Bisbee daily review., 1910-08-14


ference between the character and |
status Of the First and Second banks !
of the United States. incorporated |
early in the country's history, and |
the conception of a central bank as
developed under modern conditions
in Europe, is brought out in a for
chile manner In a volume just made
public by the national monetary
commission The volume consists OF
two parts-a study Of the First bank
of the United States, by DR.. John
Thomas Holdsworth of the University
OF Pittsburg, and study OF the Sec
ond bank OF the United States, by
DR.. Davis r. Dewey, of the Massa-
chusetts Institute of Technology, the
author OF "A Financial History Of the
United States"
The esay OF Doctor Holdsworth
recounts the plan of Hamilton TO
found bank for the purpose of aid
ing the government. which became
a law in 1871. 1t is declared by
Hamilton that a national bank was
not "a mere matter of private prop
erty, but a political machine of the
greatest importance to the state.
Thus conceived as a political ma
chine, it is declared by the author
that the bank never threw of en-
tirely it's political trappings, and It
finally died as the result of political
enmities and jealousies." The cap
ital of the bank was fixed at $40
600. 900, was allowed to be subscribed
to the proportion of three-quarters
in United States stock bearing 6
per cent interests, and the president
Of the United States was authorized
TO subscribe one behalf of the gov
eminent $4,000, 900. An equal amount
was to be loaned by the bank to the
government, which was to be repaid
in ten equal annual installments.
II is obvious, from these details.
that the capital was raised more
largely by bookkeeping transfers than
by the actual payment of specie, at
time when specie was extremely
scarce. The device by which Hamil-
/ ton carried through the government
subscription is defined as ''an ingen
I ious example of financial juggling
Shorn of technicalities, the govern
ment paid for its stock by bills o.
i exchange on Amsterdam, then IL Dor
4 rowed these bills and gave its not
8 for 81, ,000, 900. payable in ten equa
d installments, with interest at pc
8 cent. The practice was instituted b,
81 the government itself Of paying sui
q scriptions with stock notes was TO
4 lowed widely and in numerous in
& stances with disastrous effects in tn
& next fifty years. The central offic
q of the bank was in philadelphia. OF
81 the present site of tie Girard Nation
b al bank. and of the first board of p
q directors II were from Pennsylva
q MIA and 5 from New York.
81 Hamilton was not in favor o
81 branches, but they were soon estab
q commercial bank, with practically
& Hshed at the leading commercial cen
B tiers of the country and entered int
8 clearing and other relations with tn
81 local banks. The government sooi
& availed itself of Hamilton's origina
81 project to borrow freely from th'
bank, and these loans proved to b
4 larger and for a longer time thai
3 was at first expected, causing EN-
3 barrassment to the treasury and uu
E easiness to the bank before they wer'
q finally settled. This indebtedness
q amounted within four years to Sc
& 200, 900. or nearly two-thirds of th'
4 capital of the bank. The loan of 81
& large a portion of its funds crippled
+ its service to commerce and manu-
n facturers and made it difficult ever
to continue the temporary loans re
3 quired to facilitate the financial OF
4 erations of the government. Uuti
mately the loan was repaid, partl.
3 from the proceeds of the sale OF tn
& government holdings of bank stock
AS these shares sold at a premium
8 lin some cases as high as As pc
B cent, the government made prof
i of s671 $50, exclusive of dividends re
4 ceived to the amount of $1,101,720.
3 The First bank OF the United
States did not have the exclusive
privilege OF note issue, but customs
s duties were made payable in tn
notes Of the bank, which gave then
wide circulation. The bank. more
3 over. exercised a salutary restrain
upon the other banks by presenting
their notes promptly for redemption
when received over its counters. Tn
D passing of the political control 0
the country from the hands Of tn
federalists to those of the democrat
at the beginning of the nineteenl
century, It is declared by Docto
Holdsworth, had no immediate effec
upon the interests or fortunes Of tn
/ bank Though always regarded as I
d federalist institution. and manages
largely by men Of federalist leanings
its affairs were administered in tn
main with an eye single to busines
and profit. and It never became en-
broiled IN political controversies a
did its successor. the Second banl
Of the Unitd States. Only once di
the treasury. under democratic ae
ministration, apply to the bank 70
Ill