DateEvent
July 17, 1790The Bank of Pennsylvania opens.
Philadelphia merchants open the Bank of Pennsylvania on July 17, 1790, in order to provide funds for the Continental Army in the fight against Britain. Prior to this opening, the colonies had no established banking system, instead depending on each colonial government to issue money and coins. Colonists relied on credit from local merchants or merchants and banks in Britain.
January 4, 1782The Bank of North America opens.
The Continental Congress, which rules the fledgling nation while it continues to fight for independence from Britain, approves the Bank of North America. The BNA, which opens in Philadelphia on January 4, 1782, is the nation's first commercial bank. It loans money to federal and state governments as well as to Philadelphia businesses, and these actions encourage commerce between the colonies as well as between the U.S. and other countries.
February 25, 1791Congress creates the Bank of the United States.
Secretary of the Treasury Alexander Hamilton asks Congress to set up a national bank for the new nation, and the Bank of the United States (BUS) is created on February 25, 1791. The government deposits tax money in the Bank. The Bank, in turn, issues paper money to pay the government's bills and make loans to farmers and businesses. The new Bank thus encourages economic growth.
1811The charter for the BUS runs out.
Despite the Bank's help in developing the economy, Republicans oppose a national bank, and in 1811 the charter for the Bank of the United States runs out. Without a national bank, state banks must make loans and issue money, but with so much money in circulation, prices rise rapidly. As a result, the economy suffers.
April 10, 1816A second national bank is chartered.
By 1816, Republicans realize that the nation needs a central bank to regulate the money supply, and they support a law to charter the second national bank. The second BUS restores order to the nation's money and helps American businesses grow.
March 6, 1819The federal government prevents Maryland from taxing the Bank.
After the second Bank is chartered, Maryland attempts to tax the Bank in order to drive it out of the state. James McCulloch, the Bank cashier, refuses to pay the tax, and the conflict is resolved in the Supreme Court. In McCulloch v. Maryland (1819), the Court rules that states have no right to interfere with federal institutions within their borders. This ruling strengthens federal power and encourages the Bank to continue to grow.
1832President Andrew Jackson forces the Bank to close.
Although the charter for the BUS is not up for renewal until 1836, President Andrew Jackson, who sees the Bank as undemocratic, vetoes a bill to renew the charter four years early. As a result, the Bank becomes a major issue in the 1832 election, and the popular vote rejects the Bank's renewal. To further cripple the bank, Jackson demands that federal money be deposited in state banks rather than the BUS.
1836The BUS closes, leading to an economic depression.
Without a new charter or federal money, the BUS is forced to close in 1836. As state banks can now lend money without limit, they begin printing paper money that is not backed by gold or silver, and speculation runs wild. When speculators cannot exchange their paper money for gold and silver, many banks are forced to close. The nation plunges into an economic depression.
January 1, 1861Jay Cooke launches an investment banking firm.
On January 1, 1861, the wealthy banker Jay Cooke launches the first investment banking firm in the U.S. Borrowing three million dollars from the Pennsylvania government, he sets up Jay Cooke & Company, which helps finance Northern efforts during the Civil War. The company negotiates loans for the government and sells government bonds.
February 25, 1863Congress approves the National Bank Act.
As the Union battles the Confederacy in the Civil War, the war grows increasingly expensive, with no clear tax program in place to finance it. On February 25, 1863 Congress approves the National Bank Act, which is meant to establish a national banking system, make federal war loans, and create a national currency. Additional legislation converts state banks to national ones, but the currency supply remains precarious until 1913.
December 23, 1913The Federal Reserve Act sets up a new system of federal banks.
Under President Woodrow Wilson, who hopes to restore the national economy, Congress passes the Federal Reserve Act in 1913. The Act sets up a new system of federal banks, the first since the BUS closed in 1836. The Act also gives the government the power to raise or lower interest rates and control the money supply.
October 24, 1929The Great Depression begins in the U.S.
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