Second Bank of the United States

Second Bank of the United States: Panic of 1819

Second Bank of the United States: McCulloch v. Maryland

Second Bank of the United States: Biddle Versus Jackson

Identification: Federally chartered, quasi-private national bank
Date: January 1, 1817-1841
Significance: The financial stability of the United States and its currency was compromised by the expiration of the charter of the First Bank of the United States in 1811 and by the expenses incurred by the War of 1812. The Second Bank of the United States was chartered to promote a common U.S. currency, repay loans, and reestablish the nation’s international credit.

In 1811, Congress failed to recharter the First Bank of the United States, because the majority Democratic-Republican Party believed that its existence was unconstitutional. This decision left the nation without a unified currency. Local and state banks used paper currency that lost value during the financial strains of the War of 1812, because it was not backed by specie (gold or silver). American bankers and businessmen, as well as foreign shippers, refused to accept local currencies. Congress thus had little choice but to establish a new national bank to create a new national currency. 

The bill authorizing the Second Bank of the United States was introduced by Senator John C. Calhoun of South Carolina and was approved with little opposition. The Second Bank was similar to Alexander Hamilton’s First Bank: It was chartered for twenty years and authorized to serve as a source of deposit, act as the fiscal agent of the government, loan money to the government, and establish a credible national currency. Congress agreed to provide $7 million of the $35 million required as operating capital, and five of the twenty-five members of the bank’s board would be appointed by the federal government. The bank’s first president was William Jones, who was more a Democratic-Republican political loyalist than an economic talent. The new bank helped facilitate Henry Clay’s expansionist scheme to develop the interior of the United States with a transportation network connecting the Great Lakes and the Ohio and Mississippi Rivers and a tariff system to encourage domestic manufacturing.

Further Reading

• Bodenhorn, Howard. A History of Banking in Antebellum America: Financial Markets and Economic Development in an Era of Nation-Building. New York: Cambridge University Press, 2000. Examination of American banking policies in the years leading up to the U.S. Civil War, with attention to the Bank of the United States. 
• Brown, Marion A. The Second Bank of the United States and Ohio, 1803-1860: A Collision of Interests. Lewiston, N.Y.: Edwin Mellen Press, 1998. Study of conflicts between the Second Bank of the United States and the state of Ohio. 
• Ellis, Richard E. Andrew Jackson. Washington, D.C.: CQ Press, 2003. Excellent biography of President Jackson that explores his life, career, policies, and legacy. 
• Govan, Thomas P. Nicholas Biddle: Nationalist and Public Banker, 1786-1844. Chicago: University of Chicago Press, 1959.Well-written biography that provides rich background information on the development of the Second Bank of the United States. 
• Kaplan, Edward S. The Bank of the United States and the American Economy. Westport, Conn.: Greenwood Press, 1999.Wide-ranging economic study of the role of the Bank of the United States in American economic history. 
• Sharp, James R. The Jacksonians Versus the Banks: Politics in the States After the Panic of 1837. New York: Columbia University Press, 1970. Examines the ruinous aftereffects of the demise of the national bank and the rise of untrustworthy state banks. 
• Timberlake, Richard H. Monetary Policy in the United States: An Intellectual and Institutional History. Chicago: University of Chicago Press, 1993. Broad history of American monetary policy. The third chapter, focusing on the Second Bank of the United States, regards the institution as a comparatively primitive central bank that was constrained by its commitment to the gold standard. 
• Watson, Harry L. Liberty and Power: The Politics of Jacksonian America. New York: Noonday Press, 1990. Analyzes the political forces that elevated the bank battle to become the primary issue in the 1832 presidential campaign. 

See also: Articles of Confederation; Constitution, United States; Federal Reserve; U.S. Presidency; Supreme Court and banking law.