In 1792 the bank established in the chief cities of the country eight branches, among which the $10,000,000 capital was appor tioned.
Bank notes were issued by the parent bank and its branches in denominations of $5 and more, the total amount in circulation at any one time never exceeding $6,000,000. As the parent bank refused to redeem the notes of its branches, this forced each branch to be self-reliant and tended to prevent overextension; this policy also relieved the parent bank from a sudden demand for large payment at any one of its branches. The bank used "half-notes" and "post-notes" to make payments at a distance. As these notes circulated widely, they had a salutary effect in restraining the overissue of notes by state banks.
Services of First Bank to Government The government enjoyed many advantages from the bank, such as the $2,000,000 loan for its stock subscription, which bore only 6 per cent interest, whereas the dividend rate on the stock was 8 per cent, the 2 per cent difference representing a net profit to the government. The Treasury also borrowed on short-term notes from the bank. When by 1795 long-term loans to the government amounted to $6,200,000, or nearly two-thirds of its entire capital, this concentration of loans crippled its services to commerce and industry and also made it difficult for the institu tion to help the government with short-term accommodation. To liquidate its debt to the bank the government, between 1797 and 1802, sold its shares of the bank's stock—at premiums aggre gating $671,860. Meanwhile the government had received dividends amounting to The relations between the Treasury and the bank were in timate. The bank granted loans to the Treasury, helped it to perform its foreign exchange business—for the bank did most of the foreign and domestic exchange business of the country—acted as government depository, paying no interest on the public de posits, and in compensation for the use of the deposits transmitted public moneys from place to place free of charge. In addition the bank was of service to importers in the payment of custom duties, which were commonly paid in post-notes. After 1800 the Collec tor of the Internal Revenue used the bank as well as its branches to collect the maturing revenue bonds, promoting thereby greater punctuality and economy in the service.
Dissolution of First Bank Because the bank was regarded as a Federalist institution, Jef ferson and the Democrats were opposed to it, yet the institution was managed capably and with a view to profits and kept aloof from political controversies. Gallatin, who pleaded the bank's cause with Jefferson, was willing to waive political objections in consideration of the fiscal and business advantages of its opera tion, and in i 8o8 when the original charter was soon to expire he ad vocated its renewal. The objection which weighed most heavily against the bank was the large holdings of the bank's stock abroad and the consequent payment of dividends to foreigners. The trade organizations of the country in general favored the renewal of the charter but state jealousy of the national institution and the repressive effect of the bank and its branches on the smaller new state banks, served to fan political opposition. As a result Congress refused to renew the charter, and in x811 the bank closed. Its officials attempted to procure a state charter for it in Pennsylvania, but failed. They obtained one, however, in New York under the name, Bank of America, and the concern con tinued to do business as a state institution.
The first Bank of the United States failed of success be cause of political opposition, despite the fact that it had served well both the government and the financial and commercial world.
The Second Bank of the United States After the dissolution of the first Bank of the United States and during the war against Great Britain, the money market became badly disorganized, specie payments were suspended except in New England, and the public credit sank to a low ebb. A demand for the re-establishment of the bank arose spontane ously, the main reason being to restore to the country an orderly currency through the resumption of specie payments. Accord ingly a bill was passed in '816 creating a new bank, with a charter to run for twenty years.