9. The Bank of North America

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Length: {2:35 minutes}

Summary of Chapter 9: The Bank of North America

Towards the end of the American Revolution, the Continental Congress, desperate for funds, authorized Robert Morris, their financial superintendent, to establish a privately owned central bank in 1781. Morris, a wealthy man who had profited from trading war materials during the Revolution, founded the Bank of North America. This bank was modeled after the Bank of England, allowing it to practice fractional reserve banking, which meant it could lend money it did not have and charge interest on it.

The bank’s initial capital was supposed to come from private investors, but when Morris couldn’t raise the money, he used gold loaned by France to America. He then lent this money to himself and his associates to buy shares in the bank. The bank was granted a monopoly over the national currency, but the value of American currency continued to fall. As a result, in 1785, the bank’s charter was not renewed.

William Findley of Pennsylvania, a key opponent of the bank, criticized it for being driven by greed and seeking to control all wealth, power, and influence in the state. Despite this setback, the proponents of the bank, including Alexander Hamilton, Robert Morris, and the bank’s president Thomas Willing, did not give up. In 1791, Hamilton, then Secretary of the Treasury, and Morris successfully established a new privately owned central bank, the First Bank of the United States, with Willing again serving as its president. The key figures remained the same; only the name of the bank had changed.

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