Lessons Learned, Applied, and Ignored

Abstract

The first lesson learned and applied was to establish the Second Bank of the United States in 1816, since the absence of the First Bank of the United States after its charter was not renewed in 1811 severely hampered Gallatin’s attempts to raise domestic taxes to cover regular government expenditure or to raise new loans to cover the additional expenses of war. The new bank, however, had problems to establish itself, especially to obtain specie reserves to make its notes convertible. All this while the Bank of England was pulling in specie in anticipation of returning to the pre-war gold standard in 1819–1821. Again, Barings provided re-cycling of much of the funds used to redeem the Louisiana bonds in this period to invest in Bank of the U.S. stock, but also to set up financing of the French occupation loans in 1817–1819. Both Alexander and Pierre played leadership roles in arranging the much larger French loans, denominated in French francs with interest paid in Paris. Alexander had to deal with the Duke of Wellington for setting terms of payment to the occupying foreign armies and with Nicholas Vansittart, British Chancellor of the Exchequer, for coping with the resumption of the gold standard by the Bank of England. While Alexander performed brilliantly with the British military and political leaders, Pierre motivated the various French and European banking houses to participate as well in the French occupation loan. The question remains why their important roles in these major financial transactions have been overlooked in the historical literature.