the bank of England, on its first erection, rested wholly on that foundation. The subscribers to a loan to government of one million two hundred thousand pounds sterling, were incorporated as a bank; of which the debt created by the loan and the interest upon it, were the sole fund. The subsequent augmentations of its capital, which now amounts to between eleven and twelve millions of pounds sterling, have been of the same nature.

The confining of the right of the bank to contract debts to the amount of its capital, is an important precaution, which is not to be found in the constitution of the bank of North America, and which, while the fund consists wholly of coin, would be a restriction attended with inconveniencies, but would be free from any, if the composition of it should be such as is now proposed. The restriction exists in the establishment of the bank of England, and as a source of security, is worthy of imitation. The consequence of exceeding the limit there is, that each stockholder is liable for the excess, in proportion to his interest in the bank. When it is considered, that the directors owe their appointments to the choice of the stockholders, a responsibility of this kind on the part of the latter, does not appear unreasonable. But on the other hand it may be deemed a hardship upon those who may have dissented from the choice. And there are many among us, whom it might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the responsibility upon the directors, by whom the limit prescribed should be transgressed.

The interdiction of loans on account of the United States, or of any particular state, beyond the moderate sum specified, or of any foreign power, will serve as a barrier to executive encroachments, and to combinations inauspicious to the safety, or contrary to the policy of the Union.

The limitation of the rate of interest is dictated by the consideration, that different rates prevail in different parts of the Union; and as the operations of the bank may extend

through the whole, some rule seems to be necessary. There is room for a question, whether the limitation ought not rather to be to five, than to six per cent., as proposed. It may with safety, be taken for granted, that the former rate would yield an ample dividend; perhaps as much as the latter, by the extension which it would give to business. The natural effect of low interest is to increase trade and industry; because undertakings of every kind can be prosecuted with * greater advantage. This is a truth generally admitted; but it is requisite to have analyzed the subject in all its relations, to be able to form a just conception of the extent of that effect. Such an analysis cannot but satisfy an intelligent mind, that the difference of one per cent. in the rate at which money may be had, is often capable of making an essential change for the better, in the situation of any country or place.

Every thing, therefore, which tends to lower the rate of interest, is peculiarly worthy of the cares of legislators. And though laws which violently sink the legal rate of interest greatly below the market level, are not to be commended, because they are not calculated to answer their aim; yet, whatever has a tendency to effect a reduction, without violence to the natural course of things, ought to be attended to and pursued. Banks are among the means most proper to accomplish this end; and the moderation of the rate at which their discounts are made, is a material ingredient towards it; with which their own interest, viewed on an enlarged and permanent scale, does not appear to clash.

But as the most obvious ideas are apt to have greater force than those which depend on complex and remote combinations, there would be danger that the persons whose funds must constitute the stock of the bank, would be diffident of the sufficiency of the profits to be expected, if the rate of loans and discounts were to be placed below the point to which they have been accustomed; and might, on this account, be indisposed to embarking in the plan. There is, it is true,

one reflection, which, in regard to men actually engaged in trade, ought to be a security against this danger; it is this, that the accommodations which they might derive in the way ⚫ of their business, at a low rate, would more than indemnify them for any difference in the dividend; supposing even that some diminution of it were to be the consequence. But upon the whole, the hazard of contrary reasoning among the mass of moneyed men, is a powerful argument against the experiment. The institutions of the kind already existing, add to the difficulty of making it. Mature reflection, and a large capital, may, of themselves, lead to the desired end.

The last thing which requires any explanatory remark, is the authority proposed to be given to the president, to subscribe to the amount of two millions of dollars, on account of the public. The main design of this is, to enlarge the specie fund of the bank, and to enable it to give a more early extension to its operations. Though it is proposed to borrow with one hand what is lent with the other, yet the disbursement of what is borrowed will be progressive, and bank notes may be thrown into circulation instead of the gold and silver. Besides, there is to be an annual reimbursement of a part of the sum borrowed, which will finally operate as an actual investment of so much specie. In addition to the inducements to this measure, which result from the general interest of the government to enlarge the sphere of the utility of the bank, there is this more particular consideration, to wit: that as far as the dividend on the stock shall exceed the interest paid on the loan, there is a positive profit.

The secretary begs leave to conclude with this general observation-that if the bank of North America shall come forward with any propositions, which have for their object the ingrafting upon that institution the characteristics which shall appear to the legislature necessary to the due extent and safety of a national bank, there are, in his judgment, weighty inducements to giving every reasonable facility to the mea

sure.

Not only the pretensions of that institution, from its

original relation to the government of the United States, and from the services it has rendered, are such as to claim a disposition favorable to it, if those who are interested in it are willing, on their part, to place it on a footing satisfactory to the government, and equal to the purposes of a bank of the United States; but its co-operation would materially accelerate the accomplishment of the great object, and the collision which might otherwise arise, might, in a variety of ways, prove equally disagreeable and injurious. The incorporation or union here contemplated, may be effected in different modes, under the auspices of an act of the United States, if it shall be desired by the Bank of North America, upon terms which shall appear expedient to the government.

All which is humbly submitted.

ALEXANDER HAMILTON,

Secretary of the Treasury.

THE LATE BANK OF THE UNITED STATES.

This institution, though no longer existing, has rendered to government, and to the community at large, so many essential services, that its history will not be uninteresting. The idea of it was conceived immediately after the adoption of the present constitution, by Alexander Hamilton, Esq., then secretary of the treasury. The acute intellect and enlarged mind of this man, caused him to master every subject to which his attention was directed, and to embrace it in all its details and consequences, whether immediate or remote. had not escaped him, that the work of the revolution would remain unfinished, without a solemn compact, which should give to the new born political society consistency and shape, and unite its wide spread members into a well organized commonwealth. His efforts, therefore, as his writings testify, had been directed towards effecting the formation of a consti

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tution, and causing it to be adopted. But when this was attained, he perceived further, that in order to give permanency to the new fabric, it was necessary to render it respected abroad, and to strengthen it by the support of self-interest at home; he perceived that it was necessary to raise the edifice of public credit, and that this could only be attempted with success, by raising it on the basis of justice and good faith.

This required that the general government should acknowledge the debts contracted during the revolutionary struggle, make provision for the regular discharge of the accruing interest, and for an ultimate payment of the principal itself.

They were consequently funded; a system of revenue was created, to meet the future expenditures; and nothing could be happier than the further idea of establishing a NATIONAL BANK, the stock of which was chiefly to consist in public securities, in order to procure at once to those securities a great market value, give precision and method to the fiscal operations of the new government, and blend its stability with. the comforts of individual existence. It would also have the advantage of turning credit into capital, and enable the country to procure from abroad the innumerable things which were wanted, to start with vigor in the career of industry, though nearly exhausted with the efforts to attain independence.

The plan of such a bank was therefore submitted to congress on the 13th December, 1790. It was opposed in congress, by the party then in the minority, but who have since come into favor, chiefly on the ground of the presumed unconstitutionality of the measure proposed. The power of creating a bank, or any corporate body whatever, not having been expressly delegated to congress, it was contended that no such power was possessed. The cabinet was divided on the question, as well as the public councils. The then secretary of state in particular argued, that though the constitution, in a summary manner, granted to congress power to pass such laws as were necessary to carry the specified