When Alexander Hamilton became the first Treasury Secretary in 1789, the nascent United States faced financial turmoil. With no tax revenue until 1789, the government was in default on most domestic debts, and there was no national currency, banking system, or securities market. Not great.
Hamilton’s “Report on a National Bank” (1790) outlined the need for a national bank to stabilize the economy. After heated debate, Congress approved the “Bank of the United States” (BUS) in 1791, with a $10 million capitalization, 80% privately owned and 20% government-owned. Amazingly, the IPO was on… July 4, 1791.
The BUS IPO had unique features: investors paid 25% of the share price in specie and 75% in US debt securities (Hamilton’s ‘Sixes’). This strategy increased demand for government debt.
Chartered for 20 years, the BUS was not renewed in 1811.
Read More:Panic Series (Pt. I): 1792
