Bank of the United States
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Bank of the United States,name for two national banks established by the U.S. Congress to serve as government fiscal agents and as depositories for federal funds; the first bank was in existence from 1791 to 1811 and the second from 1816 to 1836.
The First Bank
The first bank was established under the auspices of the Federalists as part of the system proposed by Alexander HamiltonHamilton, Alexander,
1755–1804, American statesman, b. Nevis, in the West Indies. Early Career
He was the illegitimate son of James Hamilton (of a prominent Scottish family) and Rachel Faucett Lavien (daughter of a doctor-planter on Nevis and the estranged
..... Click the link for more information. to establish the new government on a sound economic basis. Congress approved a charter for the bank despite the argument that the Constitution did not give Congress power to establish a central bank and the charge that the bank was designed to favor mercantile over agrarian interests.
The bank had a head office in Philadelphia and branches in eight other cities. The government subscribed one fifth of the capital of $10 million, but a loan of $2 million was immediately made to the government. In addition to acting as a fiscal agent for the government, the bank conducted a general commercial business.
It was well managed and paid good dividends, but its conservative policies and its restraining influence on state banks, through its refusal to accept state bank notes not redeemable in specie, antagonized more exuberant business elements, especially in the West. These interests combined with agrarian opponents of the bank to defeat its rechartering, despite the support given the bank by the Madison administration. The bank concluded its affairs and repaid its shareholders.
The Second Bank
Financing the War of 1812 proved difficult because of the lack of a central bank, and by the end of the war the financial system of the country was in chaos. Enough support was forthcoming in Congress and a new bank was chartered for 20 years. The second bank, capitalized at $35 million, operated much as did the first one, 25 branches being established.
After an initial period of difficulty during the presidency (1816–19) of William Jones, the bank was placed on a sound basis by Langdon ChevesCheves, Langdon
, 1776–1857, American statesman, b. Abbeville District (now Abbeville co.), S.C. Admitted to the bar in 1797, he became one of the leading lawyers of Charleston. In the U.S.
..... Click the link for more information. (1819–22). It became especially prosperous under the management of Nicholas BiddleBiddle, Nicholas,
1786–1844, American financier, b. Philadelphia. After holding important posts in the American legations in France and England, he returned to the United States in 1807 and became one of the leading lights of Port-Folio,
..... Click the link for more information. , but was criticized by state banks and frontiersmen on the grounds that it was too powerful and that it operated in the interests of the commercial classes of the East.
Opponents of the bank came into power with the election (1828) of Andrew JacksonJackson, Andrew,
1767–1845, 7th President of the United States (1829–37), b. Waxhaw settlement on the border of South Carolina and North Carolina (both states claim him). Early Career
A child of the backwoods, he was left an orphan at 14.
..... Click the link for more information. . Although the bank's charter did not expire until 1836, Henry ClayClay, Henry,
1777–1852, American statesman, b. Hanover co., Va. Early Career
His father died when he was four years old, and Clay's formal schooling was limited to three years.
..... Click the link for more information. persuaded Biddle to apply to Congress for a renewal in 1832. President Jackson vetoed the bill for its recharter, and the bank became a leading issue in his fight for reelection against Clay. Interpreting his victory at the polls as an expression of popular will on the subject, Jackson did not wait for the expiration of the bank's charter but began in 1833, through his new Secretary of the Treasury Roger B. TaneyTaney, Roger Brooke
, 1777–1864, American jurist, 5th chief justice of the United States (1836–64), b. Calvert co., Md., grad. Dickinson College, 1795. Early Life
Taney was born of a wealthy slave-owning family of tobacco farmers.
..... Click the link for more information. , to deposit government moneys in state banks, referred to by his opponents as "pet banks." Under Martin Van BurenVan Buren, Martin,
1782–1862, 8th President of the United States (1837–41), b. Kinderhook, Columbia co., N.Y. Early Career
He was reared on his father's farm, was educated at local schools, and after reading law was admitted (1803) to the bar.
..... Click the link for more information. 's administration the Independent Treasury SystemIndependent Treasury System,
in U.S. history, system for the retaining of government funds in the Treasury and its subtreasuries independently of the national banking and financial systems. In one form or another, it existed from the 1840s to 1921.
..... Click the link for more information. was established to handle the government's funds.
See R. C. H. Catterall, The Second Bank of the United States (1902, repr. 1960); W. B. Smith, Economic Aspects of the Second Bank of the United States (1953); J. A. Wilburn, Biddle's Bank (1967).