Reviewed by Michelle Hamer University of Maryland
Steven Girard was a wealthy Philadelphian with extensive interests in shipping and trade between the U.S. and Europe. Economic instability in Europe resulting from the Napoleonic Wars and the uncertainty of international trade caused by imminent war between the U.S. and Britain led Girard to liquidate his European assets and repatriate the resulting funds in the years 1808-1812. He used this money to establish a large, unchartered, private (as opposed to corporate) bank. His bank was opposed by the state chartered banks already in existence. This book describes the bank’s operations from its establishment in 1812 to its closing in 1831 immediately after Girard’s death.
Although this is the history of a single bank, the book provides considerable insight into banking legislation, the relationship between the state and federal governments, and banking practices of the period. During the early years of the bank’s existence, Girard was involved in a variety of attempts to influence banking legislation at both the federal and state levels. During this period, federal legislation forbidding noncorporate banks, state legislation forbidding nonchartered banks, and tax legislation providing for higher taxes for noncorporate than for corporate banks were proposed. Girard attempted to persuade his powerful friends to block legislation harmful to his bank. Girard’s bank made a large investment in U.S. bonds used to finance the War of 1812. In return for this, his bank was made a depository bank for the U.S. Treasury and notes on his bank were accepted in payment of debts owed to the Trea-sury. The Treasury’s financial problems during this period, highlighted by the default of treasury notes in 1814, led to frequent ne-gotiations between the Secretary of the Treasury and Girard about the possibility of additional loans to the Treasury. Girard’s active support of the establishment of a national bank to regulate U.S. federal debt and to control the money supply are described. Problems with the specie (gold) standard, its suspension during the war, and reinstatement following the war are discussed.
The bank’s operations are described in considerable detail. No interest was paid on deposits. Loans were short term, commercial loans restricted to residents of Philadelphia. Initially, 60 day loans were the rule, but this was gradually increased to permit loans for as long as 180 days. Girard required borrowers to keep funds on deposit (similar to modern day compensatory balance requirements). Girard favored a large portfolio of relatively small loans which diversified his risk and reduced uncollectibles. He was very conservative in his asset management and generally maintained sufficient specie (gold and silver reserves) to cover his bank notes, whereas the average Pennsylvania bank could cover only about one third of its notes. His investment portfolio included large amounts of highly liquid investments, e.g., Bank of United States stock and U.S. government bonds.
From the viewpoint of an accounting historian, the book provides an interesting example of the use of accounting records to reconstruct the activities of an enterprise. Adams used quarterly balance sheets, ledgers, and daily record books of bank tellers to shed light on the bank’s asset and liability management policies and changes in these policies over time.
The book is not well organized. The later chapters frequently repeat material contained in Chapters one to four. Although Girard must have been an interesting character, he never seems to come to life. In many cases, possible motives for Girard’s strategems in relations with his correspondent and competing banks and with the government are not clearly developed. Most of the discussion of the specie standard and specie raids of one bank on another is not clearly explicated. The author seems to presuppose the reader has considerable familiarity with banking. The book is probably only of use to a specialized audience.
