Title: Draft of the Second Report on the Further Provision Necessary for Establishing Public Credit (Report on a National Bank), [13 December 1790]
From: Hamilton, Alexander
To:

That from a conviction (as suggested in his Report No. I herewith presented) That a National Bank is an Institution essential to of primary importance to the prosperous administration of the Finances, and would be of the greatest utility in the operations connected with the support of public Credit—his attention has been accordingly occupied drawn to in devising the plan of such an institution, upon a scale, which will intitle it to the public Confidence, and which will be likely to render it equal to the exigencies of the Public.
Previous to entering upon the detail of this plan, he entreats the Indulgence of the House, towards some preliminary reflections, naturally arising out of the subject, which he hopes will be deemed neither useless nor out of place. Public Opinion being the ultimate Arbiter of every measure of Government, it can scar[c]ely appear improper, in reference deference to that, it to accompany the origination of any new proposition with explanations many of which the superior information of those to whom it is immediately addressed, would render superfluous.
It is a fact well understood, that Public Banks have found admission and patronage, among most the principal & most enlightened commercial Nations. They have successively obtained in Italy, 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 even a question about their utility, in the countries in which they have been as long established. TheoristsSpeculatists and men of business unite in an unqualified the are agreed in the acknowlegment of it. their value.
Trade and Industry, wherever they have been tried have been are indebted to them for important aid. And Government has been repeatedly under the greatest obligations to them in dangerous and distressing trying emergencies: That of the United States, as well in some of the most critical conjunctures of the late war, as since the peace, 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 expected that there would be a perfect union of opinions in their favour. Yet doubts have been entertained; by many jealousies and prejudices have been disseminated. circulated: And though our own Experience the experiment is every day dissipating them within the spheres in which their effects are most visible and best known, yet there are still persons by whom they have not been intirely relinquished. To give a full and accurate view of the subject would be to make a treatise of a Report;convert a report into a Treatise but there are a few aspects in which it may be cursorily presented exhibited, which may perhaps conduce to a just impressionconception of its merits. These will involve a comparison of the advantages with the disadvantages real or supposed of such institutions.
The following are among the principal advantages of a Bank—
First   The augmentation of the active or productive capital of the a country: community. Gold and silver, when they are employed merely as the medium symbols of the exchange and transfer of other objects, alienation have been not improperly denominated dead stock; but when deposited in banks to become as a the basis of a paper circulation, which takes their character and or place, as the mere signs symbols or representatives of value, they then acquire life or in other words be an active or and productive productive quality. This idea which rather appears rather subtile and abstract. in a general form at first view may be made sensible or and obvious by particulars entering into some
proceeding to somestating a few particulars. little detail. a few details.. and palpable and by entering into a few particulars.
It is evident, for instance, that the money which of a Merchant, not in vested keeps in his chest waiting for a favourable opportunity to employ it produces him nothing ’till that opportunity arrives. If But if instead of locking it up in this manner keeping it in his Chest, he invests it in Bank stock, it yields a profit during that the interval which he will realize in some future dividend; and when any profitable advantageous speculation offers, presents itself itself occurs to be able to embrace it, he has only to obtain a loan by way of discount from the bank or to dispose of his stock; a thing  an alternative seldom attended with difficulty, when the affairs of the institution are in a prosperous train. either of which which enables him to embrace it. His money so invested placed there in the bank is a fund upon which he himself and others can borrow to a much larger amount. It is a well a established known fact, that Banks in good proper good credit can circulate a much larger far greater sum than the actual quantum amount of their Capital in gold and silver. The extent of the possible excess seems indeterminate; though it has been conjecturally stated at the proportions of two and three for to one. it. This faculty is produced in various different ways. First A great proportion of the notes, which are issued and pass current as Cash are indefinitely suspended in circulation, upon from the confidence, which each holder has, that he can at any moment obtain the turn them into gold and silver. for them secondly. Every loan which a Bank makes of a Bank is in its first shape a Credit given to the borrower on its books, the amount of which it stands ready to pay either in its own notes or in goldcoin or silver at his option. But in a great number of cases no actual payment is made, in either. The party borrower frequently, often by an order a Check or order, transfers his credit to some other person, to whom he has a payment to make; who in his turn is as often content with a similar Credit, because he can at all times is satisfied knows that he can obtain whenever he pleases either convert it into cash or pass it to some other hand as an equivalent for it; such; and in this manner the Credit keeps circulating, and answering performing in every stage the function purpose office of money, till it is extinguished by a discount with some person who has a payment to make to the Bankis Debtor to the Bank to an equal or greater amount. for some loan to him. Thus large sums are lent and paid from hand to hand, without the intervention of a single piece of coin. In addition to these circumstances Thirdly, there is always a large quantity of gold and silver in the Bank vaults repositories of the Bank, besides its own stock, which is deposited placed there by the dealers with it and others, partly with a view to partly to its safety safe-keeping and partly to the accommodation of an institution which is itself of a source of such general accommodation. These deposits conspire cooperate with the Stock of the Bank to constitute a fund which enables it to answer the demands for Coin arising from the occasional returns of its Notes.
It is easy to perceive in what manner, from these different causes,these different operations create the ability ofin a bank to circulate a larger sum, than its actual capital in Coin, is acquired; when confidence in it has once been solidly established. And as the excess is always bottomed upon good security of some kind or other it follows that that confidence has a rational and substantial foundation. Nor is that confidence without a destitute of a rational and substantial foundation; the excess being always bottomed upon good security of one kind or another, which the Bank cautiously requires before it consents will consent whenever it engages to advance its money or its Credit.
It is not less easy to desire discern from the same view of the subject the truth of the general proposition, that it is one of the properties one effect of the the tendency of a Bank to augment the active and productive capital of a Country. In a variety of cases The money one of one individual, while he is waiting for a call to employ it beneficially, is in a situation to administer to the wants of others; and if he be in a situation and this without being put of his own reach when his occasions press. Whence he can derive in the interval derive a profit from itin the mean time;; for in the almost infinite competitions and vicissitudes of Mercantile entreprise there can be no danger of an intermission of demand or that the money will remain unemployed in the vaults of the Bank. Nor it is this the the only consideration. It is not merely that the money Coin which constitutes the stock of the Bank is thus put into a state of continualincessant and unremitting activity; but the faculty which has been explained of lending and circulating a greater sum than the amount of that stock is to all the purposes of Trade and industry an absolute increase of capital. For whatever answers the the end of money. Purchases and undertakings of almost every kind can be carried on by any given sum of bank ⟨paper⟩ as effectually as by an equal sum in gold and silver.
And thushence it is that Banks serve to enlarge the spherescope of enterprise and industry, and, by so doing so, become nurseries of national wealth, of which these are the parents. This consequence so easily deducible in theory has been verified in experience by the most striking results.
Secondly, Greater facility to the government in obtaining pecuniary aids; particularly especially in sudden emergencies: This is another and an undisputed advantage of public public banks. As already remarked, it has been felt realised in signal instances among by ourselves. The reason is obvious: A large The capitals of a great number of individuals are by this operation brought collected to one a point and placed under one direction. And The mass they form is formed by this union is in a certain sense magnified by the credit it produces attached to it: And while it this mass is always ready and can at once be put in motion in aid of the state, & the government, the state, the interest of the Bank to afford that aid its own interest to afford it independent of a reasonable regard to the public safety and welfare, which it is presumeable the Directors of it will always feel in an equal proportion with other different & respectable Citizens is always a security a sure pledge for its disposition to go as far in its compliances in doing it as the government, can in prudence be can desired. In There is in the nature of things as will be more particularly noticed hereafter in another place there is an intimate connection of interest between the Government and the Bank of a Nation a National Bank. The patronage of the Government besides the interest it always pays for what it borrows is in various ways of not less importance to the Bank than in its aid to the Government.
Thirdly. The facilitating of the payment of taxes: This advantage is produced in two ways: Those who are in a situation to have ready access to the Bank  can be have the assistance of are enabled by direct loans to answer with punctuality the public the calls upon them. This accommodation has been sensibly felt by those in the payment of the duties of the customs heretofore laid, by those who reside where there are establishments of this natureexist. This however though an extensive, is not an universal benefit. The other way, in which the effect here contemplated is brought about produced, and in which the benefit is rendered becomes is general is the increasing of the circulating medium and the quickening of circulation. The manner in which the first happens has been already unfolded: The last may require  a brief some illustration. When payments are to be made between different places at a distance from each other different distant places which have having an intercourse of businesswith each other, if there happen to be no private bills at Market and there are no bank notes which have a currency common circulation in both the consequence is that Coin must be remitted. This is attended with trouble delay expence & risk. and delay. If on the contrary the notes of a pub there are bank notes current in both, the transmission of these by the post or any other speedy or convenient conveyance answersthe purpose; and these again; which very often in the alternations of demand are frequently soon after very soon after returned very soon after, to the place from whence they came: And thus Whence the transportation and retransportation of the metals are prevented; 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 oscillation vibration from one place to another place by remaining where they are continue in activity and administer still to the general ordinary ordinary circulation; which of course suffers no is prevented from suffering any either diminution nor 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 increases augments enhances the quantity of circulating money adds to the ease with which every industrious person member of the community may acquire that portion of it of which he stands in need; and this as well for the payment of his taxes as for the answering of an and thence he is better able and enables him the better to to pay his taxes as well as to supply any his every all other wants he may have. If even Even where the circulation of the bank paper be is not general, it must still have the same effect, though in a less degree. For whatever supplies the chan furnishes new additional supplies to the channels of circulation in one place quarter particular places must necessarily naturally contributes to keep the streams fuller elsewhere. This last view of the subject not only serves to illustrate the position, that Banks tend to facilitate the payment of taxes; but exemplifies, in several some new lights, their utility to Trade 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 detail of the advantages of Banks; especially as all those, which might  still be enumerated particularised be particularised, are readily to be inferred as consequences from those which have been stated enumerated. Their disadvantages real or supposed are now to be reviewed. But a satisfactory development of the subject requires that a summary concise view should be next taken of these things which have been imputed to Banks as disadvantages. The principal most serious of the charges which have been brought against them are—
First   That they serve to increase usury
Secondly   That they tend to prevent other kinds of lending.
Thirdly   That they furnish temptations to overtrading overtaking
Fourthly   That they afford aid to ignorant mere adventurers; who disturb the natural and beneficial and beneficial operations course of Trade.
Fifthly   That they uphold give to bankrupt and fraudulent debtors Traders a fictitious credit by which they are enabled enables them to to maintain false appearances and extend their impositions. And lastly
Lastly   That they have a tendency to banish gold and silver from the Country.
There is great reason to believe that these on a close and candid inspection it will appear either that these be several charges will on discovered are without that these charges are either destitute of foundation; a close inspection appear either to be without foundation; or that, as far as the evils they suppose suggest have been found to exist, they have proceeded from other or partial or temporary causes; and are not inherent in the nature and permanent operation of such institutions; or that they are more than counterballanced by opposite advantages. Let this inspection be made This inspection shall be had in the order in which the charges have been stated.
They serve, it is said The first of them is that Banks serve to to increase usury.
As it is the truth, so it 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 some instances 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 their resources and their 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 practicing it observing it with the Bank; a circumstance which itself more than compensates for any occasional ill, which may have sprung from that necessity in which the particular under consideration. As far, therefore as they depend Traders depend on each other for pecuniary supplies supplies resources they can make their calculations of what they they can calculate their expectations with greater certainty; and are in proportionably less danger of disappointments which might compel them to resort have recourse to so pernicious an species of aid expedient:; And the mischiefs of doing it (among which the loss of Credit with the Bank is not the least) the mischiefs of which, after a few examples have been exhibitted witnessed naturally inspire great care caution, in all but men 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 making use of it, is loss of Credit with the Bank itself; if the fact be known or even strongly suspected, is loss of Credit with the Bank itself.
The Directors of a Bank too, though perhaps in order to extend its business and its popularity, in the infancy of the an institution, they may perhaps be tempted to go further in accommodations than the strict rules of prudence will warrant, grow more circumspect of course, as its affairs become better established and as the evils of too great facility are experimentally demonstrated. evinced witnessed. demonstrated. They become more attentive to the situation and conduct of those with whom they deal; they are observe more narrowly their operations and pursuits; they œconomise the credit they give to those of suspicious solidity; they refuse it to those whose carreer is more manifestly hazardous. In short, a word in the course of practice, from the very nature of things, the interest will make it the policy of a Bank will render make it its policy, to assist succour and support the wary and industrious and to discountenance and to discredit the rash and unthrifty; to discountenance usurious lenders and usurious borrowers.
There is a leading view, in which the tendency of Banks will be seen to be, to abrige restrain rather than to promote usury. This relates to their quality faculty (as which has been demonstrated) of increasing the quantity and accelerating the circulation of money producing a greater property of increasing the quantity and quickening the a more quick circulation of money. It is If it be evident that usury must will prevail increase or diminish in according to the proportion proportion as which the demands for borrowing bears to exceeds or keeps measure with the quantity of money at market to be lent; and therefore whatever And therefore has the effect that whatever has the property effect just mentioned, whether it be it be in the shape of paper or coin, must be of a nature to counteract the progress of usury, by contributing to render the supply more equal to the demand must tend to counteract the progress of usury.
But bank-lending it is pretended, is an impediment to alleged served to prevent other kinds of lending; which by confining the the resource of borrowing to a particular class leaves the the rest of the community more necessitous destitute, and therefore a of course more exposed to the extortions of usurers. As the profits of Bank Stock exceed the ordinary legal rate of interest, those who have money prefer, it is affirmed alleged the possessors of money, it is argued prefer investing it in that article to lending it at this rate; to which there is are the additional motives of a more prompt command of the Capital and of that the income from the former of more quick frequent and exact returns pay 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; especially particularly in reference to the state of things in this Country. First the great bulk of the stock of a bank will consist of the funds of men in trade, among ourselves, and of monied foreigners; neither the former of whom could not share afford to put their capitals out of their own reach to be invested by investing it in loans in the ordinary mode for long periods on mortgages or personal security; and the latter of whom would not choose be willing to be subjected to the casualties delays and embarrassments of of that method of such a disposition of their money in a distant Country. Secondly. There will always be a considerable proportion of those, who are properly the money lenders, who from a that spirit of caution which usually characterises 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 will are apt to consider regard as a more precarious security.
But an a These considerations serve in a material great degree to narrow the foundation of the objection as to the point of fact. But there is a more satisfactory answer to it. The effect supposed, as far as it has existence is, in the nature of the thing, 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 comprised with restricted to within a certain defined limit. It is the province of legislative prudence so to adjust this limit, that while it will not be too 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 by the Bank it will still be within the compass of the pecuniary resources of the community; so that there may be an easy practicability of completing the subscriptions to it. This done, the supposed effect must of necessity ceases. There is no longer room for the investment of any additional capital. Stock may indeed change hands by one person selling and another buying; but the money which one the buyer takes out of the common mass another channel to purchase the stock the other seller receives restored to it and restores to it. to be employed in some other way. Hence the future surplusses, which may accumulate must take their natural usual course, and lending at interest must go on as if there were no such institution.
It must indeed flow in a more copious stream. The Bank furnishes an extraordinary supply for borrowers within its immediate sphere. A larger supply consequently remains for borrowers elsewhere. In proportion, as the operations and circulation of the Bank are is extended, there is an augmentation of the aggregate mass of money for answering the aggregate mass of demand—Hence a greater facility in obtaining it for every purpose.
That Banks furnish temptations to overtrading is the third of the
It ought not to escape without a remark that as far as the citizens of other 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 yearly half yearly rent is drawn back accruing from the equal to any fund invest the arising from the dividends upon the stock. But as this rent arises accrues 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 their rent is in the course of trade converted into the products of our country. This view of the subject furnishes an answer to an objection which has been started for deduced from the circumstance here taken notice of, namely the of foreigners deriving a yearly income resulting to foreigners from the part of the Stock owned by them, which has been represented as tending as tending to drain the country of its specie. In this objection the original investment of the capital and the in 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. Nor is it any imputation to them to acknowlege that they does it derogate from their utility. This must mean that by affording additional aids to the mercantile enterprise they induce the merchant sometimes to adventure beyond the prudent or salutary point. But the very statement of the position thing shews that the object of the charge is an occasional ill, incident to a general good. benefit advantage. The plenty of gold & Credit of every kind (as a species of which only can bank lending have the effect supposed) must be in different degrees chargeable with the same inconvenience. Nay it would will even attend Even 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, or to prescribe proscribe 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 overtrading is one?
If the abuses of a beneficial thing are to produce determine its condemnation, there is scarcely a source of public prosperity which will not speedily be dammed up geting closed. In every case the evil ill is to be compared with the good; and in the present, such a comparison will will issue in this, which furnish this result that the new and increased energies energies which derived to commercial enterprise derives from the aid of banks and the additional stock of industry which it serves are a source of general profit and advantage, which greatly overballance the partial ills of the overtrading of a few individuals at particular times, or of numbers, in particular conjunctures.
The fourth and fifth charges may be considered together:. These relate to the aid, which is sometimes derived from afforded by Banks by to unskilful adventurers and fraudulent Traders. These charges also have some degree of foundation; though far less than has been pretended, and they are among add to the instances of partial ills connected with more extensive and over ballancing benefits.
The practice of giving fictitious credit to improper persons is one of those evils which experience prompted guided by interest gradually 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 directly by the delinquencies failures of the persons to whom such Credit is given of this description themselves but eventually by the incapacities of others, whom their impositions or delinquencies failures may have ruined. As the the Bank not only
Nor is there much danger of a Bank’s being betrayed often led into this practice error from want of information. The Directors themselves being for the most part taken selected from the class of Traders may are to be expected to possess individually an general and comprehensive accurate knowlege of the characters and situations of those who fall come 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, direct them which is itself in most cases a very good index of their dialy situation of the state in which those persons are. The shifts doubtings artifices and shifts, He they which those in desperate or declining circumstances are obliged to employ to keep up the countenance, which the rules of the Bank require & the train of their connections are so many beacons so so many prognostics not difficult to be interpreted of the fate which awaits them. to experienced directors very good guides steer clear of them. pretty sure prognostics 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 witholding credit to announce to the public that they are unworthy not intitled to of it.
But If some Banks do sometimes give in spite of every precaution are betrayed into giving a false credit to the persons described, they more frequently enable honest and industrious men of small little or perhaps with of no capital to undertake and prosecute business with advantage both to themselves and to to the community; and assist Merchants of both capital and Credit, who meet with accidental fortuitous and unforeseenshocks, which might without such help otherwise prove fatal to them and and to others, to make head against their misfortunes and finally to retrieve their affairs: These Circumstances which form suggest no inconsiderable encomiums on the utility of Banks.

But the last and heaviest charge is still to be examined. This is that Banks tend to banish the gold & silver of the specie of the Country.
The force of this objection rests upon their being an 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 paper Credit. The number and respectability of the patrons of this idea intitle it to particular attention.
The most common answer given to it is that the thing supposed is of little or no consequence: That it is immaterial what serves the purpose of money whether silver or gold 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 estimated 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 it is not intirely satisfactory. It is certain, that the vivification 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; if the consequence of avoiding that loss should be a scanty or defective circulation.
But the positive increase or decrease of the gold and silver precious metals, in of a Country, unless temporarily unless the latter be temporary can hardly 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 being as the money of the world, it it is of great concern to the state that there be it possess a sufficiency of it to face any external calls demands which the protection of its external interests may create.
The objection seems to admit of another and a more conclusive answer, which controverts the fact itself. A nation a that which has no mines of its own must derive the precious metals from others; generally speaking generally speaking in exchange for the products of its labour and industry. The quantity it will possess will therefore in the ordinary course of things be regulated by the favourable or unfavourable ballance of its Trade; that is, by the proportion between its abilities to supply foreigners & products and its wants of them, between the amount of its exportations and that of its importations. The state therefore Hence the state of its improve progressive agriculture and manufactures, the general mass of quantity and quality of its labour and industry must in the main influence and determine in the general course of things the increase or decrease of its gold and silver.
If this be true, the inference will seems to be that well constituted banks favour the increase of the precious metals. It has been shewn, that they augment in different ways, the active capital of the Country.
Tis Capital which gives employed This it is, which generates employment; Tis this, which and which animates and expands labour and industry. Any Every addition which is made to it, by putting contributing to put in motion a greater quantity of both must tends to create a greater quantity of the products of both—And by furnishing more materials to exchange supply with foreigners with others for those which are wanted from them for exportation conduces to a favourable ballance of Trade and consequently to the introduction and increase of gold and silver.
This consequence conclusion seems appears to be deduced drawn from solid premisses. There are however objections to be made to it.
It may might 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 case of a wrong ballance, might restrain in some degree their exportation; and it may might may be added that from the same cause in the same case, it would it may retard those œconomical 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 ballances.

There is perhaps some truth in both these observations; but they appear to be of a nature rather to form exceptions to the principle of the generality of the conclusion which has been drawn than to overthrow it. The state of things in which the exigencies absolute necessities exigencies of circulation can be supposed to resist with any effect the urgent demand for specie which a wrong ballance of Trade may occasion presents an extreme case. And a situation, in which the too expensive manner of living of a community compared with its means can stand in need of so severe such a corrective is one, which perhaps can will rarely results, but from extradinary and adventitious causes: such as, for example, as a national revolution which unsettles had unsettled all the established habits of a people and inflames inflamed the appetite for extravagance by the illusions of an ideal wealth engendered occasioned by the continual multiplication of a depending on a depreciating currencyor some similar causes. There is good reason to believe, that where the laws are wise and well executed, and the inviolability of property and contracts maintained, the œconomy of a people will in the general course of things correspond with its means.
The animation of industry is are means which nourish or support industry probably,
The support of Industry is probably, in every case, of more consequence towards correcting rectifying a disadvantageous wrong ballance of Trade, of Trade and the stagnation of it would be likely to have a worse effect than any practiccable retrenchments of expence in the expences of families or individuals.:
And its the stagnation of it would be likely to have more effect contribute more to towards in prolonging it than any such savings in shortening its continuance. Bank circulation serves contributes to prevent that stagnation, which That stagnation is a natural consequence of the defect of an adequate medium, by coming in aid of the gold and silver which without the aid of Bank circulation would in the cases supposed be severely felt.
It is also to be observed deserves noticed, that as this circulation is always in a compound ration to the fund upon which it depends and to the demand for it, and as that fund itself is itself affected by the exportation of the metals, there is no danger of its being overstocked as in the case of paper is emitt issued at the pleasure of the government; or of its preventing the consequences of any unfavourable ballance from being sufficiently felt to produce the reforms alluded to, as far as circumstances may require and admit.
Nothing can be more fallible than the comparisons which can sometimes have been made between different countries to illustrate the truth of the position under consideration. The more or less of Gold and silver in any country different countries depends upon an infinite variety of combinations all of which ought to be known in order to judge whether the existence or non existence of paper currencies has any share in the relative proportions they relatively severally contain. The comparitive mass and value of the productions of the labour and industry of each of each compared with the its wants; of each the nature of its establishments abroad; the kind of wars in which it is usually engaged; the relations it bears to those countries, which are the original possessors of those metals; the privileges it enjoys in their trade; these and a vast variety 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 suggestions, surmises which have been hitherto hazarded on the point.
These several different views of the subject appear sufficient to impress a full conviction, that of the utility of Banks and to demonstrate that they are of great importance not only in relation to administration of the finances, but in the general system of the political Oeconomy.
The judgment of many concerning them has no doubt been perplexed by the misinterpertation of appearances which were to be ascribed to other causes. The general devastation of personal a property occasionned by the late war naturally produced on the one hand a great demand for money and on the other a great scarcity to a deficiency of it to answer the demand: Some injudicious laws which grew out of the public distresses by weaking impairing confidence aggravated the evil 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 led to expences beyond their incomes resources; the number of adventurers who at that epoch rushed into trade without capital, and in many of them instances without character or information who at that epoch rushed into Trade and and who were obliged to make any sacrifices to support a transient Credit; and the unsettled state of the public debt: All these different circumstances concurring cooperating with those first mentioned necessarily led to usurious borrowing, and produced most of the mischiefs inconveniences and were the true causes of most of the inauspicious appearances; which, where Banks were established, were have been by some erroneously placed to their account; and which they would could not have done if they had turned a mistake they might easily have avoided by turning their eyes toward places where there were none existed and where, notwithstanding nevertheless the same evils would have been seen perceived to exist even in a greater degree, than where those institutions had obtained.
These evils have either intirely ceased or been greatly mitigated. A more perfect cure for them may Their more complete extinction may be looked for, from that additional security to property which the constitution of the United States happily gives (a circumstance of prodigious moment in the scale both of public and private prosperity) from the attraction of foreign capital, under the impression management auspices of that security, to be employed upon objects and in enterprises, for which the state of this country opens a wide field and inviting field; from the consistency and stability, which the public debt is fast acquiring, as well in the public opinion as in fact—from the augmentation of capital, which that circumstance and the quarter yearly payment of Interest will afford 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. Previous to the Revolution circulation was in a great measure carried by on by the paper emissions. emitted by the several local governments In Pensylvania alone the quantity of it was about a million and a half of dollars. This auxiliary may These may be said to be now done away. And it is generally supposed that there has been for some time past and still is a deficiency of circulating medium.
How far this that deficiency is real or imaginary is not susceptible of demonstration, but there are circumstances & appearances which render its reality probable.
The circumstances are besides the fact just mentioned respecting the paper emissions formerly in use, the vast tracts of waste land, and the little advanced state of manufactures. The progressive settlement of the former, while it promises ample retributionrecompence 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, but it diverts it into its own channels a portion of that species of labour and industry which would otherwise be employed in furnishing materials for foreign trade, and which by contributing to a favourable ballance, would assist the introduction of specie. In the early periods of new settlers settlements, the labour of the settlem settlers not only furnish no surplussses for exportation but 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 hypothesis 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. The sword may in ancient times have won They were often won in ancient times have been sometimes acquired by the sword but the modern system of war has expelled done away this resource; and it is one upon which it is to be hoped the United States will never be inclined to depend rely.
The appearances alluded to are a greater prevalency of direct barter in some parts of the Country; and greater difficulty almost every where in the advantageous alienation of improved real estate. The greater difficulty of getting money, which is a general complaint, is not mentioned added to the number,, because it is the complaint of all times, and one in which imagination must ever have too great scope latitude to permit an appeal to it.
The emitting of If these things be true and some aid to circulation is necess. The convenient pay
If these things be true and some aid to circulation be necessary it remains to inquire what ought to be the nature of that aid.
The emitting of paper money by the authority of Government is wisely prohibitted to the individual states by the national constitution. And the spirit of that prohibition ought not to be disregarded by the Government of the United States. Though paper emissions under a general authority might have some advantages not applicable, and be free from some disadvantages, which are applicable, to the like emissions by the states separately; yet they are of a nature so liable to abuse, and it may even be affirmed so certain of being abused, that the wisdom of the government will be shewn in never trusting itself with the use of so baseless treacherous seductive and dangerous so seducing and treacherous an expedient. In times of tranquillity it might have no ill con[se]quence; it might even perhaps be managed in a way so regulated as to be productive of good; but in great and trying emergencies, there is almost a moral certainty of its becoming mischievous. The stamping of paper is an operation so much easier than the laying of taxes, that a government, in the practice of paper emissions, would rarely fail in any such emergency to indulge itself too far in the employment of that resour[c]e, to avoid as much as possible one less propitious to present popularity; though incomparably more safe and salutary. in itself. If it should not even be carried so far as to be rendered an absolute bubble it would at least be likely to be extended to a degree which would occasion an inflated and artificial state of things inconsistent incompatible with the regular and prosperous course of the political œconomy.
Among other material differences been 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 will return upon the bank. Its emissions as elsewhere intimated must always be in a compound ratio to the fund and to 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.
Assuming it then now, as a consequence from what has been said, that a National Bank is a desireable institution two inquiries emerge—Is there no such institution, already in existence being, which has a claim to that character, and which supersedes the propriety, or necessity of another? If there be none, what ought to be are the principles upon which one ought to be established?

There are at present three institutions Banks in the United States. That of North America established in this City; that of New York, established in the city of New York, that of Massachusettes established in the City of Boston. Of these three, the first is the only one, which has at any time had a direct relation to the United States.
The Bank of N America originated in a resolution of Congress of the 26 of May 1781 founded upon a proposition of the Superintendent of Finance which was afterwards carried into execution by an ordinance of the 31 of December following intitled “An Ordinance to incorporate the subscribers to the Bank of North America,” and which was followed by acts of incorporation, grounded upon that Ordinance, by the states of ☞
The aid afforded to the U States, by this institution during the remaining period of the late war was of essential consequence; 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 appear to invalidate them, and in others which considerations which to indicate the propriety of a different new establishment, on principles somewhat different.
The directors of this institution Bank, on behalf of their constituents, have since accepted and acted under a new Charter from the State of Pensylvania materially variant from their original one; and which so narrows the foundation of the Bank institution as to render its funds it an impor in incompetent basis for the extensive purposes of a National Bank.
The limit assigned by the ordinance of Congress limits to the funds stock of the Bank is ten Millions of Dollars. The last charter of Pensylvania confines it to two millions. Is there not an a direct repugnancy between two charters so differently circumstanced? Must not the acceptance of the one be deemed a virtual renunciation surrender of the other?
These questions naturally present themselves, and yet perhaps it is neither adviseable nor necessary to enter into upon attempt a solution of them.
There is nothing in the acts of Congress which imply an exclusive right in the institution to which it relates except during the term continuance of the war. There is therefore nothing, if the public good requires it, which prevents the establishment of another.
It may however be incidentally remarked, that in the general opinion of the United States, the Bank of North America has acquired taken the station of a Bank of Pensylvania only, and that the ☞Directors of that Bank seem themselves on various occasions to have viewed it in the same light. One of the proofs of this is in the change of the principle of voting for directors.
By the 5th Article of the plan upon which the subscriptions were first made, approved by the resolution of the 26 of May and organised by the Ordinance of the 31 of December, every Stockholder is intitled in the election of Directors to as many votes as he holds shares. By a bye law of the Corporation since the last charter, a different ratio of suffrages is established, and has been practiced upon.
But though the Ordinance of Congress contains no grant of exclusive privileges, there is 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, such well founded claims to protection and favour 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 motives reasons of public good. And in the manner of doing it every facility should be given to a consolidation of the old into with the new, one upon terms agreeable to the part beneficial not injurious to the parties interested concerned.. But there is no ground to maintain that in a case in which the government has made no condition restricting its authority that it ought voluntarily to restrict it, in 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 those which characterise the actual situation of the Bank of North America.
The inducements to a new another establishment are now to be considered.
It is now proper to consider examine examine what are the considerations of public good which render a new establishment adviseable.
The first of them which occurs is, the, at least, ambiguous situation in which the Bank of N America has placed itself by the acceptance by the acceptance of its last charter. is the first, which occurs. If this has rendered it the mere Bank of a particular state, liable to dissolution at the expiration of the 14 years, to which term the act of that state that charge charter has restricted its duration, it would be neither fit nor expedient to rely on accept it, as an equivalent for the a Bank of the United States.
The restriction of its capital also, which according to the same supposition could cannot be extended beyond two Millions of Dollars, is a conclusive reason for another establishment. So small a Capital neither 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 coextensive with the United States, which cover 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 being 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 any time (now far short of the ultimate limit 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 will 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 the indiv[id]uals of it as the state) are made more subordinate to the interest real or imagined of the Stockholders than they ought to 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 are worthy of Confidence). But it does not follow that this is alone to be consulted, or that it even ought to be paramount. Public utility is more truly the object of a Public Banks than private profit. But And it is the business of government to constitute them on such principles, that while the latter will result in a sufficient degree to offer 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 the creation of an ample capital; and with in this view to fixing the bounds which are deemed safe and convenient and not to be exceeded, to leave no discretion either to stop short of them or to overpass them. The want of this precaution in the constitution establishment of the Bank of N America is a further and a powerful consideration an important reason for desiring one another differently constituted.
There may be room, at first sight, for a supposition, that as the profits of a bank will bear a proportion to the extent of its operations and as, for this reason, the interest of the stockholders will not be disadvantageously affected dispose them readily to consent to all by any necessary augmentations of Capital there is no cause to apprehend, that they will be indisposed to such augmentations.
But most men in cases matters of this nature will 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 the attempt to face the additional demands which the course of business may create, from a desire to enchance its profits, than to set on foot new subscriptions which may hazard a diminution of them 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 in to have this effect their Capitals must to ought to be equal until considerable, completely equal to all the demands of business, and such as will tend to remove the idea that the accommodations they afford is 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 lead to a moderation of its price. Latitude in this respect may safely be allowed in this country; as there is no danger
The want of a principle of Rotation in the constitution of the Bank of North America is another weighty argument for a new different 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 while there are strong reasons in favour of it, in relation to the latter one, which do not apply to the former other. The knowlege 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 force of that consideration in referrence to the last relation to the latter. latter. Almost every important case of legislation involve requires towards a right decision a general and accurate acquaintance with knowlege of the affairs of the state and habits of thinking which are not acquired seldom acquired but from in private life, the offspring for the most part of a familiarity with public concerns. The deta administration of a bank, on the contrary, is regulated by a few simple fixed maxims the application of which cannot be is not difficult to any man of judgment; especially if instructed in acquainted with the principles of Trade. It is in general a constant succession of the same details.
But though this be the case the idea of the advantages of experience is not to be slighted. Room ought to be left for the regular transmission of official information. And for this purpose the The President or head of the direction ought to be excepted from the principle of rotation. With this exception, the & taking care that the periodical exclusion shall not extending to the whole body of Directors at the same time, 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 knowlege; especially to as the periodical exclusion ought not not to reach the whole of the Directors at one time.
The reasons argument in favour of the principle of rotation are these, the firmly assuring of the public confidence, the le is, this, that it will render the public confidence more firm, stable and unqualified, by lessening the danger of combinations among the directors to make the institution subservient to party views or to the the accommodation preferably of any particular set of men, it will render the public confidence more firm stable and unqualified.
When it is considered, that the Directors of a Bank are not elected by the great body of the community, in which a diversity of views will naturally prevail at different conjunctures but by a small and select class of men, among whom it is far more easy to cultivate a steady adherence to the same persons and objects; preserve a systematic pursuit of the same views; and that those Directors have it in their power so directly immediately, to conciliate by obliging, the most influential of this class, it is easy to perceive, that without the principles of rotation changes in that body can rarely happen, but as a concession which they may themselves think it prudent it expedient fit to make to public clamor or to make to public opinion.
A continual su
The constit continual administration of an institution of this kind by the same persons, will never fail, with or without cause from their conduct, to excite distrust and discontents. The necessary secrecy of the transactions of the a Bank gives  unlimited greater scope to imagination to infer that something is or may be wrong. And this inevitable mystery is a solid reason in the nature of 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, it is essential, that both should have that check upon their conduct and that security against the prevalency of a partial or pernicious system, which will be produced by the certainty of periodical changes. of men. Such too is the delicacy of the Credit of a Bank, that every thing, which can fortify confidence and repel suspicion, without injuring its operations ought carefully to be sought after in its formation.
The last Another A further consideration, which will be mentioned, as recommending s a new another establishment, is the improper rule by which the right of voting for Directors is regulated in the original plan upon which the Bank of North America was originally constituted, namely a vote for each share, and the want of a rule in the last Charter; 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 proper rule should be established on this point head as it is one of those things, which ought not to be left to discretion; and it is consequently of equal importance, that that rule should be a proper one.
A vote for each share renders a combination, between a few principal stockholders, to monopolise the power and benefits of the Bank, too easy. An equal vote to each stockholder, however large great or small his interest in the institution allows not a due that degree of weight to large stockholders, which it is reasonable they should have, and which perhaps their security and that of the Bank may require. A prudent mean is to be desired. preferred. aimed at. A conviction of this has produced a bye law of the corporation of the Bank of North America which evidently aims at such a mean. But a A reflexion 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 reconcileable with a due caution prudent to permit that any but citizens should be eligible as Directors of a National Bank, or that non resident foreigners should be able to influence the appointment of Directors by the votes of their proxies. 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 N America not of inconsiderable money moment, which appear desireable, but which are not of magnitude enough to claim a preliminary discussion here. particular remark. These will be seen in the plan which will be submittedin the sequel..
The order of the investigation leads now to enquiry into the principle of upon which
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 services that Bank the institution it has rendered, or of the benefits it has produced.
The establishment of such an institution at the time it was done proposed was a measure dictated by wisdom. The Its utility has been amply evinced by its fruits. American Independence owes much to it. And it is very conceivable that reasons of the moment may have rendered those features in it inexpedient which on a revision, with a permanent view suggested as are desireable.
The order of the subject now leads to an inquiry into the principles upon which a National Bank ought to be established. instituted.
The situation of the U States naturally suggests 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 structure plan would be apt to inspire doubts, which would deter from entering into adventuring in it. And the practicability of a safe and orderly administration, though not to be abandonned 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. It The most that would seem adviseable, on this point, is to insert a provision, which may lead to it hereafter; if when if experience may better shall more clearly demonstrate its utility and the practical observations of can satisfy those who may have the direction shall render it in their judgment safe that it may be adopted with safety. It is certain 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 necessarily be under a distinct, though a subordinate direction; to which a considerable latitude of discretion must of necessity be entrusted. 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 of the institution might would hazard serious disorders. possibly something more possibly to a ruinous extent ruin perhaps to a serious extent..
Another wish dictated by the particular situation of the Country is that the Bank could be so constituted as to be made an immediate instrument of loans to the proprietors of land; but this wish also yields to the difficulty of accomplishing it. Various projects have at different times been proposed for the establishment of what has been called a land bank, but none of them are to can be deemed satisfactory.
Land is alone an unfit unfit fund for a bank circulation. If the notes issued upon it were not to be paper emitted by it be not payable in coin on demand or at a short date, this would it will amount to nothing more than a repitition of the paper emissions which have heretofore obtained, and which are now exploded by the general voice. If a the notes they are to be payable in coin the land must first be converted into it by sale or mortgage. neither of which in a sudden emergency could be The difficulty of effecting the former latter is the very thing which begets the desire of finding another resource, and the former would not be practicable on a sudden emergency but with sacrifices which would make the cure worse than the disease.
If it be said that the sub
Neither is the idea of constituting the fund partly of coin and partly of land freer from impediments. These two species of property do not for the most part unite in the same hands. Will the monied men consent to enter into in a partnership with the landholders by which the latterthese will share in the profits which are will be made by the money of  with their money?
the former? Money can be the only Agent in such a case of the The Money it is certain evident will be the Agent or efficient cause of these the profits. which are made. The land can only be regarded as an be nothing more than a an additional security. It is easy not difficult to see that an union on such terms will not readily be formed. If the land holders 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 as if it were to be compounded of money and land.
But when is to arise the aid To procure for the land holders the assistance of loans is the great desideratum. of such a plan
The aid intended desired for the land holders is the obtaining procuring for them the assistance aid of loans. If in order to this the Bank is to ade Supposing other difficulties surmounted, and a fund constituted composed partly of coin & partly of land the benefit contemplated could only then be obtained, by the Bank’s advancing them its notes for the whole or a part of the lands, they had subscribed to the stock. If this advance was small the relief aimed at would not be given acquired; obtained; if it was considerable large the quantity of notes issued would be a source cause of distrust diffidence and, if received at all, they would be likely to return speedily upon the Bank for payment; which after exhausting its coin would might be under a necessity of turning its land into money at any price that could be obtained for them, to the irreparable prejudice of the proprietors.
A further wish, which is suggested by considerations of public advantage, is Considerations of public advantage suggest a further wish, which is that the Bank could be established upon such principles, as that which would cause the profits of it would to redound to the immediate benefit of the State. government; and to as an article of revenue. This is contemplated by many, who speak of a national Bank; but the idea seems liable to insuperable objections. To attach the public justify attach full confidence to an instit[ut]ion of this nature it appears to be an essential ingredient in the constitution of it its frame, that it shall be under the a private not a public direction, under the guidance of individual influence interest not of public policy; which would be supposed to be, and in certain emergencies, under a feeble or too sanguine an administration not possessed of consummate firmness would really be in danger of liable to being too much influenced by public necessity. The suspicion of this would most probably be a canker that would continually corrode the vitals of the Credit of the Bank and would be most likely to prove fatal most malignant in those situations in which the public good would required that that credit they should should be most sound and vigorous. It would indeed be little less than a miracle, should if the credit of the Bank should be at the disposition disposal of the government, if in a long series of time there was not experienced a calamitous abuseperversion of it. It is true that it would be the true real interest of the government not to abuse it; its genuine policy to husband and cherish it with the most cautious circumspection guarded as an inestimable resource treasure: But what Government ever uniformly consulted its true interest in opposition to the temptations of momentary temptations exigencies? What Nation was ever blessed with a constant succession of upright and wise Administrators? No office of Government Director
The keen and and as it were magnetic steady sense, of their own interest, as proprietors, in the Directors of a Bank pointing invariably to its true pole the prosperity of the Institution, is the only security that can always be relied upon for a careful and prudent administration. It is therefore the only basis on which an enlightened, unqualified and permanent public confidence can be expected to be erected and maintained.
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; though the management be in the hands of private individuals. One reason for it has been already assigned——the power of the government to reciprocate benefits. This is fortified by others. As the insitution, 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 unworthy of public patronage by its conduct unworthy of public patronage. The government too also, in the administration conduct of its finances, has it [in] its power to reciprocate benefits to the Bank of not less inportance than those which the Bank affords to the Government, and which besides are never unattended with an immediate and adequate consideration 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; and as the Directors will usually be composed of some of the most discreet respectable and best well informed citizens, it can hardly ever be difficult to make them to sensible of the force of the ease inducements which ought to stimulate call for their exertions.
It will not follow from what has been said that the State may not be the holder of a part of the funds stock of a Bank and consequently in that capacity 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 too large a proportion the whole or a principal part of the Stock funds. For if the mass of the property should belong to be in the public and if the management direction of it be in private hands, this would be to commit the interests of the state to persons not interested or not sufficiently 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 proprietors of the Stock of the Bank; Stockholders; that this which is to stipulate reserve to itself a right of inspecting its at all times the proceedings and state of the Bank, excluding every however all pretension to controul. This right for every propriety forms is made  an an article in the primitive constitution of the Bank of North America. And its propriety stands upon the clearest most obvious reasons. If the paper of a Bank is to be permitted to insinuate itself into all the receipts on public revenues and receipts of a country; 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 importance. magnitude. As such the ordinary rules of prudence require that the government should possess the means of ascertaining at all times whenever it thinks fit that so delicate a trust is executed with fidelity and care. An inspection for this purpose of this sort is not only desireable with a view to as it relates to to to the public safety but as it to  as it respects the government; but it ought to be equally so to all those concerned in the Institution, as an additional title to public and private confidence; and as a thing which can only be formadable to practices that shun the light. The presumption must always be that the characters who would be entrusted 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 too great a return of confidence for that very considerable large portion of it which the government is required to place in the Bank.
Abandonning therefore ideas things which however desireable are not attainable whatever agreeable sides they may have are not practicable nor safe however agreeable or desirable, are neither practicable, nor safe, the following plan for the Constitution of a National Bank is respectfully submitted to the consideration of the House.
I The Capital Stock of the Bank shall not to exceed 10.000.000 of Dollars divided into 20.000 shares each share being consisting of 500 Dollars; payable one fifth in gold and silver Coin and four fifths in that part of the public Debt bearing which according to the loan proposed by the Act to raise which sum subscriptions shall be opened on the first Monday of April next and shall and continue open until the whole shall be subscribed. shall bear an accruing interest at the time of payment of 6 per Centum per annum.
II The amount of each share shall be payable one fifth in gold and silver coin and four fifths in that part of the public debt which according to the loan proposed by the Act making provision for the debt of the United States shall bear an accruing interest at the time of payment: of six per Centum per annum.
III The Payments shall be regulated as follows
IV.  When the sum of 400000 Dollars in gold and silver shall have been actually paid in the operations of the Bank to shall commence in the City of Philadelphia.
V The Subscribers to the Bank and their successers shall to be incorporated by the name of The Company of the Bank of the United States; and to continue a corporation and shall so continue, until the final redemption of that part of its stock which shall consist of the public debt.
VI The capacity of the Corporation to hold real and personal estate shall to be limited to fifteen Millions of Dollars, including the amount of its Capital or original stock. The lands and tenements which it shall be permitted to hold shall to shall be only such as shall be requisite for the immediate accommodation of the institution and such as shall have been bona fide mortgaged to it for the by way of to of security. of money lent
VII The totality of the debts due for of of the Company, whether by bond bill note or other contract, shall never exceed the amount of its actual capital stock. In case of excess the Directors under whose administration it shall happen shall be liable for it in their private and or seperate capacities. If any dissent they Those who may have dissented may excuse themselves from this responsibility by making known publishing the fact and their dissent in two gazettes or news papers printed at the place where the bank is kept.
VII The Company shall trade in nothing but bills of exchange and gold and silver bullion or in the sale of goods left at a pledged for money lent; nor shall take more than at the rate of 6 per Centum per annum upon its loans or discounts.
VIII No loan shall be made by the Bank for public use, or on account of the government of the United States, or of any of them, or of any foreign prince or state; unless previously authorised by a law of the United States.
IX The Stock of the Bank shall be transferrable according to such rules as shall be instituted by the Company in that behalf.
X The affairs of the Bank shall be under the management of thirteen Directors one of whom shall be President. And there shall be on the first Monday of June in each year an election a choice of Directors by plurality of suffrages of the Stockholders, to serve for one year, commencing on the first of July immediately succeeding each election.
The Directors at their first full meeting after such election to shall choose one of their number as President, who shall be same person same that was  the President of for the preceding year, if he shall have been reelected. But The President and first Directors shall be appointed by the President of the United States and to continue in office until the last day of June in the year 1792 inclusively.
XI The number of votes to which each Stockholder shall be intitled shall be according to the number of shares they respectively hold in the proportions following that is to say for one share and not more than two shares One vote; for every two shares above two and not exceeding ten, one vote; for every four shares above ten and not exceeding twenty thirty one vote; for [e]very six shares above 30 & not exceeding sixty one vote for every Eight shares above sixty and not exceeding 100 one vote and for every ten shares above 100 one vote; but no person copartnership or body politic none shall shall be intitled to a greater number than fifty thirty votes. but And after the first election no share or shares shall confer a right of suffrage, which shall not have been holden three six six calendar months previous to the day of election. Stock holders actually resident within the U States & none other may vote in elections by proxy.
XII Not more than three fourths of the Directors in office, excluding exclusive of the President, shall be reeligible for the next a succeeding year. But the Director who shall be the President at the time of an election may always be reelected.
X None but a Stockholders of not less than 4 shares, being a citizens of the United States, shall be eligible as a Directors.
XI Any number of Stockholders not less than thirty who together shall be proprietors of not less than one hundred shares or upwards shall have power at any time to call a general Meeting of Stockholders, for purposes relative to the institution giving at least twenty days notice in two public Gazettes of the place where the Bank is kept; and specifying in such notice the object of the Meeting.
XII In case of the death resignation absence from the U States or removal of a Director by the Stockholders, his place may be filled by a new choice election for the remainder of the year.
XIII No President or Director except the President shall have any other emolument than such as shall have been allowed by the Stockholders at a general Meeting. But the Directors may allow the President a sum not exceeding   per annum in consideration of his extradinary for his dayly attendance at the Bank; subject nevertheless to revocation or alteration by the Stockholders.
XIV Not less than seven Directors shall be competent to constitute a Board for the transaction of business.
XV Every Cashier or treasurer before he enters on the duties of his office shall be required to give Bond with one two or more sureties to the satisfaction of the Directors in a sum not less than 20000 Dollars with condition for his good behaviour.
XVI Half yearly dividends shall be made of so much of the Profits of the Bank as shall appear to the Directors adviseable: And once 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 bad Debts which may have accrued been made and of the surplus of Profit, if any, which remains after deducting losses and dividends. in order that such disposition thereof may be made as shall appear to the Stockholders expedient.
XVII If any Director or other Officer or servant of the Company shall be convicted of wilfully wasting or embezzling the money or other property thereof, he shall be deemed guilty of he shall forfeit treble the value thereof shall suffer imprisonment for the term of  years and shall be rendered infamous.
XVIII To forge or counterfeit any of the bonds bills or notes of the Companyfor the payment of money shall be an offence punishable with death.
XIX The bills or and notes of the Bank which are payable to bearer in coin on demand in gold and silver Coin shall be receiveable in all payments to the United States.
XX The officer at the head of the Treasury Dept of the U States shall have a right at all times to examine into the affairs of  the Bank and for that purpose shall have access to all its books and papers; to whom also the Directors shall cause to be furnished a weekly state abstract of the Cash account and of the Notes issued and received. to be deliver
XXI No similar institution shall be established by any future act of the U States during the continuance of the one hereby proposed to be established.
XXII It shall be lawful for the Directors of the Bank to establish offices of discount deposits wheresoever they shall think fit in within the United States of such portions of their funds as they shall judge expedient for the purpose of making discounts only, and upon the same terms & in the same manner as shall be practiced at the pr Bank and to commit the management of the said deposits offices and the making of the said discounts either to Agents specially appointed by them or to such persons as may be chosen by the Stockholders residing at the place where any such office deposit shall be, under such agreements and subject to such regulations as as they shall be deemed proper; not being contrary to law or to the constitution of the Bank.
And lastly
The President of the United States to shall be authorised 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 intitled an Act making provision for the Debt of the United States & the other intitled an Act making provision for the reduction of the Public Debt; and to borrowing of the Bank an equal sum to be applied to be purposes for which the money said monies shall have been procured reimbursable in ten years by equal annual installments.
The reasons for the several provisions contained in the foregoing plan have been in great part so far anticipated and will for the most part be so readily suggested by their nature of those provisions, that any comments which need further be made will be a both few and concise. neither many nor long.
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 object A primary of it is The The chief object of this is to enable the creation of a Capital sufficiently large to be the basis of an extensive circulation and of operations with the aiding of the government an adequate security for it. As has been elsewhere remarked the original plan of the Bank of North America contemplated a capital of 10.000 000. of dallars; which was is certainly not too broad a foundation for the extensive operations to which a National Bank must be is destined. But to collect such a sum in this country in gold and silver into one depository may without hesitation be pronounced impracticable. Hence the necessity of an auxiliary; which the public debt at once presents.
This part of the fund will be always ready to come in aid of the specie. It will more and more command a prompt ready sale; and can therefore readily expeditiously be turned into coin if an exigency of the Bank should at any time require it. This quality of prompt convertibity into coin into coin renders it an equivalent for that necessary Agent of Bank circulation; ingredient 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 payments receipts of interest will also be an actual addition to the specie-fund during the intervals between them and the half yearly dividands of profits. The debt is also The objection to uniting combinging land with money specie resulting from their not being generally in possession of the same persons does not apply to the debt, which is and will be more and extensively diffus will always be found in considerable proportion quantity among the monied and trading people.
The debt composing a part debt, composing part of the Capital, partly of debt independ besides its collateral effect in extending enabling the Bank to extend its operations & consequently to enlarge its profits will always will produces a sure direct annual revenue of 6 ⅌ Cent from the government which will enters into the half yearly dividends received by the Stockholders.
When the present price of the public debt is considered and the rise probable rise effect which its incorporation with a spec conversion into Bank Stock, incorporated too with a specie fund, would in all probability have to accelerate its rise to the proper point, it will be readily easily be discerned that the operation presents in its ousett a very considerable advantage to those who may become subscribers: and from the influence, which that rise would have on the general mass of the debt, a proportial a proportional benefit to all the public creditors, and, in a sense, which has been more than once adverted to, to the community at lage.
There is an important fact, which exemplifies the fitness of the public debt for a Bank fund and which may serve to remove doubts in some minds on this point. It is this, that the Bank of England, was at first in its first erection rested wholly on that foundation. The subscribers to a loan to government of 1.200 000 pounds Sterling were incorporated as a Bank; of which the debt created by the loan and the interest upon it were the sole fund. The successive subsequent augmentations of its capital which now amounts to between 11 & 12000.000 of pounds Sterling have been of the same nature.
The confining the capacity right of the Bank to contract Debts is to the amount of its capital is an important precaution, which is not to be found in the constitution of the Bank of North America, and which while the fund consists wholly of Coin would perhaps be an inconvenient restriction but when a restriction attended with inconveniences, but a would be free from any when it part of it is if the composition of the fund should be such as has been is now proposed. The restriction is to be found exists in the Charter establishment of the Bank of England, and as a source of security is worthy of imitation. The consequence of exceeding the limit there is that each stockholder is liable for it the excess, in proportion to his interest in the Bank. When it is considered, that the Directors owe their appointments to the choice of the Stockholders such a that responsibility of this kind on the part of the latter for them their maladministration does not appear unreasonable. But on the other hand it would may be deemed a hardship might bear hard upon those, who may have dissented from the choice. And here it would there are many among us whom it might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the resposibility upon the directors, in office by whom the limit prescribed should be transgressed.
The interdiction of loans on account of the U States or of any particular state or of any foreign power is as it relates to the U States conformable to the spirit of will serve as a barrier to executive encroachments and to combinations inauspicious to the safety or contrary to the policy of the Union.
The limitation of the rate of interest to 6 ⅌ Cent is dictated by the consideration that different rates prevail in different states parts of the Union; whence the propriety of a ru uniform rule and as the operations of the Bank may extend through the whole it seems expedient some rule seems to be necessary. There is room for a question whether the a limitation to five ⅌ Cent ought not rather to be to five per Cent than to six per Cent as is proposed. There It may without haz safely be affirmed It may be considered as morally certain It may be safely taken for granted There is great probability that the former rate would yield an ample dividend, probably perhaps as much as the latter, has heretofore yielded; by the extension which it would give to good business. or in other words to profitable undertakings to which The natural effect of low interest is to increase enterprise Trade and industry; because undertakings of every kind can be prosecuted with greater advantage. The difference of one per Cent may itself constitute It is not easy to imagine This is a truth generally admitted generally which obtains a general assent, but it is requisite to have analized the subject in all its relations to be able to form a just conception an adequate idea of the extent of that effect. Such an analysis cannot but will satisfy any an intelligent mind that the difference of one per Cent in the rate at which money may be had is capable of making an essential change for the better in the situation of a any country or place.
There is nothing Every thing therefore which tends to lower the rate of interest is peculiarly worthy of the cares of Legislators. legislators a government. And though laws which violently sink the legal reduce the general rate of interest greatly below the standard market natural level which the state of things in the community indicates, are not to be commended, because they are not calculated to answer their end aim; every thing which yet whatever has a tendency to effect a reduction consistently without doing violence to the natural course of things ought to be consulted attended to and pursued. Banks are among the means most proper to accomplish this end; and a low rate of bank discount the moderation of the rate, at which its their discounts are made would be likely to prove not less beneficial to them than useful to community. is a material ingredient towards it, with which their interest rightly understood own interest, viewed on an enlarged and permanent scale does not militate.
But as more obv the most obvious ideas are apt to have greater force than commonly preferred to those which depend on intricate complex and remote combinations, there would be dangerous that the persons those whose funds must constitute the stock of the Bank would be diffident of the sufficiency of the profitsto be expected, if the rate of loans and discounts were to be placed below the point to which they have been accustomed; and this would be might on this account be indisposed to embarking in the plan. There is, it is true, one reflection, which in regard to men actively engaged in trade ought to be a security against this danger; it is this, that the accomodations which they might derive in the way of their business, at a low rate, would more than indemnify them for any difference in the dividend; supposing even that some diminution of it were to be the consequence. But upon the whole the hazard of contrary reasoning among the mass of monied men is a powerful argument rew consideration against the experiment. The institutions of the kind already existing add to the difficulty of making it. Mature reflection & a large capital may alone produce what it would be of themselves answer the desired purpose lead to the desired end.
The last thing which will require any explanatory remark is the authority proposed to be given to the President to subscribe to the amount of two millions of dollars on account of the public. The main object design of this is to enlarge the specie fund fundation of the Bank and to enable it to give a more an early extension to its operations. Though it is proposed to borrow with one hand what is lent with the other; yet the disbursement of what is borrowed will be progressive and bank notes may be thrown into circulation, instead of the gold and silver. Besides, there is to be an annual reimbusement of a part of the sum borrowed, which will finally operate as an active actual investment of so much specie. In addition to the inducement to this measure which the public will fund results from the general interest of the government to enlarge the sphere of the utility of the Bank, there is this more particular consideration,to wit that as far as the dividend on the stock shall exceed the interest paid on the loan there is a positive profit.
The Secretary begs leave to conclude with this general observation that if the Bank of North America shall come forward with any propositions to the Legislature, which have for object the ingrafting upon that institution the general principles characteristics which shall appear to the Legislature proper necessary to the due extent and safety of a National Bank, there a are in his judgment weighty inducements to will solid reasons for giving every reasonable facility to the measure. Not only the pretensions of that institution from its original relation to the government of the United States and from the services it has rendered are such as a to claim ought to excite a disposition favourable to it; if those who are interested in it are willing on their part to place it on a footing satisfactory to the government and equal to the purposes of a Bank of the United States: But its cooperation would greatly materially accelerate the accomplishment of the great object, and the collision which might otherwise arise would be might in a variety of views ways prove equally disagreeable and injurious. The incorporation or union here contemplated may be effected in different modes under the auspices of an act of the United States, if it shall be desired by the Bank of North America upon terms, which shall appear expedient to the Government.
All which is humbly submitted.