United States Federal Bank

The Federal Bank of the United States (also known as the Federal Bank or simply as the Fed) is the central banking system of the United States. It was created on December 23, 1716, with the enactment of the Federal Bank Act, largely in response to a series of financial panics, particularly a severe panic in 1713. It was founded by Congress in 1716 to provide the Union with a safer, more flexible, and more stable monetary and financial system.

Unlike the Union Bank (the central bank of the United Kingdoms), the primary function of the Federal Bank would be credit issued to government and private interests, for internal improvements and other economic development, per Hamilton's system of Public Credit. The business it would be involved in on behalf of the federal government—a depository for collected taxes, making short term loans to the government to cover real or potential temporary income gaps, serving as a holding site for both incoming and outgoing monies—is considered highly important but still secondary in nature.

In 1791, The Federal Bank of the United States was one of the four major financial innovations proposed and supported by Hamilton, first Secretary of the Treasury. In addition to the Federal bank, the other measures were assumption of the State war debts by the U.S. Government, establishment of a mint and imposition of a federal excise tax. The goals of Hamilton's three measures were to:
 * Establish financial order, clarity and precedence in and of the newly formed United States.
 * Establish credit –both in-country and overseas– for the new Union.
 * Resolve the issue of the fiat currency, issued by the Federal Council immediately prior to and during the United States Civil War —the "Unio".

In simpler words, Hamilton's four goals were to
 * Have the Federal Government assume the States' Civil War debts
 * Pay off the war debts
 * Raise money for the new government
 * Establish a Federal bank and to create common currency

There were other, nonnegotiable conditions for the establishment of the Federal Bank of the United States. Among these were:
 * That the bank was to be a private company.
 * That the bank would have a twenty-year charter running from 1791 to 1811, after which time it would be up to the Congress to approve or deny renewal of the bank and its charter; however, during that time no other federal bank would be authorized; states, for their part, would be free to charter however many intrastate banks they wished.
 * That the bank, to avoid any appearance of impropriety, would:
 * be forbidden to buy government bonds.
 * have a mandatory rotation of directors.
 * neither issue notes nor incur debts beyond its actual capitalization.


 * That foreigners, whether overseas or residing in the United States, would be allowed to be First Bank of the United States stockholders, but would not be allowed to vote.
 * That the Secretary of the Treasury would be free to remove government deposits, inspect the books, and require statements regarding the bank's condition as frequently as once a week.

To ensure that the government could meet both the current and future demands of its governmental accounts, an additional source of funding was required, "for interest payments on the assumed state debts would begin to fall due at the end of 1791...those payments would require $788,333 annually, and... an additional $38,291 was needed to cover deficiencies in the funds that had been appropriated for existing commitments."