Second Bank of the United States

Second Bank of the United States

Overview
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...

 lost its own charter
Charter
A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified...

. The Second Bank of the United States was initially headquartered in Carpenters' Hall
Carpenters' Hall
Carpenters' Hall is a two-story brick building in the Old City neighborhood of Philadelphia, Pennsylvania, that was a key meeting place in the early history of the United States. Completed in 1773 and set back from Chestnut Street, the meeting hall was built for and is still owned by the...

, 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.
Discussion
Ask a question about 'Second Bank of the United States'
Start a new discussion about 'Second Bank of the United States'
Answer questions from other users
Full Discussion Forum
 
Unanswered Questions
Encyclopedia
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...

 lost its own charter
Charter
A charter is the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified...

. The Second Bank of the United States was initially headquartered in Carpenters' Hall
Carpenters' Hall
Carpenters' Hall is a two-story brick building in the Old City neighborhood of Philadelphia, Pennsylvania, that was a key meeting place in the early history of the United States. Completed in 1773 and set back from Chestnut Street, the meeting hall was built for and is still owned by the...

, 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
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...

, the U.S. experienced severe inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 and had difficulty in financing military operations. Subsequently, the credit and borrowing status of the United States were at their lowest levels since its founding.

Like the First Bank, the Second Bank was also chartered for 20 years, and also failed to have its charter renewed. It existed for 5 more years as an ordinary bank before going bankrupt in 1841.

Charter renewal


The charter of the Second Bank of the United States (B.U.S.) was for 20 years and therefore up for renewal in 1836. "The Second Bank functioned as a clearinghouse; it held large quantities of other banks' notes in reserve and could discipline banks that it was concerned were over-issuing notes with the threat of redeeming those notes. In this way, it functioned as an early bank regulator, a crucial function of the modern Fed." The bank had a unique relationship with the federal government that gave it access to substantial profits. Its role as the depository of the federal government's revenues made it a political target of banks chartered by the individual states which either objected to, or 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
Arthur Schlesinger
Arthur Schlesinger may refer to:*Arthur M. Schlesinger, Sr. , American historian and professor at Harvard University*Arthur M. Schlesinger, Jr. , his son, American historian, social critic and former John F. Kennedy associate...

 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
Andrew Jackson
Andrew Jackson was the seventh President of the United States . Based in frontier Tennessee, Jackson was a politician and army general who defeated the Creek Indians at the Battle of Horseshoe Bend , and the British at the Battle of New Orleans...

 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
Nicholas Biddle (banker)
Nicholas Biddle was an American financier who served as the president of the Second Bank of the United States.-Ancestry and early life:...

, financier, politician, and president of the Bank of the United States.

Apart from a general hostility to banking and the belief that specie
Commodity money
Commodity money is money whose value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....

 (gold and/or silver) was the only true money, Jackson's reasons for opposing the renewal of the charter revolved around his belief that bestowing special privileges (such as government sponsorship) on banks 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. While six of the seven initial depositories were controlled by Jacksonian Democrats, the later depositories, such as the ones in North Carolina
North Carolina
North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte...

, South Carolina
South Carolina
South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence...

 and Michigan
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....

, were run by managers who opposed Jacksonian politics.

Background


The Second Bank of the United States was patterned after the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...

. The legality of the Bank was upheld in the U.S. Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...

 case McCulloch v. Maryland
McCulloch v. Maryland
McCulloch v. Maryland, , was a landmark decision by the Supreme Court of the United States. The state of Maryland had attempted to impede operation of a branch of the Second Bank of the United States by imposing a tax on all notes of banks not chartered in Maryland...

17 U.S. 316 (1819) that also declared null and void any state law contrary to a federal law made in pursuance of the Constitution. The Bank's last president was Nicholas Biddle
Nicholas Biddle (banker)
Nicholas Biddle was an American financier who served as the president of the Second Bank of the United States.-Ancestry and early life:...

 (1786–1845).

Controversy


The Second Bank of the United States provided a way for the government to handle its financial affairs. The bank was created when James Madison
James Madison
James Madison, Jr. was an American statesman and political theorist. He was the fourth President of the United States and is hailed as the “Father of the Constitution” for being the primary author of the United States Constitution and at first an opponent of, and then a key author of the United...

 and Albert Gallatin
Albert Gallatin
Abraham Alfonse Albert Gallatin was a Swiss-American ethnologist, linguist, politician, diplomat, congressman, and the longest-serving United States Secretary of the Treasury. In 1831, he founded the University of the City of New York...

 found the government unable to finance the country in the aftermath of the War of 1812
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...

. The War of 1812 had put the United States in significant debt, and the First Bank of the United States had closed in 1811. The debt of the nation led to an increase in banknotes among the new private banks, and as a result, inflation increased greatly. As a result, Madison and Congress agreed to form the Second Bank of the United States.

After the war, despite the debt, the United States also experienced an economic boom, due to the devastation of the Napoleonic Wars
Napoleonic Wars
The Napoleonic Wars were a series of wars declared against Napoleon's French Empire by opposing coalitions that ran from 1803 to 1815. As a continuation of the wars sparked by the French Revolution of 1789, they revolutionised European armies and played out on an unprecedented scale, mainly due to...

. In particular, because of the damage to Europe's agricultural sector, the U.S. agricultural sector underwent an expansion. The Bank aided this boom through its lending, which encouraged speculation in land. This lending allowed almost anyone to borrow money and speculate in land, sometimes doubling or even tripling the prices of land. The land sales for 1819, alone, totaled some 55 million acres (220,000 km²). With such a boom, hardly anyone noticed the widespread fraud occurring at the Bank as well as the economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...

 that had been created.

In the summer of 1818, the national bank managers realized the bank's massive over-extension, and instituted a policy of contraction and the calling in of loans. This recalling of loans simultaneously curtailed land sales and slowed the U.S. production boom due to the recovery of Europe. The result was the Panic of 1819
Panic of 1819
The Panic of 1819 was the first major financial crisis in the United States, and had occurred during the political calm of the Era of Good Feelings. The new nation previously had faced a depression following the war of independence in the late 1780s and led directly to the establishment of the...

 and the situation leading up to McCulloch v. Maryland
McCulloch v. Maryland
McCulloch v. Maryland, , was a landmark decision by the Supreme Court of the United States. The state of Maryland had attempted to impede operation of a branch of the Second Bank of the United States by imposing a tax on all notes of banks not chartered in Maryland...

17 U.S. 316 (1819).

Maryland
Maryland
Maryland is a U.S. state located in the Mid Atlantic region of the United States, bordering Virginia, West Virginia, and the District of Columbia to its south and west; Pennsylvania to its north; and Delaware to its east...

 adopted a policy to restrict banks, by placing a tax on any bank that was not chartered by the state legislature. This tax was either 2% of all assets or a flat rate of $30,000. That meant that the Baltimore Branch would have to pay this hefty tax. The State, through John James, an informer intent on receiving half of the fine to be levied against the offending bank, pursuant to the restricted state statute recently adopted, filed suit against McCulloch, as the representative of the bank, in a county court. The case made its way through the courts
United States federal courts
The United States federal courts make up the judiciary branch of federal government of the United States organized under the United States Constitution and laws of the federal government.-Categories:...

, all the way up to the United States Supreme Court, where the tax by the state of Maryland was ultimately struck down. Daniel Webster
Daniel Webster
Daniel Webster was a leading American statesman and senator from Massachusetts during the period leading up to the Civil War. He first rose to regional prominence through his defense of New England shipping interests...

, the Bank's attorney as well as director of its Boston branch, successfully argued the case before the Supreme Court.


Bank's decline


By the early 1830s, President Jackson had come to thoroughly dislike the Second Bank of the United States because of its fraud and corruption. Jackson then had an investigation done on the Bank which he said established “beyond question that this great and powerful institution had been actively engaged in attempting to influence the elections of the public officers by means of its money.” Although its charter was bound to run out in 1836, Jackson wanted to "kill" the Second Bank of the United States even earlier. Jackson is considered primarily responsible for its demise, seeing it as an instrument of political corruption and a threat to American liberties. The head of the Second Bank during Jackson's presidency, Nicholas Biddle
Nicholas Biddle (banker)
Nicholas Biddle was an American financier who served as the president of the Second Bank of the United States.-Ancestry and early life:...

, had decided to seek an extension of the bank's charter four years early, in 1832. Henry Clay helped to steer the re-chartering bill through Congress, but Jackson then vetoed it.

In his message regarding his veto, Jackson used language which appeared to resonate mostly with common citizens while attacking the predominantly rich and in many cases foreign stockholders of the current bank. The veto message "broke with all previous tradition, spelling out for the first time a sitting president's legislative preferences."

Biddle dismissed the veto message as a "manifesto of anarchy." Senator Daniel Webster
Daniel Webster
Daniel Webster was a leading American statesman and senator from Massachusetts during the period leading up to the Civil War. He first rose to regional prominence through his defense of New England shipping interests...

 of Massachusetts, who was on retainer as the bank's legal counsel and was also Director of its Boston branch, suggested that the message was a political ploy to support Jackson's re-election campaign against Henry Clay. Clay himself described the message as "hardly reconcilable with the genius of representative government." In any case, Jackson defeated Clay in November.

The Second Bank of the United States thrived from the tax revenue that the federal government regularly deposited. Jackson struck at this vital source of funds in 1833 by instructing his Secretary of the Treasury to deposit federal tax revenues in state banks, soon nicknamed "pet banks
Pet banks
Pet banks is a pejorative term for state banks selected by the U.S. Department of Treasury to receive surplus government funds in 1833. They were also named "Wildcat Banks". They were made among the big U.S...

" because of their loyalty to Jackson's party.
In September 1833, Secretary of the Treasury Roger B. Taney
Roger B. Taney
Roger Brooke Taney was the fifth Chief Justice of the United States, holding that office from 1836 until his death in 1864. He was the first Roman Catholic to hold that office or sit on the Supreme Court of the United States. He was also the eleventh United States Attorney General. He is most...

 transferred the government's Pennsylvania deposits in the Second Bank of the United States to the Bank of Girard in Philadelphia. This was the successor bank to the Bank of Stephen Girard. Stephen Girard
Stephen Girard
Stephen Girard was a French-born, naturalized American, philanthropist and banker. He personally saved the U.S. government from financial collapse during the War of 1812, and became one of the wealthiest men in America, estimated to have been the fourth richest American of all time, based on the...

 had purchased the assets of the First Bank of the United States when its charter was not renewed in 1811. He then named his new bank the Bank of Stephen Girard. He became a major financier of the War of 1812, including most of the war loan of 1813. He was the original organizer and a major shareholder of the Second Bank. He died in 1841.

The Second Bank of the United States soon began to lose money. Nicholas Biddle
Nicholas Biddle (banker)
Nicholas Biddle was an American financier who served as the president of the Second Bank of the United States.-Ancestry and early life:...

, desperate to save his bank, called in all of his loans and closed the bank to new loans. This angered many of the bank's clients, causing them to pressure Biddle to re-adopt its previous loan policy. This then triggered Biddle's Panic.

Some anti-Jacksonians converted their outrage into political action. Under guidance from Webster and Clay, in 1833 they formed the Whig Party
Whig Party (United States)
The Whig Party was a political party of the United States during the era of Jacksonian democracy. Considered integral to the Second Party System and operating from the early 1830s to the mid-1850s, the party was formed in opposition to the policies of President Andrew Jackson and his Democratic...

. If the Whigs and anti-Jackson National Republicans could gain enough votes in Congress in the 1836 election to override a second Jackson veto, they could extend the bank's charter. They did not get enough new members to override a veto. Because of this and the numerous economic Panics during the preceding years, Congress did not send another bank charter extension bill to Jackson.

The Second Bank of the United States was left with little money and, in 1836, its charter expired and it turned into an ordinary bank. Five years later, the former Second Bank of the United States went bankrupt.

Current building use


Since the Bank's closing in 1841, the edifice has performed a variety of functions. As of 2006, it is included as one of the main structures in Independence National Historical Park
Independence National Historical Park
Independence National Historical Park is a United States National Historical Park in Philadelphia that preserves several sites associated with the American Revolution and the nation's founding history. Administered by the National Park Service, the park comprises much of the downtown historic...

 in downtown Philadelphia, alongside many other important early American structures such as Independence Hall and the Philadelphia Merchants' Exchange
Merchants' Exchange Building (Philadelphia)
Built between 1832 and 1834, the Merchants' Exchange Building, is located on the triangular site bounded by Dock Street, Third Street, and Walnut Street. This monumental office building, designed by architect William Strickland, operated as a brokerage house in the nineteenth century...

.

The structure is open daily free of charge and serves as an art gallery, housing a large and famous collection of portraits of prominent early Americans painted by Charles Willson Peale
Charles Willson Peale
Charles Willson Peale was an American painter, soldier and naturalist. He is best remembered for his portrait paintings of leading figures of the American Revolution, as well as establishing one of the first museums....

 and many others.



Architecture



The architect of the Second Bank of the United States was William Strickland
William Strickland (architect)
William Strickland , was a noted architect in nineteenth-century Philadelphia, Pennsylvania and Nashville, Tennessee.-Life and career:...

 (1788–1854), a former student of Benjamin Latrobe
Benjamin Latrobe
Benjamin Henry Boneval Latrobe was a British-born American neoclassical architect best known for his design of the United States Capitol, along with his work on the Baltimore Basilica, the first Roman Catholic Cathedral in the United States...

 (1764–1820), the man who is often called the first professionally-trained American architect
Architect
An architect is a person trained in the planning, design and oversight of the construction of buildings. To practice architecture means to offer or render services in connection with the design and construction of a building, or group of buildings and the space within the site surrounding the...

. 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
New Orleans Mint
The New Orleans Mint operated in New Orleans, Louisiana, as a branch mint of the United States Mint from 1838 to 1861 and from 1879 to 1909. During its years of operation, it produced over 427 million gold and silver coins of nearly every American denomination, with a total face value of over...

, Dahlonega
Dahlonega Mint
The Dahlonega Mint was a branch of the United States Mint. It was located at 34°31.8′N 83°59.2′W at Dahlonega, Lumpkin County, Georgia. Coins produced at the Dahlonega Mint bear the "D" mint mark. That mint mark is used today by the Denver Mint, which opened many years after the Dahlonega Mint...

, Mechanics National Bank
Mechanics National Bank
The Mechanics National Bank was a Philadelphia, Pennsylvania, bank founded by and geared toward mechanics.-History:In 1809, Philadelphia was already known for both skilled workers and as America's main financial center, but the merchants who controlled its banks had little interest in lending to...

 (also in Philadelphia) and Charlotte
Charlotte Mint
The Charlotte Mint was a branch of the United States Mint that came into existence on March 3, 1835 during the Carolina Gold Rush. The first gold mine in the United States was established in North Carolina at the Reed Gold Mine...

 branch mints in the mid-to-late 1830s, as well as the second building for the main U.S. Mint in Philadelphia
Philadelphia Mint
The Philadelphia Mint was created from the need to establish a national identity and the needs of commerce in the United States. This led the Founding Fathers of the United States to make an establishment of a continental national mint a main priority after the ratification of the Constitution of...

 in 1833.

Strickland's design for the Second Bank of the United States remains fairly straightforward. 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
Stylobate
In classical Greek architecture, a stylobate is the top step of the crepidoma, the stepped platform on which colonnades of temple columns are placed...

. On top of these, Strickland placed eight severe Doric
Doric order
The Doric order was one of the three orders or organizational systems of ancient Greek or classical architecture; the other two canonical orders were the Ionic and the Corinthian.-History:...

 columns , which are crowned by an entablature containing a triglyph
Triglyph
Triglyph is an architectural term for the vertically channeled tablets of the Doric frieze, so called because of the angular channels in them, two perfect and one divided, the two chamfered angles or hemiglyphs being reckoned as one. The square recessed spaces between the triglyphs on a Doric...

 frieze
Frieze
thumb|267px|Frieze of the [[Tower of the Winds]], AthensIn architecture the frieze is the wide central section part of an entablature and may be plain in the Ionic or Doric order, or decorated with bas-reliefs. Even when neither columns nor pilasters are expressed, on an astylar wall it lies upon...

 and simple triangular pediment
Pediment
A pediment is a classical architectural element consisting of the triangular section found above the horizontal structure , typically supported by columns. The gable end of the pediment is surrounded by the cornice moulding...

. 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 from the exposure to the elements of weak parts of the stone. 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
Federal architecture
Federal-style architecture is the name for the classicizing architecture built in the United States between c. 1780 and 1830, and particularly from 1785 to 1815. This style shares its name with its era, the Federal Period. The name Federal style is also used in association with furniture design...

 in architecture used for the First Bank, whose building 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.

See also

  • Banking in the Jacksonian Era
    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...

  • Federal Reserve Act
    Federal Reserve Act
    The Federal Reserve Act is an Act of Congress that created and set up the Federal Reserve System, the central banking system of the United States of America, and granted it the legal authority to issue Federal Reserve Notes and Federal Reserve Bank Notes as legal tender...

  • History of central banking in the United States
    History of central banking in the United States
    This article is about the history of central banking in the United States, from the 1790s to the present.-Bank of North America:Some Founding Fathers were strongly opposed to the formation of a central banking system; the fact that England tried to place the colonies under the monetary control of...

  • Panic of 1837
    Panic of 1837
    The Panic of 1837 was a financial crisis or market correction in the United States built on a speculative fever. The end of the Second Bank of the United States had produced a period of runaway inflation, but on May 10, 1837 in New York City, every bank began to accept payment only in specie ,...


External links