ABA Banking Journal Podcast · 2026-06-29 · 15 min
Key moments - from our scoring
Substance score
47 / 100
Five dimensions, 20 points each
The colonial American economy operated without banks due to British restrictions, forcing the Continental Congress to finance the Revolutionary War through ad hoc methods and individual merchants like Robert Morris. The money supply consisted of Spanish dollars, tobacco warehouse certificates, and barter, creating severe constraints on military financing and economic development. After Yorktown, the Bank of North America was chartered in 1781 as the nation's first bank and effective central bank, followed by Alexander Hamilton's Bank of the United States in 1791. Hamilton drew crucial lessons from the Bank of England's 1694 founding and its role as Britain's "secret weapon" in funding 18th-century wars: he maintained 80% private ownership to enforce financial discipline (avoiding the hyperinflation of Continentals) while reserving 20% for the federal government and audit rights. This banking infrastructure proved transformative - the number of U.S. banks grew from three in 1790 to thirty by 1800. Gordon argues banks function as the economy's circulatory system; without them, the diversified colonial economy that had grown rapidly under barter and personal credit would have stagnated further. The Constitution and subsequent financial reforms emerged from economic crisis, specifically Shays' Rebellion in 1786, demonstrating how institutional weakness forced systemic redesign.
Britain prohibited the establishment of banks in the colonies and also forbade the export of British currency, leaving colonists to rely on a chaotic mix of Spanish dollars, British coins, tobacco warehouse certificates, and barter.
Robert Morris, a Philadelphia merchant, served as the financier of the Revolution through creative and largely mysterious financial arrangements, though his efforts proved inadequate until after the British effectively lost at Yorktown in 1781.
The Bank of North America was chartered by the Continental Congress in 1781 in Philadelphia, making it the first bank in the United States and effectively serving as a central bank for the Confederation government.
Hamilton designed the Bank of the United States with 80% private ownership and 20% federal ownership, plus government audit rights, deliberately using private self-interest to enforce financial discipline and avoid the hyperinflation that had destroyed Continental currency.
The Bank of England, established in 1694, demonstrated that private ownership of a central bank with government oversight enabled nations to raise capital at low interest rates and finance large-scale military operations - advantages Britain leveraged throughout 18th-century wars against France and other powers.
Our reviewer’s read on each dimension, with quotes from the episode.
The episode contains a handful of genuinely interesting historical specifics (colonial money supply, Bank of North America as first IPO, 3-to-30 bank growth) but it's a brisk 15-minute overview that sacrifices depth for accessibility, with much of the runtime consumed by intro, sponsor read, and long host questions. Most of the historical narrative will be familiar to anyone with a basic finance-history background.
the money supply that we had was a hodgepodge of Spanish dollars and bits and pieces of, some British coins, but not many, and things like tobacco warehouse certificates which passed as money
There were only three banks in the United States in 1790. There were 30 in 1800.
The framing of the Bank of England as Britain's 'secret weapon' and the France-vs-Britain interest-rate comparison is a mildly fresh angle, but the episode largely retells a well-documented historical narrative (Continentals, Hamilton, Shays' Rebellion) without contrarian or first-principles reinterpretation. The Confederation-as-UN analogy is a one-liner rather than a developed argument.
The Bank of England, which was established in 1694 was Britain's secret weapon in all those wars of the 18th century
technically every time the government made a loan, it was a personal loan to the King of France. And kings, of course, are notorious on not paying their their debts.
John Steele Gordon is a legitimate, prolific economic historian with multiple well-regarded books on this exact subject matter, not a career podcast guest or thin 'thought leader.' However, he is a writer-historian rather than a practitioner who built or ran financial institutions at scale, which caps the caliber score for a practitioner-focused B2B audience.
General Jedediah Huntington described the soldiers at Valley Forge as being barefooted, bare legged, and for the most part, bare-assed.
It was 20% was to be owned, of the shares were to be owned by the federal government, and the other 80% were to be held by private investors. He also put in the charter that the government had the right to inspect the books at any time.
The episode delivers a reasonable set of concrete historical markers - 1694, 1781, 1791, the 20/80 ownership split, 3-to-30 bank growth, Shays' Rebellion 1786 - but is entirely absent of dollar figures for what was actually raised or spent, specific interest rates, or operational detail about how the Bank of North America actually functioned. The specificity is chronological rather than financial.
The Bank of England, which was established in 1694
It was 20% was to be owned, of the shares were to be owned by the federal government, and the other 80% were to be held by private investors
The host consistently asks long, winding questions that half-answer themselves before the guest can respond, and there is zero pushback or productive challenge to any of Gordon's claims. Inserting a Brian Moynihan paraphrase mid-conversation and then having Gordon simply affirm it ('are the circulatory system in the body') is emblematic of a soft PR-style exchange rather than probing journalism.
Brian Moynihan, the CEO of Bank of America, once said that recently that, banks don't cr-create, and I'm paraphrasing here a little bit, but banks don't make the economy, they reflect the economy.
Can you tell us a little bit about how that bank functioned and the lessons that had for for future efforts to create a central bank?
Computed from the transcript - who did the talking, and the words that came up most.
To mark the 250th anniversary of Independence Day this week, this classic replay episode of the ABA Banking Journal - sponsored by Q2 Software - explores the role of banking and finance in the American Revolution and the founding era. John Steele Gordon is an acclaimed economic historian whose books include Hamilton's Blessing , The Great Game and An Empire of Wealth ; he is also the ABA Banking Journal's " From the Vault " columnist. In this episode, Gordon discusses: How not having any chartered banks prior to 1782 put the United States at a disadvantage during the Revolution. Conversely, how the Bank of England was a "secret weapon" for Britain during the war. The role of patriotic financiers like Robert Morris in achieving U.S. victory. The debates over a central bank in the post-revolutionary period and how they contributed to the development of the Constitution.
Transcribed and scored by The B2B Podcast Index.
John Steele Gordon: there were no banks in the, in, in the colonies because Britain didn't allow them, and Britain also forbade the export of British And so the money supply that we had was a hodgepodge of Spanish dollars and bits and pieces of, some British coins, but not many, and things like tobacco warehouse certificates which passed as money. so we were in a very poor shape when it came to, the most expensive public policy of all is war. Evan Sparks: From the American Bankers Association, this is the ABA Banking Journal Podcast.
Today's episode is presented by Q2. Welcome back to this special 4th of July episode here in the 250th year since the Declaration of Independence was signed in 1776. Looking ahead to the holiday weekend, we wanted to bring you a special bonus episode from our archives, a conversation with John Steele Gordon, who is the From the Vault columnist for the ABA Banking Journal, as well as one of America's preeminent business and economic historians. We had a great conversation about the financing of the American Revolution and the role that banks played in both in the Revolutionary War period as well as in the early founding of the United States.
Thanks so much for listening and Happy Independence Day. John is best known for his many books of economic history. The, his book on "Hamilton's Blessing: The Story of America's National Debt," the book "The Great Game" about how Wall Street became a major economic power, and my favorite, "An Empire of Wealth: The Epic History of American Economic Power." It truly is a must-read book for anyone who's interested in the story of business enterprise and economics in the United States.
And and so we're delighted to have John here with us. You've r- you may well have read his work in The Wall Street Journal commentary, many other publications, in addition to the ABA Banking Journal. John, thank you so much for being with us today. John Steele Gordon: I'm delighted to be here.
Evan Sparks: I wanted to take some time to talk a little bit about the role that banking and finance played in the early years of the fight to win America's independence and to become a not just a politically independent entity, but a a power of its own on the world stage. I think a really fascinating topic for us to explore, to think about for our audience of bankers, but it's a it's one that loo- often gets overshadowed by the drama of the Revolutionary War battles or the the excitement over the political debates around the Declaration of Independence, the Continental Congress, the the Articles of Confederation and the Constitutional Convention.
This is a… But it's a really important topic. So I guess I'll just start by saying, John, when I talk about the the role of banks or finance in the American Revolution, part of the challenge is that there really, for most of the war, there was no role for banks in the revolution because there were no banks in the United States. There were no banks in colonial America. And so as we, look at, the Continental Congress where the delegates are gathering to make this decision about, about independence marshaling the resources to fight a war against Britain that had already broken out what tools Did the Continental Congress and the 13 colonies declaring independence have at their disposal to ensure that they might be able to win this war against against Britain?
What financial tools did they have to to to prosecute the war? John Steele Gordon: It's an old Chinese expression that wars are fought with silver bullets, and unfortunately, we didn't have any. As you said, there, there were no banks in the, in, in the colonies because Britain didn't allow them, and Britain also forbade the export of British And so the money supply that we had was a hodgepodge of Spanish dollars and bits and pieces of, some British coins, but not many, and things like tobacco warehouse certificates which passed as money.
so we were in a very poor shape when it came to, the most expensive public policy of all is war. I think the I'm not sure they articulated it, but, the British had to fight a war with a 3,500-mile supply line. And that was very difficult and turned out too difficult thing for them to do. From a from tactical point of view by, hocus pocus.
Evan Sparks: From a tactical point of view, the British had a, were at a significant disadvantage in terms of fighting at great distances. They did not have a significant s- home army at the time. They had to, bring in mercenaries from Europe to prosecute many of the battles in the earlier part of the war, and yet they were successful at many stages of the campaign, I think is that, I think in large part because of the the penury of the continental army. And I know, one, one of… We ha- we have all these, letters from Washington at Valley Forge where he's writing, begging the Continental Congress to send money.
They just don't, didn't have any to, with which to prosecute the war. There's a, there, there were some men who came along to to help make possible the fight against Britain, and one of them I know is Robert Morris, who's the, often described as the financier of the Revolution. Can you talk a little bit about Robert Morris and the role that he played in helping America, helping the young the revolutionary army fight the war against Britain that it was that it was j- barely hanging on to, to be able to prosecute?
John Steele Gordon: Yeah. Robert Morris was a very successful Philadelphia merchant, lived in state in a large house, and he was very creative financially. And he was known as the financier the Revolution. But how he did it is, to some extent " "don't ask.
Here's money. " And he was he was a brilliant man, but we still, we were … The Continental Army was just barely hanging on. General Jedediah Huntington described the soldiers at Valley Forge as being barefooted, bare legged, and for the most part, bare-assed. And and Morris was able to do things, but it was only after the British had effectively lost the war.
When the Battle of Yorktown had, when they were forced to surrender, and the British were faced with either, throwing in the towel or raising a whole new army. And that was not possible politically in Britain. And after October of 1781, the war was essentially over, but it took two years of negotiation before the peace treaty was signed. Then the and then at that point, the the Bank of North America was chartered, the very first bank in the United States, and and effectively the central bank for the Confederation government.
Evan Sparks: Can you tell us a little bit about how that bank functioned and the lessons that had for for future efforts to create a central bank? John Steele Gordon: The Bank of North America was chartered by the the Continental Congress in 1781 and established in Philadelphia. Philadelphia was then still the largest city, and also, of course, New York was under British occupation 1783. And it was supposed to function as a central bank.
And it it succeeded fairly well for a while. But, central banks are central, to coin a phrase. You really can't run a banking system without one, although we tried for about 80 years the Jeffersonians just loathed banking, and the bigger the bank, the more they loathed it. So they kept killing the central bank.
And so the Bank of North America functioned as a central bank until it then took a Pennsylvania charter and became the Bank of Pennsylvania. And it was the first bank chartered in the United States. The sale of the stock was the first initial public offering in the United States. The, And then, of course, in 1791, Hamilton established the Bank of the United States, which was a true central bank in every sense.
Evan Sparks: I'm gonna take a quick moment to thank our sponsor for this episode, Q2 Software. Check and ACH fraud are rising, yet only thirty-five percent of eligible businesses are protected by Positive Pay. To drive Positive Pay adoption at your institution, you can find out more in a free playbook at q2.com/playbook.
Again, that's q2.com/playbook, and thank you to Q2 Software for sponsoring this episode. It seems there could have been some lessons for the United States from the Bank of England, which is, looks, which seems to me that was one of the definitive advantages of the, of Great Britain in the Revolutionary conflict was the ability to capture wealth in the economy in a form that, made it liquid in a way that allowed them to finance the to finance the w- finance such a far-flung war effort that, otherwise might have forced them to give up a little earlier.
They had th- but yet they had this this relatively young, novel central banking institution. What How does it, how is what lessons could the, did the colonists, did the early colonial financial leaders learn from the Bank of England? And what did that mean for the, what how important was the Bank of England in in Britain's success up till the seven- late 1770s in in fighting the Revolutionary War? John Steele Gordon: The Bank of England, which was established in 1694 was Britain's secret weapon in all those wars of the 18th century, mostly against France and Spain, and Austria and everybody else.
Because the Bank of England was able to, they established a true modern national debt, and Britain was able to raise money at quite low rates. The French didn't have a central bank, and so technically every time the government made a loan, it was a personal loan to the King of France. And kings, of course, are notorious on not paying their their debts. And so France had to pay much higher rates of interest.
And so it was, the Bank of England, as I said, it was Britain's secret weapon, because Britain was, a smaller country than France in terms of population. So the so we ended up with the Bank of North America. It was eventually succeeded by the first Bank of the United States under, after the con- after the Constitution was ratified and George Washington became president. We they had the, the genius of Alexander Hamilton and not cr- not only creating a commercial bank for New York, but in really driving the creation of our first central bank and the, what what lessons did the founders of America's financial system, did Hamilton and his peers take from their their observations of the Bank of England and other developments that were going on in the, in our, in the mother country, so to speak?
What Hamilton thought was that the Bank of England was a private bank. It, its shares were bought and sold on the market. It was not a government institution- until well into the 20th century. And he thought that was vital to maintain discipline because, governments have a very bad reputation printing too much money.
We did that in during the American Revolution when the Congress was issuing what were called Continentals, and of course, they just evaporated into worthlessness. In fact, for 100 years, it was a phrase in the United States, not worth a Continental. And so he thought that if they were with private ownership, then these people had a self-interest in maintaining discipline. And so that's how we established the Bank of the United States.
It was 20% was to be owned, of the shares were to be owned by the federal government, and the other 80% were to be held by private investors. He also put in the charter that the government had the right to inspect the books at any time. And it was, it worked very well. There were only three banks in the United States in 1790.
There were 30 in 1800. And, American prosperity in the 1790s, mainly thanks to the European war it was a great time of prosperity here. Evan Sparks: Brian Moynihan, the CEO of Bank of America, once said that recently that, banks don't cr-create, and I'm paraphrasing here a little bit, but banks don't make the economy, they reflect the economy. That there's some that you don't just create banks and then suddenly, oh, we have economic growth.
You, you have to have a firm foundation for economic growth, and then banks help make that growth. They propel that growth through the efficient intermediation of credit and the flow of payments. John Steele Gordon: So the, are the circulatory system in the body. Yeah.
And you have a good circulatory system, then you can flourish. On the other hand, if you don't, you're in indeed trouble. If you say break your arm that's an incredible nuisance for six weeks. But then you're, back in business.
If you have a heart attack, you're dead. And We can have an industry go to, down the tubes in the United States and fine, but if the banking system goes down the tubes, then the whole economy collapses. Evan Sparks: So if when we're looking at that economy that the banking industry serves as a circulatory system for, when in the years of the American Revolution and the post-revolutionary period, what was the underlying strength of the US economy? This was, one of the things I, I know you talk about in your book, "An Empire of Wealth," is the that it is what it had become this sort of diversified, relatively mature economy across the different colonies.
How did that economy function in the pre-revolutionary period without a banking system? And and when we saw the creation of a banking system to serve that economy, what was the result in terms of economic growth after that, in, after that period? John Steele Gordon: as said, in the colonial period because we didn't have a financial circulatory system, it was all done, by… A lot of it was barter. A great deal of it was barter.
And this was a, a huge impediment to the development. The American colonies had been growing very rapidly, but it would, they probably would've grown even faster without it. The 1780s, on the other hand, was not a good period in the United States economy 'cause again the federal government simply didn't have enough power. It, it couldn't tax, for instance.
It had to ask the states to send the money, and sometimes they did, and sometimes they didn't. And so in that way the Confederation was a bit like the UN today. The UN doesn't have the power to tax, thank heavens. And so they have to ask the member states to contribute money, and sometimes they don't.
And so In 1786, they had Shays' Rebellion in Massachusetts. It's a bunch of farmers who couldn't pay their taxes, and the people in Boston were basically just gonna take the farms. And so there was a rebellion led by Shays. It was quickly put down.
But this led people to say, "Look, this isn't working. We need to amend the the Articles of Confederation." So they had a meeting in Philadelphia in 1787, and the very first thing they did practically was to throw out the Articles of Confederation and begin de novo, and the result was the United States Constitution, which has been an astonishing success. Evan Sparks: I think that's a good note for us to wrap up on.
John, thank you so much. And to our to our listeners, we wanna wish you a very happy Independence Day, and hope you enjoy the time with your, with family and celebrating our, celebrating the freedoms that we enjoy in this country, and that have been secured for us by so much sacrifice over the last 250 plus years. Have a very happy 4th of July and we will talk to you again soon.
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