free from objection. The bank was re-chartered March 17, 1787, for fourteen years. Its capital was limited to two million dollars.
It is stated that the Bank of North America issued penny notes about 1790.[1]
The first and one of the most important services rendered by banks in the United States was inculcating punctuality. At the end of the Revolutionary war, Philadelphia was the only place in the country where commercial punctuality was general. Banks introduced it elsewhere.[2] The great fault of the banks, however, was that they did not impose punctuality on themselves or each other.
The first bank chartered, after the peace, was the Bank of Massachusetts, February 7, 1784. The charter was originally perpetual, but was limited, in 1812, with the consent of the bank. Amongst the rules of this bank were: the full names of all delinquents to be posted in the bank, in order to avoid useless applications for credit; absolutely no renewals.[3]
A scheme was published in the New York "Packet," February 12, 1784, for a Bank of the State of New York. Subscribers to the stock were to pay one-third in cash and the other two-thirds in mortgages on land in New York and New Jersey, appraised at not more than two-thirds of its value. If necessary, the directors were to borrow one-third of the value of the land. A fortnight later a meeting was called to found a bank, but on specie only. Alexander Hamilton attributed the land bank scheme to Chancellor Livingston, who, he said, had carried on a zealous propaganda in its favor. In order to defeat it, Hamilton started another scheme, and he also endeavored (as it appears, successfully, ) to show the fallacies in the notion of a land bank. A constitution for the bank was drawn up, undoubtedly by Hamilton. One of the rules was that the bank should not deal in foreign exchange. There was so much eagerness to start the bank, that it began in June without a charter. The rule was adopted: "No discount will be made for longer than thirty days, nor will any note or bill be discounted to pay a former one. Payment must be made in bank notes or specie."[4]
Loud complaints were raised against this bank as soon as it went into operation. It was charged with working in the interest of British capitalists and traders, but it is plain that the chief ground of complaint against it was the punctuality which it enforced. It will be seen, in the course of this history, that the real occasion of the unpopularity of banks, in their early history, was that they were having this effect, which produced irritation and resistance. This opposition prevented the bank from obtaining a charter. It also stimulated a paper money party which wanted a State issue, and obtained it in . The directors of the Bank of New York thereupon decided to keep two sets of accounts, and in fact they organized two banks—a "specie bank" and a "paper bank"—the latter doing business on the State paper; the former using the denomination dollars and the latter pounds. A
