Banking in the United States really dates from 1781, when Robert Morris, Superintendent of Finance of the Revolution, founded the Bank of North America at Philadelphia to promote the financing of Washington's army. The institution was chartered by the Continental Congress and was organized as a means of creating credits based upon the small amount of specie that existed and of making advances to the government. It was a complete success as a war measure and had a benign commercial influence as well. In 1782 it was chartered as a state bank in Pennsylvania, and under this charter, renewed from time to time, it enjoyed a very successful career until 1864, when it became a national bank, and is still a leading bank of Philadelphia.

In 1784 Massachusetts chartered the Bank of Massachusetts, and in New York, under Hamilton's influence, the Bank of New York was founded and put into operation but the state refused to grant it a charter until 1791. The tendency in both these states, as time passed, was to lay heavier restrictions upon their banks. The restrictions included the imposition of personal liability upon directors for any violation of the law that debts should not exceed some specified multiple of the paid-in capital, the limitation of notes to large denominations, the prohibition of dealing in merchandise or stocks, and the requirement of reports of condition.

By the year 1800 the number of state banks had increased to 28, and by 1811, to 88. This rapid increase, though it indicated the need of credit institutions, was also a leading cause of the opposition to the rechartering of the first Bank of the United States. In the period from 1812 to 1816 the Treasury of the United States employed the state banks as depositories of the public funds. The poor conduct of the national finances, particularly the failure to levy taxes, the heavy issue of Treasury circulating notes, and the drain of specie abroad precipitated suspension of specie payments by all state banks, except those in New England, and tied up the government deposits.

The failure to recharter the first Bank of the United States left the field free to the state banks, which increased from 88 in 1811 to 246 in 1816, and expanded their bank note issues to $100,000,000. These banks were organized on very defective credit principles, the loans being based heavily upon lands and government securities. The export of specie due to the adverse balance of trade made the situation still worse. The Treasury operations were thrown into confusion by the disordered currency. At this juncture, in the year 1816, the demand for a second Bank of the United States became strong enough to force Congress to grant a charter.

From its organization in 1816 down to 1834, the year in which the second Bank of the United States was refused an extension of its charter, the state banks grew in number. Good statistics are not available as to their number, for no general reporting system existed and, moreover, through a peculiar policy of secrecy, several states concealed the operations of their banks. The available records, however, indicate that in 1829 there were 329 banks, the character of which varied greatly, depending upon state law, local conditions, and individual management.

After Jackson's re-election in 1832 he became more determined in his opposition to the second Bank of the United States and decided to sever relations between the government and the institution, removing the public deposits and putting them in state banks. These state banks, although selected with reasonable care and subjected to fairly strict conditions, were called Jackson's "pets," and political motives were alleged to have entered into their selection. The entire period from 1816 to 1837 was one of rapid development and speculative prosperity. Land speculation, internal improvements, and the development of cotton farming were particularly active features of finance, and banks in consequence sprang into existence in great numbers. The hope of procuring some of the redistributed public surplus during Jackson's administration was a further stimulus. By 1836 the number of state depository banks increased To 89 And By 1837 the state banks increased to 788, with a circulation of $149,000,000.