James Madison Papers

Notes on Banks, [ca. 1 February] 1791

Notes on Banks

[ca. 1 February 1791]1

On Banks in general & particular ones other than that of England.

  • The first establd. was that of Venice 1157.
    • Genoa Florence & other Ital: cities soon followed the example.
    • The bank of Venice is like that of Amsterdam for transfer only
      • — it is an engine of State merely
      • — its agio2 has been as high as 30 PerCt. now restrained to 20
      • — Its original Capital was 2,000,000 ducats wch. has been doubled
      • — Both before & since the capital was increased the State has made free with it, making itself security for replacing it.3
  • The Bank of St. George at Genoa—proposed in 1345—erected 1407
    • — It was produced by public debt & meant as a provision for them
    • — The Holders of the debt had the customs assigned to them
    • — They had a Council consisting of 100—& 8 Govrs. for executing the business.
    • — They became by good managemt. very rich & granted aids to the State—for which the Cities & territories of Genoa pawned & were sold.
    • — The Cities pawned were govd. by the bank.
    • — Machiavel of opinion that by degrees the Bank wd get possession of the whole city & republic.4
  • The first charitable bank (mons pietatis) was erected at Padua by its Bishop, lending to the poor, on pawns, at a low interest, in order to save them from Usurers—this example soon spread.5
  • Bank of Amsterdam established in 1609
    • — produced by inconveniency of large payments in Silver
    • — it is purely a bank of deposit—the magistracy of Amsterdam being the cashiers of the inhabitants
    • — The credits are transferred by sealed tickets, directing the bank to carry the credit of the ower to that of the receiver
    • — not less than 600 Guilders, at first, nor of 300 since, transferred
    • — one advantage—the registry being proof of the transactions hin⟨ders?⟩ law suits
    • — all payments in bills of exchange made in the bank
    • — the burgomasters only have inspection of the bank
    • — 1 stiver pd to Bank for every transfer of more than 600 Guilder
    • — 6 stivers for leave to transfer less than 300 do—&
    • — 10 Guilders on first opening acct. with Bank &
    • — these incomes, the expence of managemt. is defrayed—the Surplus goes to the poor of City
    • — the agio commonly abt. 5 per Ct. owing to greater purity of coin than current money—& the demand on banks.
    • — in 1672. run on bank—yet it paid all calling for their money.
    • — Jewels &⟨c deposited as much?⟩ as money6
  • The Bank of Rotterdam, was erected in 1635
    • — It is not very considerable
    • — Bills of exchange are paid in large money—and only ten perCt. in shilling pieces.7
  • The Bank of Hamburg, an imitation & nearly of the same standing with that Amsterdam.
    • — It takes in none but the purest coin & has an agio
    • — It lends on pledges at moderate interest
    • — none but Citizens admitted to have acct. in their books.8

The Banks of Amsterdam Venice & Hamburg, solely for the Convenience of Merchants—not so Genoa, Naples & Bologna, which having advanced money to the State have a perpetual fund of Interest, and are Banks of loan & deposit, being models of that of Engd. And. 3. p 141.

In 1650 the favorers of the Commonwealth led by the convenience of the Italian & Amsterdam Banks—first began to project one for London.9
In 10 The Bank of Engd. & E. Inda. Compy. established. They pd. to Govt. 3,200,000 for 8 PerCt. StClair p. 36511

The capital of the Bank for—

Quer. ⟨how?⟩ much of the debt of G. B. has been lent by the Bank

The Bank not only nor greatest lender. E. Ind. & S. Sea Compy.

The competition of different lendrs. good—if establish Bank can & sd.

Also—other great rival Money Companies—See rival offers—Sinclair p. 433

— where that rivalship cause of S. Sea Bubble

In time of war, when [illegible] would most—Govt at mercy of Bank—vis vers in peace

Bank. see Sinclair p. 403.
E. Ind Compy. 40212

In deciding on the policy of raising funds beyond par—consider

  • 1. unjust to debtor part of people.
  • 2. interest then of Creditors to prevent sinking fund, & this caused perversion of sinking do. in G. B. Sinclair p. 438

Ms (DLC). In JM’s hand. Undated (see Index to the James Madison Papers under “Madison, J—Banks”).

1These notes on early European banks and those on the Bank of England (see next document) were almost certainly drawn up by JM in preparation for the bank bill debate of February 1791. Both documents date no earlier than 1790, as is proved by JM’s references to the 1790 edition of Adam Anderson’s Origin of Commerce (for his use of this work at the preceding session, see Notes for Speech in Congress, ca. 13 May 1790). Although in his reported speeches on the bank bill he emphasized the unconstitutionality of the proposed bank, JM also believed that the bank would prove inexpedient and benefit a few private individuals at the expense of the public. It is clear from the tenor of his notes that he was searching for facts and episodes in the history of banking that would support his contention that creation of a national bank, if not unconstitutional, was unwise public policy.

2The agio, a term used in Venetian finance, was a premium charged upon depreciated currency in exchange for currency of full value.

3Anderson, Origin of Commerce, I, 202–3.

4Ibid., I, 420–21. In the passage cited Anderson referred to Machiavelli’s History of Florence.

5Anderson, Origin of Commerce, I, 700. According to the author, this bank was established about 1490.

6Ibid., II, 313–15.

7Ibid., II, 316. Following this entry JM left one-fourth of the page blank.

8Ibid. Following this entry JM left blank room for three or four more lines.

9Ibid., II, 549–50.

10JM left the space blank. The passage cited begins “In this reign,” i.e., that of William III.

11Sir John Sinclair, The History of the Public Revenue of the British Empire (Dublin, 1785). In light of JM’s title for this document, this section of his notes (which is on the last page of the Ms) would seem to belong more properly with those on the Bank of England (printed below), and may have been originally filed with the latter document.

12Following this entry JM left one-fourth of the page blank.

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