Financial History 25th Anniversary Special Edition (104, Fall 2012) - Page 37
went to the floor for a vote, the bill was
greatly changed. Committee members had
made multiple alterations, many of which
Girard detested. For instance, the revised
bill did not restore the specie standard and
was little more than an attempted revenue
grab. Girard was pleased, therefore, when
Madison vetoed his altered brainchild.
The War of 1812 ended with the signing
of the Treaty of Ghent on December 24,
1814, but the American financial system
was still on a shaky foundation. Girard
and Dallas pressed once again for the
incorporation of a new central bank. With
the aid of future Vice President John C.
Calhoun, the “yeas” carried the day. On
April 10, 1816, Madison signed into law a
national charter for the Second Bank of the
United States. Like the earlier bank (now
referred to as the First Bank of the United
States), the government would have 20%
ownership in the institution, but this time
the capital would be $35 million instead of
$10 million. Hamilton’s creation had been
cloned, three and a half times over!
Another irony of this story is that Republicans — from Girard to Gallatin, and Madison to Calhoun — created what was far and
away the largest bank in the country; the
next largest bank at that time was infinitely
smaller, the Citizens Bank of Louisiana with
$12 million in capital. Most history books
will say that the Republicans were anti-bank,
but most Republicans loved banks as long as
they were under their control.
Gallatin continues to hold the record for
the longest tenure as Treasury Secretary in
US history. He made his share of friends
and enemies on both sides of the political
aisle, and his support of the First Bank of
the United States was politically costly.
But, like Alexander Hamilton in the 1790s,
his actions were immensely important to
America’s subsequent economic growth.
Historians have often highlighted the
sharp differences between Federalists and
Republicans, with Hamilton’s philosophy
on one end of the spectrum and Thomas
Jefferson’s on the other. However, with
respect to the country’s finances, Gallatin
set the important precedent that Treasury
Secretaries were to be guardians of the
financial system and the economy first
and foremost, above any party affiliation. He supported, used and expanded
on the financial framework put in place
by Hamilton, including a central bank, a
unit of account defined in specie, a system
of corporate intermediaries (banks and
insurers), securities markets and the use
of private syndicates to raise public funds.
Though Gallatin failed to win a charter
for a new national bank before leaving for
the peace talks — itself an important mission for the financial sector — he planted
the seeds that others, like Stephen Girard,
would champion and grow into the Second Bank of the United States.
Today, 200 years later, we again hear
voices of those calling for the abolishment
of a central bank. Those politicians and
pundits ought to review what Secretary
Gallatin, Stephen Girard and others faced
in 1812 without one, and all of the subsequent difficulties financing the country in a
period of wartime exigencies.
David Cowen has been the Museum’s President and CEO since 2009. He holds a BA
in American history from Columbia College, an MBA from the Wharton School of
Business, and an MA and Ph.D. in American history from NYU. He has written
extensively on US financial history, and is
co-author of Financial Founding Fathers:
The Men Who Made America Rich, from
which this article is adapted.
www.MoAF.org | Fall 2012 | FINANCIAL HISTORY 35