As a result of the 2008-2009 credit crisis, the United States government has committed over $700 billion to bail out the banks in order to stem the tide of systemic meltdown. As the populace rages about these rescues and how the banks themselves have chosen to use these funds, it is important to remember that there was a time when the banks themselves were used to bailout the US.
Interestingly enough, this was done via an IPO!
Prior to the American Revolution, there was no need for there to be a stock exchange here in the colonies as all financing activity was done in London. Once the revolution was won, the merchant class severed most of their ties to England, including their monetary ones. Eventually, in 1790, the founding fathers created America’s first stock exchange, but it wasn’t on Wall Street, it was in Philadelphia.
The Continental Congress was flat broke owing to the cost of maintaining the army and winning the war. The decision was made to sell shares in the first 3 American banks to help pay off these war debts. Led by the nation’s first Secretary of the Treasury Alexander Hamilton, three banks “went public” with share sales. They were called the Bank of North America, founded in 1781, the Bank of New York, founded in 1784, and the First Bank of the United States which was established in 1791.
A year later in 1792, a group of 24 stock brokers got together and began an exchange in New York, then known as the New York Stock and Exchange Board. This very organization would ultimately become the NYSE hat exists today, although it didn’t come to inhabit it’s current trading floor until the early 1900’s.
So on this 4th of July, as we celebrate the birth of American Independence, let’s try to remember the fact that the US and it’s banks have not always had the contentious relationship they do today and that there was a time when the banks themselves succored the nation in it’s infancy.
And as this is The Reformed Broker’s site, let us also keep in mind that stock brokers played an important role in America’s formative years as well. Someone had to sell those shares, despite the fact that the red herrings were printed on parchment!
Happy Independence Day to all…you have no idea how many ribs I’m gonna eat today!