The Bank of the United States was the first semi-public national bank in the United States. It was established in February 1791 and chartered for a term of twenty years.
Although the Bank did not set monetary policy, it had great influence over the economy due to its size. In particular, it was in charge of issuing banknotes and collecting federal taxes.
Origins
The Bank of the United States was conceived in 1790 as part of Alexander Hamilton’s plan to address the nation’s war debt and establish a sound financial footing for the government. He based the Bank on the Bank of England and argued that it could provide the country with a national currency.
However, the bank met resistance from the anti-Bank forces that gathered momentum as political changes occurred in the country. These largely centered on the restraints the bank placed on private, state-chartered banks and the perceived infringement of state rights.
In 1810, the debate over the renewal of the Bank’s charter began. Treasury Secretary Albert Gallatin favored renewal while Vice President George Clinton, who was a Federalist, opposed it. When the vote failed, the Bank’s charter expired in 1811.
Functions
The bank of the united states performed a number of basic banking functions. It accepted deposits, issued bank notes and made loans to businesses, farmers, manufacturers and landowners throughout the country.
The Bank of the United States also purchased securities, much like the Federal Reserve does today. This intermediation function helped to finance American commerce and government by creating the money we use everyday.
However, the Bank of the United States did not set monetary policy. It did not regulate private banks or hold their excess reserves, and it did not act as a lender of last resort.
Management
In 1791, the Bank of the United States was established to provide a monetary system that would be stable. Until then, the government had issued exorbitant amounts of paper money and the economy suffered from high inflation.
The Bank of the United States was a joint-stock corporation and was managed by an executive committee. Its board of directors included representatives from various states and the federal government.
The Bank of the United States was established to act as the fiscal agent for the federal government and to manage government deposits and investments. The government was the largest shareholder of the Bank of the United States, and its profits were a source of revenue for the Treasury department.
Board of Directors
A board of directors is an important part of the structure of a bank, and it is vital that the board has a balance of members that represent different perspectives. They should include individuals who are independent of the bank and management, have previous banking experience and represent a broad range of business contacts.
The Board of Directors meets regularly to oversee the bank and to set goals for the bank’s operations and finances. In addition, they review the bank’s risk management policies and procedures.
The Board of Directors is composed of nine individuals who are appointed from outside the Reserve Bank. Each member is divided into three equal classes—designated A, B and C—and is chosen to be broadly representative of a variety of occupational sectors, demographic groups and geographic areas.
Stockholders
Bank of the united states operates as a global financial institution. It provides a range of products and services, including savings accounts, mortgage loans, investment funds, cash management, insurance, and more.
The bank’s stock is owned by member banks, which must subscribe to the Federal Reserve Bank in their district in an amount equal to 6% of their capital and surplus. The bank keeps this stock only as long as it is a member of the system and it rises and falls with changes in its own capital and surplus.
Of the twenty-five directors, five are chosen by the government and twenty by citizen stockholders. As a result, foreign stockholders are largely excluded from the voting.
