Financial History Issue 121 (Spring 2017) | Page 15

Library of Congress
Main building , Girard College , 1901 .
Stephen Girard was born in Bordeaux , France in 1750 . He immigrated to Philadelphia in 1776 and died there in 1831 . In addition to his mercantile and financial activities , Girard is remembered for his critical role during Philadelphia ’ s yellow fever epidemic of 1793 that killed some 10 % of the city ’ s population . Girard managed the temporary hospital at Bush Hill and directly cared for many of the ill . His most lasting legacy was bequeathing the vast majority of his fortune to found Girard College , providing free education for Philadelphia ’ s orphans . His gift continues to benefit Philadelphians to this day . bank to meet challenges in the form of specie calls from several rival chartered banks . The calls were based on Treasury drafts drawn on Girard ’ s Bank . He immediately countered with specie calls on those banks using their notes his institution had accumulated . Girard ’ s action quickly brought this form of opposition to an end . The strong capital position also instilled confidence in the stability of Girard ’ s Bank among the business community . Further , unlike British and European merchant banks , Girard maintained strict separation between his mercantile enterprises and his banking operations , thus ensuring transparency and enhancing the bank ’ s reputation .
Girard further solidified his banking institution by quickly establishing a network of correspondent banks in major cities , in inland Pennsylvania , and with Baring Brothers in London This was further enhanced by establishing an arrangement with the Trustees of the former Bank of the United States whereby in exchange for maintaining their account with his bank it would be the institution that received and deposited the Trustee ’ s payments as they wound down the closed institution .
Establishing relations with the Treasury proved much more difficult . Despite Gallatin ’ s promise in the 1812 negotiations that he would recommend that banks holding public deposits would accept Girard ’ s Bank ’ s notes and they would not make unnecessary specie draws from each other , this did not happen . It took until 1815 when in response to Treasury ’ s difficulties in transferring funds from Southern banks to make payments in the Northeast that the issue was resolved . Girard offered to use his correspondent relationships to collect and credit Treasury notes to his account in the Bank of South Carolina and to credit an equal amount to the Treasury in his Philadelphia bank . This and Girard ’ s
agreement to accept Treasury notes with interest accrued as if they were bank notes led Treasury to make Girard ’ s Bank a depository for federal reserves and place it on par with chartered banks .
The process of getting Girard ’ s Bank established and accepted faced one more obstacle — the battle over unchartered banks in the Pennsylvania legislature . Attempts to outlaw private banks in the 1813 session passed both houses of the legislature by one vote but failed when vetoed by the governor . Renewed efforts succeeded in 1814 despite the governor ’ s veto , but when Girard ’ s name appeared on the list of illegal institutions at the beginning of 1815 , no enforcement actions were taken . Following a sharp exchange with the state ’ s banking authorities , Girard was removed from the list . Here , the magnitude of Girard ’ s wealth and the stability and reputation of Girard and his Bank likely were critical .
Girard ’ s important contribution to the success of the 1813 Treasury loan enhanced his standing as a patriot and a financial anchor for the nation . With his banking institution established and accepted , Girard was poised to be an ongoing force in the financial world of the new nation . His role in the specie suspension of 1814 , his forceful advocacy for the Second Bank of the United States , his large ongoing role in Treasury financing and his allowing The Bank of Stephen Girard to serve a central reserve role for inland Pennsylvania banks ( thus enabling their notes to circulate at par in Philadelphia ), put Girard at the forefront of financial sector developments in Philadelphia and the nation for two decades . Even more important was the critical part Girard played as market capitalism began its transformation from a primarily mercantile focus to the industrial capitalism that would dominate the country and the world . His financing of private ventures particularly in the area of transportation — navigation and railroads — and coal provided a model for the investment bankers who would be so important for economic development later in the 19th century .
By the time Girard died in 1831 , he and his bank had played a critical and unique role in transforming Philadelphia and the nation at a pivotal time for the emerging national economy and its financial system .
Clyde Haulman is Professor Emeritus of Economics at the College of William and Mary . He studies the Early National economy , the development of American economic thought , and is the author of Virginia and the Panic of 1819 ( 2008 , Chatto and Pickering ).
Adams Donald R ., Jr . Finance and Enterprise in Early America : A Study of Stephen Girard ’ s Bank 1812 – 1831 . Philadelphia : University of Pennsylvania Press . 1978 .
Hehnen , Mark T . “ Girard to the Rescue : Stephen Girard and the War Loan of February 8 , 1813 .” Stephen Girard Forgotten Patriot at www . forgottenpatriot . com .
Holland , Brenna O ’ Rourke . Free Market Family : Gender , Capitalism and the Life of Stephen Girard . Ph . D . dissertation , Temple University . 2014 .
Wilson , George . Stephen Girard : America ’ s First Tycoon . Conshohocken , Pennsylvania : Combined Books . 1995 .
Wright , Robert E . The First Wall Street : Chestnut Street , Philadelphia , and the Birth of American Finance . Chicago and London : University of Chicago Press . 2005 .
Wright , Robert E . and David J . Cowen . Financial Founding Fathers : The Men Who Made America Rich . Chicago and London : University of Chicago Press . 2006 .
www . MoAF . org | Spring 2017 | FINANCIAL HISTORY 13