Second Bank of the United States

Second Bank of the United States. Chartered in 1816, it served as the central bank of the United States for twenty years. Its creation was driven by economic instability following the War of 1812, and it was headquartered in a landmark Greek Revival building in Philadelphia. The bank's existence became a central issue in the political struggle known as the Bank War between President Andrew Jackson and the bank's president, Nicholas Biddle.

History

The Madison administration supported the bank's charter in the aftermath of the War of 1812, which had caused severe inflation and a lack of a uniform currency. President James Madison signed the charter into law on April 10, 1816, following its passage by the 14th United States Congress. The bank began operations in January 1817 under its first president, former Secretary of the Navy William Jones. Early mismanagement under Jones and his successor, Langdon Cheves, led to a contraction of credit that contributed to the Panic of 1819. The bank's fortunes stabilized significantly under the leadership of Nicholas Biddle, who assumed the presidency in 1823.

Structure and operations

Modeled after its predecessor, the First Bank of the United States, it was a private corporation with public duties, holding the federal government's deposits and issuing a national currency. The Treasury owned twenty percent of its capital, and the bank had twenty-five directors, five of whom were appointed by the President of the United States. Its main branch was in Philadelphia, with numerous branches in cities like Baltimore, New Orleans, and Cincinnati. The bank's notes were intended to provide a stable national currency, and it acted as a fiscal agent for the government, handling transactions like the payment of military salaries and the purchase of territories.

Controversy and political conflict

The bank became a flashpoint for major political debates over federal power, states' rights, and economic privilege. Opponents, including powerful figures like Andrew Jackson and Thomas Hart Benton, denounced it as an unconstitutional monopoly that favored wealthy Northern interests over Southern and Western farmers. The conflict culminated in the Bank War during Jackson's presidency, following his victory in the 1828 election. In 1832, Biddle, with support from Henry Clay and Daniel Webster, pushed for an early recharter through Congress, which passed but was met with a famous veto by Jackson. The veto message, written largely by Amos Kendall and Roger B. Taney, articulated a populist critique of concentrated financial power.

Role in the economy

As the nation's central bank, it regulated the money supply and restrained the lending practices of often-unregulated state banks by regularly presenting their notes for redemption in specie. This discipline helped control inflation and fostered a period of economic expansion in the Mid-Atlantic region. The bank also played a crucial role in facilitating interstate commerce and international trade by providing a reliable exchange medium. Its policies, however, were often criticized for causing periodic credit crunches in regions dependent on easy money, fueling resentment that became a cornerstone of Jacksonian democracy.

Expiration of charter and aftermath

Despite the congressional recharter effort, Jackson's veto was sustained, and he subsequently ordered the removal of federal deposits from the bank, redistributing them to various pet banks. The bank's national charter expired in 1836, after which it continued under a Pennsylvania state charter as the United States Bank of Pennsylvania. This institution failed in 1841 amid the Panic of 1837. The absence of a central bank led to the Free banking era and increased financial instability. The federal government would not charter another central bank until the creation of the Federal Reserve System in 1913 following the Aldrich–Vreeland Act.

Category:Banks established in 1816 Category:Defunct banks of the United States Category:1816 establishments in the United States Category:1841 disestablishments in the United States