The Usa Treasury and Its First "Bank"

The "First" Bank of the usa.

War and economic hardship had typically driven the important developments from the financial progression of the first colonies, first under British rule and then along with the Continental Congress. However, introduction of the Bank of the us--largely a private achievement of then Secretary of the Treasury Alexander Hamilton--was a crucial exception. Working during a period of peace and prosperity, Hamilton designed your bank within his overall plan for building a supply of credit for any new government. Not alone would this new bank assist the Treasury with receipts and expenditures, it would provide a national currency.

Before Hamilton's plan was adopted, it became the point of interest of the constitutional controversy that lasted many years. The Constitution explicitly forbade state governments to coin money, emit bills of credit, or make anything but gold and silver coin legal tender in payment of debts. With regards to banking, however, the Constitution failed to specify the powers in the Federal and state governments.

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The Federalists, supporters of strong central government and broad interpretation of your Constitution, favored Hamilton's plan. Strict constructionists, including James Madison, opposed your bank for an infringement on rights properly reserved into the states. Hamilton along with the Federalists ultimately prevailed. President Washington rejected the opinions of his Attorney General and Secretary of State that the act was unconstitutional and signed the bill incorporating the bank in 1791.

The lender soon became a major lender. Hamilton gradually transferred the Treasury deposits on the bank. Your bank begun to issue notes which were receivable in payments to the Federal government. Even if this did not mean the notes were explicitly legal tender under law, it turned out essentially that in reality. This gave your budget of the us quite a plus over other, private banks.

Almost all of the bank's transactions however, were commercial loans for financing domestic and foreign trade. Thus, even though the bank had prominence and influence nationally, it was not what later came to be termed as a central bank with authority over or responsibility for any country's monetary system.