Indeed, let’s turn our gaze to the year 1782 and the momentous, albeit brief, existence of the Bank of North America, a period that vividly illustrates the foundational debates over finance, power, and public trust in the nascent United States. This institution, headed by Robert Morris, was more than just a bank; it was America’s first foray into central banking, profoundly shaping the monetary landscape and revealing the inherent tensions within the young republic.

Established as America’s inaugural central bank, the Bank of North America received its federal charter in the spring of 1781 and officially commenced operations at the beginning of 1782. This privately-owned entity was meticulously modeled after the Bank of England, signaling an early inclination among some American leaders to adopt European financial structures. Robert Morris, a prominent member of Congress and a wealthy Philadelphia merchant who had, quite lucratively, profited from war contracts during the Revolution, was instrumental in its formation and served as its head. He was widely regarded as the “financial wizard of Congress”.

A crucial aspect of the Bank of North America’s design was its authorized ability to issue notes that were to be “receivable in all duties and taxes to all government at par with specie”. This provision effectively granted its paper notes a “quasi legal tender status” and made them “attractive for use as common money” for settling debts to the government. Furthermore, the bank was afforded a unique monopoly, as “no other banks were to be permitted to operate in the country” during its federal charter. The stated, and primary, purpose of the bank was to “create money for the federal government,” with lending to the private sector explicitly designated as secondary.

From its very inception, the Bank of North America was steeped in controversy regarding its financial integrity. The charter stipulated that private investors were to contribute $400,000 for the initial subscription. However, when Morris found himself unable to raise this capital, he leveraged his political influence in what was described as “legalized embezzlement”. He utilized gold that France had loaned to the United States, depositing it in the bank, and then, using this gold as a fractional-reserve base, “simply created the money that was needed for the subscription and loaned it to himself and his associates”. This audacious maneuver allowed the “monetary scientists” of the time to effectively collect “double interest on the same nothing” by using government IOUs as a basis for additional loans. The bank’s promotional circular openly touted this seemingly miraculous ability, declaring that “The Bank hath benefit of interest on all the moneys which it, the Bank, creates out of nothing”.

One of the bank’s initial significant actions was to rapidly loan $1.2 million to Congress, which was also presided over by Robert Morris himself. However, despite the considerable power and influence wielded by Morris, coupled with the monopoly privileges bestowed upon his bank, the market quickly perceived that the bank’s notes were being inflated compared to specie (gold and silver coinage). This “lack of confidence in the inflated notes” led to their depreciation outside the bank’s home base in Philadelphia. In a rather telling move, the bank even resorted to employing individuals “to urge redeemers of its notes not to insist on specie,” an action “scarcely calculated to improve ultimate confidence in the bank”.

By the close of 1783, a mere year after its opening, the first experiment with a central bank in the United States drew to a close. With Robert Morris’s political power waning in the aftermath of the Revolutionary War, he swiftly transitioned the Bank of North America from its central banking role to that of a private commercial bank, now operating under a charter from the state of Pennsylvania. All federal government stock in the bank, which had constituted a significant five-eighths of its capital the previous year, was divested into private hands, and all U.S. government debt to the bank was repaid. The bank’s federal charter was ultimately “not to have its charter renewed by Congress and it did not survive beyond the end of the war”.

The broader economic consequences of this period were stark. The contraction of the immense volume of paper money in circulation following the Revolutionary War, combined with the resumption of imports from Great Britain, led to a dramatic fall in prices—more than half in just a few years. In the post-1782 period, other banks, such as the Bank of New York and the Massachusetts Bank of Boston, were subsequently launched, each granted a regional monopoly in banking. However, their expansion of banknotes and deposits further exacerbated the situation by driving out specie and leading to a “contraction of credit,” intensifying the problems of an already existing recession.

This early chapter in American financial history underscores several critical themes that would continue to shape the nation’s economic and political trajectory. It highlights the persistent efforts by financial elites to “centralize and coordinate” control over the monetary system for their own benefit, even as they publicly claimed to be acting for the common good. The Bank of North America’s short-lived federal existence is a potent example of “systematic corruption,” where valuable privileges, like exclusive bank charters and the power to create money, were exploited to consolidate power and generate profit for a select few. It also laid bare the inherent inflationary nature of fractional-reserve banking and its capacity to “fleece the American public” through a “hidden tax called inflation”. The recurring tension between advocates of “hard money” and those who championed paper money and credit expansion would become a defining characteristic of American economic policy for decades to come.