By Kate Young
With so much transition in the world of financial services, it makes sense that we would use much of this space to talk about the future of banking. On this most American of holidays, however, it seems right to reflect on the earliest days of America’s banks, and to recognize the role they played in our nation’s development. And to take pride in the vital role banks continue to play in keeping the American dream alive.
Test your knowledge. Impress your coworkers at the company picnic. And have a very happy Independence Day.
Q: Was the First Bank of the United States the first bank in the United States?
Described as Alexander Hamilton’s “grand experiment” in central banking, the was established in 1791 in Philadelphia. As a national bank, it faced political opposition from Thomas Jefferson and state banks, among others. Ultimately, though, it helped the country emerge from the economic chaos following the Revolutionary War. Over the next 14 years, the First Bank opened eight branches in major cities and ports stretching from Boston to New Orleans. These branches facilitated international trade and the country’s westward expansion.
Very impressive. But it wasn’t the nation’s first bank.
Q: Was the First Bank at least the first central bank in the United States?
A: Not even.
That honor goes to Bank of North America. As the first bank to be chartered in the United States (the year was 1781) Bank of North America was a de facto central bank until it was re-chartered in 1787 under conditions that restricted it from acting as a central bank.
Q: Can you open an account at the First Bank?
A: Sorry, no.
The First Bank’s 20-year charter expired in 1811. The political winds had shifted toward de-centralization, and the U.S. went without a national bank until 1816. The tide turned when a reluctant James Madison signed an act to establish the , and only then because the U.S. economy was reeling from effects of the War of 1812. Like the First Bank, the Second Bank did not get its 20-year charter renewed. Andrew Jackson had become president by then, and they say he didn’t much care for paper money, credit, or (ahem) banks in general.
Bonus fun facts:
- The United States would not have another central bank until the creation of the Federal Reserve System in 1913.
- Jackson’s face, despite his disdain for paper money, now graces the $20 bill— while Hamilton only gets the $10.
- The building that housed the First Bank still stands—you can see it for yourself on your next trip to Philly.
Q: Are there any banks still in operation since the nation’s earliest days?
Bank of New York (now BNY Mellon) got its start in 1784, founded by Alexander Hamilton with $500,000 in capital and a mandate to revive the economy after the Revolutionary War.
Massachusetts Bank was also founded in 1784, and continues to live on in the form of Bank of America. B of A is proud of the role that many of its “heritage banks” have played in U.S. history, from funding the reconstruction of Washington, DC after the War of 1812, to managing the wealth of the whaling industry, to financing the Erie Canal.
Another Massachusetts bank, State Street Corporation, was founded in 1792, the same year the U.S. dollar was established and the U.S. Postal Service was launched. Its charter was signed by John Hancock.
Q: How do banks continue to make history in America?
A: Every bank has its own story, but ABA has a pretty good overview of what the industry is contributing to the U.S. economy.
<Insert caption:> To view the entire infographic, click the image above. [http://www.aba.com/Tools/Infographics/Pages/Infographic-BanksRoleEconomy.aspx