7 January 1782: America’s first central bank opens for business
On this day in 1782, the Bank of North America, created to help pay for the American war of independence, opened for business.
The USA's split from Great Britain was a fairly long drawn out and bloody affair. It was also an expensive one. The Continental Congress had experimented with issuing paper money to finance the revolution, but these efforts soon collapsed. So it turned to Richard Morris, a wealthy Liverpool-born Philadelphia merchant.
Morris had interests in shipping and real estate, plus some more nefarious activities, including slave trading, piracy and gun running. He was elected by Congress as superintendent of finance in 1781, to manage the economy of the fledgling nation. He immediately proposed to found a national bank – the Bank of North America – to fund the war. On 31 December 1781, Congress passed the act that gave the bank a charter, and it became the first bank to be incorporated by the federal government. There was some doubt over whether the federal government had this power, however, so the bank was also given a charter by the state of Pennsylvania.
In America's first initial public offering, 1,000 shares were offered for sale at $400 each. Subscribers included some of the founding fathers of the USA, including Thomas Jefferson, Benjamin Franklin, Alexander Hamilton and James Monroe. Morris acquired a loan from France, and used this to buy 633 of the shares on behalf of the government.
On this day in 1782, the bank opened for business. Morris persuaded his business acquaintances to invest additional funds, and to transact with the bank, thus instilling confidence in it. Morris also persuaded states and the federal government to accept the bank's notes as payment of taxes. As well as issuing its own currency, the bank also issued "Morris notes", which were backed by Morris's own personal fortune. After a few years in operation, the bank reverted to being a purely commercial enterprise, and was succeeded as central bank by the First Bank of the United States. It was liquidated in 1908 after a loss of confidence led to a run on its finances.