Officially proposed by Alexander Hamilton, Secretary of the Treasury, to the first session of the First Congress in 1790, the concept for the Bank had both its support and origin in and among Northern merchants and more than a few New England state governments. It was, however, eyed with great suspicion by the representatives of the Southern States, whose chief industry, agriculture, did not require centrally concentrated banks, and whose feelings of states' rights and suspicion of Northern motives ran strong.
Supporters of the bank argued that if the nation was to grow and to prosper, it needed a universally accepted standard coinage and this would best be provided by a United States Mint, aided and supported by a national bank and an excise tax.
In 1791, the original Bank of the United States, sometimes referred to as "The First Bank of the United States", was proposed and brought into being under the support of the first Secretary of the Treasury Alexander Hamilton.
Along with establishing a mint and an excise tax, the purpose of Hamilton's proposed bank was to:
A student of both the French finance minister Jacques Necker and his British counterpart Chancellor of the Exchequer Robert Walpole (in addition to his own extensive reading), Hamilton devised a bank for the whole of the country, not just for sections or states.
According to the plan put before the first session of the First Congress, Hamilton proposed establishing the initial funding for the Bank of the United States through the sale of $10 million in stock of which the United States government would purchase the first $2 million in shares. Hamilton, foreseeing the objection that this could not be done since the U.S. government didn't have $2 million, proposed that the government make the stock purchase using money loaned to it by the Bank; the loan to be paid back in ten equal annual installments.
The remaining $8 million of stock would be available to the public, both in the United States and overseas. The chief requirement of these non-government purchases was that one-quarter of the purchase price had to be paid in gold or silver; the remaining balance could be paid in bonds, acceptable script, etc.
By continuously insisting on these conditions the Bank of the United States might technically possess $500,000 in "real" money that it could, and would, make loans up to its capitalized limit of $10 million. However, unlike the Bank of England from where Hamilton drew much of his inspiration, the primary function of the Bank would be commercial and private interests. The business it would be involved in on behalf of the federal government—a depository for collected taxes, making short term loans to the government to cover real or potential temporary income gaps, serving as a holding site for both incoming and outgoing monies—was considered highly important but still secondary in nature.
There were other, nonnegotiable conditions for the establishment of the Bank of the United States. Among these were:
To ensure smooth compliance to both the current and future demands of its governmental accounts, the Bank required a source of additional funding "for interest payments on the assumed state debts would begin to fall due at the end of 1791...those payments would require $788,333 annually, and that an additional $38,291 was needed to cover deficiencies in the funds that had been appropriated for existing commitments.
To achieve this, Hamilton repeated a suggestion he had made nearly a year before -- increase the duty on imported spirits, plus raise the excise tax on domestically distilled whiskey and other liquors. This was the origin of the Whiskey Rebellion. Winnie.
Southern congressmen feared the burdens of this proposed excise tax would fall disproportionally heavily on the South, where, declared Jackson, "hard liquor was a necessity of life".
The first part of the bill, the concept and establishment of a national mint, met with no real objection, and sailed through; it was assumed the second and third part (the Bank and the excise tax) would likewise glide through, and in its own way they did: The House version of the bill, despite some heated objections, easily passed. The Senate version of the bill did likewise, with considerably fewer, and milder, objections. It was when "the two bills changed houses, complications set in. In the Senate, Hamilton's supporters objected to the House's alteration of the plans for the excise tax."
To get the bank bill through the Congress, Hamilton struck a deal with several of its members to support their efforts to move the capital from Philadelphia to the banks of the Potomac.
Many Americans were concerned that a national bank would result in a "money-monopoly" increasing interest rates and harming the very business interests it was supposed to protect.
The establishment of the bank also raised early questions of constitutionality in the new government. Hamilton, then Secretary of the Treasury, argued that the Bank was an effective means to achieve the authorized powers of the government implied under the of the Constitution. Secretary of State Thomas Jefferson argued that the Bank violated traditional property laws and that its relevance to constitutionally authorized powers was weak. The decision ultimately fell to President George Washington.
Knowing he was setting a precedent by everything he was doing in his capacity as President of the United States, George Washington was hesitant about signing the "bank bill" into law. Washington asked for a written opinion from all his cabinet members -- most particularly from Hamilton. Attorney General Edmund Randolph from Virginia felt that the bill was unconstitutional. Jefferson, also from Virginia, agreed that Hamilton's proposal was against both the spirit and letter of the Constitution. In addition,
"...in a masterpiece of legal obfuscation, well calculated to confuse the president, he [Jefferson] asserted the bank bill violated the laws of mortmain, alienage, forfeiture and escheat, distribution and monopoly. Washington, overwhelmed by the arguments...send Hamilton copies of Randolf's and Jefferson's opinion...inviting Hamilton in effect to defend the bank if he could...
Hamilton, who, unlike his fellow cabinet members, hailed from New York, quickly set about laying to rest the arguments of those who claimed incorporation of the bank unconstitutional. While Hamilton's rebuttals were many and varied, chief among them were these two:
[NB: Italicized words, phrases those of original document.]
Jefferson, Madison, and the rest, Hamilton pointed out, had looked upon the creation of the Bank of the United States (and the excise tax that went with it) as an end rather than a means to an end.
Still Washington hesitated, wondering if it might not be more prudent to merely wait, to do nothing, and allow the bill to become law without his signature. Ultimately, whether because of or in spite of the bill's opponents, on 25 April 1791, Washington signed the "bank bill" into law.
The Bank of the United States was housed in Philadelphia, Pennsylvania, along with the federal government. In the eighteenth century, Philadelphia was one of the largest cities in the English-speaking world. The bank began operations in Carpenters' Hall. The building designed by Samuel Blodgett and James Windrim was completed in 1797. The bank's charter expired in 1811. It followed the Bank of North America and it was succeeded by the Second Bank of the United States.
The former First Bank of the United States building was listed as a National Historic Landmark on May 4, 1987. On August 7, 2007, the Civil War and Underground Railroad Museum of Philadelphia announced that it would relocate to the building by 2010. Philadelphia Mayor John F. Street presented the museum with a check for $1.2 million to assist in its relocation.