“We may therefore by means of this establishment carry on the war three years,”
Hamilton noted.4
A public authority would review the
bank’s books, and Congress wouldn’t
grant it exclusive privileges that might
“fetter the spirit of enterprise and competition on which the prosperity of commerce depends.”
Significantly, this new bank — really a
central banking corporation — wouldn’t
have monopoly privileges, leaving the
door open to form more banks and a fully
fledged banking system. The only financial
pillar that Hamilton didn’t mention was
a securities market to trade the bank’s
stock and government debt to increase the
liquidity of both, an idea that became part
of his grand plan a decade later.
• • •
‘‘
‘‘
Hamilton had figured
out why the war had
dragged on for so long.
First he estimated the revenue capacity of the country, comparing it with
an estimate of necessary civil and military expenses. No great shock: The latter
greatly exceeded the former, leaving a
deficit. Foreign loans might help, but they
certainly couldn’t heal the shortfall. Hamilton’s solution once again was a national
bank. He discussed the pros and cons of
national banks in theory and in history,
including how banking development and
the expansion of credit promoted both
state power and economic growth:
Pennsylvania Academy of Fine Arts, Philadelphia/Bridgeman Images
Then it happened. The Continental currency collapsed. In response, Congress
appointed Robert Morris, one of the country’s leading merchants and patriots, as
Superintendent of Finance. Shortly thereafter, Hamilton sent an essay to Morris in
April 1781.
Hamilton wrote the letter as he was
transitioning from Washington’s aide
to his field command in the Army. He
stressed the importance of finance to the
revolution: “’Tis by introducing order into
our finances—by restoring public credit—
not by gaining battles, that we are finally
to gain our object.”5 Then he shared some
ideas he had on financial administration.
Robert Morris, the Superintendent of Finance for Cong ress.
The tendency of a national bank is to
increase public and private credit. The
former gives power to the state for the
protection of its rights and interests,
and the latter facilitates and extends
the operations of commerce among
individuals. Industry is increased,
commodities are multiplied, agriculture and manufactures flourish, and
herein consist the true wealth and
prosperity of a state.
Most commercial nations have found
it necessary to institute banks and they
have proved to be the happiest engines
that ever were invented for advancing trade. Venice, Genoa, Hamburgh,
Holland and England are examples
of their utility. They owe their riches,
commerce, and the figure they have
18 FINANCIAL HISTORY | Fall 2016 | www.MoAF.org
made at different periods in a great
measure to this source. Great Britain
is indebted for the immense efforts she
has been able to make in so many illustrious and successful wars essentially
to that vast fabric of credit raise on this
foundation. ’Tis by this alone she now
menaces our independence.6
In this letter, Hamilton had figured out
why the war had dragged on for so long:
The British were better financed and had
better credit. This point underscored his
plan to make better finance and a creditbased economy one of the cornerstones of
American power.
The rest of Hamilton’s letter consists mostly of articles that comprise the
national bank’s charter and a discussion
of same. The bank would be a corporation,