which can exist in regard to the conception and organization of a bank. If the stockholders of a bank are debtors to it and not creditors of it, it is a swindle. They take something out where they have put nothing in. They are not lending a surplus of their own; they are using an engine by which they can get possession of other people's capital. They print notes which have no security and make the public use them as money. They bear no risk of their own operations, but throw all the risk on others while taking all the gain. The government had no more right to subscribe stock when it possessed nothing, and put nothing in, than an individual would have to do the same thing.
The stock of this Bank and four thousand shares more were subscribed in two hours.[1] It went into operation December 12, 1791. A very active speculation in the scrip sprang up as soon as the first installment was paid, and it was run up to a premium. This contributed largely to the financial crisis in the winter of 1791-2, "with distress for money unequaled in this country." A story is told that the son of the president of the Massachusetts Bank, and two others, borrowed the funds of the bank to such an extent that it stopped discounting for six or eight weeks, while they went to New York and speculated in government paper. They sold out to Duer. The next day the stocks fell 20 or 30 per cent., and he was ruined. He had high credit and had taken on deposit the savings of small people.[2] He was put in jail, where he remained five years. Threats were made of lynching him.[3]
The belief at the time, and subsequently, was that no more than the specie part of the first installment ever was paid into the Bank in specie.
In managing the relation of banks to each other, Hamilton set some precedents which deserve careful attention on account of the momentous consequences which afterwards followed from them. He naturally had a tender feeling for the Bank of New York, and one reason why he opposed branches for the national bank was that he foresaw a collision of interests. As soon as the charter was passed he wrote to reassure the Bank of New York, saying that he had explicitly directed the Treasurer not to draw upon it without special directions from himself. He declared his intention in lhe public interest to protect that bank against speculators.[4]
In November, 1791, he assured the cashier that, although it would be his duty to put the public deposits in the branch, he would precipitate nothing, but would conduct the transfer so as not to embarrass or disturb that institution. In the commercial crisis of 1791-2 he ordered the Bank of New York to buy government bonds, in order to sustain their value and relieve the money market. In fact he followed the course of the panic with such interference as he judged would be useful. In May, 1792, he encouraged
