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Bead <j» the House of Representatives, Dee. ISA, 1790

3fo 118, FeMl-«reet
J S^flDOBT, fir X





Treasury Department, Bet. IS, 1790.
jry ohedignceto the order of the HOUSB of REPBJ&SKNTATITBS, of the ninth day of August last, requiring the
8B^B&TAKT of theTxs&jwmx to prepare and report, on
this day^snch further provision as may, in hie opinion,
J nt&sfartfar establishing ike PIJBOC C^ptfT—
the said Secretaryfurther

HAT from a>convfetion that a .l^ation&l ^ank is aa
institution of primary importance to the prosperous adininiittratvrn of thefinances,and would be of the greatest
utility IK the operations connected with the support of the
Public Credit, his attention has been drawn to devising
the plat* pf such ah institution* upon a scale whieh will
entitle it to the confidence, and be likely to reader it
equal to the evgenejes, of the public
Prerisoaljslo entering upon the. detail »f this, plan, h $
entreats the indulgence of the House* t^ward^. ?on^f|pHiaiivary connections naturally arising o*t of the subj^et,
which hV hopes Will be deemed neither useless m h out of
place. Public opinion being the ultiniate'wbUer* of eVery
measure of government, it can scarcely appear imprepe^
in deference to that, to accompany the origination of any
new proposition, with explanations, whieh tij^ superioF information of those to whom it is immediately addressed,
would reader superfluous.
It is a fact well understood, that public banks have
found admission and patronage among the principal and
most enlightened commercial nations. They have «ue-



cessively obtained in Italy, Germany, Holland, England,
and France, as well as in the United States. And it is a
circumstance which cannot but have considerable weight,
in a candid estimate of their tendency, that after an experience of centuries, there exists not a question about
their utility in the countries in which they have been so
long established. Theorists and men of business unite, in
the acknowledgment of itTrade and industry, wherever they have been tried, have
been-indebted to diem for important aid. And government
has been repeatedly under the greatest obligations to them,
in dangerous and distressing emergencies. That of the
United States, as well in some of die most critical conjunctures of the late war, as since the peaee, has received assistance from those established among, us, with
which it could not have dispensed.
With this two-fold evidence before us, it might be ejspected> that there would-be a perfect union of<opmidnS*i»
their favour. Yet doubts have 'been entertained^ jealousies and prejudices have circulated} and though the experiment is every day dissipating them, within the
spheres in which effects are belt knownj yet there are
still'persons by whom they hare not been entirely renounced. To give a full and accurate view of the subject*
would be to make a treatise of a reportj but there- are eer> tain aspeetsin which it maybe cursorily exhibited^ which
dlpperhaps eonduee to a just impression of its merits.;—
These will involve a comparison of the advantages, with
the disadvantages, real or supposed, of such institutions.
, The fol!owil%*are among the principal advantages of a
- First^ The augmentation of the active or- productive
capital of a*eonntry. Gold and silver, where they are employed merely as the instruments of exchange and alienation, have been, not improperly,.denominated dead stock;
but when deposited in banks, to become the basis of a paper circulation, which takes their character and place, as
the signs or represeatattves of value, they then acquire


$ •

Mfe, or, in other words, an active-and* productive quality.
This idea, which appears rather.subtile and abstract, In a
general form, may be made obvious and palpable* by entering into a few particulars. It -is evident* for instance*
that-the money which a merchant keeps in his chest, waiting for a favourable opportunity to employ it, produces
nothing till that opportunity arrives. But if, instead of
looking it up in this manner, he either deposits it in a
bank, or invests it in the stock of a bank, it yields a profit
duringtiieinterval, in which he partakes ornot,according to the ehbiee'he may have made of being a depositor
or a proprietor f and when any advantageous speculation
oilers; in> order to be able to embrace it, ho has only to
withdraw,if a depositor} or if .a proprietor, to
obtain a loajf f com the hanky or to dispose of Ms stock; an
alternative seldom or never attended with difficulty, when
ih&affairs of the institution are in a prosperous train. His
money thus deposited or invested, is a fund upon which
himself and others can borrow to a much larger amount.
It isa well established fact, that banks in good credit can
eirculate a far greater sum than the actual quantum of
their capital in gold and silver. The extent of the possible excess seems indeterminatej though it has been eonjecturally stated at the proportions of two and three to
one. • This faculty'is produced in various' ways. First—
A, great proportion oftinenotes which are issued and pass
current as .eash, are indefinitely suspended in circulation,
from the confidence which each holder has, that he can at
any moment turit them into gold and silver. Secondly—
Every loan which a bask makes, is, in itsfifestshape, a.
credit given to the borrower on its books, the amount »f
whieh |t stands «eady to pay, either in its Own notes, or in
gold or silver, at his option. But, in a great number of
cases, no actual payment is made in either. The borrower frequently, by a cheek or order, transfers his credit to
some other person, to whom he has a payment to make ;
who, in bis torn, is as often content with a similar credit,,
because he is satisfied that he can, whenever he pleases,


either convert it into cash, or pass it to some other hand,
as an equivalent for it. And in this manner the credit
keeps circulating, performing, in every stage, the office of
money, till it is extinguished by a discount with some
person who has a payment to make to the bank, to an
equal or greater amount. Thus large sums are lent and
paid, frequently through a variety of hands, without the
intervention of a single piece of coin. Thirdly—There
is always a large quantity of gold and silver in the repositories of the bank, besides its own stock, which, is .placed
there with a view, partly to its safe keeping, and partly to
the accommodation Of' an institution, which "is itself a
source of general accommodation. These deposits are of
immense consequence in the operations of a bank. Though
liable to be redrawn at any moment, experience proves,
that the money so much oftener changes proprietors than
place, and that what is drawn out is generally so speedily
replaced, as to authorize the counting upon the stuns deposited, as ah ejfiBe&beftmd; which, concurring with the
stock of the bank, enables it to extend its loans, and to
answer all the demands for coin, whether in consequence
of those loans, or arising from the occasional return of its
These different circumstances explain the manner in
which the ability of a bank to circulate a greater .sum
than its actual capital in coin, is acquired. This; hdwevefc,
must be gradual; and must be preceded by a firm establishment of confidence; a confidence which may be bestowed O the most rational grounds$ since the -excess in
question will always be bottomed on good' security of one
kind or another. This every Well-conducted bank carefully requires, before it will consent to advance either its
money or its credit 5 and where there is an auxiliary capital, (as will be the ease in tile plan hereafter submitted,)
which, together with the capital in coin, define the boundary that shall not be exceeded by the engagements of the
bank, the security may, consistently with all the maxims
of a reasonable circumspection, be regarded as complete-


t h e same circumstances illustrate the truth of the position, thajt it is one of the properties of banks to increase
the active capital of a country. This, in other words, is
the sum of them-—The money of one individual, while he
is waiting for an opportunity to employ it, by being either
deposited in the bank for safe-keeping, or invested in its
stock, is in a condition to administer to the wants of
others, without being put out of his own reach, when occasion presents. This yields an extra profit, arising front
what is paid for the use of his money by. others, when he"
could not himself make use of it; and keeps the money
itself in a state of incessant activity. In the almost infinite vicissitudes and competitions of mercantile enterprise, there never can be danger of an intermission of
demand, or that the money will remain for a moment idle
in the vaults of the bank. This additional employment
given to money, and the {acuity of a bank to lend and circulate a greater sum than the amount of its stock in coin,
are,'to all the purposes of trade and industry, an absolute
increase of capital. Purchases and undertakings, in general, can be carried on by any given sum. of bank paper
or credit, as effectually as by an equal sum of gold and
silver. And thus by contributing to enlarge the mass of
industrious and commercial enterprise, banks become nurseries of national wealth: a consequence, as satisfactorily verified by experience, as it is clearly dedueible in
Secondly. Greater facility to the government in obtainingpecuniary aids, especially in sudden emergencies.
This is another, and an undisputed advantage of public
banks: one which, as already remarked, has been realized in signal instances among ourselves.. The reason is
obvious: The capitals of a great number of individuals .
are, by this operation, collected to a point, and placed
under one direction. The mass formed by this union is,
in a certain sense, magnified by the credit attached to it.
And while this mass is always ready,,and can at once be
put in motion in aid of the government, the interest of



the bank-to aflbrd that aid, independent of regard to the
public safety and welfare, is a sure pledge for its disposition to go as far in its compliances, as can in prudence be
desired. There is in the nature of things, as will be more
particularly noticed in another place, an intimate connexion of interest between die government, and the bank,
of-a nation.
Thirdly. The facilitating of the payment of taxes.
This advantage is produced in two ways. Those who are
in a situation to have access to the bank, can have the assistance of loans to answer with punctuality the public
©alls upon them. This accommodation has been sensibly
felt in the payment of the duties heretofore laid, by those
who reside where establishments of this nature exist.
This, however, though an extensive, is not an universal,
benefit. The other way in which the effect here contemplated is produced, and in which the benefit is general, is
the increasing of the quantity of circulating medium, and
the quickening of circulation. The manner in which Che
first happens has already been traced. The last may require some illustration. When payments are to be made
between different places, having an intercourse of business •
-with each other, if there happen to be no private bills at
market, and there are no bank notes which have a currency in both, the consequence is, that coin must be remitted.
This is attended with trouble, delay, expense, and risk.
Jf, on the contrary, there are bank notes current in both
places, the transmission of these by the post, or any other
speedy or convenient conveyance, answers the purpose j ' and
these again, in the alternations of demand, are frequently returned very .soon after to the place from whence they
were first sent; whenee the transportation and re-transportation of the metals are obviated; and a more convenient, and more expeditious medium of payment is substituted. Nor is this all—The metals, instead of being suspended from their usual functions, during this process of
vibration from place to place, continue in'activity, and
administer still to the ordinary circulation; which of


course is prevented from suffering either diminution or
stagnation. These circumstances are additional causes of
what, in a practical sense, or to the purposes of business*
may be called greater plenty of money. And it is evident,
that whatever enhances the quantity of circulating money,
adds to the ease with which every industrious member of"
the community may acquire that portion of it, of which
he stands in need; and enables him the better to pay his taxes,' as well as to supply Ms other wants. Even
where the circulation of the bank paper is not general, it must still have the same effect, though 'in a
less degree. For whatever furnishes additional supplies
to the channels of circulation, in one quarter, naturally
contributes to keep, the streams fuller elsewhere. This
last view of the subject, serves both to illustrate the position, that banks tend to facilitate the payment of taxes;
and to exemplify their utility to business of every kind, in
which money is an agent.
It would be to intrude too much on the patience of. the
House, to-prolong the details of the advantages of banks;
especially as all those, which might still be particularized,
are readily to be inferred as consequences from those
which have been enumerated. Their disadvantages, real
or supposed, are now to be reviewed. The most serious of
the charges which have been brought against them, are—
That they serve to increase usury:
That they tend to prevent other kinds of lending:
That they furnish temptations to over-trading:
That they afford aid to ignorant adventurers, who disturb the natural and beneficial course of trade -.
That they give to bankrupt and fraudulent' traders a
fictitious credit, which enables them to maintain false appearances, and to extend their impositions: And lastly,
That they have a tendency to banish gold and silver from
the country.
There is great reason to believe, that on a close and ean- *
did survey," it will be discovered, that these charges, are



either-without foundation, or that, as far as the evils the*
suggest have been found to exist, they have proceeded
from other, or partial, or temporary causes 5 are not inherent in the nature, and permanent tendency, of such institutions; or are more than counterbalanced by opposite
advantages. This survey Shall be had, in the order in
which the charges have been stated. The first of them

That banks serve to increase usury.
It is a truth, which ought not to be denied, that the method of conducting business, which is essential to bank
operations, has among us, in particular instances, given
occasion to usurious transactions. The punctuality in
payments, which they necessarily exact, has sometimes
obliged those who have adventured beyond both their capital and credit, to procure money, at any price, and consequently to resort to usurers for aid.
But experience and practice gradually bring a cure to
this evil. A general habit of punctuality among traders,
is the natural consequence of the necessity of observing it
with the bank; a circumstance which itself more than
compensates for any occasional ill which may have sprung
from that necessity, in the particular under consideration.
As far, therefore, as traders depend on each other for pecuniary supplies, they can calculate their expectations
with greater certainty j and are in proportionably less
danger of disappointments, which might compel them to
have recourse to so pernicious an expedient as that of borrowing at usury; the mischiefs of which, after a few examples, naturally inspire great care in all but men of
desperate circumstances, to avoid the possibility of being
subjected to them. One, and not the least of the evils incident to the use of that expedient, if the fact be known,
or even strongly suspected, is loss of credit with the bank
The directors of a bank too, though in order to extend
its business and its popularity, in the infancy of aa institution, they may be tempted to go farther in accommodation


than the strict rules of prudence will warrant, grow more
circumspect of course, as its affairs become better established,, and as t h e evils of to© grea£ facility are experimentally demonstrated. T h e y become more attentive to
the situation and eonduet of those with whom they deal }
they observe more narrowly their operations and pursuits *
they economize t h e credit they give to those of suspicious
solidity; they refuse it to those whose eareer is more manifestly hazardous: In a word, in the course of practice,
from the very uature of tilings, the interest, will make it
the policy, of a. bank, to succour the -wary and industrious ;
to discredit the rash and unthrifty ; to discountenance both
usurious lenders and usurious borrowers.
- ,
There is a lending view, in which the tendency of banks
will be seen to be, to abridge, rather than to promote,
usury. This relates to their property of increasing t h e
quantity, and quickening the circulation, of money. I f i t
h e evident, that Usury will prevail or diminish, according
to the proportion which the demand for borrowing hears
to the quantity o f money at market to be lent; whatever
has the property just mentioned, whether i t be in the shape
of paper or coin, by contributing to render the supply more
equal to t h e demand, must tend to counteract the progress
o f usury.
But bank lending, it is pretended, is an impediment to
other kinds of lending; which, by confining the resource
of borrowing to a particular class, leaves the rest of the
community more destitute, and therefore more exposed to
the extortions of usurers. A s the profits of bank stock exceed the legal rate of interest, the possessors of money, it
is argued, prefer investing it in that article, to lending it at
this rate ; to which there are the additional motives of a
more prompt command of the capital, and of more frequent and'exact returns, without trouble or perplexity in
the collection. This constitutes the second charge which
has been enumerated.
The fact on which this charge rests, is not to be admitted without several qualifications ; particularly in refer-


enee to the state of things in this country. .First—The
great bulk of the stoek of a hank, will consist of the funds
of men in trade, among ourselves, and monied foreigners ;
the former of whom could not spare their capitals out of
their reach, to be invested in loans for long periods, on mortgages, or personal security; and the latter of whom would
not be willing to be subjected to the casualties, delays, and
embarrassments, of such a disposition of their money in a
distant country. Secondly, There will always be a conside.
rable proportion of those who are properly the money lenders of a country, who, from that spirit of caution which
usually characterizes this description of men, will incline
rather to vest their funds in mortgages on real estate, than
in the stock of a bank, which they are apt to consider as a
more precarious security.
These considerations serve in a material degree to narrow the foundation of the objection, as to the point of fact.
But there is a more satisfactory answer to i t The effect
supposed, as far as it has existence, is temporary. The reverse of it takes place in the general, and permanent operation of the thing.
The capital of every public bank will of course be restricted within a certain defined limit It is the province
of legislative prudence so to adjust this limit, that while it
will not be tod contracted for the demand, which the course
of business may create, and for the security which the public ought to have for the solidity of the paper which may
be issued bytinebank, it will still be within the compass of
the pecuniary resources of the community j so that there
may be an easy practicability of completing the subscriptionstoi t When this is once done, the supposed effect of necessity eeases. There is then no longer- room for the invest,
meat of any additional capital. Stock may indeed change
hands by one person selling and another buying; but the
money which the buyer takes out of the common mass to
purchase the stoek, the seller receives and restores to it.
Hence the fature surplusses which may accumulate must
take their natural course, and lending at interest must go
on as if there were no such institution.


It must indeed flow in a more eopious stream. The
hank furnishes an extraordinary supply for borrowers,
within its immediate sphere. A larger supply consequently remains for borrowers elsewhere. In proportion as
the circulation of the hank is extended, there is an augmentation of the aggregate mass of money for answering
the aggregate mass of demand. Hence greater facility in
obtaining it for every purpose.
It ought not to escape without a remark, that as far
as the citizens of oilier countries become adventurers in
the bank, there is a positive increase of the gold and
silver of the country. It is true, that from this a halfyearly rent' is drawn back, accruing from the dividends
upon the stock: but as this rent arises from the employment of the capital, by our own citizens, it is probable,
that it is more than replaced by the profits of that employment It is also likely, that a part of it is, in the course
of trade; converted into the products of our country: and *
it may even prove an incentive, in some cases, to emigration to a country in which the character of- citizen is
as easy td be acquired, as it is estimable and important.
This view of the subject furnishes an answer to an objection which has been deduced from the circumstance
here taken notice of; namely, the income resulting to
foreigners from the part of the stock owned by them,
which has been represented as- tending to drain'the country of its speeie. In this objection, the original investment of the capita], and the constant use of it afterwards,
seem both to have been overlooked.
That banks furnish temptations to over-trading, is the
third of the enumerated objections. This must mean,
that by affording additional aid to mercantile enterprise,
they induce the merchant sometimes to adventure beyond
the prudent, or salutary point. But the very statement
of the thing shows, that the subject of the charge is an
occasional ill, incident to a general good. Credit of every
kind, (as a species of which only can bank-lending have
the effect'supposed,) must be, in different degrees, charge-


able with the same inconvenience. It is even applicable
to gold and silver, when they abound in circulation. But
would it be wise on this account to decry the precious
metals; to root out credit j or to prescribe the means' of
that enterprise, which is the main spring of trade, and a
principal source of national wealth, because it now and
then runs into excesses, of which over-trading is one ?
If the abuses of a beneficial thing, are to determine its
condemnation, there is scarcely a source of public prosperity which will not speedily be closed.' In every case,
the evil is to be compared with the good; and in the present case, sueh a comparison will issue in this, that the
new and increased energies derived to commercial enterprise, from the aid of banks, are a source of general profit and advantage; which greatly outweigh the partial
ills of the over-trading of a few individuals, at particular
times, or of numbers in particular conjunctures.
The fourth and fifth charges may be considered together : These ljelate t6 the aid which is sometimes afforded by banks to unskilful adventurers and fraudulent traders. These charges also have some degree of foundation | though far less than has been pretended,* and they
add to the instances of partial ills, connected with more
extensive and overbalancing benefits.
The practice of giving fictitious credit to improper persons, is one of those evils which experience, guided by interest, speedily corrects. The bank itself is in so much
jeopardy of being a sufferer by it,.that it has the strongest
of all inducements to be on its guard. It may not only
be injured immediately by the delinquencies of the' persons to whom sueh credit is given} but eventually, by
the incapacities of others, whom their impositions or failures may have ruined.
Nor is there much danger of a bank's being betrayed
into this error from want of information: The directors
themselves being for the most part selected from the class
of traders, are to be expected to possess individually, an
accurate knowledge of the characters and situations of


those who eome within that description. And they have,
in addition to this, the course of dealing of the persons
themselves with the bank, to assist their judgment, which
is in most cases a good index of the state in which those
persons are. The artifices and shifts, which those in
desperate or declining circumstances, are obliged to employ to keep up the countenance which the rules of the
bank require, and the train of their connexions, are so
many prognostics, not difficult to be interpreted, of the
fate which awaits them. Hence it not unfrequently happens, that banks are the first to discover the unsoundness
of such characters, and by withholding credit, to announce
to the public that they are not entitled to i t
If banks, in spite of every precaution, arc sometimes
botrayed into giving a false credit to the persons described ; they more frequently enable honest and industrious
men, of small, or perhaps of no capital, to undertake and
prosecute business, with advantage to themselves and to
the community ; and assist merchants of both capital and
credit, who meet with fortuitous and unforeseen shocks,
which might, without such helps, prove fatal to them and
to others, to make head against their misfortunes, and finally to retrieve their affairs j circumstances which form
no inconsiderable encomium on the utility of banks.
But the last, and heaviest eharge, is still to be examined : This, is, that banks tend to banish the gold and silver
out of the country.
The force of this objection, rests upon their being aa
engine of paper credit, which by furnishing a substitute
for the metals, is supposed to promote their exportation.
It is an objection, which, if it has any foundation, lies not
against banks peculiarly, but against every species of pa-'
per credit.
The most common answer given to it is, that the thing
supposed is of little or no eonseqnenee; that it is immaterial
what serves the purpose of money; whether paper, or gold
and silver,• that the effect of both upon industry is the
same;' and that the intrinsic wealth of a nation is to be


measured, not by the abundance of the precious metals
contained in it, but by the quantity of the productions of
its labour and industry.
This answer is not destitute of solidity, though not entirely satisfactory. It is certain, that the verification of
industry, by a full circulation, with the aid of a. proper
and well regulated paper credit, may more than compensate for the loss of a part of the gold and silver of a nation 5 if the consequence of avoiding that loss, should be
a scanty or defective circulation.
But the positive, and permanent increase or decrease of
the precious metals in a country, can hardly ever be a
matter of indifference. As the commodity taken in lieu
of every Other, it is a species of the most effective wealth,
and as the money of the world, it is of great concern to
tjhie state, that it possess a sufficiency of it to face any demands which the protection of its external interests may
?\:>>-^I^^Xol^fSfeflB«ii»-- seems to admit of another, and a more
conclusive answer, which controverts the fact itself. A
nation, that has no mines of its own, must derive the precious metals' from others ,• generally speaking,. in exchange for the products of its labour and industry. The
quantity it will possess, ^trill therefore, in the ordinary
course .of things, be regulated by the favourable' or unfavourable balance of its trade j that is, by the proportion
between its abilities to supply foreigners^and its wants of
them; between the amount of its exportation, and that of
its importations. Henee the state of its agriculture arid
manufactures; the quantity and quality of its labour and
industry5 must, in the main, influence and determine, the
increase or decrease of its gold and silver.
If this be true, the inference seems to be, that well constituted banks,, favour the increase of- the precious metals.
It has been shown, that they augment, in different ways,
the active capital of a country. This- it is, whieh generates employment; which animates and expands labour
and industry. Every addition which is made to it, by


contributing to put in motion a greater quantity of both.,
tends to create a greater quantity of the products of both.
And by furnishing more materials for exportation, conduces to a favourable balance of trade, and consequently
to the introduction and increase of gold and silver.
This conclusion appears to be drawn from solid premises:
There are, however, objections to be made to it.
It may be said, that as bank paper affords a substitute
for specie, it serves to counteract that rigorous necessity
for the metals as a medium of circulation, which, in the
ease of a wrong balance might restrain, in some degree,
their exportation$ and it may be added, that from the
same cause, in the same case, it would retard those economical and parsimonious reforms in the manner of living,
which the scarcity of money is calculated to produce, and
which might be necessary to rectify such wrong balance.
There is, perhaps, some truth in both these observations j but they appear to be of a nature rather to form exceptions to the generality of the conclusion, than to overthrow i t The state of things, in which the absolute exigencies of circulation can be supposed to resist with any effect the urgent demands for specie which a wrong balance
of trade may occasion, presents an extreme ease. And a
situation in which a too expensive manner of Hying of a
community, compared with its means, can stand in need
of a corrective, from distress or necessityj is one whieh
perhaps rarely results, but from extraordinary and adventitious causes: such, for example, as a national revolution; which unsettles all'the established habits of a
people, and inflames the appetite for extravagance, by the
illusions of an ideal wealth, engendered by the continual
multiplication of a depreciating currency, or some similar
cause.. There is good reason to believe, that where the
laws are wise and well executed, and the inviolability of
property and contracts maintained; the economy of a
people will, in the general course of thing*, correspond
with its means.


The support of industry, is probably in every case* of
more consequence towards correcting a wrong balance of
trade, than any practicable retrenchments in the expenses
of families or individuals; and the stagnation of it would
be likely tt> have more effect in prolonging, than any such
savings in shortening, its continuance. That stagnation,
is a natural consequence of an inadequate medium, which,
without the aid of hank circulation, would, in the cases
supposed, be severely felt
It also deserves notice* that as the circulation qf a bank
is always in a compound ratio to the fund upon which it
depends, and to the demand for it 5 and as that fund is itself affected by the exportation of the metals, there is no
danger of its being overstocked, as in the ease of paper
issued at the pleasure of tiie government,- or of its preventing the consequences of any unfavourable balance
from being sufficiently felt to produce the reforms alluded
to, as far as circumstances may require aftd admit.
Nothing ewjbe more fellible t than 'the comparisons
which have been made between different countries, to illustrate the truth of the position under consideration.-—
The comparative quantity of gold and silver, in different
countries, depends upon an infinite variety of facts and
combinations, aU of whieh ought to be known, in order to
judge whether tiie existence, or non-existence, of paper
currencies, has any share Tto the relative proportions they
contain. The mass and value of the productions of the
labour and industry of each, compared, with its wants,the'nature of its establishmenttsabroad 5 the kind of wars
in\which it is usually engaged; the relations it bears to
theNsountries which are the original possessors of those
metals; the privileges it enjoys in their trade j these, and
a number of other circumstances, are all to be taken into
the account, and render the investigation too complex to
justify any reliance on the vague and general surmises,
which have been hitherto hazarded on the point.
|n the foregoing discussion, the objection has been cuusidered as applying to the permanent expulsion and dhai-


19 .
nutioa of the metals. Their temporary exportation, for
particular purposes, has not been contemplated: This, it
wast be confessed, is facilitated by banks, from the faculty banks possess of supplying their place. But their utility is in nothing more conspicuous, than in these very eases.
They enable the government to pay its foreign debts, and
to answer -any exigencies which the external concerns of
the community may have produced. They enable the
merchant to support his credit, (on which the prosperity of
trade depends,) when special circumstances prevent remittances in other modes. They enable him also to prosecute' enterprises, which ultimately tend to an augmentation of the species of wealth in question. It is evident,
that gold and silver may often be employed in procuring
commodities abroad; which, in a circuitous commerce, replace the original fund, with considerable addition. But
it is net to be inferred from this facility given to temporary exportation, that banks, which are so friendly to trade
and industry, are in their general tendency inimical to the
increase of the precious metals.
These several views of the subject, appear sufficient to
impress a full conviction of the utility of banks, and to
demonstrate that they are of great importance, not only
in relation to the administration of thefinances,but in the
general system »f the political economy. .
- The judgment of many concerning them has, no doubt,
"been perplexed by the misinterpretation of appearances,
Which were to be ascribed to other causes. The general
devastation of personal property, occasioned by the late
war, naturally produced on the one hand, a great demand
for money; and on the other, a great deficiency of it to
answer the demand. Some injudicious laws, which grew
out of the public distresses, by impairing confidence, and
causing a part of the inadequate sum in the country to be
locked up, aggravated the evil: The dissipated habits,
contracted by many individuals during the war, which after the peace plunged them into expenses beyond their incomes | the number of adventurers without capital, and in



many instances without information, who at that epoch
rushed into trade, and were obliged to make any sacrifices
to support a transient credit; the employment of considerable sums in speculations upon the public debt, which from
its unsettled state was incapable of becoming itself a substitute: all these circumstances concurring, necessarily
led to usurious borrowing; produced most of the inconveniences, and were the true cause of most of the appearances,
which, where banks were established, have been by some
erroneously placed to their account: a mistake which they
might easily have avoided, by turning their eyes towards
places where there were none j and where, nevertheless,
the same evils would have been perceived to exist, even in
a greater degree than where those institutions had ob.tained.
These evils have either ceased, or been greatly mitigated.
Their more complete extinction may be looked for from
that additional security to property, which the Constitution
of idle United States happily gives j (a circumstance of
prodigious moment in the scale, both of public and private
prosperity,) from the attraction of foreign capital, under
the auspices of that security, to be employed upon objects,
and in enterprises, for which the state of this country opens
a wide and inviting fieldj from the consistency, and stability, which the public debt is fast acquiring, as well in
the public opinion at home and abroad, as in fact; from
the augmentation of capital, which that circumstance, and
the quarfer-yearly payment of interest will afford j and
from the more copious' circulation, which will be likely to
be created by a well-constituted national bank.
The 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.
In Pennsylvania alone, the quantity of it was near a million
and a half of dollars. This auxiliary may be said to be
now at an end. And it is gonerally supposed, that there
has been for some time past, a deficiency of circulating


medium. How far thai deficiency is to be considered as
real or imaginary, is not susceptible of demonstration; but
there are circumstances and appearances, which, in relation to the country at large, countenance the snpposition of
its reality.
The circumstances are, besides the fact just mentioned
respecting paper emissions; the vast tracts of waste land,
and the little advanced state of manufactures. The progressive settlement of the former, while it promises ample
retribution, in the generation of future resources, diminishes or obstructs, in the mean time, the active wealth of the
country. It not only draws off a part of the circulating
money, and places it in a more passive state, hut it diverts
into its own channels? a portion of that species of labour
and industry, which would otherwise be employed in furnishing materials for foreign trade j and which, by contributing to a favourable balance, would assist the introduction of specie. In the early periods of new settlements,
the settlers not only furnish no surplus for exportation, hut
they consume a part of that which is produced by the labour of others. The same thing is a cause, that manufactures do not advance, or advance slowly. And notwithstanding some hypotheses to the contrary, there are many
things to induce a suspicion, that the precious metals will
not abound in any country which has not mines, or variety
of manufactures. They have been sometimes acquired by
•the sword; but the modern system ofwar has expelled this
resource j and it is one upon whieh it is to be* hoped the
United States will never be inclined to rely.
The appearances alluded to, are, greater prevaleney of
direct barter, in the more interior districts of the country,
whieh, however, has been for some time past, gradually
lessening; and greater difficulty generally in the advantageous alienation of improved real estate$ which also
has of late diminished, but is still seriously felt in different parts of the Union. The difficulty ofgetting money,
whieh has been a general complaint, is not added to the
number; because it is the complaint of all times, and one



in which imagination mast ever have too great seope to
permit an appeal to it.
If tirn 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 i
The emitting of paper money by the authority of government, is-wisely prohibited to the individual-states, by
the national constitution 5 and the spirit of that prohibition ought not he disregarded by the government of the
United States. Though paper emissions, under a general
authority, might have some advantages set applicable,
and be free from some disadvantages whieh are applicable,
to emissions by the states separately $ yet they
are of a nature so liable to abuse, and it may even be affirmed, so certain of bejng abused; that the wisdom at
the government will be shown in never trusting itself with
the use of so seducing and dangerous an expedient. Ik
times of tranquillity, it might have no ill consequence |
it might even perhaps be managed in a way to be productive of good5 but inigreat and trying emergencies, there is
almost a moral certainty of its becoming mischievous.
The stamping of paper is an operation so mueh easier
than- the laying, of taxes, that a government, in the practice of paper emissions, would rarely fail in any sueh
emergency, to indulge itself too far in the employment of
that resource, to avoid as mueh as possible, one less auspicious to present popularity. If it should not even be- carried so far as to be rendered an absolute bubble, it would
at least he likely to be extended to a degree whieh would
occasion an inflated and artificial state of tilings, inebm- ~
patible with the regular and prosperous course of the political economy.
Among otiier 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 trill return upon the* bank. Its emissions,
as elsewhere intimated, 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 emissions, by its own authority.
This consideration- further illustrates the danger of
emissions of that sort, and the preference which is due to
bank paper.
The payment of the interest of the publie debt, at tuir- •
teen 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 of the
country must always be suspended from circulation, and
left to accumulate, preparatorily 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. This necessity will be felt very injuriously to the trade of .some of the states; and will embarrass not a little the operations of the treasury is those
states. It will also obstruct those negeciations, between
different parts of the Union, by the instrumentality of
treasury bills, whieh have already afforded valuable accommodations to trade in general.
Assuming ft then- as a consequence, from what has beea
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-Ameiiea» established in the city of Philadelphia; that of New-York, established in the eity 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.
The bank of North-America originated in a resolution
of Congress of the 26th of May, 1781, founded upon a
proposition of the superintendant of finance, which was
afterwards carried into execution by an ordinance of the
31st of December following, entitled, " An ordinance to
incorporate the Subscribers to the Bank of North-America."
The aid afforded to the United States by this institution,
during the remaining period of the war, was of essential
eonsequence; and its conduct towards them since the
•peace, has not weakened its title to their patronage and
favour. So far its pretensions to the character in question are respectable; but there are circumstances which
militate against them; and considerations which indicate
the propriety of an establishment on different principles.
The directors of this bank, on behalf of their constituents, have since accepted and acted under a new charier
from the state of Pennsylvania, materially varient 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.
The limit assigned by the ordinance of Congress to the
stock of the bank, is ten millions of dollars. -The last
charter of Pennsylvania confines it to two millions. Questions naturally arise, whether there be not a'direct repugnancy between two charters so differently circumstanced;
and whether the acceptance of the one, is not to be deemed a virtual surrender of the other 1 But perhaps it is
neither adviseable nor necessary, to attempt a solution of
There is nothing in the acts of Congress, which imply
an exclusive right in the institution to which they relate,
except during the term of the war. There is therefore
nothing, if the public good require it, whieh prevents the
establishment of another. It may, however, be irieidW-


tally remarked, that in the general opinion of the citizens
of the United States, the hank of North-America has
taken the station of a bank of Pennsylvania only. This
is a strong argument for a new institution, or for a renovation of the old, to restore it to the situation in which it
originally stood, in the view of th/United 8tates.
But though the ordinance of Congress contains no grant
of exclusive privileges, there may be room to allege, that
the government of the United States ought not, in point of
candour and equity, to establish any rival or interfering
institution, in prejudice of the one already established ',
especially as this has, from services rendered, well-founded claims to protection and regard.
The justice of such an observation ought, within proper
bounds to be admitted. A new establishment of the sort
ought not to be made without cogent and sincere reasons
of public good. And in the manner of doing it, every facility should be given to a consolidation of the old with
the new, upon terms not injurious to the parties concerned.
But there is no ground to maintain, that in a case in which
the government has made no condition restricting its authority, if ought voluntarily to restrict it, through regard
to. the interests of a particular institution, when those of
the state dictate a different course; especially too, after
such circumstances have intervened, as characterize die
actual situation of the bank of North-America.
The inducements to a new disposition of the thing, are
now to be considered. The first of them which occurs is,
the at least ambiguous situation in which the bank of
North-America has placed itself, by the acceptance of
its last charter: If this has rendered it the mere bank of
a particular state, liable to dissolution at the expiration of
fourteen years, to which term the act of that state has
restricted its duration; it would be neither fit nor expedient, to accept it as-an equivalent for a bank of the.
United States.
The restriction of its capital also, which, according to


the same supposition, cannot be extended beyond two millions of dollars, is a conclusive reason for a different establishment. So small a capital promises neither the requisite aid to government, nor the requisite security to
the community. It may answer very well the purposes
of local accommodation, but is an inadequate foundation
for a circulation co-extensive with the United States j embracing the whole of their revenues, and affecting every
individual into whose hands the paper may come.
And inadequate as such a capital would be to the essential ends of a national bank, it is liable to be rendered
still more so, by that principle of the constitution of the
bank of North-America, contained equally in its old, and
in its new charter, which leaves the increase of the actual
capital at anytime, (now far short of the allowed extent,)
to the discretion of the directors or stockholders. It is
naturally to be expected, that the allurements of an advanced price of stock, and of large dividends, may disincline those who are interested, to an extension of capital;
from which they will be apt to fear a diminution of profits.
And from this circumstance, the interest and accommodation of the public, (as well individually as collectively,)
are made more subordinate to the interest, real or imagined, of the stockholders, than they oughtto be. It is true,
that unless the latter be consulted, there can be no bank,
(in the sense at least in which institutions of this kind,
worthy of confidence, can be established in this country.) But it does hot follow, that this is alone to be consulted,
«r that it even ought to be paramount. Public utility
is more truly the object of public banks, than private
profit. And it is the business of government, to constitute them on such principles, that while the latter will
result, in a sufficient degree, to afford competent motives
to engage in them, the former be not made subservient to
it, To effect this, a principal object of attention ought to
be, to give free scope to tine creation of an ample capital;
and with this view, fixing the bounds which are deemed
safe and convenient, to leave no discretion either to stop


short of them, or to over-pass them. The want of this
precautioh, in the establishment of the bank of NorthAmerica, is a further, and an important .reason, for desiring one differently constituted.
There may be room at first sight, for a supposition, that
as the profits of the bank will bear a proportion i» the extent of its operationsj and as, for this reason, the interest
of the stockholders will not be disadvantageous^ affected
by any necessary augmentations of capitalj there is no
cause to apprehend that-they will be indisposed to such
augmentations. But most men, in matters of this nature,
prefer the certainties they enjoy, to probabilities depending on untried experiments; especially when these promise rather that they will not be injured, than that they
will be benefitted.
From the influence of this principle, and a desire of enhancing its profits, the directors of a bank will be more
apt to overstrain; its .faculties, in. an attempt to face the
additional demands which the course of business, may
create, than to set on foot new subscriptions, which may
hazard a, diminution of the profits, and even a temporary
reduction of the price of stock.
Banks are among the best expedients for lowering the
rate of interest in a country; but to have this effect, their
capitals must be completely equal to all the demands of
business, and sueh as will tend to remove the idea, that
the 'accommodations they afford, are in any degree favours; an idea very apt to accompany the parsimonious
dispensation of contracted funds. In this, as in every
other case, the plenty of the commodity ought to beget a.
moderation of. the price.
The want of a principle of rotation, in the constitution
of the. bank of North-America, is. another argument for a
variation of the establishment. Scarcely one of the reasons which militate against this principle in the constitution of a country, is applicable to that of a bank; while
there are strong reasons in favour of it, in relation to the
one, which do not apply to the ether. The knowledge, to


- be derived from experience, is the only circumstance common to both, which pleads against rotation in the directing
officers of a bank.
But the objects of the government of a nation, and those
of the government of a bank, are so widely different, as
greatly to weaken the foree of that consideration, in reference to the latter. Almost every important ease of legislation requires, towards a right decision, a general and
accurate acquaintance with the affairs of the state; and
habits of thinking seldom acquired but from a familiarity with public concerns. The administration of a bank,
on the contrary, is regulated by a few simple fixed maxim*, the application of which is not difficult to any man
of judgment, especially if instructed in the principles of
trade. It is in general a constant succession of the same
But though this be the ease, the idea of the advantages
of experience, is not to be slighted: Room ought to be
left for the regular transmission of official informationj
and for this purpose', the head of the direction ought to
be excepted from the principle of rotation. With thisr
exception, and with the aid of the information of the subordinate officers, there can be no danger of any ill effects
from want of experience, or knowledge; especially as the
periodical exclusion ought not to reach the whole of the
directors at one time.
The argument in favour of the principle of rotation is
this; that by lessening' the danger of combinations among
the directors, to make the institution subservient to party
views, or to the accommodation, preferably, of any particular get of men, it will render the public confidence more
Arm, stable, and unqualified.
When it is considered, that the directors of a bank are
not elected bytinegreat body of the community, in which
a diversity of views will naturally prevail, at different conjunctures ; but by a small arid select class of men,' among
whom it is far more easy to cultivate a steady adherence
to the same persons and objects; and that those directors


have it in their power so immediately to conciliate, by obliging the most influential of this class, it is easy to perceive, that without the principle of rotation, changes in
that body can rarely happen, but as a concession which
they, may themselves think it expedient to make to publie qpinion.
The continual administration of an institution of this
kind, by the same persons, will never fail, with or withT
out cause, from their conduct* to excite distrust and discontent. The necessary secrecy of their transactions,
gives unlimited scope to imagination to infer that something is, or may be, wrong. And this metdtable mystery
is a solid reason for inserting in the constitution of a bank
the necessity of a change of- men. As neither the mass
of the parties interested, nor the public in general, can
be permitted to be witnesses of the interior management
of the directors, it is reasonable that both should have
that cheek upon their conduct, and that security against
the .preyalency of a partial or pernicious system, which
will be produced by the certainty of periodical changes.
Sueh too is the delicacy of the credit of a bank, that
everything which can.'fortify.confidence and repel suspicion, without injuring its operations, ought carefully to
be sought after in its formation.
A further consideration in favour of a change, is the
improper rule, by which the right of voting for directors
is regulated in the plan upon which the bank of NorthAmerica "was originally constituted; namely, a vote for
each sham, and the want of a rule in the last charter j
unless the silence of it on that point, may signify that
every stockholder is to have an equal and a single vote,
which would be a rule in a different extreme, not less erroneous. It is' of importance that a rule should be established on this head, as it is one of those things which
ought not to be left to discretion$ and it is consequently
of equal importance, that the rule should be a proper one,
A vote for each share, renders a combination between a
few principal stockholders, to monopolize the power and


benefits of the bank, too easy. An equal vote to each
stockholder, however great or small bis interest in the
institution, allows not that degree of weight to large
stockholders, which it is reasonable they should have, and
which perhaps their security, and that of the bank, require.
A prudent mean is to be preferred. A conviction of this, has
produced a by-law of the corporation of the bank of
Worth-America, which evidently aims at such a mean.
But a reflection arises here, that a like majority with that
which enacted this law, may at any moment repeal it.
The last inducement which shall be mentioned, is the
want of precautions to guard against a foreign influence
insinuating itself into the direction of the bank. It seems
scarcely reeoneileable with a due caution, to permit, that
any but citizens should be eligible, as directors of a national bank, or that non-resident foreigners should bo able
to influence the appointment of directors, by the votes of
their proxies. In the event, however, of an incorporation of the bank of North-America, in the plan, it may
be necessary to qualify this principle, so as to leave the
right of foreigners, who now hold shares of its stock, unimpaired, but without the power of transmitting the privilege in question, to foreign alienees.
It is to be considered, that such a bank is not a mere
matter of private property, but a political machine of the
greatest importance to the state.
There are other variations from the constitution of the
bank of North-America, not of inconsiderable moment,
which appear desirable, but which are not of magnitude
enough to claim a preliminary discussion: These will be
seen in the plan whieh will be submitted in the sequel.
If the objections which have been stated, to the constitution of the bank of North-America, are admitted to be
well founded, they will nevertheless not derogate from the
merit of the main design, or of the serviees which that
bank has rendered, or of the benefits whieh it has produced. The creation of such an institution, at the time it
took place, was a measure dictated by wisdom. Its utili-


ty has been amply evinced hy its 'fruits—American iadependenee owes much to it—And it is very conceivable,
that reasons of the moment, may have rendered those features in it inexpedient, which a revision with a permanent
view, suggests a | desirable.
The-ordetf of the subject, leads next to an inquiry into
the principles upon which a national bank ought to be organized.
Tile 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. The complexity of such
a plan would be apt to inspire doubts, which might deter
from adventuring hi i t : And the practicability of a safe
and orderly 'administration, though not to be abandoned
as desperate, cannot be made so manifest in perspective, as
to promise the removal of those doubts, or to justify the
government in adopting the idea as an original experiment.* The most that would seem adviseable, on this
pojnt, is to insert a provision, which may lead to it hereafter, if experience shall more -clearly demonstrate its
utility, and satisfy those/who may have the direction, that
it may be adopted with safety. It is eertain, that it would
have some advantages, both peculiar and important..—
Besides more general accommodation, it would lessen the
danger of a run upon the bank.
The argument against it is, that each branch must be
under a distinct, though subordinate direction, to which a
considerable latitude of discretion must of necessity be
intrusted. And as the property of the whole institution
would be liable for the engagements of each part; that,
and its credit, would be at stake upon the prudence of the
directors of every part. The mismanagement of either
branch might hazard serious disorder in the whole.
Another wish, dictated by the particular situation ©f the
country, is, that the bank could be so constituted as to be
made an immediate instrument of loans to the proprietors
of land j but this wish alsfryields to the difficulty of awe«-



plishing it. Land is alone an unfit fund for a bank circulation i If the notes issued upon it were not to be payable
in coin, on demand, or at a short date, this would amount
to nothing more than a repetition of the paper emissions,
which are now exploded by the general voice. If the
notes are to be payable in coin, the land must first be
converted into it, by sale' or mortgage. The difficulty of
effecting the latter, is the very thing which begets the desire offindinganother 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. Will the monied man consent to enter into a partnership with the landholder, by which the latter jwill share
in the profits which will be made by the money of theformer ?
The money, it is evident, will be the agent or efficient
cause of the profits—the land can only be regarded as an
additional security. It is not difficult to foresee, that an
union, on such terms, will not readily be formed. 'If the
landholders are to procure the money by sale or mortgage
of-a part of their lands, this they can as well do, when
the stock consists wholly of money, as if it were to be
compounded of money and land.
To procure for the landholders the assistance of loans,
is Hie great desideratum. Supposing other difficulties surmounted, and a fund created, composed partly of coin and
partly of land, yet the beneftt contemplated could only then
' be obtained, by the bank's advancing them its notes for the
whole, or part of the value of the lands they had subscribed to the stock. If this advanee was small, the relief
aimed at would not be given; if it was large, the quantity
of notes issued would be a cause of distrust, and, if received at all, they would be likely to return speedily upon
the bank for payment; which, after exhausting its coin",
might be under the necessity of turning its lands into
money, at any price that could be ^obtained for them, to
the irreparable prejudice of the proprietors.


- Considerations of public advantage snggest 9 *W$her
Jffiah, wMeb is, ttot the bank could be established upon
principles, that would cause fte pwflts of it to rewound tp
*he immediate benefit of the-state. This is contemplated
bj many who speak of a national bank, but the idea seem?
liable to insuperable objections. To attach full confidence
to an institution of this nature, it appears to he an essential
ingredient in its structure, that it shall be under a •private,
not a pttWfe direction, under the guidance of, &>idwd
rnterent, not of pwpKc poUoy ; whiejh would be supposed to
be, and in certain emergencies, under a feeble or too sanr
guine administration, would really be, ljabje to being top
HMueh influenced by js»6K? ?{£&$$%. f h * suspicion of this*
would most probably be a canker that would continually
porode the yitajs -of the credit of the bank, and'would be
piofet likely to prpve fatal inthose situations in which the.
public good would require that they .should be most sound
•atfd -Rigorous, It would* indeed* be little less than a mte$ele, should the credit of the bank be at the disposal'of
£he government* if in a long series of time, there was not
experienced a calamitous abuse of it. It is tine, that k
wonld be the real interest of the government net to abuse
yt 5 its genuine policyto-husband and cherish it with the
most .guarded circumspection, as an inestimable treasure.
.But what government ever- uniformly consulted its true
Interests, in opposition tp the temptations of momentary
exigencies? What nation was pver blessed with a constant
succession of upright and wise administrators ?
Tjae keen* steady, wad *» i t were, magnetic sense of their
own interest as proprietors, in the directors of abankj
.pointing invariable to its true pole, the prosperity of the
Institution j is the only .security that can always be relied
iupon for a careful «md prudent administration. It is,
therefore, the only basis on which an enlightened, unqualified, and permanent confidence, pan be expected tp be erect" s and maintained.'
The precedents of the banks established in several cities
»f Europe; Amsterdanv Hamburg, and others; may


seem to militate against this position* Without a precise
knowledge of all the peculiarities ©f their respective constitutions* it is difficult to pronounce how far this may be
the case. That of Amsterdam, however, which we best
know, is rather under a municipal than a governmental
direction. Particular magistrates of the e£ty, not officers
of the republic, have the management of it. It is also a
bank of deposit, not of loan, or circulation; consequently,
less liable to abuse, as well as less useful. Its general
business consists in receiving money for safe keeping, which
if not called for within a certain time, becomes a part of its
stock, and irreclaimable: But a credit is given for it en
the books of the bank, which being transferable, answers
all the purposes of money.
The directors being- magistrates of the eity, and th©
stockholders, in general, its most influential citizens j it is
evident, that the principle of private interest must be prevalent in the management of (he bank. And it is equally
evident, that from the nature of its operations, that principle is less essential to it, than to an institution constituted
with a view'to the accommodation of the public and individuals, by direct loans and a paper circulation.
As 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 5 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. Independent of these more
particular considerations, the natural weight and influence
of a good government will always go far towards procuring
a compliance with its desires j and as the directors will
usually be composed of some of the most discreet, re-


speetable, and ^ell-kforaed citizens, it can hardly ever
he difficult to make them sensible of the force of the inducements which ought to stimulate their exertions.
• It Drill net follow, from what has been said, that the
state may not be the holder of a part of the stoek 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 stoek ,• for if the
mass of the property should belong to the public, and if
the. direction of ft should be in private hands, this would
be to commit the interests of the state to persons not in'
terested, or not enough interested in their proper management.
There 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 stockholdersj which is to reserve
to itself a right of ascertaining, as often as may be necessary, the state of the bank, excluding, however, all pretension to control. This right forms an article in the
primitive constitution of the bank of North-America, and
its propriety stands upon the clearest reasons. If the paper of a bank is to be permitted to insinuate itself into
all the revenues and receipts of a countryj if it is even to
be tolerated as the substitute for gold and silver-in all
the transactions of business; it becomes, in either view,
a national concern of'the first magnitude. As such, the
ordinary rules of prudence require, that the government
should possess die means of ascertaining, whenever it
thinks fit, that so delicate a trust is executed with fidelity
And care. A right of this nature, is not only desirable as
it respects die governmentj but it ought to he equally so
to all those concerned in the institution; as an additional
tide to public and private confidencej and as a thing
which can only be formidable to practices that imply mismanagement. The presumption must always be, that the
characters who would be intrusted with the exercise of
this right on behalf of the government, will not be deficient in the*.discretion which it may require; at least the,'


admitting of this presumption cannot be' deemed tod great
a return of confidence for that very-large portion of if
which the government is required to place in the bantu
Abandoning! therefore, ideas which however agreeable
or desirable, are neither practicable nor safe, the follow
lowing plan for the constitution of a National Bank/is
respectfully submitted to the consideration of the house.
I. The capital stock-of the hank shall not exceed ten
- millions of dollars, divided into twenty-five thousand
shares, each share being four hundred dollars; to raise
which sum, subscriptions shall be opened on the first
Monday of April next; and shall continue open until the
whole shall be subscribed. Bodies politic, as well as in*
dividuals, may subscribe.
II. 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, according to the loan pro*
posed fry the act making provision for the debt of the
United States, shall hear sn accruing interest at the tint*of payment of six per centum per annum.
III. The respective sums subscribed, shall be payable
in four equal parts, as well specie as debt, in succession*
and at the distance of six calendar months from «ach
other; the first payment to be made at the time of sub*
scription. If there shall be' a failure in any subsequent
payment, the parly failing shall lode the benefit of any
dividend which may have accrued prior to the time for
Waking such payment, and duringtikedelay of the sanje.
IV. The subscribers to the bank, and their successors*
shall he incorporated, and shall so continue, until the final
redemption of that part of its stock whieh shall consist of
the public debt.
Y. The capacity of the corporation to hold real and
personal estate, shall be limited to fifteen millions of dol*
lars, including the amount of its capital or original stock*
The lands and tenements whieh it shall be permitted to
hold, shall be only such as shall be requisite for the im*.
mediate accommodation of the institution | and sneh as
shall have been bona fide mortgaged-to it by way of seen*


«tty, OF conveyed to it is satisfection. of debts previeasly
contracted* in the usual course of: its dealing's, or purchas. ed at safes upon judgments which shall have been obtained for such debts.
VX The totality of the debts of the company, whether
by bond, bill, note, or other contract, (sredits fpv deposits
excepted,) shall sever exceed the amount of. it& capital
stock. In ease of excess, the directors, under whose administration it shall happen, shall be liable for it l a their
private or separate capacities* Those who may have dissented, may excuse themselves fromfhis responsibility, by
immediately giving notice of the fact and their dissent, to'
the President of the United States, and to the stockhalders, at a general meeting to be called by the president of
the bank, at their request.
T i l . The company may sell or demise its lands and
tenements, or may sell the whole or any part of the pub- .
lie debt, whereof its stock shall consist; but shall -trade ift nothing, except bilk of exchange, geld and silver bullion, or in the sale of goods' pledged for money lent: nor
shall take more than at the rate of six per centum per an*
nam, upon its loans or discounts.
T i l l . No loan shall be made by the bank, for the use,
of on account of, 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 j unless previously authorized by a law of the United States.
IX< The stock of the bank shall be transferable accord*
Jag to such rales as shall be instituted bytinecompany ia
that behalf.
: X. The affairs of the bank shall be under the management of twenty-five directors, one of whom shall be the pre'
«ident.. And there shall be on the first Monday of January, in each year, a choice of directors, by a plurality of
suffrages of the stockholders, to serve for a year. The
directors* at their first meeting after each election, shall' of their number as president.
XI. The number of votes to which each stockholder
.shall fee entitled, shall be according to the number of



shares he shall hold, in the proportions following:—that
is to say, For one'share, and not more than two shares,
one yote: For every two shares, above two, and not exceeding ten, one vote: For every four shares, above ten,
and not exceeding thirty, one vote: For every six shares,
above thirty, and not exceeding sixty, one vote: For
every eight shares, above sixty, and not exceeding one
hundred, one votej and for every ten shares, above one
hundred, one vote: Bat HO person, co-partnership, or bo*
dy politic, shall be entitled to a greater number than
thirty votes. And after the first election, no share or
shares shall confer a right of suffrage, which shall not
have been, holden three calendar months previous to the
day of election. Stockholders, actually resident within
the ^United States, and none other, may vote, in elections
by proxy.,.,,
XII. Not more than three fourths of the directors in
office,-exclusive of the president, shall be eligible for the
next succeeding year. But the director who shall be
president at the time of an election, may be always reelectedXIII. None but a stockholder, being a citizen of the
United States, shall be eligible as a director.
XIV. Any number of stockholders not less than sixty,
who together shall be proprietors of two hundred shares,
or upwards, shall have power at any time to call a general meeting of the stockholders, for purposes relative to
the institution; giving at least six weeks notice in two
public gazettes of the place where.the bank,is kept, and
specifying, in such notice, the object of the meeting.
XV. In ease of the death, resignation, absence from
the United' States, or removal of a director by the stockholders, his place may be filled by a new choice for the
remainder of the year.
XVI. No director shall be entitled to any emolument,
unless the same shall have been allowed by the stockholders at a general meeting. The stockholders shall make
such compensation to the president, for his extraordinary
attendance at the bank, as shall appear to them reasonable*


XVII. Not less than seven directors shall constitute a
board for the transaction of business.
XVIII. Every eashier, or treasurer, before he enters
on the duties.of his office, shall be required to give bond,
with two or more sureties, to the satisfaction of the directors, in a sum. not less than twenty thousand dollars, with
condition for his good behaviour.
XIX. Half yearly dividends shall be made of so much*
of the profits of the bank, as shall appear to the directors
adviseable. And onee in every three years the directors
shall lay before the stockholders, at a general meeting,
for their information, an exact and particular statement of
the debts which shall have remained unpaid, after the ex>
piration of the original credit, for a period of treble the
term of that credit, and of the surplus of profit, if any,
after deducting losses and dividends.
XX. The bills and notes of the bank originally made payable, or which shall have beeome payable on demands in
gold and silver coin, shall be receivable in all payments to
the United States.
XXI. 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 oncer-a week,
with statements of the amount of the eapitai 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.
XXII. No similar institution shall be established by any
future act of the United States, during the continuance of
the one hereby proposed to be established.
XXIII. It shall be lawful for the directors of the bank
to establish offices, wheresoever they shall think fit, within the United States, for tbe purposes of discount and deposit only, and upon the same terms, and in the same manner, as shall be practised at the bank, and to commit the


management of the said offices, and the making of the said
discounts, either to agents specially appointed by them, or
to stieh persons as may be chosen by the stockholders residing at the place where any such office shall be, under
snfeft -agreements, and subjeetto such regulations as they
shall deem proper; not being- contrary to law, or to the
constitution of the bank.
XXIF. And lastly. T*te 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,
to be paid out of the monies which shall -be borrowed by
'virtue of either of the acts, the one entitled, ** An act malting provision for the debt of the United States," and the
-other entitled, t* An act making provision for the reduction of the public debt," borrowing of the bank an equal
sum, to he applied to the purposes for which the said monies shall have been procured, reimhurseahle in ten years
&y equal annual instalmentsj or at any time sooner, or in
any greater proportions, that the government may think fit.
The reasons for the several provisions contained in the
foregoing plan,' .have been so far anticipated, and will, for
•the most part, be so readily suggested by the nature of
(those provisions, that any .comments which need further
-be made, -Will be both few-and -concise.
The 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. As has been elsewhere remarked, the original plan
of the bank of North-America, contemplated a capital of
ten millions of dollars, which is certainly not-too'broad a
foundation for the extensive operations to which a national bank is destined. But to collect such a sum in this
country in gold and siver, into one depository, may, without
hesitation, be pronounced, impracticable. Hence the necessity of an auxiliary, which the public debt atonce presents.
This -part of ihte fond wiUfee-«b?ays ready to come m


aid «f the specie. I t will more and stare command a
ready sale 5 and can therefore expeditiously lie turned in*
to coin, if an exigency of the bank snaiUd at any time require k. This quality of prompt convertibility into eoin,
renders it an equivalent for that necessary agent of bank
eireulation; and distinguishes it from a fund in land, of
which the sale would generally be far less compendious,
and at great disadvantage. The quarter-yearly receipts
of interest, mil also he an actual additidn to the specie
fund, during the intervals between them and the half year*
ly dividends of profits. The objection to combining land
with specie, resulting from their not being generally in
possession of the same persons, does not apply to .the deljt,
whieh will alwaysfeefound in considerable quantity among
the moniedand trading people.
The debt composing pact of the capital* besides its col*
lateral effect in enabling the bank to extend its operations;
and consequently to .enlarge its profits, will produce a di*
reet annual revenue of six per centum from the government, whieh will enter into the half yearly dividends received by the stockholders.
Wheat the present price of the public debt is considered*
and the effect which its conversion into bank stock* iacorporated with a specie fund* would in all probability have
to accelerate its rise to the proper point* it will easily be
discovered, that the operation presents in its outset a very
considerable advantage to those who may become subseri^
hers,; and from the influence which that, rise would have
on the general mass of the debt, a proportional benefit
to all the public creditors, and in a sense whieh has been
more than once adverted to* to the community at large.
These is an important fact* which exemplifies the Witness of the public debt, for a bank fund* and whieh may
serve to remove doubts in lome minds on this point. I t
is this* that the bank of England* in its first erection, rested wholly on that foundation. The subscribers to a loan
to government of one million two hundred thousand pounds
sterling* were incorporated as a bank , of which th4 debt
created by the loan and the interest upon it, were the sob*

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