the Bank of England (1887); B. B. Turner, Chronicles of the Bank of England (1897); T. A. Stephens, Bibliography of the Bank of England (1897); A. Andréadès, Histoire de la banque d’Angleterre (1904; Eng. trans., 1909); Sir F. Schuster, The Bank of England and the State (1906).
History of Banking Houses.—L. H. Grindon, Manchester Banks and Bankers (1877); J. B. Martin, “The Grasshopper” in Lombard Street (1892); M. Phillips, Banks, Bankers, and Banking in Northumberland, Durham and North Yorkshire (1894); C. H. Cave, History of Banking in Bristol (1899); Bidwell, Annals of an East Anglian Bank (1900); Richardson, Coutts & Co., Bankers, Edinburgh and London; H. T. Easton, History of a Banking House (Smith, Payne & Smiths) (1903); J. Hughes, Liverpool Banks and Bankers, 1760–1837 (1906).
Scotland.—W. H. Logan, The Scottish Banker (1847); Robert Somers, The Scotch Banks and System of Issue (1873); W. Mitchell, Scotch Banks and Limited Liability (1879); A. W. Kerr, History of Scotch Banking (1884); A. W. Kerr, Scottish Banking, 1865–1896 (1898); Boase, A Century of Banking in Dundee (1867).
Ireland.—Malcolm Dillon, History and Development of Banking in Ireland (1889).
British Colonies.—Edward B. Hamilton, A Manual of the Law and Practice of Banking in Australia and New Zealand (1880); Banking in Australasia (1883); The Canadian System of Banking and the National Banking System of the United States (Toronto, 1890); Journal of the Canadian Bankers’ Association (Montreal).
France.—Annuaire-Chaix, Les Principales Sociétés par actions (1905); A. Raffalovich, Le Marché financier (1905).
Germany.—Dr W. Scharling, Bank Politik (Jena, 1900); Die Reichsbank, 1876–1900 (a history and description of the operations of the bank); Dr Adolf Weber, Depositenbanken und Spekulationsbanken, Ein Vergleich deutschen und englischen Bankwesens (Leipzig, 1902); Dr Felix Hecht, Die Mannheimer Banken, 1870 bis 1900 (Leipzig, 1902); Siegfried Buff, Das Kontokurrentgeschaft im deutschen Bankwerbe (Stuttgart and Berlin, 1904); Dr Riesser, Zur Entwicklungsgeschichte der deutschen Grossbanken mit besonderer Rucksicht auf die Konzentrationsbestrebungen (1905); G. M. Boissevain, Duitsche en Engelsche Deposito-Banken (1905).
Italy.—La Banca Popolare di Milano (1881).
Austria.—Compass, Finanzielles Jahrbuch für Österreich-Ungarn (Vienna).
Japan.—The House of Mitsui (Tokio); The Law and the By-Laws of the Nippon Kogyo Ginko (The Industrial Bank of Japan) (1903).
H. W. Wolff, People’s Banks (1893). (On systems worked by Schulze-Delitzsch, Raiffeisen, Luzzatti, Banche Popolari, Dr Wollemborg, Popular Banks in Belgium, Switzerland, France, England). (R. H. I. P.)
United States
The early history of the American colonies is strewn, like that of most new countries, with many crude experiments in banking and currency issues. Most of these colonial enterprises, however, were projects for the issue of paper money rather than the creation of commercial banks. Speculative banking was checked to a large extent in the colonies by the Bubble Act (6 Geo. I. c. 18), which was passed in England after the bursting of the South Sea Bubble. This act, which forbade the formation of banking companies without a special charter, was in 1740 extended to the colonies.
The serious history of banking in the United States may be said to have begun with the foundation of the Bank of Pennsylvania. This bank originated in the project of a number of the citizens of Philadelphia to supply the continental army with rations. The first bills, issued in 1780, were nothing more than interest-bearing notes payable at a future time. The advances in continental money made by the shareholders were secured by bills of exchange for £150,000, drawn on the American envoys in Europe, but not intended to be negotiated.
A further outgrowth of the needs of the continental government was the Bank of North America, which was authorized by congress on May 26, 1781. The act gave to Robert Morris, the financier, power to create a bank with a capital of $400,000, to be increased if desirable. Morris arranged with the Bank of Pennsylvania to take over its holdings of foreign bills and paid in cash its claims against the Federation. The Bank of North America did not begin business until the 7th of January 1782, and there was so much doubt of the power of the continental congress to charter a bank that it was thought advisable to obtain a charter from the state of Pennsylvania. Under this charter the bank continued to operate until it was absorbed in the national banking system in 1863, and it may be considered the oldest organized banking institution in the United States.
The bank did much, during the first eight years after its organization, to restore order to the chaos of Federation finances. It loaned to Morris, as government superintendent of finance, $1,249,975, of which $996,581 was repaid in cash and the remainder by surrendering the stock in the bank owned by the government.
The Bank of the United States.—A national bank of issue was one of the essential parts of the system built up by Alexander Hamilton in organizing the finances of the Federal government under the constitution of 1789. The first “Bank of the United States” was accordingly incorporated in 1791, with a capital of $10,000,000, divided into 25,000 shares of $400 each. This bank issued circulating notes, discounted commercial paper and aided the government in its financial operations. The government subscribed one-fifth of the capital, but paid for it by a roundabout process which actually resulted in the loan of the amount by the bank to the treasury. Other loans were made by the bank to the government, which gradually carried the obligation by the end of 1795 to $6,200,000. In order to meet these obligations, the government gradually disposed of its bank stock, until by 1802 its entire holdings had been disposed of at a profit of $671,860. The bank did not publish regular reports, but a statement submitted by Gallatin to congress for January 24, 1811, showed resources of $24,183,046, of which $14,578,294 was in loans and discounts, $2,750,000 in United States stock and $5,009,567 in specie.
The expiration of the charter of the bank in 1811 was the occasion of a party contest, which prevented renewal and added greatly to the financial difficulties of the government in the war with Great Britain which began in the next year. Although foreign shareholders were not permitted to vote by proxy, and the twenty-five directors were required to be citizens of the United States, the bank was attacked on the ground of foreign ownership as well as on the constitutional ground that congress had no power to create such an institution.
The government was compelled in the war of 1812 to rely on the state banks. Their suspension of specie payments, in 1814, made it very difficult for the treasury to transfer funds from one part of the Union to the other, because the notes of one section did not circulate readily in another. Gallatin left on record the opinion that the suspension of specie payments “might have been prevented at the time when it took place, had the former Bank of the United States been still in existence.”
The financial condition of the government became so bad during the war that the second Bank of the United States was authorized in April 1816. The general project was that of Alexander J. Dallas, who in October 1814 had become secretary of the treasury. The capital of the new bank was $35,000,000, and the government again appeared as owner of one-fifth of the stock, which was paid in a stock note. The president of the United States was authorized to appoint five of the twenty-five directors and public funds were to be deposited in the bank, “unless the secretary of the treasury shall at any time otherwise order and direct.” The right of congress to charter the bank came before the Supreme Court in 1819 in the famous case of McCulloch v. Maryland. Chief Justice Marshall rendered the decision that the right to create the bank was within the implied powers granted by the Federal constitution, and that it was not competent for the states to levy taxes upon the circulating notes of the bank or upon its property except in common with other property.
The second Bank of the United States was not well managed in the early part of its career, but was upon a firmer foundation under the presidency of Langdon Cheves in 1819. Its policy greatly benefited commerce, but invited bitter complaints from the private dealers in exchange, who had been enabled to make excessive profits while the currency was below par, because of its different values in different states and the constant fluctuations in these values. The Bank, in the language of the report of Senator Samuel Smith of Maryland in 1832, furnished “a currency as safe as silver, more convenient, and more valuable
