Wednesday, March 20, 2013

FEBRUARY 25, 1791 – CREATION OF THE FIRST BANK OF THE UNITED STATES

1791 – CREATION OF THE FIRST BANK OF THE UNITED STATES
A 20-year charter was issued by the federal government (very unusual at the
time since most corporate charters, or licenses, were issued by states) to
create the first national private bank. This was the first private institution
empowered to create paper money -- with all the power and profit that goes
along with it. The bank’s paper money was accepted for taxes. Eighty percent of
its shares were privately owned, among these 75% were foreign owned (mostly by
the English and Dutch). The bank was modeled on the Bank of England. It’s main
proponent, Alexander Hamilton, argued in support: "Suppose that the
necessity existed...for obtaining a loan; that a number of individuals came
forward and said, we are willing to accommodate the government with this money
(which we have or can raise) but in order to do this it is indispensable that
we should be incorporated as a bank...and we are obliged on that account to
make it a consideration or condition of the loan." In other words, Hamilton was saying the
private/corporate bank will be more than happy to give the government loans if
the government grants the private/corporate bank the power to create money!
Jefferson, Madison
and others opposed it. Jefferson said,
"This institution (the Bank of England) is one of the most deadly
hostility against the principles of our Constitution…suppose an emergency
should occur…an institution like this…in a critical moment might overthrow the
government." The bank had an enormous impact on the economy early on.
Within 2 months of its creation, it flooded the market with loans and banknotes
and then suddenly called in many of its loans. The result was the first US securities
market crash -- what became known as the “Panic of 1792” – the first of many
panics, recessions and depressions due to the private/corporate control of our
money system.