To Albert Gallatin
Oct. 7. 1802.
Th:J. to mr Gallatin
The application of the bank of Baltimore is of great importance. the consideration is very weighty that it is held by citizens while the stock of the US. bank is held in so great a proportion by foreigners. were the bank of the US. to swallow up the others & monopolize the whole banking business of the US., which the demands we furnish them with tend strongly to favor, we might, on a misunderstanding with a foreign power, be immensely embarrassed by any disaffection in that bank. it is certainly for the public good to keep all the banks competitors for our favors, by a judicious distribution of them, and thus to engage the individuals who belong to them in the support of the reformed order of things, or at least in an acquiescence under it. I suppose that on the condition of participating in the deposits, the banks would be willing to make such communications of their operations & the state of their affairs as might satisfy the Secy. of the Treasury of their stability. it is recommended to mr Gallatin to leave such an opening in his answer to this letter, as to leave us free to do hereafter what shall be adviseable on a broad view of all the banks in the different parts of the Union.
RC (NHi: Gallatin Papers); endorsed. PrC (DLC); pressed on same sheet following the memorandum on appointments, 7 Oct.; lacks salutation, dateline, and postscript.
The Maryland legislature chartered the BANK OF BALTIMORE in December 1795, giving it the right to sell stock at $300 per share to raise up to $1,200,000 in capital. James McHenry promoted the establishment of the bank and his protégé George Salmon became the first president. The charter gave the state of Maryland the right to invest up to $180,000 in the stock of the bank. Henry Payson and Luke Tiernan, recently appointed bankruptcy commissioners, served on the board of directors. During the legislative session that began in November 1802, the Maryland Assembly decided to purchase 220 shares of Bank of Baltimore stock with $66,000 of unappropriated monies in the state Treasury (Votes and Proceedings of the House of Delegates of the State of Maryland. November Session, One Thousand Eight Hundred and Two [Annapolis, 1803], 76; Laws of Maryland, Made and Passed at a Session of Assembly, Begun and Held at the City of Annapolis on Monday the Second of November, in the Year of Our Lord One Thousand Seven Hundred and Ninety-Five [Annapolis, 1796], chap. 27; Laws of Maryland, Made and Passed at a Session of Assembly, Begun and Held at the City of Annapolis on Monday the First of November, in the Year of our Lord One Thousand Eight Hundred and Two [Annapolis, 1803], chap. 58; Washington, Papers, Pres. Ser description begins W. W. Abbot, Dorothy Twohig, Philander D. Chase, Theodore J. Crackel, and others, eds., The Papers of George Washington, 1983– , 55 vols. Colonial Ser., 10 vols. Confederation Ser., 6 vols. Pres. Ser., 15 vols. Retirement Ser., 4 vols. Rev. War Ser., 20 vols. description ends ., 7:341–2; ANB description begins John A. Garraty and Mark C. Carnes, eds., American National Biography, New York and Oxford, 1999, 24 vols. description ends , s.v. “McHenry, James”; Baltimore Federal Gazette, 7 Dec. 1802; Vol. 37: Appendix ii, Lists 1 and 2).
The Bank of the United States established an office of discount and deposit in Baltimore in 1792 and by 1800 its capital had expanded from $200,000 to $600,000. In January 1798, it was estimated that FOREIGNERS owned 13,000 of the 25,000 shares of the Bank of the United States. The proportion increased in June 1802 when the U.S. sold 2,220 shares to British financier Alexander Baring at $580 per share. In exchange, Baring agreed to have over 3,000,000 guilders available at Amsterdam for the payment of the Dutch debt falling due during the first five months of 1803. Baring agreed to the rate of 41 cents per guilder, which was much better than what Gallatin anticipated if the U.S. had tried to obtain bills on Holland for such a large amount (James O. Wettereau, “New Light on the First Bank of the United States,” PMHB description begins Pennsylvania Magazine of History and Biography, 1877– description ends , 61 , 269, 277–8;ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States, Washington, D.C., 1832–61, 38 vols. description ends , Finance, 2:9, 29; Madison, Papers, Sec. of State Ser. description begins William T. Hutchinson, Robert A. Rutland, J. C. A. Stagg, and others, eds., The Papers of James Madison, Chicago and Charlottesville, 1962–, 33 vols. Sec. of State Ser., 1986–, 9 vols.; Pres. Ser., 1984–, 6 vols.; Ret. Ser., 2009–, 1 vol. description ends , 3:287n). For Gallatin’s fear that funds could not be accumulated in Amsterdam without raising the exchange rate, see Vol. 37:157–9. Neither the letter of application from the Bank of Baltimore nor Gallatin’s ANSWER has been found. State banks received an increasing proportion of Treasury funds during TJ’s years in office, but the deposits were usually in regions where there was no branch of the Bank of the United States (Wettereau, “The Branches of the First Bank of the United States,” Journal of Economic History, 2 , 86n).
1. Name interlined in place of “Mc.Connel.”