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America Before Banks
In 1724 — 52 years before he would sign the Declaration of Independence — Benjamin Franklin needed money to open a print shop.
He went to his father, who thought his son was too young and the venture too expensive. Pennsylvania governor Sir William Keith then promised the funds but never actually came up with the money. Franklin finally found a partner, but that turned out disastrous. His partner preferred alcohol to printing, and the two were sued when the partner’s father, who had backed the enterprise, didn’t pay for goods that had been purchased on credit. Franklin’s business was saved when two friends offered the funds to dissolve the partnership and settle with the merchant.
Why didn’t Franklin go to a bank? He couldn’t. The British government didn’t allow banks to operate in the colonies. Colonists instead relied on family, friends and acquaintances for loans. “A family member often had knowledge about whether or not the person was a good risk,” wrote Sharon Ann Murphy in “Other People’s Money,” her book about early American banking. “Was the borrower reliable with money? A hard worker? Honest?”
Lending to Franklin would have been a sound credit decision; he was a successful printer by all accounts. An advocate for paper currency versus silver and gold, he printed roughly 2.5 million notes for the colonies and was the official printer for Pennsylvania and New Jersey. He also published the popular “Poor Richard’s Almanack,” which he wrote annually under a pseudonym for 25 years, starting in 1732.
Franklin’s early experience trying to fund his print business must have stuck. In an essay he published as “Poor Richard,” he wrote: “[I]f you would know the value of money, go and try to borrow some, for, he that goes a borrowing goes a sorrowing.”
It’s impossible to know if a bank would have lent money to a young Ben Franklin. But the development of the U.S. banking system allowed the national economy to grow. We can thank Alexander Hamilton, one of our Founding Fathers and the first treasury secretary, for its beginnings, which I wrote about for Bank Director magazine in time for America’s 250th anniversary.
Today, the U.S. has more than 4,000 banks. As you watch the fireworks this 4th of July, I hope you’ll think back on how far the industry has come.
• Emily McCormick, vice president of editorial & research for Bank Director
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