"scrip" temporary receipts for the initial payment of $25 began to issue July 15, and immediately an unprecedented speculation in them arose. On October 1 the first board of directors was elected; within a week they organized, taking for president Robert Morris's partner, Thomas Willing, president of the Bank of North America. On November 9 the directors determined on the establishment of branches in Boston, New York, Baltimore, and Charleston, and then or soon after they were besieged with applications from various other places for the same privileges.3 About December 12 business was commenced in Philadelphia, with discounts of over $300,000, and within a week the specie deposits of private individuals were reported to exceed half the specie capital of the bank.

5

The auspicious establishment of the Bank of the United States aroused on the one hand aspirations for a completely unified banking system, and on the other hand a fear lest the new institution might swallow up the state banks. This fear had been expressed during the congressional debates, in particular by Stone of Maryland; it might have figured more largely had not the state banks been few in number and largely in the hands of the capitalistic Federalist element which approved the establishment of the national institution." It is probable, indeed, that such fears then and later proceeded more from the classes which had least to do with the state banks,

1 See Essay II, 202-211, 341; also Gazette of the U. S., July 6, 16; Pa. Gazette, July 6, 20; Federal Gazette, July 6; N. Y. Journal, July 9; Daily Advertiser (N. Y.), July 22; Madison to Jefferson, July, 1791, in Madison, Works (ed. 1865), i, 538; Wolcott to Wadsworth, July 5, Platt to Wadsworth, July 7, in Wadsworth Papers; Jefferson to Monroe, July 10, in Jefferson, Works (Washington ed.), iii, 267–268.

The Columbian Centinel of November 2, printing the list of directors with votes for each, reports the statement that the property of those elected averaged above £25,000.

Branches were later established in Norfolk (1799), Washington (1801), Savannah (as early as 1802), and New Orleans (1804). Holdsworth, First Bank of the U. S., 38, 60; Bryan, History of the National Capital, i, 432; Howe, Financial Institutions of Washington, 26-27. Cf. infra, 61-63, 79.

• Amer. Museum, x, App. III, 1-2, 26, 33, 38.

Feb. 6, 1791: Clarke and Hall, Bank of the U. S., 68.

The Boston and New York banks acted as agents to receive local subscriptions (and deposits thereon) to the federal bank, and "the Bank of North America evinced a lively interest in the welfare of the new institution": Holdsworth, First Bank of the U. S., 22-24.

either as stockholders or as mercantile customers, than from the banks themselves. Certainly for a time after the incorporation of the national bank the stockholders of at least one state institution that of Massachusetts were not at all

averse to being "swallowed up."

The most obvious method of securing a unified system was that of a central institution with branches. Hamilton discussed this policy in his report, but came to a conclusion opposed to it, partly because it might interfere with the passage of the charter, partly because sufficiently good management for the branches could not be counted upon.

"The situation of the United States," he says, "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 advisable, 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 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 might hazard serious disorder in the whole.” The result of his recommendation was a modest provision in the charter (Art. XV, Sect. 7) authorizing the establishment of offices of discount and deposit anywhere in the United States at the discretion of the directors.

The board, when it was elected, was presented with three alternative policies as to branches. It might content itself with a single office at the seat of government; this policy Hamilton strongly favored for the present. It might open branches generally through the country; and the board soon received applications from a considerable number of places, larger and

smaller, for an extension of its facilities to these localities. Finally, it might establish a small number of branches in the large centres only. Furthermore, there was the problem of the new bank's relation to the state banks, if they were not to be absorbed. Should there be no formal relation, integral or otherwise? Should the competition be cutthroat, unsympathetic, or friendly? Should there be formal independence supplemented by agreements? Should there be intercorporate stockholding and interlocking directorates?

Several banks considered these matters in advance. In the Bank of New York a minority in the directorate favored outright merger with the national bank. The majority, however, favored interlocking interests, to be supplemented, probably, by formal understandings, and hoped by this means to evade the competition of a branch. When enlarging their stock shortly after incorporation to $900,000, they reserved one-sixth of this amount for ownership by the Bank of the United States.2 April 27, 1791, the stockholders of the Massachusetts Bank appointed Judge Lowell, Jonathan Mason, Jr., and William Tudor a committee "to enquire into, and receive any communication that may be made on the subject of a Union with the Bank of the United States, or any partial connection with the same Probably upon their recommendation the stockholders voted June 23 that the directors authorize a subscription of two hundred and fifty shares in the national bank, to be paid for out of the capital stock of the Massachusetts Bank. This subscription was duly made, and on August 22 the board appointed Gore and Mason to represent this stock at the meeting of the stockholders of the national bank. On August 7 Christopher Gore wrote Rufus King in New York:1

. . .

"The post of last evening bro't news that the Bank of New York had completed their number of Shares & that the Directors had reserved three

1 See the intimation of "Plain Truth" in the Daily Advertiser of Jan. 25, 1792: "a set of men who but the other day, were anxious to surrender their charter in order to form a coalition with the National Bank or a branch of it."

2 Mass. Magazine, iii, 526 (August, 1791).

• Stockholders' and Directors' Records, under dates cited.

4 King, Rufus King, i, 400–401.

hundred Shares, intending to offer them to the Governor & directors of the National bank that, by this measure, they hoped to prevent the establishment of a branch from the National Bank in your city. One great benefit contemplated, by the establishing a national bank, viz. the annihilation of all State banks, will fail — if the intentions of New York Bank should be successful, the Mass. bank will probably follow the example, and it is not improbable that a connection will, in the ensuing winter, be proposed by the Legislature to take place between the Government of Mass. and the State Bank. The State Bank of Mass. is well disposed to receive its death warrant at the present time. The stockholders are very largely interested in the National Bank & wou'd willingly promote the latter to the destruction of the former. But this I fear will not long continue their disposition. Some who were shut out from the national bank will be very solicitous of reaping the profits heretofore experienc'd from the State Bnk. The State legislatures are all organiz'd bodies & disciplin❜d to counteract the operations of the federal government it is now a war of words only we may have to deprecate a different kind of warfare. We well know the State Legislatures are generally dispos'd to discern & oppose the power & influence of the nation; but their meanness & parsimony interfere with their views & besides they are without a military check. Give them a State Bank to recur to and this great evil will be remov'd. The State Bank will continue for a long time to afford great profits to the proprietors of their stock. The State Legislatures will be proud of imitating the conduct of Congress in having a bank under their patronage & having a continuance of this badge of Sovereignty, the emission of money, & the interest of the Commonwealth & the Bank will be made to combine, that the pride and avarice of these two corporations may be gratified.

"I have hastily thrown my thoughts on this subject on paper. I wish you to examine them, & whether this continuance of the State banks will not be injurious to the growth of national politics. The few hints will lead to a course of reflections in your own mind — and if the event shall be a conviction that there is no danger to be apprehended, I shall be happy to learn that my fears are groundless; but I think the present the most favorable time for the dissolution of the State banks, & I fear that politics & interest will unite to support and prolong their existence."

This was the message of a Federalist big business man, who was naturally a centralizationist, but perhaps who did not appreciate, as the modern Germans have done, the possibilities of concentration by stock control. Fisher Ames, Federalist congressman from Massachusetts, had written Hamilton a few days earlier somewhat in the same vein:1

"If the bank would do business for five per cent., they would do a great deal more, and with safer people. They would overpower the State banks by giving borrowers better terms. I have had my fears that the State 1 Letter of July 31, 1791, in Hamilton, Works, v, 474-475.

banks will become unfriendly to that of the United States; causes of hatred and rivalry will abound, the State banks will narrow the business of the United States Bank, and may become dangerous instruments in the hands of State partisans, who may have had points to carry. I will not expatiate. The occasion is a favorable one. The Bank and the United States Government at this moment possess more popularity than any institution or government can maintain for a long time. Perhaps no act of power can be done to destroy the State banks, but if they are willing to become interested individually, I mean the State stockholders, and to establish sub-banks, so as to absorb the funds and contract the business of the local banks, why should any measures be adopted to support the local banks to the prejudice of my hypothesis? or why should cold water be thrown upon the plan of subbanks? Mr. **** and the Philadelphians are thought unfriendly to this idea, perhaps it may be attended with some hazard; but if it must fail, let it not be charged to local prejudice, but to solid reason. . . . All the influence of the moneyed men ought to be wrapped up in the Union, and in one bank. The State banks may become the favorites of the States. They, the latter, will be pressed to emulate the example of the Union, and to show their sovereignty by a parade of institutions, like those of the nations. . . .”

Seth Johnson, a New York merchant, wrote his partner, Andrew Craigie, from New York August 20:1

"There seems to be a diversity of opinion respecting the National Bank ingrafting itself on the established State banks-or of its establishing branches to do the latter to any great extent would so divide the capital of the Bank as to cramp it in its great operations it is said that if a branch is established in one place it cannot with propriety be refused wherever it is demanded - Mr Seton informed me that in a Conversation he had with Mr H. the latter observed it was difficult to say what plan the National directors would pursue he seemed to approve of this Bank offering the 300 shares this in Confidence

Assailed by such cross-currents of opinion,2 the new board of directors decided in November on the policy of a small number of branches in the large centres, so selected that all but one of the existing state banks had a competing branch. In January, 1792, the directors of the branch banks in New York, Boston, and Charleston were elected, and in February those for Baltimore; and all four branches were opened in the spring. Offers of shares were rejected on the formal ground that such action

1 Craigie Papers, iii, 68.

2 Cf. also infra, 88-89.

3 Holdsworth, First Bank of the U. S., 38, citing Pa. Journal, Jan. 25, Feb. 15, 1792. The New York branch opened April 1, the Boston one a few days earlier: King, Rufus King, i, 406.