Take the 2-minute tour ×
History Stack Exchange is a question and answer site for historians and history buffs. It's 100% free, no registration required.

I've been hearing the phrase recently that Alexander Hamilton is considered the "father of modern banking", but haven't really come up with any explanation or definition that I can really understand how this came to be attributed to him. From my studies of American Colonial history and after, I know Hamilton was a proponent of industry, debt and a central bank that he fought long and hard for. Is there a real definition for "modern banking"? If so, how is this different than other financial systems in use at the time?

share|improve this question
    
Great question. At this point I would suggest that "modern banking" is hardly a reflection of either Alexander Hamilton's advocacy/implementation of a central banking system or other financial systems in use at the time (throughout the world), including those later established by Hamilton himself. Regardless of wether the banks were privately owned, government owned or both; it does not appear to me that the operations and restrictions of the banks of that era are represented in today's banking system. Again great question! –  E1Suave May 31 '12 at 14:25
    
Thanks! This has been bugging me more of late since I keep seeing commercials with actor portrayals of Hamilton and a lot of references to him as the father of modern banking. There are far more rules now on banks than when he created the First Bank of the United States but I put that on the fact that it was a new country and no one had done this before. –  MichaelF May 31 '12 at 16:43
1  
@MichaelIF Two factors are hugely different though. Our currency is no longer backed by precious metal(s), and loans as we utilize them were never utilized by the banking system in Hamilton's era. (Note: these two factors are not the only differences just two that come to mind) –  E1Suave May 31 '12 at 17:17
    
@E1Suave I was aware of the precious metals, but not the loans part. Interesting. –  MichaelF May 31 '12 at 17:27
1  
If you're interested in the subject I highly recommend Ron Chernow's biography of Hamilton. It's a good balance of vivid, colourful details about the man himself with an overview of his role in developing American finance and public credit. He's an incredibly important figure in American history, but widely underappreciated by the popular culture. –  Evan Harper Aug 6 '12 at 9:51
show 3 more comments

2 Answers

up vote 3 down vote accepted

One unique characteristic of Hamilton's Bank of the U.S. (BUS) was that the government only had a 20 percent ownership of the bank, but the government had the right at all times for reports and status on the operation of the bank. Hamilton was concerned that government officials would be tempted to use the bank to give/gain favors politically...so he found this solution. Two good books on the Modern Banks are "Financial Founding Fathers" (Wright/Cowan) and "One Nation Under Debt" (Wright). The Museum of American Finance is a terrific resource and visit spot in lower Manhattan (48 Wall St). Rand Scholet, Founder of the Alexander Hamilton Awareness Society (The-AHA-Society)

share|improve this answer
    
Giving you the win here for the book references, those look good. –  MichaelF Jun 27 '12 at 15:16
add comment

He pushed for a private and independent central bank, the First Bank of the United States. It was similar to the Bank of England, except he expected it to loan money to private institutions and businesses as well as perform its government duties. He also founded the Bank of New York, which was a private lending institution similar to modern commercial banks.

share|improve this answer
    
Though I agree with your answer I am not sure it entirely answers the OP's question. " Is there a real definition for "modern banking"? If so, how is this different than other financial systems in use at the time? –  E1Suave May 31 '12 at 14:58
1  
Completely agree he did this, though it's not exactly answering my question unless these banks were doing things differently than say the Bank of England. If they were what are those specific differences? –  MichaelF May 31 '12 at 16:41
    
@ MichaelF - The bank he designed was privately owned and loaned to commercial and private interests - it was a way of establishing credit for the new Republic and American industry, agriculture and shipping. The BoE was Britain's private banker - it would collect and store taxes, make short term loans to the government and manage the receipt and disbursement of government funds, but not loan those funds to commercial interests or provide services to other financial institutions. Hamilton's bank served both the government and private commerce. –  RI Swamp Yankee May 31 '12 at 17:32
    
@RISwampYankee This is a good comment you should incorporate into your answer, it helps round it out. –  MichaelF Jun 2 '12 at 10:43
3  
So, basically he founded or started the modern American banking system. –  JoeHobbit Jun 6 '12 at 1:30
add comment

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.