Government Financing in the Early Years

The first central bank in America was chartered February 25, 1791 by Congress with a twenty year charter. Secretary of the Treasury, Alexander Hamilton wanted a bank but Democratic-Republican, Thomas Jefferson objected. It was such an on going debate that the charter was not renewed in 1811. The bank had political oppression during this time and finally ceased operation in 1841.

The first bank of the United States located in Philadelphia, Pennsylvania, was a success in that it helped fund the debt from the American Revolution, it provided a stable national currency, and provided a means of exchange for all the colonies. Soon other banks were chartered and issued notes to their borrowers. The notes were redeemed for gold and silver, which protected the economy from inflation.

Alexander Hamilton wanted to establish financial order and establish credit with other nations. He established a single currency within the United States. He wanted a bank for the nation as a whole. To finance the bank he would sell stock. The price had to be in paid at least 1/4 in gold or silver. The bank would have real money to make loans. He also established an excise tax.

Finally in 1913, the Federal Reserve System(FED) was created and signed by Woodrow Wilson. It is regulated by a board made up of presidential appointees, Federal Open Market Committee, twelve regional banks, many private banks, and various advisory councils. It is located in Washington D.C. in the Eccles building.

The time line of central banking in the United States is as follows: 1791-1811 the First Bank of the United States, 1811-1816 no central bank, 1816-1836 Second Bank of the United States, 1837-1862 Free Bank Era, 1863-1913 National Banks, and 1913-Present Federal Reserve System.