22

in which imagination must ever have too great scope to
permit an appeal to it.

If the supposition of such a deficiency be in any degree
founded; and some aid to circulation be desirable, it re-
mains to inquire what ought to be the nature of that aid?

The emitting of paper money by the authority of go-
vernment, is wisely prohibited to the individual states, by
the national constitution; and the spirit of that prohibi-
tion ought not 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 af-
firmed, so certain of being abused; that the wisdom of
the government will be shown in never trusting itself with
the use of so seducing and dangerous an expedient. In
times of tranquillity, it might have no ill consequence;
it might even perhaps be managed in a way to be produc-
tive 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 prac-
tice of paper emissions, would rarely fail in any such
emergency, to indulge itself too far in the employment of
that resource, to avoid as much as possible, one less auspi-
cious to present popularity. If it should not even be car-
ried 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, incom-
patible with the regular and prosperous course of the po-
litical economy.

Among other material differences between a paper cur-
rency, 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

23

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 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.

The payment of the interest of the public debt, at thir-
teen different places, is a weighty reason, peculiar to our
immediate situation, for desiring a bank circulation.—
Without a paper, in general currency, equivalent to gold
and silver, a considerable proportion of the specie of the
country must always be suspended from circulation, and
left to accumulate, preparatorily to each day of payment;
and as often as one approaches, there must in several ca-
ses be an actual transportation of the metals at both ex-
pense and risk, from their natural and proper reservoirs,
to distant places. This necessity will be felt very in-
juriously to the trade of some of the states; and will em-
barrass not a little the operations of the treasury in those
states. It will also obstruct those negociations, between
different parts of the Union, by the instrumentality of
treasury bills, which have already afforded valuable ac-
commodations to trade in general.

Assuming it then as a consequence, from what has been
said, that a national bank is a desirable institution, two
inquiries emerge—Is there no such institution, already in
being, which has a claim to that character, and which
supersedes the propriety or necessity of another? If there
be none, what are the principles upon which one ought to
be established?

There are at present three banks in the United States:
that of North-America, established in the city of Phila-
delphia; that of New-York, established in the city of
New-York; that of Massachusetts, established in the town

24

of Boston. Of these three, the first is the only one which
has at any time had a direct relation to the government
of the United States.

The bank of North-America originated in a resolution
of Congress of the 26th of May, 1781, founded upon a
proposition of the superintendant of finance, which was
afterwards carried into execution by an ordinance of the
31st of December following, entitled, " An ordinance to
incorporate the Subscribers to the Bank of North-Ame-
rica."

The aid afforded to the United States by this institution,
during the remaining period of the 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 ques-
tion are respectable; but there are circumstances which
militate against them; and considerations which indicate
the propriety of an establishment on different principles.

The directors of this bank, on behalf of their constitu-
ents, have since accepted and acted under a new charter
from the state of Pennsylvania, materially varient from
their original one; and which so narrows the foundation
of the institution, as to render it an incompetent basis for
the extensive purposes of a national bank.

The limit assigned by the ordinance of Congress to the
stock of the bank, is ten millions of dollars. The last
charter of Pennsylvania confines it to two millions. Ques-
tions naturally arise, whether there be not a direct repug-
nancy between two charters so differently circumstanced;
and whether the acceptance of the one, is not to be deem-
ed a virtual surrender of the other? But perhaps it is
neither adviseable nor necessary, to attempt a solution of
them.

There is nothing in the acts of Congress, which imply
an exclusive right in the institution to which they relate,
except during the term of the war. There is therefore
nothing, if the public good require it, which prevents the
establishment of another. It may, however, be inciden-

25

tally remarked, that in the general opinion of the citizens
of the United States, the bank of North-America has
taken the station of a bank of Pennsylvania only. This
is a strong argument for a new institution, or for a reno-
vation of the old, to restore it to the situation in which it
originally stood, in the view of the United States.

But though the ordinance of Congress contains no grant
of exclusive privileges, there may be 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, well-found-
ed claims to protection and 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 reasons
of public good. And in the manner of doing it, every fa-
cility should be given to a consolidation of the old with
the new, upon terms not injurious to the parties concerned.
But there is no ground to maintain, that in a case in which
the government has made no condition restricting its au-
thority, it ought voluntarily to restrict it, 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 characterize the
actual situation of the bank of North-America.

The inducements to a new disposition of the thing are
now to be considered. The first of them which occurs is,
the at least ambiguous situation in which the bank of
North-America has placed itself, by the acceptance of
its last charter: If this has rendered it the mere bank of
a particular state, liable to dissolution at the expiration of
fourteen years, to which term the act of that state has
restricted its duration; it would be neither fit nor expe-
dient, to accept it as an equivalent for a bank of the
United States.

The restriction of its capital also, which, according to

D

26

the same supposition, cannot be extended beyond two millions of dollars, is a conclusive reason for a different establishment. So small a capital 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 co-extensive with the United States; 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 be 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 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, may disincrine 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 individually as collectively,) 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, worthy of confidence, can be established in this country.) 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 public banks, than private profit. And it is the business of government, to constitute them on such principles, that while the latter will result, in a sufficient degree, to 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 this view, fixing the bounds which are deemed safe and convenient, to leave no discretion either to stop

27

short of them, or to over-pass them. The want of this
precaution, in the establishment of the bank of North-
America, is a further, and an important reason, for desir-
ing one differently constituted.

There may be room at first sight, for a supposition, that
as the profits of the bank will bear a proportion to the ex-
tent of its operations; and as, for this reason, the interest
of the stockholders will not be disadvantageously affected
by any necessary augmentations of capital; there is no
cause to apprehend that they will be indisposed to such
augmentations. But most men, in matters of this nature,
prefer the certainties they enjoy, to probabilities depend-
ing on untried experiments; especially when these pro-
mise rather than they will not be injured, than that they
will be benefitted.

From the influence of this principle, and a desire of en-
hancing its profits, the directors of a bank will be more
apt to overstrain its faculties, in an attempt to face the
additional demands which the course of business may
create, than to set on foot new subscriptions, which may
hazard a diminution of 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 to have this effect, their
capitals must be completely equal to all the demands of
business, and such as will tend to remove the idea, that
the accommodations they afford, are in any degree fa-
vours; 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 a
moderation of the price.

The want of a principle of rotation, in the constitution
of the bank of North-America, is another argument for a
variation of the establishment. Scarcely one of the rea-
sons which militate against this principle in the constitu-
tion of a country, is applicable to that of a bank; while
there are strong reasons in favour of it, in relation to the
one, which do not apply to the other. The knowledge to

28

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 reference to the latter. Almost every important case of legislation requires, towards a right decision, a general and accurate acquaintance with the affairs of the state; and habits of thinking seldom acquired but from a familiarity with public concerns. The administration of a bank, on the contrary, is regulated by a few simple fixed maxims, the application of which is not difficult to any man of judgment, especially if instructed in 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 head of the direction ought to be excepted from the principle of rotation. With this exception, 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 knowledge; especially as the periodical exclusion ought not to reach the whole of the directors at one time.

The argument in favour of the principle of rotation is this; that by lessening the danger of combinations among the directors, to make the institution subservient to party views, or to 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 conjunctions; 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; and that those directors

29

have it in their power so immediately to conciliate, by obliging the most influential of this class, it is easy to perceive, that without the principle of rotation, changes in that body can rarely happen, but as a concession which they may themselves think it expedient to make to public opinion.

The 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 discontent. The necessary secrecy of their transactions, gives unlimited scope to imagination to infer that something is, or may be, wrong. And this inevitable mystery is a solid reason 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 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. 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.

A further consideration in favour of a change, is the improper rule, by which the right of voting for directors is regulated in the 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 rule should be established on this head, as it is one of those things which ought not to be left to discretion; and it is consequently of equal importance, that the rule should be a proper one.

A vote for each share, renders a combination between a few principal stockholders, to monopolize the power and

30

benefits of the bank, too easy. An equal vote to each stockholder, however great or small his interest in the institution, allows not that degree of weight to large stockholders, which it is reasonable they should have, and which perhaps their security, and that of the bank, require. A prudent mean is to be preferred. A conviction of this, has produced a by-law of the corporation of the bank of North-America, which evidently aims at such a mean. But a reflection 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, 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. In the event, however, of an incorporation of the bank of North-America, in the plan, it may be necessary to qualify this principle, so as to leave the right of foreigners, who now hold shares of its stock, unimpaired, but without the power of transmitting the privilege in question, to foreign alienees.

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 North-America, not of inconsiderable moment, which appear desirable, but which are not of magnitude enough to claim a preliminary discussion: These will be seen in the plan which will be submitted in the sequel.

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 which that bank has rendered, or of the benefits which it has produced. The creation of such an institution, at the time it took place, was a measure dictated by wisdom. Its utili-

31

ty 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 a revision with a permanent view, suggests as desirable.

The order of the subject, leads next to an inquiry into the principles upon which a national bank ought to be organized.

The situation of the United States naturally 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 plan would be apt to inspire doubts, which might deter from adventuring in it: And the practicability of a safe and orderly administration, though not to be abandoned 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. The most that would seem adviseable, on this point, is to insert a provision, which may lead to it hereafter, if experience shall more clearly demonstrate its utility, and satisfy those who may have the direction, 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 be under a distinct, though subordinate direction, to which a considerable latitude of discretion must of necessity be intrusted. 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 might hazard serious disorder in the whole.

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 accom-

32

plishing it. Land is alone an unfit fund for a bank circulation: If the notes issued upon it were not to be payable in coin, on demand, or at a short date, this would amount to nothing more than a repetition of the paper emissions, which are now exploded by the general voice. If the notes are to be payable in coin, the land must first be converted into it, by sale or mortgage. The difficulty of effecting the 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. Neither is the idea of constituting the fund partly of coin and partly of land, free from impediments: these two species of property do not, for the most part, unite in the same hands. Will the monied man consent to enter into a partnership with the landholder, by which the latter will share in the profits which will be made by the money of the former? The money, it is evident, will be the agent or efficient cause of the profits—the land can only be regarded as an additional security. It is not difficult to foresee, that an union, on such terms, will not readily be formed. If the landholders 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 if it were to be compounded of money and land.

To procure for the landholders the assistance of loans, is the great desideratum. Supposing other difficulties surmounted, and a fund created, composed partly of coin and partly of land, yet the benefit contemplated could only then be obtained, by the bank's advancing them its notes for the whole, or part of the value of the lands they had subscribed to the stock. If this advance was small, the relief aimed at would not be given; if it was large, the quantity of notes issued would be a cause of *distrust*, and, if received at all, they would be likely to return speedily upon the bank for payment; which, after exhausting its coin, might be under the necessity of turning its lands into money, at any price that could be obtained for them, to the irreparable prejudice of the proprietors.

33

Considerations of public advantage suggest a further wish, which is, that the bank could be established upon principles that would cause the profits of it to redound to the immediate benefit of the state. This is contemplated by many who speak of a national bank, but the idea seems liable to insuperable objections. To attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure, that it shall be under a *private*, not a *public* direction, under the guidance of *individual interest*, not of *public policy*; which would be supposed to be, and in certain emergencies, under a feeble or too sanguine administration, would really be, liable to being too much influenced by *public necessity*. The suspicion of this, would most probably be a canker that would continually corode the vitals of the credit of the bank, and would be most likely to prove fatal in those situations in which the public good would require that they should be most sound and vigorous. It would, indeed, be little less than a miracle, should the credit of the bank be at the disposal of the government, if in a long series of time, there was not experienced a calamitous abuse of it. It is true, that it would be the real interest of the government not to abuse it; its genuine policy to husband and cherish it with the most guarded circumspection, as an inestimable treasure. But what government ever uniformly consulted its true interests, in opposition to the temptations of momentary exigencies? What nation was ever blessed with a constant succession of upright and wise administrators?

The keen, steady, and as it were, magnetic sense of their own interest as proprietors, in the directors of a bank, pointing invariable 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 confidence, can be expected to be erected and maintained.

The precedents of the banks established in several cities of Europe; Amsterdam, Hamburg, and others; may

E

34

seem to militate against this position. Without a precise
knowledge of all the peculiarities of their respective con-
stitutions, it is difficult to pronounce how far this may be
the case. That of Amsterdam, however, which we best
know, is rather under a municipal than a governmental
direction. Particular magistrates of the city, not officers
of the republic, have the management of it. It is also a
bank of deposit, not of loan, or circulation; consequently,
less liable to abuse, as well as less useful. Its general
business consists in receiving money for safe keeping, which
if not called for within a certain time, becomes a part of its
stock, and irreclaimable: But a credit is given for it on
the books of the bank, which being transferable, answers
all the purposes of money.

The directors being magistrates of the city, and the
stockholders, in general, its most influential citizens; it is
evident, that the principle of private interest must be pre-
valent in the management of the bank. And it is equally
evident, that from the nature of its operations, that princi-
ple is less essential to it, than to an institution constituted
with a view to the accommodation of the public and indi-
viduals, by direct loans and a paper circulation.

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. As the institution, 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 by its con-
duct, unworthy of public patronage. The government too,
in the administration of its finances, has it in its power to
reciprocate benefits to the bank, of not less importance
than those which the bank affords to the government, and
which, besides, are never unattended with an immediate
and adequate 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, re-

35

spectable, and well-informed citizens, it can hardly ever
be difficult to make them sensible of the force of the in-
ducements which ought to stimulate their exertions.

It will not follow, from what has been said, that the
state may not be the holder of a part of the stock of a
bank, and consequently a sharer in the profits of it. It
will only follow, that it ought not to desire any participa-
tion in the direction of it, and therefore, ought not to own
the whole or a principal part of the stock; for if the
mass of the property should belong to the public, and if
the direction of it should be in private hands, this would
be to commit the interests of the state to persons not in-
terested, or not enough interested in their proper manage-
ment.

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 stockholders; which is to reserve
to itself a right of ascertaining, as often as may be neces-
sary, the state of the bank, excluding, however, all pre-
tension to control. This right forms an article in the
primitive constitution of the bank of North-America, and
its propriety stands upon the clearest reasons. If the pa-
per of a bank is to be permitted to insinuate itself into
all the 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 magnitude. As such, the
ordinary rules of prudence require, that the goverment
should possess the means of ascertaining, whenever it
thinks fit, that so delicate a trust is executed with fidelity
and care. A right of this nature, is not only desirable 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 formidable to practices that imply mis-
management. The presumption must always be, that the
characters who would be intrusted with the exercise of
this right on behalf of the government, will not be defi-
cient in the discretion which it may require; at least the

36

admitting of this presumption cannot be deemed too great
a return of confidence for that very large portion of it
which the government is required to place in the bank.

Abandoning, therefore, ideas which however agreeable
or desirable, are neither practicable nor safe, the follow-
lowing 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 exceed ten
millions of dollars, divided into twenty-five thousand
shares, each share being four hundred dollars; to raise
which sum, subscriptions shall be opened on the first
Monday of April next, and shall continue open until the
whole shall be subscribed. Bodies politic, as well as in-
dividuals, may subscribe.

II. The amount of each share shall be payable, one
fourth in gold and silver coin, and three fourths in that
part of the public debt, which, according to the loan pro-
posed 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 respective sums subscribed, shall be payable
in four equal parts, as well specie as debt, in succession,
and at the distance of six calendar months from each
other; the first payment to be made at the time of sub-
scription. If there shall be a failure in any subsequent
payment, the party failing shall lose the benefit of any
dividend which may have accrued prior to the time for
making such payment, and during the delay of the same.

IV. The subscribers to the bank, and their successors,
shall be incorporated, and shall so continue, until the final
redemption of that part of its stock which shall consist of
the public debt.

V. The capacity of the corporation to hold real and
personal estate, shall be limited to fifteen millions of dol-
lars, including the amount of its capital or original stock.
The lands and tenements which it shall be permitted to
hold, shall be only such as shall be requisite for the im-
mediate accommodation of the institution; and such as
shall have been bona fide mortgaged to it by way of secu-

37

rily, or conveyed to it in satisfaction of debts previously contracted, in the usual course of its dealings, or purchased at sales upon judgments which shall have been obtained for such debts.

VI. The totality of the debts of the company, whether by bond, bill, note, or other contract, (credits for deposits excepted,) shall never exceed the amount of its capital stock. In case of excess, the directors, under whose administration it shall happen, shall be liable for it in their private or separate capacities. Those who may have dissented, may excuse themselves from this responsibility, by immediately giving notice of the fact and their dissent, to the President of the United States, and to the stockholders, at a general meeting to be called by the president of the bank, at their request.

VII. The company may sell or demise its lands and tenements, or may sell the whole or any part of the public debt, whereof its stock shall consist; but shall trade in nothing, except bills of exchange, gold and silver bullion, or in the sale of goods pledged for money lent: nor shall take more than at the rate of six per centum per annum, upon its loans or discounts.

VIII. No loan shall be made by the bank, for the use, or on account of, the government of the United States, or of either of them, to an amount exceeding fifty thousand dollars, or of any foreign prince or state; unless previously authorized by a law of the United States.

IX. The stock of the bank shall be transferable 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 twenty-five directors, one of whom shall be the president. And there shall be on the first Monday of January, in each year, a choice of directors, by a plurality of suffrages of the stockholders, to serve for a year. The directors, at their first meeting after each election, shall choose one of their number as president.

XI. The number of votes to which each stockholder shall be entitled, shall be according to the number of

38

shares he shall 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 thirty, one vote: For every six shares, above thirty, and not exceeding sixty, one vote: For every eight shares, above sixty, and not exceeding one hundred, one vote; and for every ten shares, above one hundred, one vote: But no person, co-partnership, or body politic, shall be entitled to a greater number than thirty votes. And after the first election, no share or shares shall confer a right of suffrage, which shall not have been holden three calendar months previous to the day of election. Stockholders, actually resident within the United States, and none other, may vote in elections by proxy.

XII. Not more than three fourths of the directors in office, exclusive of the president, shall be eligible for the next succeeding year. But the director who shall be president at the time of an election, may be always re-elected.

XIII. None but a stockholder, being a citizen of the United States, shall be eligible as a director.

XIV. Any number of stockholders not less than sixty, who together shall be proprietors of two hundred shares, or upwards, shall have power at any time to call a general meeting of the stockholders, for purposes relative to the institution; giving at least six weeks notice in two public gazettes of the place where the bank is kept, and specifying, in such notice, the object of the meeting.

XV. In case of the death, resignation, absence from the United States, or removal of a director by the stockholders, his place may be filled by a new choice for the remainder of the year.

XVI. No director shall be entitled to any emolument, unless the same shall have been allowed by the stockholders at a general meeting. The stockholders shall make such compensation to the president, for his extraordinary attendance at the bank, as shall appear to them reasonable.

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XVII. Not less than seven directors shall constitute a board for the transaction of business.

XVIII. Every cashier, or treasurer, before he enters on the duties of his office, shall be required to give bond, with two or more sureties, to the satisfaction of the directors, in a sum not less than twenty thousand dollars, with condition for his good behaviour.

XIX. 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 debts which shall have remained unpaid, after the expiration of the original credit, for a period of treble the term of that credit, and of the surplus of profit, if any, after deducting losses and dividends.

XX. The bills and notes of the bank originally made payable, or which shall have become payable on demand, in gold and silver coin, shall be receivable in all payments to the United States.

XXI. The officer at the head of the treasury department of the United States, shall be furnished from time to time, as often as he may require, not exceeding once a week, with statements of the amount of the capital stock of the bank, and of the debts due to the same, of the monies deposited therein, of the notes in circulation, and of the cash in hand; and shall have a right to inspect such general accounts in the books of the bank, as shall relate to the said statements; provided that this shall not be construed to imply a right of inspecting the account of any private individual or individuals, with the bank.

XXII. No similar institution shall be established by any future act of the United States, during the continuance of the one hereby proposed to be established.

XXIII. It shall be lawful for the directors of the bank to establish offices, wheresoever they shall think fit, within the United States, for the purposes of discount and deposit only, and upon the same terms, and in the same manner, as shall be practised at the bank, and to commit the

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management of the said 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 shall be, under such agreements, and subject to such regulations as they shall deem proper; not being contrary to law, or to the constitution of the bank.

XXIV. And lastly. The President of the United States shall be authorized 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 entitled, "An act making provision for the debt of the United States," and the other entitled, "An act making provision for the reduction of the public debt," borrowing of the bank an equal sum, to be applied to the purposes for which the said monies shall have been procured, reimburseable in ten years by equal annual instalments; or at any time sooner, or in any greater proportions, that the government may think fit.

The reasons for the several provisions contained in the foregoing plan, have been so far anticipated, and will, for the most part, be so readily suggested by the nature of those provisions, that any comments which need further be made, will be both few and concise.

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 chief object of this is, to enable the creation of a capital sufficiently large to be the basis of an extensive circulation, and an adequate security for it. As has been elsewhere remarked, the original plan of the bank of North-America, contemplated a capital of ten millions of dollars, which is certainly not too broad a foundation for the extensive operations to which a national bank is destined. But to collect such a sum in this country in gold and siver, 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

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aid of the specie. It will more and more command a
ready sale; and can therefore expeditiously be turned in-
to coin, if an exigency of the bank should at any time re-
quire it. This quality of prompt convertibility into coin,
renders it an equivalent for that necessary agent of bank
circulation; 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 receipts
of interest, will also be an actual addition to the specie
fund, during the intervals between them and the half year-
ly dividends of profits. The objection to combining land
with specie, resulting from their not being generally in
possession of the same persons, does not apply to the debt,
which will always be found in considerable quantity among
the monied and trading people.

The debt composing part of the capital, besides its col-
lateral effect in enabling the bank to extend its operations,
and consequently to enlarge its profits, will produce a di-
rect annual revenue of six per centum from the govern-
ment, which will enter into the half yearly dividends re-
ceived by the stockholders.

When the present price of the public debt is considered,
and the effect which its conversion into bank stock, incor-
porated with a specie fund, would in all probability have
to accelerate its rise to the proper point, it will easily be
discovered, that the operation presents in its outset a very
considerable advantage to those who may become subscri-
bers; and from the influence which that rise would have
on the general mass of the debt, a proportional benefit
to all the public creditors, and in a sense which has been
more than once adverted to, to the community at large.

There is an important fact, which exemplifies the fit-
ness 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, in its first erection, rest-
ed wholly on that foundation. The subscribers to a loan
to government of one million two hundred thousand pounds
sterling, were incorporated as a bank; of which the debt
created by the loan and the interest upon it, were the sole

F

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fund. The subsequent augmentations of its capital, which now amounts to between eleven and twelve millions of pounds sterling, have been of the same nature.

The confining of the right of the bank to contract debts 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 be a restriction attended with inconveniences, but would be free from any, if the composition of it should be such as is now proposed. The restriction exists in the 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 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, a responsibility of this kind on the part of the latter, does not appear unreasonable. But on the other hand it may be deemed a hardship upon those who may have dissented from the choice. And there are many among us, whom it might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the responsibility upon the directors, by whom the limit prescribed should be transgressed.

The interdiction of loans on account of the United States, or of any particular state, beyond the moderate sum specified, or of any foreign power, 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 is dictated by the consideration, that different rates prevail in different parts of the Union; and as the operations of the bank may extend through the whole, some rule seems to be necessary. There is room for a question, whether the limitation ought not rather to be to five, than to six per cent., as proposed. It may with safety be taken for granted, that the former rate would yield an ample dividend; perhaps as much as the latter, by the extension which it would give to business. The natural effect of low interest is to increase

43

trade and industry; because undertakings of every kind
can be prosecuted with greater advantage. This is a truth
generally admitted; but it is requisite to have analyzed
the subject in all its relations, to be able to form a just
conception of the extent of that effect. Such an analysis
cannot but satisfy an intelligent mind, that the difference
of one per cent. in the rate at which money may be had,
is often capable of making an essential change for the
better, in the situation of any country or place.

Every thing, therefore, which tends to lower the rate of
interest, is peculiarly worthy of the cares of legislators.
And though laws, which violently sink the legal rate of
interest greatly below the market level, are not to be
commended, because they are not calculated to answer
their aim; yet, whatever has a tendency to effect a reduc-
tion, without violence to the natural course of things,
ought to be attended to and pursued. Banks are among
the means most proper to accomplish this end; and the
moderation of the rate at which their discounts are made,
is a material ingredient towards it; with which their own
interest, viewed on an enlarged and permanent scale, does
not appear to clash.

But as the most obvious ideas are apt to have greater
force than those which depend on complex and remote
combinations, there would be danger, that the persons,
whose funds must constitute the stock of the bank, would
be diffident of the sufficiency of the profits to be expected,
if the rate of loans and discounts were to be placed below
the point to which they have been accustomed; and might,
on this account, be indisposed to embarking in the plan.
There is, it is true, one reflection, which, in regard to men
actually engaged in trade, ought to be a security against
this danger; it is this, That the accommodations 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 against the experiment. The institu-

44

tions of the kind already existing, add to the difficulty of
making it. Mature reflection, and a large capital, may,
of themselves, lead to the desired end.

The last thing which requires any explanatory remark,
is, the authority proposed to be given to the President to
subscribe to the amount of two millions of dollars, on ac-
count of the public. The main design of this is, to en-
large the specie fund of the bank, and to enable it to give
a more 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 cir-
culation, instead of the gold and silver. Besides, there is
to be an annual reimbursement of a part of the sum bor-
rowed, which will finally operate as an actual investment
of so much specie. In addition to the inducements to this
measure, which result 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 ob-
servation—That if the bank of North-America shall come for-
ward with any propositions, which have for their object the in-
grafting upon that institution, the characteristics which shall
appear to the legislature necessary to the due extent and safety
of a national bank, there are, in his judgment, weighty induce-
ments to giving every reasonable facility to the measure. Not
only the pretensions of that institution, from its original rela-
tion to the government of the United States, and from the ser-
vices it has rendered, are such as to claim a disposition favour-
able 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
co-operation would materially accelerate the accomplishment
of the great object, and the collision, which might otherwise
arise, might, in a variety of 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.

ALEXANDER HAMILTON, *Sec'ry of the Treasury*.