Looking back to the outset of the 19th century, it is impossible to say that any real banking system had really been developed in the US. This is to say that, though there were roughly 120 private commercial banks that had been chartered by new state governments, the so-called system was scarcely organized. It was ad hoc in nature and directly linked to the merchant banking practices of the pre-independence period. The years preceding the turn of the century were important because they brought a central banking authority onto the scene. In 1789 the new federal government established a position for the Secretary of the Treasury. As we know, the first to hold this prestigious title was Alexander Hamilton. He accomplished a great deal in the 11 years leading up to the year 1800. Most notably his actions were largely responsible for the creation of the First Bank of the United States, which was given a charter in 1791. This thrust towards central banking was only to last 20 years, however. Up for review in 1811, the bank's charter was not renewed.

This paper will argue that the failure to renew the First Bank of the United State's charter was a direct result of the strong

In the final analysis, observing the first decade of the 19th century reveals that the banking system was basically in upheaval over the federal/state divide. Put another way, the decade was marked by the debate over central vs. state led banking. During the decade, the forces led by Alexander Hamilton were dominant, though consistently losing ground. The inordinate power bestowed upon Hamilton as the first Secretary of the Treasury, along with his ability to persuade Washington of his plan, allowed for the creation of a strong central bank that was efficiently run. Above all, Hamilton's plan was to create a banking system that would allow the US to prosper, and gain integrity in the eyes of the international community. The operation of the First Bank of the US directly reflected these objectives. "The Bank carried a remarkable amount of liquidity. In 1809, for example, its specie/banknote ratio was about 40 percent (compared to a modern average reserve/deposit ratio of about 12 percent) making it probably the most liquid bank in the U.S. at the time. Despite the liquidity, the Bank was also profitable, earning most of its income through substantial loans to both government and private business. It helped to end several bank runs by transferring funds to banks in need of temporary liquidity"(Flaherty, 1997). As it turns out, the success of the bank was the factor that led to its demise. Roughly 20% of the bank notes in circulation throughout the United States belonged to the First Bank, making its money the closest thing to a national currency that existed. States were adverse to the relative power of this centralist institution, and based on the bitter conflicts between Madison and Hamilton over state vs. federal power, the bank itself became politicized. As state-led forces increased their popularity, it is wholly unsurprising that the First Bank of the US was one of the first things to go.

Hamilton, however, while considering Hume's views, took more note of the success of the British system. To compete on a global scale, Hamilton felt that it was absolutely necessary for the US to fast-track to prominence. "Hamilton based his program primarily on the British model, with variations more suited to the United States' unique characteristics. Public credit was to become the pillar of Hamilton's fiscal reform package, the 'invigorating principle' which would infuse the United States with the energy and international respectability he had envisioned. In order to stimulate the economy, Hamilton needed big investors. The support and capital of the nation's wealthiest citizens would provide the foundation and security of his system. He wrote in 1780:

Some common words found in the essay are:
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Approximate Word count = 3713
Approximate Pages = 15 (250 words per page double spaced)