BANKS, AMERICAN

Banking in the United States had its real g in the Revolutionary War, though long before that event various colonies felt the need of banks and projected schemes for their establishment. As far back as 1686 a company in the colony of Ma achusetts Bay received authority to i ue bills of credit on the security of real and personal estate. About thirty-six years later the Land Bank in that colony was established and thrived for many years in the face of hostility from governors and councils. In 1780 the nece ity of supporting Washington’s army with nece aries led to the raising of a considerable sum of money by subscriptions, finally amounting to $1,500,000 in Pennsylvania currency. The subscribers numbered 92 and formed an a ociation known as_ the Pennsylvania Bank. The first bank of the republic was thus a war emergency institution organized to facilitate the despatch of supplies. The directors had power to borrow money on the bank’s credit and to i ue notes bearing six per cent interest. The bank was not established for profit and came to an end in 1784 after rendering great service to the cause.: The next bank, originated by Robert Morris and Alexander Hamilton, was likewise established to aid American independence, but it was a commercial bank, privately capitalized, and under government control and support. It became known as the Bank of North America, and to it Congre turned to preserve the Government’s credit from the evils of a depreciated currency. Opened in 1782 on a specie basis, it has continued operations to the present day as a member of the national banking system. The Bank of the United States came into being in 1791 on a twenty years’ charter through the efforts of Hamilton, and lasted till 1809, when Congre ended its existence. The institution was empowered to i ue notes, which were receivable for all payments to the United States government. The latter also utilized it as an agent in financial transactions, especially in obtaining loans from it to meet deficits in public revenues. The bank encountered the strongest opposition from Jefferson and his followers. Samuel Girard of Philadelphia purchased the bank’s premises and most of its a ets including $5,000,000 in specie, thereupon it was re-established as the Girard Bank, under which name it exists today. The Bank of the United States was not unprofitable; fits shareholders received dividends averaging 8 per cent. per annum and $434 per share on its final winding up. The second United States Bank, with a capital fixed at $55,000,000, one-fifth of which was subscribed by the government, with five of its directors appointed by the President, began operations in 1817, also on a twenty years’ charter. It had an eventful career, encountering at the outset the worst stage of a parlous financial situation which arose with the suspension of specie payments in 1816 and was culminated in a general crash six years later. The bank was of undoubted service, but its management was a ailed and charges of gro irregularities were made against it. Moreover, it became deeply involved in politics. As a result the bank incurred the hostility of President Jackson and could not get its charter renewed. In 1836 the institution secured a charter from the Pennsylvania legislature, but its life as a state institution was brief and calamitous. It was not until the Civil War that American banking organizations acquired the foundation they retain today. See Banks, NaTIonaL.