By Evan SparksAlexander Hamilton is today celebrated on Broadway, honored on the $10 bill, revered for his contributions to American political thought through the Federalist Papers and remembered for a swashbuckling political life that ended in a duel against the vice president of the United States. But he ought to be just as famous for his distinctions as a banker—founding the Bank of New York in 1784 and, seven years later, the First Bank of the United States, all before the age of 35. In fact, Hamilton was a mere 27 when he opened the first bank in New York and the second bank ever established in the United States.
In the post-Revolutionary War years in New York, young lawyer Hamilton saw the need for a sound bank. American money was a mess, with a wide array of specie, near-worthless state-issued notes and foreign currency in circulation in New York City. Hamilton saw a role for a sound, well-managed institution to issue its own notes that would bring some order to the chaos.
Some wealthy New York landowners sought a so-called land bank, in which the capital is constituted in real estate, as a means of employing their land. Hamilton outmaneuvered them in positing a “money bank,” in which the capital stock was liquid, as an idea better suited to the commercial needs of New York City. The bank opened seven years before getting an official charter in 1791, proving that it sometimes pays to ask forgiveness rather than permission.
That same year, when the then-34-year-old Hamilton was serving as the first treasury secretary, Congress followed his urging in chartering the First Bank of the United States for a 20-year term. Its purpose was to lend to the government, make loans to businesses and provide a stable money supply through its notes. The new central bank triggered the formation of 18 new commercial banks in just five years, compared with four in all of the United States prior to the First Bank’s chartering, and shored up the credit of the young republic—giving it much-needed credibility in international financial markets and providing a platform for crucial investments in internal improvements and military strength.
As a pioneer in U.S. commercial banking and the original architect of the young republic’s financial infrastructure, there has been no young banker more accomplished or consequential than Hamilton.Email This Post