nd after the bursting of the South
Sea Bubble. This act, which forbade the formation of banking companies
without a special charter, was in 1740 extended to the colonies.

The serious history of banking in the United States may be said to have
begun with the foundation of the Bank of Pennsylvania. This bank originated
in the project of a number of the citizens of Philadelphia to supply the
continental army with rations. The first bills, issued in 1780, were
nothing more than interest-bearing notes payable at a future time. The
advances in continental money made by the shareholders were secured by
bills of exchange for L150,000, drawn on the American envoys in Europe, but
not intended to be negotiated.

A further outgrowth of the needs of the continental government was the Bank
of North America, which was authorized by congress on May 26, 1781. The act
gave to Robert Morris, the financier, power to create a bank with a capital
of $400,000, to be increased if desirable. Morris arranged with the Bank of
Pennsylvania to take over its holdings of foreign bills and paid in cash
its claims against the Federation. The Bank of North America did not begin
business until the 7th of January 1782, and there was so much doubt of the
power of the continental congress to charter a bank that it was thought
advisable to obtain a charter from the state of Pennsylvania. Under this
charter the bank continued to operate until it was absorbed in the national
banking system in 1863, and it may be considered the oldest organized
banking institution in the United States.

The bank did much, during the first eight years after its organization, to
restore order to the chaos of Federation finances. It loaned to Morris, as
government superintendent of finance, $1,249,975, of which $996,581 was
repaid in cash and the remainder by surrendering the stock in the bank
owned by the government.

_The Bank of the United States._--A national bank of issue was one of the
essential parts of the system built up by Alexander Hamilton in organizing
the finances of the Federal government under the constitution of 1789. The
first "Bank of the United States" was accordingly incorporated in 1791,
with a capital of $10,000,000, divided into 25,000 shares of $400 each.
This bank issued circulating notes, discounted commercial paper and aided
the government in its financial operations. The government subscribed
one-fifth of the capital, but paid for it by a roundabout