First Commercial Bank Established in the United States
The Bank of North America, established on January 7, 1782, in Philadelphia, is recognized as the first commercial bank in the United States. This institution emerged during a tumultuous period following the American Revolution, marked by a financial crisis as the Continental Congress struggled with the devaluation of its paper currency. In response to this urgent need for financial stability, Congress appointed Robert Morris, a prominent financier and one of the signers of the Declaration of Independence, as superintendent of finance. He advocated for the creation of a commercial bank to support the war effort and stabilize the economy.
Funded primarily by government resources and a loan from France, the bank initially issued two series of banknotes, one backed by the bank's assets and the other by Morris's personal fortune. The establishment of the Bank of North America not only contributed to alleviating the financial crisis of the time but also set a significant precedent for future banking institutions in the country. It laid the groundwork for the eventual formation of the Bank of the United States in the 19th century and influenced the development of the modern Federal Reserve System. This historical milestone reflects the interconnectedness of finance and governance in early American society and its lasting impact on the U.S. banking system.
First Commercial Bank Established in the United States
First Commercial Bank Established in the United States
On January 7, 1782, the Bank of North America in Philadelphia, Pennsylvania, opened its doors, becoming the first commercial bank in the United States.
The American Revolution, which began in 1776, was undergoing a serious crisis by the end of the 1770s. The crisis was not just military, but financial as well. The Continental Congress issued paper currency to help finance the war, but the “Continentals” were rapidly becoming worthless. Congress turned to Pennsylvania financier and businessman Robert Morris, one of the signers of the Declaration of Independence, and appointed him superintendent of finance. Morris was a large importer of arms and supplies for the army, and he had chaired a secret congressional committee organized to obtain foreign aid and assistance.
Morris told Congress that the war effort required a commercial bank to act as the financial arm of the government and stabilize the currency. Thus, in 1781 Congress passed legislation authorizing the creation of the Bank of North America under Morris's stewardship. The Bank of North America was financed largely by government funds and a loan from France, with some additional financing by private investors. It issued two new series of bank notes to help finance the war. One series was backed by the assets of the bank, while the other series, nicknamed “Morris notes,” was backed by Robert Morris's considerable personal fortune.
The Bank of North America helped to stabilize the financial situation somewhat. Morris held his post as superintendent of finance until 1784, losing much of his personal fortune in the process, and later came under fire for having allegedly misused his authority while in office. The bank not only inaugurated commercial banking in the United States, but the precedent of an independent and yet government-sponsored central bank helped pave the way for the Bank of the United States in the 19th century, and indirectly for the modern Federal Reserve System.