The First Bank of the United States: 1791-1811

The history of central banking in the United States begins almost with the founding of the country. Once America won its independence, Congress was faced with the task of paying off the new nation’s war debts.

Alexander Hamilton, the first Secretary of the Treasury, urged Congress to also assume the war debts of the individual states and then create a Bank of the United States to help refinance all these debts. The bank would be the only national bank, and it would hold the federal government’s deposits and lend to the government and business. The first Bank of the United States, also called the First Bank, helped transform the country into a more unified national economy, but it was a private institution and foreigners owned 70 percent. That worried many Americans.

The First Bank was not a central bank in the modern sense, especially since the country had few banks. It did not conduct monetary policy as we know it today, and it did not supervise or regulate other banks.

Like other banks, the First Bank made business loans, accepted deposits, and issued notes that circulated as currency and were convertible into gold or silver. It served as the federal government’s fiscal agent, receiving its revenues, holding its deposits, and making its payments. Its stock was publicly traded and held by both foreign and domestic investors.

15. Read the text again. Are these statements true (T) or false (F).

1. The First Bank of the US was founded before the war for independence. (T / F)

2. Congress created the First Bank to pay off the war debts of the individual states. (T / F)

3. The First Bank was private and held foreign government’s deposits. (T / F)

4. There were enough banks in America in those years. (T / F)

5. The First Bank was invested not only by domestic investors. (T / F)

6. The American government guaranteed that its currency could be converted into precious metals. (T / F)

7. The First Bank accepted money for safe keeping and lending it out. (T / F)

8. Other American banks were controlled by the First Bank of the US. (T / F)

16. Match the verbs on the left with the words on the right to make word phrases.

1. to owna. debts

2. to issue b. deposits

3. to lend c. the banks

4. to make d. money

5. to hold i. business

6. to receive f. the banknotes

7. to refinance g. payments

8. to supervise h. revenues

17. Complete these sentences with suitable words phrases from 16.

e.g. Foreign investors owned 70 percent of banking business in America.

1. The First Bank of the US was created to ¹_____ the national war _____ .

2. Banks ²_____ _____ to the government and private customers.

3. The US banks acted as financial intermediaries for the government; they ³_____ its _____ and ⁴_____ its _____ .

4. The First Bank was expected to ⁵_____ the US government _____ .

5. At first, the First Bank didn’t conduct monetary policy, but it ⁶_____ _____ which were convertible into gold or silver.

6. The US government didn’t ⁷_____ _____ , because they were private.

18. How much do you know about English Banks? Try this quiz.

19. Listen and check your answers to the quiz. Does any of the information surprise you?

Writing

20. Write quiz questions about the Central Bank of Russia. Ask your partners.