Biddle, Nicholas

BIDDLE, NICHOLAS

Nicholas Biddle (1786–1844) established the Bank of the United States as a prototype of the modern central banking system. Using the power of the bank to expand and contract the money supply, Biddle played a prominent role in creating a stable currency and in bringing order to the chaotic American marketplace. A true American aristocrat, he read classics in their original language and collected art. Following his retirement from banking, he helped establish Girard College in Philadelphia and held literary salons at Andalusia, his country estate.

Biddle was born in Philadelphia, the son of Charles Biddle and Hannah Shepard. Biddle's mother was the daughter of a North Carolina merchant; his father was a successful merchant. Biddle was a precocious student and was admitted to the University of Pennsylvania when he was ten years old. His parents took a keen interest in his education. At age thirteen they had him transferred to Princeton University as a sophomore. He graduated in September 1801. At the age of fifteen, Biddle was the highest ranking student in his class.

In 1804 Biddle went to France as a member of the American legation, where he worked on claims resulting from the Louisiana Purchase. After one year, he took a tour of Europe and Greece, then settled in London where he worked for two years as secretary for future President James Monroe (1817–1875). During the time he spent overseas, Biddle acquired valuable insights into the problems and techniques of international finance.

In 1810 Biddle met and later married Jane Craig, whose father's estate was one of the largest in Philadelphia. That same year he was elected to the Pennsylvania legislature. The highlight of his term was an eloquent defense of the First Bank of the United States.

In 1822 Biddle assumed the presidency of the Second Bank of the United States—the first effective central bank in U.S. history. The bank carried out regular commercial functions, and also acted as a collecting and disbursing agent for the federal government. Under Biddle's guidance, the bank expanded to twenty-nine branches and controlled one-fifth of the country's loans and bank notes in circulation.

Biddle was a brilliant administrator who maintained complete control over the Bank of the United States. His political instincts, however, were less astute: He believed that any reasonable person must agree with him on the value of the bank to the nation's economy. His hard—headed convictions proved disastrous for the bank.

By 1828 the central bank was under attack from President Andrew Jackson (1829–1837) whose personal experience had given him a deep mistrust of financial institutions. Uncertain of the bank's future, Biddle decided to press for re-chartering the bank in 1832, four years before the bank's original charter required the action. Jackson vetoed the move, publicly denouncing the bank as a monopoly that was under foreign influence. Though the reputation of the bank had improved under Biddle's leadership, public opinion favored Jackson's position.

Bolstered by his supporters, Jackson resolved to destroy the bank. He directed the removal of almost $10 million in government deposits, which were placed in state or "pet banks." Biddle responded by curtailing loans. Though the move may have been necessary to protect the bank, the restriction of credit dealt a serious blow to the US economy. Bankruptcies multiplied while wages and prices declined. These hardships turned people against the bank.

The bank's federal charter was terminated in 1836, but it was granted a state charter to operate as the Bank of the United States of Pennsylvania. The frenzied speculation that followed the loss of stability that the central bank had provided the Panic of 1837. Biddle, however, was still the most prominent banker in the country. As President of the Bank of the United States of Pennsylvania, Biddle played an important role in trying to shore up the nation's banking system. He also intervened heavily in the cotton market to prevent its collapse.

With order seemingly restored, Biddle resigned his position in March 1839. The bank continued to operate, but due to falling cotton prices and mismanagement by the bank's directors, its plight grew steadily worse. The bank collapsed in February 1841, taking Biddle's personal fortune with it. During his final years, Biddle faced many lawsuits. Although arrested on charges of criminal conspiracy in 1842, he was exonerated. Legal problems continued to pursue him until his death in 1844.

See also: Bank of the United States (First National Bank), Bank of the United States (Second National Bank), Bank War, Central Bank, Andrew Jackson, Panic of 1837

FURTHER READING

Govan, Thomas Payne. Nicholas Biddle: Nationalist and Public Banker, 1786–1844. Chicago: University of Chicago Press, 1959.

Hammond, Bray. Banks and Politics in America from the Revolution to the Civil War. Princeton, New Jersey: Princeton University Press, 1957.

McFaul, John M. The Politics of Jacksonian Finance. Ithaca, New York: W.W. Norton and Co., 1968.

Temin, Peter. The Jacksonian Economy. New York: W.W. Norton and Co., 1969.

Weisberger, Bernard A. "The bank war." American Heritage, July–August 1997.

Wilburn, Jean Alexander. Biddle's Bank: The Crucial Years. New York: Columbia University Press, 1967.

using the power of the bank to expand and contract the money supply, biddle played a prominent role in creating a stable currency and in bringing order to the chaotic american marketplace.