The large financial institutions of the world have dominated the news cycle for the past few years, and it got me thinking, what were the first large banks in the US? I am interested in hearing about the first big retail banks, as well as financial banks. I know that some of the banks that are still in existence today can probably trace their lineage back to much earlier banks, but I'm curious what were the institutions that were the first to become truly national and be dominant forces in the US economy.

  • Goldman Sachs has been around for quite a while. – quant_dev May 14 '12 at 12:48

This is a very good question with a very weird and convoluted answer. This is my first post, so I've only got two links - I've bolded terms you should google, and referred to interesting wiki articles by their title.

First, banks and corporations did not fill the same functions as they do today - and the giant powerhouse financial institutions were municipal, state or federally chartered institutions. The very first, created to finance the Revolutionary War was the Bank of North America. This acted like a central bank as well as a commercial bank.

Here is an article on commercial banking in the early Republic, listing the chartered banks in chronological order. Here is another article on post-colonial commercial banking.

There is very little information online on private banks before the Free Banking Era (see wiki's article on Banking in The United States), where the sheer perniciousness of the wildcat banks made them infamous.

The first investment bank (see wiki's "History of Investment Banking" article) was J. Cooke & Co., founded to finance the Union's war effort in the Civil War by selling government bonds, and later underwriting the expansion of railroads.


Retail Banking: There were not national retail banks until the 1980s, due to state and federal restrictions on branch banking and interstate banking. The history of Bank of America is instructive here. After California allowed in-state branching in 1909, BoA opened 453 branches in California by 1929. Attempts to open up branches out of state led to a series of federal actions that resulted in the forced separation of BoA into BoA, Transamerica and Firstamerica.

However, many large retail banks can somehow trace their lineage back to antebellum banks, thanks to the number of mergers that have occurred over the centuries. For example, JP Morgan Chase can trace its lineage to a 1799 water company (with some banking privileges) chartered by Aaron Burr.

"Central" Banking: The largest antebellum banks were those that ensured a sound currency and controlled interest rates. The best known of these are the First and Second Banks of the United States, which also handled the government's finances. However, even private banks could act as de facto central banks for a region, such as Boston's Suffolk Bank.

The Suffolk Bank collected bank notes from the region's other banks. The bank could threaten to redeem these notes, forcing other banks to maintain adequate specie reserves. Such an action was most likely when the economy was overheating, as redeeming notes for specie had a deflationary effect. During Panics, the bank could put off redeeming these notes, which increased the region's monetary supply. New England had the soundest currency in the U.S. and weathered Panics better than other regions thanks to the Suffolk Bank's monetary policy.

Investment Banking: Investment banking was small scale until the late 19th century due in part to the absence of effective accounting methods and disclosure systems. As Naomi Lamoreaux shows, investment banks were highly localized, their boards of directors being restricted to a single family and their associates. This helped solve information asymmetries: If you knew and trusted Providence's Brown family, then you would buy stock in their investment bank, knowing that the Brown's would use this capital to finance their non-banking concerns. As I discuss at too much length here, much of the antebellum investment banking action occurred in Philadelphia.

@RISwampYankee is correct that investment banking began to grow in order to meet financial needs imposed by the Civil War. After the war, these new methods were used to finance railroads, the corporate behemoths of the day.

Best sources on early American banking: Bray Hammond, Naomi Lamoraeux, and Howard Bodenhorn.

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