First National Bank

Although the term “First National Bank” is used by many banks worldwide if they happen to be the first bank in their countries, nevertheless the First National Bank of the United States was no less historical and as important as any. The First National Bank of the US originated at a time when there was a wide variety of foreign and locally made currencies in the US just after its first civil war. This obviously has caused financial chaos and disruption and inefficiencies because the values of these currencies were always fluctuating and sometimes impossible to determine the value.

Since they were at a time that the nation is just slowly building itself right after a civil war, the Secretary of the Treasury at that time, ”Alexander Hamilton” proposed a standard coinage system and an excise tax. The main purpose of this idea was mainly for financial stability and to establish credit within the country and outside the country. His Idea was modeled after the Bank of England but he made sure that the First Bank of America’s concerns would strictly be commercial and private interest. To establish it, he first suggested that the US government would buy the first $2 million shares using the money loaned to it by the bank itself and to be paid later in ten annual installments.

The rest of the $10 million will be distributed throughout the public. As a safety measure, they required that one-fourth of these purchases will be paid in real gold and other precious metals and the rest of it could be paper securities. Though the bank would still help the US government by being a depository for collected taxes and giving short-term loans to the government for temporary fiscal needs, their primary purpose is still to serve as a private bank and allocate capital to the best business there is. The First National Bank’s charter was to be good for twenty years from 1791 to 1811 and then they will be reviewed again by the congress if the government would still grant the renewal of its charter or not.

Hamilton also proposed a bill to increase the income of the US government by increasing the excise tax of both the imported liquor and the locally distilled liquor and other types of alcoholic drinks. This later led to the Whiskey rebellion. Aside from this, there was some opposition encountered by the establishment of the First National Bank from southern legislators. They feared that since the First National Bank is a private and a commercial entity in all respects, it might harm their southern constituents by the over burden of the excise tax on alcoholic drinks.
Some suggested that they transfer the charter functions of the bank to the south so that it would quell southern legislator’s worries over the new tax law. With this new proposal, the law makers from the north also started to worry that their commercial interest will be harmed by the transfer of money-monopoly capability to the south that would be able to control the setting of interest rates. This will effectively destroy the very commercial interest they are trying to protect in the first place. This naturally, resulted to a very furious debate of which none seemed to be able to tackle decisively.