eir monetary reserves. In turn, these actions led to differences in values attached to the notes of different banks, fluctuating values for the notes of individual banks, and periodic monetary disruptions (sometimes panics) in the country.
Prior to 1820, many unincorporated banks specialized in the issuance of notes, or money (Fenstermaker, 1965, p. 21). Following the Panic of 1819, and the subsequent chartering of banks in 1820, few unincorporated banks remained in the United States. The private incorporated banks were chartered by state governments, and they "formed the backbone of the nation's early banking system" (Fenstermaker, 1965, p. 23). State owned banks were formed, as were the two federal banks, to hold government funds, and to create a medium of exchange (Kemmerer, 1939, pp. 867 874). Trading in financial securities was stimulated to a significant extent subsequent to the end of the American Revolution. In 1790, Alexander Hamilton, as Secretary of the Treasury in the post Constitution government of the United States, recommended that the new federal government fund all Revolutionary War bonds issued both by the Continental Congress and the governments of the 13 colonies (Warshow, 1929, p. 24). The Hamilton proposal ignited intense speculation in the Revolutionary bonds, and in 1790 the first stock exchange in the United States, the Philadelphia Stock Exchange, was established.
The First Bank of the United States was chartered in 1791, and the shares in this bank sparked additional securities trading in the United States. Securities trading now began to assume an importance that caused New York City securities traders to demand a facility of their own. The outcome of this demand was the Buttonwood Tree Agreement in 1792 that created the New York Stock Exchange, and provided that securities brokers would deal only with one another (Eames, 1894, p. 14).
Paper money and bonds were created by both the Congre...