate of interest is dictated by the consideration,
that different rates prevail in different parts of the Union; and as the
operations of the bank may extend through the whole, some rule seems to
be necessary . . .
last thing which requires any explanatory remark, is, the authority
proposed to be given to the President to subscribe to the amount of two
millions of dollars, on account of the public. The main design of this
is, to enlarge the specie fund of the bank, and to enable it to give a
more early extension to its operations. Though it is proposed to borrow
with one hand what is lent with the other; yet the disbursement of what
is borrowed, will be progressive, and bank notes maybe thrown into
circulation, instead of the gold and silver. Besides, there is to be an
annual reimbursement of a part of the sum borrowed, which will finally
operate as an actual investment of so much specie. In addition to the
inducements to this measure, which result from the general interest of
the government to enlarge the sphere of the utility of the bank, there
is this more particular consideration, to wit, that as far as the
dividend on the stock shall exceed the interest paid on the loan, there
is a positive profit,
Hamilton, Works (New York, 1810), I, 80-109 passim.
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