Second Bank of the United States

The Second Bank of the United States, located in Philadelphia, Pennsylvania, was the second federally authorized Hamiltonian national bank[3] in the United States during its 20-year charter from February 1816[4] to January 1836.[5] The bank's formal name, according to section 9 of its charter as passed by Congress, was "The President, Directors, and Company, of the Bank of the United States."[6]

A private corporation with public duties, the bank handled all fiscal transactions for the U.S. Government, and was accountable to Congress and the U.S. Treasury. Twenty percent of its capital was owned by the federal government, the bank's single largest stockholder.[7][8] Four thousand private investors held 80% of the bank's capital, including one thousand Europeans. The bulk of the stocks were held by a few hundred wealthy Americans.[9] In its time, the institution was the largest monied corporation in the world.[10]

The essential function of the bank was to regulate the public credit issued by private banking institutions through the fiscal duties it performed for the U.S. Treasury, and to establish a sound and stable national currency.[11][12] The federal deposits endowed the BUS with its regulatory capacity.[5][13]

Modeled on Alexander Hamilton's First Bank of the United States,[14] the Second Bank was chartered by President James Madison in 1816 and began operations at its main branch in Philadelphia on January 7, 1817,[15][16] managing twenty-five branch offices nationwide by 1832.[17]

The efforts to renew the bank's charter put the institution at the center of the general election of 1832, in which the bank's president Nicholas Biddle and pro-bank National Republicans led by Henry Clay clashed with the "hard-money"[18][19] Andrew Jackson administration and eastern banking interests in the Bank War.[20][21] Failing to secure recharter, the Second Bank of the United States became a private corporation in 1836,[5][22] and underwent liquidation in 1841.[23]

Second Bank of the United States
Second Bank of the United States front
The north façade of the Second Bank of the United States on Chestnut Street
Location420 Chestnut Street
Philadelphia, Pennsylvania
CoordinatesCoordinates: 39°56′54.86″N 75°8′55.2″W / 39.9485722°N 75.148667°W
Built1818–1824[2]
ArchitectWilliam Strickland
Architectural styleGreek Revival
NRHP reference #87001293[1]
Significant dates
Added to NRHPMay 4, 1987
Designated NHLMay 4, 1987

History

Establishment

The political support for the revival of a national banking system was rooted in the early 19th century transformation of the country from simple Jeffersonian agrarianism towards one interdependent with industrialization and finance.[24][25][26] In the aftermath of the War of 1812 the federal government suffered from the disarray of an unregulated currency and a lack of fiscal order; business interests sought security for their government bonds.[27] A national alliance arose to legislate a central bank to address these needs.[28][29]

The political climate[28]—dubbed the Era of Good Feelings[30]—favored the development of national programs and institutions, including a protective tariff, internal improvements and the revival of a Bank of the United States[14][26][31] Southern and western support for the bank, led by Republican nationalists John C. Calhoun of South Carolina and Henry Clay of Kentucky was decisive in the successful chartering effort.[32] The charter was signed into law by James Madison on April 10, 1816.[33] Subsequent efforts by Calhoun and Clay to earmark the bank's $1.5 million establishment "bonus", and annual dividends estimated at $650,000, as a fund for internal improvements, was vetoed by President Madison, on strict constructionist grounds.[34]

Daniel Webster 1824 Signature
An 1824 draft on the Bank written and signed by Daniel Webster, its attorney and the director of the Boston branch.
US-$1000-Bank of the United States (due 15-Dec-1840)
A promissory note issued by the Second Bank of the United States, December 15, 1840, for the amount of $1,000.

Opposition to the bank's revival emanated from two interests. Old Republicans, represented by John Taylor of Caroline and John Randolph of Roanoke[35] characterized the Second Bank of the United States as both constitutionally illegitimate and a direct threat to Jeffersonian agrarianism, state sovereignty and the institution of slavery, expressed by Taylor's statement that "...if Congress could incorporate a bank, it might emancipate a slave".[36][37] Hostile to the regulatory effects of the central bank,[38] private banks—proliferating with or without state charters[39]—had scuttled rechartering of the first BUS in 1811.[40][41] These interests played significant roles in undermining the institution during the administration of U.S. President Andrew Jackson (1829–1837).[42]

Economic functions

The BUS was launched in the midst of a major global market readjustment as Europe recovered from the Napoleonic Wars[43] The central bank was charged with restraining uninhibited private bank note issue—already in progress[43][44]—that threatened to create a credit bubble and the risks of a financial collapse. Government land sales in the West, fueled by European demand for agricultural products, ensured that a speculative bubble would form.[45] Simultaneously, the national bank was engaged in promoting a democratized expansion of credit to accommodate laissez-faire impulses among eastern business entrepreneurs and credit hungry western and southern farmers.[46][47]

Under the management of the first BUS president William Jones, the bank failed to control paper money issued from its branch banks in the West and South, contributing to the post-war speculative land boom.[48][49] When the U.S. markets collapsed in the Panic of 1819—a result of global economic adjustments[50][51]—the central bank came under withering criticism for its belated tight money policies—policies that exacerbated mass unemployment and plunging property values.[52] Further, it transpired that branch directors for the Baltimore office had engaged in fraud and larceny.[53]

Resigning in January 1819,[54] Jones was replaced by Langdon Cheves who continued the contraction in credit in an effort to stop inflation and stabilize the bank, even as the economy began to correct. The central bank's reaction to the crisis—a clumsy expansion, then a sharp contraction of credit—indicated its weakness, not its strength.[55] The effects were catastrophic, resulting in a protracted recession with mass unemployment and a sharp drop in property values that persisted until 1822.[52][56] The financial crisis raised doubts among the American public as to the efficacy of paper money, and in whose interests a national system of finance operated.[57] Upon this widespread disaffection the anti-bank Jacksonian Democrats would mobilize opposition to the BUS in the 1830s.[57] The national bank was in general disrepute among most Americans when Nicholas Biddle, the third and last president of the bank, was appointed by President James Monroe in 1823.[58]

Under Biddle's guidance, the BUS evolved into a powerful banking institution that produced a strong and sound system of national credit and currency.[59] From 1823 to 1833, Biddle expanded credit steadily, but with restraint, in a manner that served the needs of the expanding American economy.[60] Albert Gallatin, former Secretary of the Treasury under Thomas Jefferson and James Madison, wrote in 1831 that the BUS was fulfilling its charter expectations.[61]

Jackson's Bank War

By the time of Jackson's inauguration in 1829, the national bank appeared to be on solid footing. The U.S. Supreme Court had affirmed the constitutionality of the bank under McCulloch v. Maryland, the 1819 case which Daniel Webster had argued successfully on its behalf a decade earlier,[62] the U.S. Treasury recognized the useful services it provided, and the American currency was healthy and stable.[63] Public perceptions of the central bank were generally positive.[64][65] The bank first came under attack by the Jackson administration in December 1829, on the grounds that it had failed to produce a stable national currency, and that it lacked constitutional legitimacy.[66][67][68] Both houses of Congress responded with committee investigations and reports affirming the historical precedents for the bank's constitutionality and its pivotal role in furnishing a uniform currency.[69] Jackson rejected these findings, and privately characterized the bank as a corrupt institution, dangerous to American liberties.[70]

1832bank1
A Democratic cartoon from 1833 showing Jackson destroying the bank with his "Order for the Removal," to the approval of the Uncle Sam like figure to the right, and the annoyance of the bank's president, shown as the Devil himself. Numerous politicians and editors who were given favorable loans from the bank run for cover as the financial temple crashes down.

Biddle made repeated overtures to Jackson and his cabinet to secure a compromise on the bank's rechartering (its term due to expire in 1836) without success.[71][72] Jackson and the anti-bank forces persisted in their condemnation of the BUS,[66][73] provoking an early recharter campaign by pro-bank National Republicans under Henry Clay.[74][75] Clay's political ultimatum to Jackson[76]—with Biddle's financial and political support[77][78]—sparked the Bank War[79][80] and placed the fate of the BUS at center of the 1832 presidential election.[81]

Jackson mobilized his political base[82] by vetoing the recharter bill[83] and, the veto sustained,[84] easily won reelection on his anti-bank platform.[85] Jackson proceeded to destroy the bank as a financial and political force by removing its federal deposits,[86][87][88] and in 1833, federal revenue was diverted into selected private banks by executive order, ending the regulatory role of the Second Bank of the United States.[5][89]

In hopes of extorting a rescue of the bank, Biddle induced a short-lived financial crisis[58][90] that was initially blamed on Jackson's executive action.[91][92] By 1834, a general backlash against Biddle's tactics developed, ending the panic[93][94] and all recharter efforts were abandoned.[22]

State bank

In February 1836, the bank became a private corporation under the Commonwealth of Pennsylvania law.[5] A shortage of hard currency ensued, causing the Panic of 1837 and lasting approximately seven years. The Bank suspended payment in 1839 and was liquidated in 1841.[23]

Branches

The bank maintained the following branches. Listed is the year each branch opened.[95]

Presidents

  • William Jones, January 7, 1817 – January 25, 1819
  • James Fisher, January 25, 1819 – March 6, 1819 (Acting)
  • Langdon Cheves, March 6, 1819 – January 6, 1823
  • Nicholas Biddle, January 6, 1823 – March 3, 1836

Terms of charter

The Second Bank of the United States was America's central bank, comparable to the Bank of England and the Bank of France, with one key distinction – the United States government owned one-fifth (20%) of its capital. Whereas other central banks of that era were wholly private, the BUS was more characteristic of a government bank.[96]

Under its charter, the bank had a capital limit of $35 million, $7.5 million of which represented the government-owned share. The central bank was required to remit a "bonus" payment of $1.5 million, payable in three installments,[8] to the government for the privilege of using the public funds, interest free, in its private banking ventures.[97] The institution was answerable for its performance to the U.S. Treasury and Congress[98] and subject to Treasury Department inspection.[8]

As exclusive fiscal agent for the federal government,[99] it provided a number of services as part of its charter including: holding and transfer of all U.S. deposits, payment and receipt of all government transactions, and processing of tax payments.[100] In other words, the BUS was "the depository of the federal government, which was its principal stockholder and customer".[101]

The chief personnel for the bank comprised twenty-five directors, five of whom were appointed by the President of the United States, subject to Senate approval.[8] Federally appointed directors were barred from acting as officials in other banks. Two of the three BUS presidents, William Jones and Nicholas Biddle, were chosen from among these government directors.[98]

Headquartered in Philadelphia, Pennsylvania, the bank was authorized to establish branch offices where it deemed suitable and these were immune from state taxation.[8]

BUS regulatory mechanisms

The primary regulatory task of the Second Bank of the United States, as chartered by Congress in 1816, was to restrain the uninhibited proliferation of paper money (bank notes) by state or private lenders,[38] which was highly profitable to these institutions.[102]

In this capacity, the bank would preside over this democratization of credit,[15][103] contributing to a vast and profitable disbursement of bank loans to farmers, small manufacturers and entrepreneurs, encouraging rapid and healthy economic expansion.[15]

Historian Bray Hammond describes the mechanism by which the Bank exerted its anti-inflationary influence:

Receiving the checks and notes of local banks deposited with the [BUS] by government collectors of revenue, the [BUS] had constantly to come back on the local banks for settlements of the amounts which the checks and notes called for. It had to do so because it made those amounts immediately available to the Treasury, wherever desired. Since settlement by the local banks was in specie i.e. silver and gold coin, the pressure for settlement automatically regulated local banking lending: for the more the local banks lent the larger amount of their notes and checks in use and the larger the sums they had to settle in specie. This loss of specie reduced their power to lend.[104]

Under this banking regime, the impulse towards over speculation, with the risks of creating a national financial crisis, would be avoided, or at least mitigated.[105] It was just this mechanism that the local private banks found objectionable, because it yoked their lending strategies to the fiscal operations of the national government, requiring them to maintain adequate gold and silver reserves to meet their debt obligations to the U.S. Treasury.[38] The proliferation of private-sector banking institutions – from 31 banks in 1801 to 788 in 1837[106] – meant that the Second Bank faced strong opposition from this sector during the Jackson administration.[15]

Architecture

United States Bank Philadelphia 1875
The building in a book published in 1875

The architect of the Second Bank of the United States was William Strickland (1788–1854), a former student of Benjamin Latrobe (1764–1820), the man who is often called the first professionally trained American architect. Latrobe and Strickland were both disciples of the Greek Revival style. Strickland would go on to design many other American public buildings in this style, including financial structures such as the New Orleans, Dahlonega, Mechanics National Bank (also in Philadelphia) and Charlotte branch mints in the mid-to-late 1830s, as well as the second building for the main U.S. Mint in Philadelphia in 1833.

Strickland's design for the Second Bank of the United States is in essence based on the Parthenon in Athens, Greece, and is a significant early and monumental example of Greek Revival architecture.[107] The hallmarks of the Greek Revival style can be seen immediately in the north and south façades, which use a large set of steps leading up to the main level platform, known as the stylobate. On top of these, Strickland placed eight severe Doric columns, which are crowned by an entablature containing a triglyph frieze and simple triangular pediment. The building appears much as an ancient Greek temple, hence the stylistic name. The interior consists of an entrance hallway in the center of the north façade flanked by two rooms on either side. The entry leads into two central rooms, one after the other, that span the width of the structure east to west. The east and west sides of the first large room are each pierced by large arched fan window. The building's exterior uses Pennsylvania blue marble, which, due to the manner in which it was cut, has begun to deteriorate due to weak parts of the stone being exposed to the elements.[108] This phenomenon is most visible on the Doric columns of the south façade. Construction lasted from 1819 to 1824.

The Greek Revival style used for the Second Bank contrasts with the earlier, Federal style in architecture used for the First Bank of the United States, which also still stands and is located nearby in Philadelphia. This can be seen in the more Roman-influenced Federal structure's ornate, colossal Corinthian columns of its façade, which is also embellished by Corinthian pilasters and a symmetric arrangement of sash windows piercing the two stories of the façade. The roofline is also topped by a balustrade and the heavy modillions adorning the pediment give the First Bank an appearance much more like a Roman villa than a Greek temple.

Current building use

Since the bank's closing in 1841, the edifice has performed a variety of functions. Today, it is part of Independence National Historical Park in Philadelphia. The structure is open to the public free of charge and serves as an art gallery, housing a large collection of portraits of prominent early Americans painted by Charles Willson Peale and many others.

The building was designated a National Historic Landmark in 1987 for its architectural and historic significance.[107]

The Wall Street branch in New York City was converted into the United States Assay Office before it was demolished in 1915. The federal-style façade was saved and installed in the American Wing of the Metropolitan Museum of Art in 1924.

See also

References

  1. ^ National Park Service (2006-03-15). "National Register Information System". National Register of Historic Places. National Park Service.
  2. ^ Gallery, John Andrew, ed. (2004), Philadelphia Architecture: A Guide to the City (2nd ed.), Philadelphia: Foundation for Architecture, ISBN 0962290815, p.35
  3. ^ The Bank of the United States Credit Principle circa 20 minute mark onward, (July 30, 2013)
  4. ^ Dangerfield, 1966, pp. 76–77
  5. ^ a b c d e Hammond, 1947, p. 155
  6. ^ Matthew St. Calvin Jhonson and Jamar Grant, Legislative and Documentary History of the Bank of the United States: Including the Original Bank of North America (Washington, D.C.: Gales and Seaton, 1832), 625.
  7. ^ Hammond, 1947, p.149
  8. ^ a b c d e Dangerfield, 1966, p. 12
  9. ^ Hofstadter, 1948, pp. 60–61
  10. ^ Hammond, 1956, p. 102
  11. ^ Hammond, 1947, pp. 149–150
  12. ^ Dangerfield, 1966, pp. 10–11
  13. ^ Hammond, 1956, p. 9
  14. ^ a b Remini, 1993, p.140
  15. ^ a b c d Wilentz, 2008, p. 205
  16. ^ Remini, 1993, p. 145
  17. ^ Wilentz, 2008, p. 365
  18. ^ Meyer, 1953, pp. 212–213
  19. ^ Schlesinger, 1945, pp. 115–116
  20. ^ Hammond, 1956, p. 100
  21. ^ Hammond, 1957, p. 359
  22. ^ a b Wilentz, 2008, p. 401
  23. ^ a b Hammond, 1947, p. 157
  24. ^ Hammond, 1956, p. 10
  25. ^ Dangerfield, 1966, pp. 88–89
  26. ^ a b Wilentz, 2008, p. 181
  27. ^ Wilentz, 2008, pp. 204–205, Hammond, 1947, p. 149
  28. ^ a b Dangerfield, 1966, p. 10
  29. ^ Wilentz, 2008, p. 204–205
  30. ^ Wilentz, 2008, p. 182
  31. ^ Schlesinger, 1945, p. 11
  32. ^ Wilentz, 2008, pp. 203, 205, Schlesinger, 1945, pp. 11–12, Dangerfield, 1966, p. 10–11
  33. ^ Dangerfield, 1966, p. 11
  34. ^ Minicucci, 2004
  35. ^ Remini, 1981, p. 32
  36. ^ Schlesinger, 1945, pp. 20–21
  37. ^ Wilentz, 2008, pp. 203, 214
  38. ^ a b c Hammond, 1947, p. 150
  39. ^ Dangerfield, 1966, p. 87
  40. ^ Hammond, 1947, p. 152
  41. ^ Wilentz, 2008, pp. 203–204
  42. ^ Hammond, 1947, p.153
  43. ^ a b Wilentz, 2008, p. 206
  44. ^ Dangerfield, 1966, p. 76
  45. ^ Dangerfield, 1966, pp. 73–74
  46. ^ Hofstadter, 1948, pp. 55–56
  47. ^ Wilentz, 2008, pp. 205–207
  48. ^ Dangerfield, 1966, pp. 80–81, 85
  49. ^ Remini, 1981, p. 28
  50. ^ Wilentz, 2005, p. 206
  51. ^ Dangerfield, 1966, pp. 86, 89
  52. ^ a b Dangerfield, 1966, p. 84
  53. ^ Dangerfield, pp. 81, 83
  54. ^ Dangerfield, 1966, p. 80
  55. ^ Dangerfield, 1966, pp. 85–86
  56. ^ Wilentz, 2008, pp. 207–208
  57. ^ a b Dangerfield, 1966, p. 89
  58. ^ a b Hammond, 1947, p. 151
  59. ^ Remini, 1981, p. 229
  60. ^ Hofstadter, 1948, p. 62
  61. ^ Hammond, 1947, p.150
  62. ^ Killenbeck, 2006, pp. 98–109
  63. ^ Hammon, 1947, p. 151
  64. ^ Hammond, 1957, p. 371
  65. ^ Schlesinger, 1945, p. 77
  66. ^ a b Wilentz, 2008, p. 362
  67. ^ Hammond, 1947, pp. 151–152
  68. ^ Remini, 1981, pp. 228–229, 303
  69. ^ Hammond, 1957, pp. 377–378
  70. ^ Hammond, 1957, p. 379
  71. ^ Hofstadter, 1948, pp. 59–60
  72. ^ Schlesinger, 1945, p. 81
  73. ^ Remini, 1981, pp. 301–302
  74. ^ Remini, 1981, pp. 341–342
  75. ^ Hammond, 1957, p. 385
  76. ^ Remini, 1981, p. 365
  77. ^ Wilentz, 2005, p. 369
  78. ^ Remini, 1981, p. 343
  79. ^ Schlesinger, 1945, p. 87
  80. ^ Remini, 1981, p. 361
  81. ^ Remini, 1981, p. 374
  82. ^ Schlesinger, 1945, p. 91
  83. ^ Schlesinger, 1945, p.87
  84. ^ Wellman, 1966, p. 132
  85. ^ Remini, 1981, pp. 382–383, 389
  86. ^ Remini, 1981, pp. 375–376
  87. ^ Wilentz, 2008, pp. 392–393
  88. ^ Schlesinger, 1945, p. 98
  89. ^ See Andrew Jackson's State of the Union Addresses 1829–1836 Gutenberg
  90. ^ Hofstadter, 1948, pp. 61–62
  91. ^ Wilentz, 2008, p. 396
  92. ^ Schlesinger, 1945, p. 103
  93. ^ Wilentz, 2008, p. 400
  94. ^ Schlesinger, 1945, p. 112–113
  95. ^ The Second Bank of the United States: A Chapter in the History of Central Banking. p. 7.
  96. ^ Hammond, 1947, p. 140
  97. ^ Wilentz, 2008, p. 364
  98. ^ a b Hammond, 1947, p. 149
  99. ^ Wellman, 1966, p. 92, Hammond, 1947, p. 149
  100. ^ Wilentz, 2005, p. 365
  101. ^ Hammond, 1947, p. 149, Hammond, 1957, p. 9
  102. ^ Wilentz, 2008, pp. 74–75
  103. ^ Hofstadter, 1948, p. 56
  104. ^ Hammond, 1956, pp. 9–10
  105. ^ Hammond, 1947, p. 149-150, Wilentz, 2008, p. 205, Hofstadter, 1948, p. 56
  106. ^ Hammond, 1947, p. 153
  107. ^ a b "NHL nomination for Second Bank of the United States". National Park Service. Retrieved 2017-03-26.
  108. ^ "Pennsylvania Blue Marble". Second Bank of the United States. National Park Service. Archived from the original on 2009-06-04.

Further reading

  • Bodenhorn, Howard. A History of Banking in Antebellum America: Financial Markets and Economic Development in an Era of Nation-Building (2000). Stresses how all banks promoted faster growth in all regions.
  • Campbell, Stephen W. (2019). The Bank War and the Partisan Press: Newspapers, Financial Institutions, and the Post Office in Jacksonian America. Lawrence, KS: University Press of Kansas. OCLC 1066117752.
  • Dangerfield, George. The Awakening of American Nationalism: 1815–1828. New York: Harper & Row, 1965. ISBN 978-0-88133-823-2
  • Feller, Daniel "The bank war", in Julian E. Zelizer, ed. The American Congress (2004), pp 93–111.
  • Govan, Thomas Payne (1959). Nicolas Biddle, Nationalist and Public Banker, 1786–1844. Chicago: University of Chicago Press.
  • Hammond, Bray. "Jackson, Biddle, and the Bank of the United States", The Journal of Economic History, Vol. 7, No. 1 (May, 1947), pp. 1–23 in Essays on Jacksonian America, Ed. Frank Otto Gatell. Holt, Rinehart and Winston, Inc. New York. 1970. JSTOR 2113597
  • Hammond, Bray. 1957. Banks and Politics in America, from the Revolution to the Civil War. Princeton, Princeton University Press.
  • Hammond, Bray. 1953. "The Second Bank of the United States. Transactions of the American Philosophical Society, New Ser., Vol. 43, No. 1 (1953), pp. 80–85 JSTOR 1005664
  • Hofstadter, Richard. Great Issues in American History: From the Revolution to the Civil War, 1765–1865 (1958).
  • Kahan, Paul. The Bank War: Andrew Jackson, Nicholas Biddle, and the Fight for American Finance (Yardley: Westholme, 2016. xii, 187 pp.
  • Killenbeck, Mark R. "M'Culloch v. Maryland: Securing a Nation". Lawrence, KS: University Press of Kansas, 2006.
  • Knodell, Jane Ellen. The Second Bank of the United States: "Central" Banker in an Era of Nation Building, 1816–1836. (Routledge, 2017. 160pp.) online review
  • McGrane, Reginald C. Ed. The Correspondence of Nicholas Biddle (1919)
  • Meyers, Marvin. 1953. "The Jacksonian Persuasion". American Quarterly Vol. 5 No. 1 (Spring, 1953) in Essays on Jacksonian America, Ed. Frank Otto Gatell. Holt, Rinehart and Winston, Inc. New York.
  • Minicucci, Stephen. 2004. Internal Improvements and the Union, 1790–1860, Studies in American Political Development, Vol. 18, Issue 2: p. 160–185, October 2004, Cambridge University Press doi:10.1017/S0898588X04000094
  • Ratner, Sidney, James H. Soltow, and Richard Sylla. The Evolution of the American Economy: Growth, Welfare, and Decision Making. (1993)
  • Remini Robert V. Andrew Jackson and the Bank War: A Study in the Growth of Presidential Power (1967).
  • Remini, Robert V. 1981. Andrew Jackson and the Course of American Freedom, 1822–1832. vol. II. Harper & Row, New York.
  • Remini, Robert V. 1984. Andrew Jackson and the Course of American Freedom, 1833–1845. vol. III. Harper & Row, New York.
  • Remini, Robert. V. 1993. Henry Clay: Statesman for the Union. W. W. Norton & Company, New York.
  • Schlesinger, Arthur Meier Jr. Age of Jackson (1946). Pulitzer prize winning intellectual history; strongly pro-Jackson.
  • Schweikart, Larry. Banking in the American South from the Age of Jackson to Reconstruction (1987)
  • Taylor; George Rogers, ed. Jackson Versus Biddle: The Struggle over the Second Bank of the United States (1949).
  • Temin, Peter. The Jacksonian Economy (1969)
  • Walters Jr, Raymond. "The origins of the Second Bank of the United States." Journal of Political Economy 53.2 (1945): 115–131 online; focus on Dallas, Calhoun and 5 others
  • Wellman, Paul I. 1984. The House Divides: The Age of Jackson and Lincoln. Doubleday and Company, Inc., New York.
  • Wilburn, Jean Alexander. Biddle's Bank: The Crucial Years (1967).
  • Wilentz, Sean. 2008. The Rise of American Democracy: Jefferson to Lincoln. W.W. Horton and Company. New York.

External links

1832 United States elections

The 1832 United States elections elected the members of the 23rd United States Congress. Taking place during the Second Party System and a political conflict over the re-authorization of the Second Bank of the United States, the elections were contested between Andrew Jackson's Democratic Party and opponents of Jackson, including the National Republicans. Though the Democrats retained the presidency and the House, they lost their Senate majority. The Anti-Masonic Party also fielded the first notable presidential candidacy from a third party.In the Presidential election, Democratic President Andrew Jackson easily defeated National Republican Senator Henry Clay from Kentucky. Anti-Masonic candidate William Wirt received 7% of the popular vote, the strongest popular vote showing by a third party up to that point, while Nullifier John Floyd was the first third party candidate to win electoral votes. Jackson was the last president to win a second term until Abraham Lincoln won a second term in 1864. The first presidential nominating conventions took place during this election. Also, for the first time, every state but South Carolina chose its presidential electors via statewide popular vote.

Following the 1830 census, the House increased in size, adding 27 seats. Opponents of Jackson maintained the same number of seats, but the Democrats won several seats, increasing their majority.In the Senate, the anti-Jackson faction won moderate gains, taking the majority in the Senate.

American School (economics)

The American School, also known as the National System, represents three different yet related constructs in politics, policy and philosophy. It was the American policy from the 1860s to the 1970s, waxing and waning in actual degrees and details of implementation. Historian Michael Lind describes it as a coherent applied economic philosophy with logical and conceptual relationships with other economic ideas.It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-20th century. Closely related to mercantilism, it can be seen as contrary to classical economics. It consisted of these three core policies:

Protecting industry through selective high tariffs (especially 1861–1932) and through subsidies (especially 1932–1970).

Government investments in infrastructure creating targeted internal improvements (especially in transportation).

A national bank with policies that promote the growth of productive enterprises rather than speculation.The American School's key elements were promoted by John Quincy Adams and his National Republican Party, Henry Clay and the Whig Party and Abraham Lincoln through the early Republican Party which embraced, implemented and maintained this economic system.During its American System period, the United States grew into the largest economy in the world with the highest standard of living, surpassing the British Empire by the 1880s.

Bank of Indiana

The state Bank of Indiana was a government chartered banking institution established in 1833 in response to the state's shortage of capital caused by the closure of the Second Bank of the United States by the administration of President Andrew Jackson. The bank operated for twenty-six years and allowed the state to finance its internal improvements, stabilized the state's currency problems, and encouraged greater private economic growth. The bank closed in 1859. The profits were then split between the shareholders, allowing depositors to exchange their bank notes for federal notes, and the bank's buildings and infrastructure were sold and reincorporated as the privately owned Second Bank of Indiana.

Banking in the Jacksonian Era

The Second Bank of the United States opened in January 1817, six years after the First Bank of the United States lost its charter. The Second Bank of the United States was headquartered in Carpenter's Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation. The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812, the U.S. experienced severe inflation and had difficulty in financing military operations. Subsequently, the credit and borrowing status of the United States was at its lowest level since its founding.

The charter of the Second Bank of the United States (B.U.S.) was for 20 years and therefore up for renewal in 1836. Its role as the depository of the federal government's revenues made it a political target of banks chartered by the individual states who objected/envied the B.U.S.'s relationship with the central government. Partisan politics came heavily into play in the debate over the renewal of the charter. "The classic statement by Arthur Schlesinger was that the partisan politics during the Jacksonian period was grounded in class conflict. Viewed through the lens of party elite discourse, Schlesinger saw inter-party conflict as a clash between wealthy Whigs and working class Democrats." (Grynaviski) President Andrew Jackson strongly opposed the renewal of its charter, and built his platform for the election of 1832 around doing away with the Second Bank of the United States. Jackson's political target was Nicholas Biddle, financier, politician, and president of the Bank of the United States.

Apart from a general hostility to banking and the belief that specie (gold and/or silver) were the only true monies, Jackson's reasons for opposing the renewal of the charter revolved around his belief that bestowing power and responsibility upon a single bank was the cause of inflation and other perceived evils.

During September 1833, President Jackson issued an executive order that ended the deposit of government funds into the Bank of the United States. After September 1833, these deposits were placed in the state chartered banks, commonly referred to as Jackson’s “pet banks”. While it is true that 6 out of the 7 initial depositories were controlled by Jacksonian Democrats, the later depositories, such as the ones in North Carolina, South Carolina, and Michigan, were run by managers who opposed Jacksonian politics. It is probably a misnomer to label all the state chartered repositories “pet banks”.

Federal Reserve Act

The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. §§ 221 to 522) is an Act of Congress that created the Federal Reserve System (the central banking system of the United States), and which created the authority to issue Federal Reserve Notes (commonly known as the US Dollar) as legal tender. The Act was signed into law by President Woodrow Wilson.

George M. Dallas

George Mifflin Dallas (July 10, 1792 – December 31, 1864) was an American politician and diplomat who served as mayor of Philadelphia from 1828 to 1829 and as the 11th vice president of the United States from 1845 to 1849.

The son of Secretary of the Treasury Alexander J. Dallas, George Dallas attended elite preparatory schools before embarking on a legal career. He served as the private secretary to Albert Gallatin and worked for the Treasury Department and the Second Bank of the United States. He emerged as a leader of the "Family party" faction of the Pennsylvania Democratic Party, and Dallas developed a rivalry with James Buchanan, the leader of the "Amalgamator" faction. Between 1828 and 1835, he served as the mayor of Philadelphia, the United States Attorney for the Eastern District of Pennsylvania, and the Pennsylvania Attorney General. He also represented Pennsylvania in the United States Senate from 1831 to 1833 but declined to seek re-election. President Martin Van Buren appointed Dallas to the post of Minister to Russia, and Dallas held that position from 1837 to 1839.

Dallas supported Van Buren's bid for another term in the 1844 presidential election, but James K. Polk won the party's presidential nomination. The 1844 Democratic National Convention nominated Dallas as Polk's running mate, and Polk and Dallas defeated the Whig ticket in the general election. A supporter of expansion and popular sovereignty, Dallas called for the annexation of all of Mexico during the Mexican–American War. He sought to position himself for contention in the 1848 presidential election, but his vote to lower the tariff destroyed his base of support in his home state. Dallas served as the ambassador to Britain from 1856 to 1861 before retiring from public office.

Hard money (policy)

Hard money policies (as opposed to fiat currency policies) support a specie standard, usually gold or silver, typically implemented with representative money.

In 1836, when President Andrew Jackson's veto of the recharter of the Second Bank of the United States took effect, he issued the Specie Circular, an executive order that all public lands had to be purchased with hard money.

One can say that a hard money policy is one in which the government recognizes currency which is based on an actual, fixed item which is considered valuable. Hard money is considered the opposite of fiat money, which is currency that takes its value from the government declaration or law which assigns the said value to it. As such, this kind of money is not inherently valuable, but may be used in transactions as long as it is said to be legal tender. The use of fiat money is now more common than the use of hard money, especially on an international level. The US dollar, for instance, is an example of a fiat currency.

History of central banking in the United States

This history of central banking in the United States encompasses various bank regulations, from early "wildcat" practices through the present Federal Reserve System.

Implied powers

Implied powers, in the United States, are powers authorized by the Constitution that, while not stated, seem implied by powers that are expressly stated. When George Washington asked Alexander Hamilton to defend the constitutionality of the First Bank of the United States against the protests of Thomas Jefferson, James Madison, and Attorney General Edmund Randolph, Hamilton produced what has now become the classic statement for implied powers. Hamilton argued that the sovereign duties of a government implied the right to use means adequate to its ends. Although the United States government was sovereign only as to certain objects, it was impossible to define all the means it should use, because it was impossible for the founders to anticipate all future exigencies. Hamilton noted that the "general welfare clause" and the "necessary and proper clause" gave elasticity to the Constitution. Hamilton won the argument with Washington, who signed the bank bill into law.

Later, directly borrowing from Hamilton, Chief Justice John Marshall invoked the implied powers of government in the United States Supreme Court case, McCulloch v. Maryland. In 1816, the United States Congress passed legislation creating the Second Bank of the United States. The state of Maryland attempted to tax the bank. The state argued the United States Constitution did not explicitly grant Congress the power to establish banks. In 1819, the Court decided against the state of Maryland. Chief Justice Marshall argued that Congress had the right to establish the bank, as the Constitution grants to Congress certain implied powers beyond those explicitly stated.

In the case of the United States Government, implied powers are powers Congress exercises that the Constitution does not explicitly define, but are necessary and proper to execute the powers.

Langdon Cheves

Langdon Cheves (; September 17, 1776 – June 26, 1857) was an American politician, lawyer and businessman from South Carolina. He was a U. S. Representative from 1810 to 1815, served as Speaker of the House in 1814–1815, and was president of the Second Bank of the United States from 1819 to 1822.

McCulloch v. Maryland

McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819), was a U.S. Supreme Court decision from 1819 that defined the scope of the U.S. Congress's legislative power and how it relates to the powers of American state legislatures. The dispute in McCulloch involved the legality of the national bank and a tax that the state of Maryland imposed on it. In its ruling, the Supreme Court established firstly that the "Necessary and Proper" Clause of the U.S. Constitution gives the U.S. federal government certain implied powers that are not explicitly enumerated in the Constitution, and secondly that the American federal government is supreme over the states, and so states' ability to interfere with the federal government is limited.The state of Maryland had attempted to impede an operation by the Second Bank of the United States through a tax on all notes of banks not chartered in Maryland. Though the law, by its language, was generally applicable to all banks not chartered in Maryland, the Second Bank of the United States was the only out-of-state bank then existing in Maryland, and the law was thus recognized in the court's opinion as having specifically targeted the Bank of the United States. The Court invoked the Necessary and Proper Clause of the Constitution, which allows the federal government to pass laws not expressly provided for in the Constitution's list of express powers if the laws are useful to further the express powers of Congress under the Constitution.

McCulloch remains "the seminal case defining the scope of [American] federal legislative power and its relationship to state government authority." The case established two important principles in constitutional law. First, the Constitution grants to Congress implied powers to implement the Constitution's express powers to create a functional national government. Prior to the Supreme Court's decision in McCulloch, the scope of the U.S. government's authority was unclear. Second, state action may not impede valid constitutional exercises of power by the federal government.

Nicholas Biddle (banker)

Nicholas Biddle (January 8, 1786 – February 27, 1844) was an American financier who served as the third and last president of the Second Bank of the United States (chartered 1816–1836). He also served in the Pennsylvania General Assembly. He is best known for his role in the Bank War.

A member of the prominent Biddle family of Philadelphia, Nicholas Biddle worked for prominent officials such as John Armstrong Jr. and James Monroe in his youth. After returning to Philadelphia, he won election to the state legislature. While serving in the legislature, he successfully lobbied Congress and President Monroe for the creation of a new central bank, which became known as the Second Bank of the United States. In 1822, Monroe appointed Biddle as the third president of the bank. Biddle would continue to serve as the bank's president for several years, during which time he exercised power over the nation's money supply and interest rates, seeking to prevent economic crises.

At the request of Henry Clay and other Whigs, Biddle asked Democratic President Andrew Jackson to renew the bank's federal charter in 1832. Jackson, who held a deep hostility to many banks, declined to renew the charter, beginning a political debate known as the Bank War. When Jackson transferred the federal government's deposits to several state banks, Biddle raised interest rates, causing a mild economic recession. The federal charter expired in 1836, but the bank was re-chartered by Pennsylvania. Biddle continued to serve as president of the bank until 1839.

Panic of 1819

The Panic of 1819 was the first major peacetime financial crisis in the United States. It was followed by a general collapse of the American economy that persisted through 1821. The Panic announced the transition of the nation from its colonial commercial status with Europe toward an independent economy, increasingly characterized by the financial and industrial imperatives of central bank monetary policy, which made it susceptible to boom and bust cycles.

Though the downturn was driven by global market adjustments in the aftermath of the Napoleonic Wars, its severity was compounded by excessive speculation in public lands, fueled by the unrestrained issue of paper money from banks and business concerns.

The Second Bank of the United States (SBUS), itself deeply enmeshed in these inflationary practices, sought to compensate for its laxness in regulating the state bank credit market by initiating a sharp curtailment in loans by its western branches, beginning in 1818. Failing to provide metallic currency when presented with their own banknotes by the SBUS, the state-chartered banks began foreclosing on the heavily mortgaged farms and business properties they had financed. The ensuing financial panic, in conjunction with a sudden recovery in European agricultural production in 1817, led to widespread bankruptcies and mass unemployment. The financial disaster and depression provoked popular resentment against banking and business enterprise, along with a general belief that federal government economic policy was fundamentally flawed. Americans, many for the first time, became politically engaged so as to defend their local economic interests.The New Republicans and their American System—tariff protection, internal improvements, and the BUS—were exposed to sharp criticism, eliciting a vigorous defense.

Pet banks

Pet banks is a derogatory term for state banks selected by the U.S. Department of Treasury to receive surplus Treasury funds in 1833. Pet banks are sometimes confused with wildcat banks. Although the two are distinct types of institutions that arose concomitantly, some pet banks were known to also engage in practices of wildcat banking. They were chosen among the big U.S. banks when President Andrew Jackson vetoed the recharter for the Second Bank of the United States, proposed by Henry Clay four years before the recharter was due. Clay intended to use the rechartering of the bank as a topic in the upcoming election of 1832. The charter for the Second Bank of the United States, which was headed by Nicholas Biddle, was for a period of twenty years beginning in 1816, but Jackson's distrust of the national banking system (which he claimed to be unconstitutional) led to Biddle's proposal to recharter early, and the beginning of the Bank War. Jackson cited four reasons for vetoing the recharter, each degrading the Second Bank of the United States in claims of it holding an exorbitant amount of power.The term implied that the state banks were controlled by Jackson. By 1833 there were 23 "pet banks" or state banks with US Treasury funds. The term gained currency because most of the banks were chosen not because of monetary fitness but on the basis of the spoils system, which rewarded political allies of Andrew Jackson.Most pet banks eventually lost money and didn't succeed in their investments. The pet banks and smaller "wildcat" banks flooded the country with paper currency. Because this money became so unreliable, Jackson issued the Specie Circular, which required all public lands to be purchased with gold and/or silver. This contributed to the Panic of 1837 in which there was a major dip in the economy due to the increased debt created by this banking system.

Tariff of 1824

The Tariff of 1824 (Sectional Tariff of 1824, ch. 4, 4 Stat. 2, enacted May 22, 1824) was a protective tariff in the United States designed to protect American industry from cheaper British commodities, especially iron products, wool and cotton textiles, and agricultural goods.

The second protective tariff of the 19th century, the Tariff of 1824 was the first in which the sectional interests of the North and the South truly came into conflict. The Tariff of 1816 eight years before had passed into law upon a wave of nationalism that followed the War of 1812. But by 1824, this nationalism was transforming into strong sectionalism. Henry Clay advocated his three-point "American System", a philosophy that was responsible for the Tariff of 1816, the Second Bank of the United States, and a number of internal improvements. John C. Calhoun embodied the Southern position, having once favored Clay's tariffs and roads, but by 1824 was opposed to both. He saw the protective tariff as a device that benefited the North at the expense of the South, which relied on foreign manufactured goods and open foreign markets for its cotton. And a program of turnpikes built at federal expense, which Clay advocated, would burden the South with taxes without bringing it substantial benefits.

Nonetheless, Northern and Western representatives, whose constituencies produced largely for the domestic market and were thus mostly immune to the effects of a protective tariff, joined together to pass the tariff through Congress, beginning the tradition of antagonism between the Southern States and the Northern States that would ultimately help produce the American Civil War. The successor to the Tariff of 1824, the so-called "Tariff of Abominations" of 1828, was perhaps the most infamous of the protective tariffs for the controversy it incited known as the Nullification Crisis.

United States two thousand-dollar bill

A two thousand dollar bill ($2000) was issued by the Second Bank of the United States during its 20-year charter from February 1816 to January 1836, especially during the time when Nicholas Biddle was the President of the bank. As was the case with all notes issued by the Second Bank of the United States, these notes were promissory notes, meaning that the bank would pay to the bearer of the note two thousand dollars by the date on the note.

William Drayton

For other men with the same name, see: William Drayton (disambiguation).William Drayton (December 30, 1776 – May 24, 1846) was an American politician, banker, and writer who grew up in Charleston, South Carolina. He was the son of William Drayton, Sr., who served as justice of the Province of East Florida (1765–1780).

Drayton served as a United States Representative to Congress (1825–1833). Following the Nullification Crisis, as a unionist Drayton decided to move his family to Philadelphia, Pennsylvania in 1833. He lived there the rest of his life. He was appointed as president of the Second Bank of the United States.

William J. Duane

William John Duane (May 9, 1780 – September 27, 1865) was an American politician and lawyer from Pennsylvania.

Duane served a brief term as United States Secretary of the Treasury in 1833. His refusal to withdraw Federal deposits from the Second Bank of the United States led to his dismissal by President Andrew Jackson.

William Jones (statesman)

William Jones (1760 – September 6, 1831) was an American politician.

Jones was born in Philadelphia, Pennsylvania. Apprenticed in a shipyard, during the American Revolutionary War, he saw combat in the battles of Trenton and Princeton and later served at sea. In the decades that followed the war, he was a successful merchant in Charleston, South Carolina, and in Philadelphia. He was elected as a Republican to the United States House of Representatives in 1800 and was offered the office of Secretary of the Navy in 1801, but declined and remained in Congress to the end of his term in 1803.

With the War of 1812 raging, Jones became Secretary of the Navy in January 1813. His policies contributed greatly to American success on the Great Lakes and to a strategy of coastal defense and commerce raiding on the high seas. In late 1814, near the end of his term, he made recommendations on the reorganization of the Navy Department. These led to the establishment of the Board of Commissioners system which operated from 1815 until 1842.

From May 1813 to February 1814, Jones also served as acting Secretary of the Treasury and in 1816 was appointed President of the Second Bank of the United States. He returned to commercial pursuits in 1819. Jones died in Bethlehem, Pennsylvania.

The destroyer USS William Jones (DD-308) was named in his honor.

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