First Bank Crash By David Cowen Summary

In this article, David Cowen speculates on what role, if any, the First Bank of the United States played in the Panic of 1792. He notes that the cause of the crash is highly contested by historians, but analyzes new data that illuminates the bank’s actions that might have resulted in the crash. There is no firm conclusion presented, as he leaves it up to interpretation, but he presents strong arguments in favor of the idea that the bank had changed vital policies in the months prior to the crash that might have played a hand. For some background, Cowen mentions that the First Bank of the United States had a total of about 10 million dollars in capital, more than all the state-chartered banks, insurance companies, and canal turnpike companies combined. Around the time it opened its doors in December 1791, two men named William Duer and Alexander Macomb hatched a plan to borrow as …show more content…
In early February, he began to grow concerned with what he saw developing with the Bank issuing so much credit so quickly, and he knew it was destined for failure. A letter he wrote to the Bank of New York shows that he issued a request that every bank in the country should change its policy on distributing bank notes and loans to “within reasonable dimensions,” or else the whole house will come crumbling down (Cowen, 1053). If he was writing a letter to the Bank of New York and since he mentioned “every existing bank,” Cowen makes the assumption that the Bank of the United States also received a letter from Hamilton. There are no records of the Bank of New York’s balances like there are for the Bank of the United States, so their reaction to Hamilton’s request is unknown, but the Bank of the United States made a quick and drastic change to their policy. Had they eased out of it slowly over the course of months, it might have worked out better, but doing it so quickly resulted in the market