Bank of North America

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The Bank of North America was the first fractional-reserve commercial bank in the United States. It was a privately owned central bank modeled after the Bank of England. [1]


There were very few privately-owned banks in colonial America, and they were short-lived.

Robert Morris, a wealthy Philadelphia merchant and Congressman, had assumed virtually total economic and financial power during the Revolutionary War. As a war contractor, Morris siphoned off millions from the public treasury into contracts to his own mercantile and shipping firm and to those of his associates. Morris was also leader of the powerful Nationalist forces in the embattled new country whose aim was to reimpose in the new United States a system of mercantilism and big government similar to that in Great Britain, against which the colonists had rebelled. The object was to have a strong central government, particularly a strong president or king as chief executive, built up by high taxes and heavy public debt. The strong central government was to impose high tariffs to subsidize domestic manufacturers, develop a big navy to open up and subsidize foreign markets for American exports, and launch a massive system of internal public works. In short, the United States was to have a British system without Great Britain.

Part of the Morris scheme was to organize and head a central bank, to provide cheap credit and expanded money for himself and his allies. The new privately owned Bank of North America was deliberately modeled after the Bank of England. Its money liabilities were to be grounded upon specie, with a controlled monetary inflation pyramiding credit upon a reserve of specie.[2]


The bank began as a bill introduced by Robert Morris, the Superintendent of Finance and the leader of the nationalist forces in the Continental Congress, in an attempt to further the drive for fiat paper money after the failure of the Continentals. It was chartered on May 26, 1781, and opened its doors on January 7, 1782. [3] [4]

The money system was to be grounded upon specie, but with a controlled monetary inflation pyramiding an expansion of money and credit. The bank received the privilege from the government of its notes being receivable in all duties and taxes to all governments, at par with specie. In addition, no other banks were to be permitted to operate in the country. In return for its monopoly license to issue paper money, the bank would then graciously lend most of its newly created money to the federal government to purchase public debt and be reimbursed by the hapless taxpayer. The bank was made the depository for all congressional funds; these funds were where most of the bank's . The first central bank in America rapidly loaned $1.2 million to the Congress, headed also by Robert Morris."[5]

In addition to Bank of North America paper, Morris notes, were also issued. The notes were payable in specie on demand. A second form of Morris notes, better termed Morris warrants, followed soon after, payable usually in thirty to sixty days from date of issue. The notes and warrants, amounting to approximately $400,000 in August of 1782, never gained the confidence of the public and were retired less than a year after first being issued. [6]

Despite the power and influence of Morris, and the monopoly privileges given to his bank, it was perceived in the market that the Bank's notes were being inflated compared with specie. The market's lack of confidence in the inflated notes led to their depreciation outside its home base in Philadelphia. After a year of operation, Morris, with his political power slipping after the end of the war, moved quickly to end his Bank's role as a central bank and to shift it to the status of a private commercial bank chartered by the state of Pennsylvania. By the end of 1783, all of the federal government's stock in the Bank of North America, which had the previous year amounted to 5/8 of its capital, had been sold by Morris into private hands, mainly to Dutch capitalists. All U.S. government debt to the bank had been repaid. The bank, of course, continued to issue discounted notes to the federal government. [7] [8]

The First Bank of the United States succeeded the experimental Bank of North America as the nation's central bank.[9]

The Bank of North America was liquidated after a bank run in 1908. Bank of N. America Is To Liquidate, New York Times, January 1908 (about a bank run on the Bank of North America)