The nation made its 2nd attempt at creating a central bank in 1816 adhering to an economic downturn. But, choose its predecessor, the institution’s charter was not renewed.

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This 1840s lithographtitled "Custom House, late U.S. Bank" reflects the building that housed the second Bank.Image via Library agency of Philadelphia

In the year leading as much as the battle of 1812, the U.S. Economy had to be on the upswing. The war with Britain, however, disrupted international trade. As among the joined States’ biggest trading partners, Britain used its navy to blockade U.S. Trade with various other nations. The war prevented U.S. Farmers and manufacturers native exporting merchandise, blocked U.S. Merchants and also fisherman from cruising the high seas, and curtailed federal government revenues, i beg your pardon were acquired mainly native tariffs on trade. By 1815, the joined States uncovered itself greatly in debt, much like the had gone to the end of the Revolutionary battle thirty year earlier.

In January 1815, the joined States had actually been there is no a national bank for virtually four years. Many world thought the a follower would again carry out relief for the country’s ailing economic situation and assist in paying its battle debt. Six men figured prominently in creating this new entity, typically referred to together the second Bank the the joined States: the financiers man Jacob Astor, David Parish, Stephen Girard, and also Jacob Barker; Alexander Dallas, that would become secretary that the Treasury in 1814; and Rep. John C. Calhoun of south Carolina. These men thought that reestablishing a national financial institution would solve some of the country’s economic woes. In particular, Astor, Parish, Girard, and also Barker – as lenders and also financiers -- felt the a national bank would restore a stable currency, thereby avoiding bouts that inflation and insuring their organization interests.

Establishing a second National Bank

Despite vast support for reestablishing a nationwide bank, the roadway to re-creation was not smooth. In January 1814, Congress received a petition signed through 150 businessmen from new York City, urging the legislative body to create a 2nd national bank. In February, and again in November, Calhoun placed forth to plan to produce a financial institution that would certainly be headquartered in the ar of Columbia, yet his bills did not pass.

In April 1814, president James Madison, who had opposed the creation of the first Bank the the United says in 1791, reluctantly admitted come the need for one more national bank. He believed a bank was essential to finance the war v Britain. Yet later that year, development in tranquility negotiations led Madison to retract his support for the proposed nationwide bank.

After tranquility with Britain come in 1815, conference rejected brand-new efforts to create the bank. In the months that followed, however, the federal government’s financial position deteriorated amid a broader economic downturn. Countless state-chartered financial institutions had stopped redeeming your notes, which encouraged Madison and also his advisers that the moment had pertained to move the nation toward a more uniform, stable document currency. In his yearly report, Dallas again referred to as for the establishment of a nationwide bank. After lot debate and a couple of added attempts, Madison finally signed in April 1816 one act creating the second Bank of the unified States.

Bank Structure and Operations

The bank opened for organization in Philadelphia in January 1817. It had much in usual with its forerunner, consisting of its functions and structure. It would act together fiscal agent because that the federal government — holding its deposits, do its payments, and also helping it issue debt to the general public — and it would certainly issue and redeem banknotes and also keep state banks’ issuance of notes in check. Additionally like that predecessor, the financial institution had a twenty-year charter and also operated as a commercial financial institution that welcomed deposits and also made loans to the public, both businesses and also individuals. Its board included twenty-five directors, with five appointed by the president and also confirmed by the Senate.

The capitalization for the second Bank to be $35 million, considerably greater than the $10 million underwriting the the very first Bank. Subscriptions go on sale in July 1816, and also the sale period was set at three weeks. To make it much easier for investors to purchase subscriptions, sales were organized in twenty cities. After 3 weeks, $3 million that scrips remained unsold, therefore Philadelphia banker Stephen Girard purchase them.

The Bank’s with was much greater than that that its predecessor. Its branches ultimately totaled twenty-five in number, compared to only eight because that the first Bank. The considerable branch network aided the country’s from the west expansion and its economic growth in several ways. The branches listed credit to businesses and farmers, and these loans helped finance the manufacturing of items and farming output as well as the delivery of these goods to domestic and also foreign destinations. Moreover, the network helped move the money deposited in the branches to various other parts of the nation, facilitating both the government’s capacity to make payments and also the branches’ capacity to it is provided credit.

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Unlike modern main banks, the bank did not collection monetary plan as we know it today. It additionally did not regulate, host the make reservation of, or act as a lender that last resort for other financial institutions. Nonetheless, its importance as among the largest U.S. Corporations and its branches’ vast geographic place in the expanding economy enabled it to command a rudimentary monetary policy. The Bank’s notes, backed by comprehensive gold reserves, provided the country a much more stable nationwide currency. By controlling its lending policies and the circulation of funds with its accounts, the bank could — and also did — change the supply of money and also credit in the economy and hence the level that interest rates charged to borrowers.