Bank of the United States
A talented administrator and pragmatic businessman, Nicholas Biddle developed the Bank of the United States into a prototype of the modern central banking system. Using the power of the Bank to expand and contract the money supply, he played a prominent role in bringing order to the chaotic American marketplace and creating a stable currency.
A member of one of early America's most aristocratic families, Nicholas Biddle was born January 8, 1786, in Philadelphia. His parents were Charles Biddle, a successful merchant and vice president of the Supreme Executive Council of Pennsylvania, and Hannah Shepard, the daughter of a North Carolina merchant. In 1810, Nicholas Biddle met and eventually married Jane Craig, whose father's estate was one of the largest in Philadelphia.
Biddle was a precocious student whose parents took a keen interest in his education. He was admitted to the University of Pennsylvania at the age of 10 and three years later transferred to Princeton University as a sophomore. He graduated from there as valedictorian (the top-ranked person in his class) in September 1801 at the age of only 15.
In the fall of 1804, Biddle joined General John Armstrong as a member of the American legation (diplomatic mission) to France, where he worked on claims resulting from the Louisiana Purchase. After spending about a year in that post, he toured Europe and Greece and then served in London as secretary to James Monroe, who was at that time the U.S. minister to Great Britain. It was during his lengthy stay overseas that Biddle gained valuable insights into the problems and techniques of international finance.
Biddle returned to the United States in September 1807. Three years later, in October 1810, he was elected to the Pennsylvania legislature. The highlight of his term came when he mounted an eloquent defense of the first Bank of the United States, which was facing a hostile attempt to deny its charter to operate. He declined renomination until 1812, when he returned to the legislature to support U.S. involvement in the War of 1812.
In 1818, Biddle was defeated in a race for the U.S. Congress. He was subsequently passed over by then-President Monroe for appointment to office because of their differing political views. However, after mismanagement of the second Bank of the United States prompted the removal of its president, Biddle was named one of five directors of the troubled institution.
Four years later, in 1822, Biddle assumed the presidency of the Bank. During his tenure, he dropped the restrictions his predecessor had imposed upon branch operations. The enlargement of credit operations stimulated the economy, which was still suffering from the effects of the Panic of 1819. Biddle increased the Bank's profits and eventually gained complete control over its operations. Under his guidance, the Bank expanded to 29 branches. It also controlled one-fifth of the country's loans and bank notes in circulation and one-third of the total bank deposits and specie (gold and silver).
Although he tried to remain neutral in the presidential race between John Quincy Adams and Andrew Jackson in 1828, Biddle came under fire amid allegations that some branches had exercised improper influence by refusing loans to Jackson's supporters. Biddle's defensive handling of the accusations only made the situation worse. In addition, Jackson harbored a strong personal prejudice against banks that was based not only on a general resentment of the power they wielded but also on his own unfortunate dealings with them. All of this caused the relationship between the Bank and the government to deteriorate rapidly following Jackson's election to the presidency.
Uncertain about the Bank's future, Biddle decided to ask for it to be rechartered in 1832 (which was four years earlier than necessary). Because it was an election year, he hoped that Jackson would not dare oppose the request for fear of losing popularity. Biddle had miscalculated, however. Jackson not only vetoed the recharter, he also publicly denounced the Bank of the United States as a monopoly that was under too much foreign influence. In spite of the goodwill Biddle had managed to create for the Bank, public opinion soon turned around to favor Jackson's point of view.
Bolstered by his supporters, Jackson resolved to destroy the Bank. He directed the removal of almost $10 million in government deposits that were then placed in state institutions dubbed "pet banks." Biddle responded by curtailing loans. Though such a move may have been necessary to protect the Bank, the restriction of credit dealt a serious blow to the U.S. economy. Bankruptcies multiplied, while wages and prices declined. Jackson made the crisis worse by declaring that the government would no longer accept branch drafts issued by the Bank for the payment of taxes.
In 1836, Biddle was forced to secure a charter from the Pennsylvania legislature to operate as a state bank. The loss of a central bank to provide order, combined with the overheating effect of government deposits in state banks, led to frenzied speculation and the Panic of 1837. Banks across the country—including Biddle's new United States Bank of Pennsylvania—were forced to suspend payment of specie for the redemption of notes. Biddle was still the most prominent banker in the nation despite his ongoing battles with Jackson, he played an important role in trying to shore up the U.S. banking system. He managed to resume specie payments in August 1838 and also intervened heavily in the cotton market to prevent its collapse.
With order seemingly restored, Biddle resigned from his post in March 1839. That summer, however, the world was again plunged into financial chaos. Falling cotton prices and mismanagement by the Bank's directors led to a second suspension of specie payments in October 1839. The Bank continued to operate, but its situation grew more and more unstable. Finally, in February 1841 it collapsed, taking Biddle's personal fortune with it.
The Bank's failure made Biddle the target of many lawsuits during the final years of his life. In 1842 he was arrested on charges of criminal conspiracy. Although he was eventually found innocent, he continued to be plagued with other legal problems until his death in 1844.
Social and Economic Impact
Biddle was a brilliant administrator who maintained complete control over the Bank of the United States. Unfortunately, his political instincts were less astute. Because he recognized the value of a central bank to the nation's economy, he believed that all reasonable citizens recognized it as well. But his naivete proved disastrous.
Despite his failures, Biddle remains an imposing figure in American history. He understood the potential of the American economy and formulated a method for realizing it. With his background in international finance and relations, Biddle felt that a powerful central banking system would establish American prosperity and make the country stronger and more secure.
Chronology: Nicholas Biddle
1801: Graduated as valedictorian from Princeton University at age 15.
1804: Worked in France as member of American legation.
1810: Elected to Pennsylvania legislature.
1818: Appointed director of Bank of the United States.
1822: Became president of Bank of the United States.
1836: Rechartered Bank of the United States as United States Bank of Pennsylvania.
1841: United States Bank collapsed.
Although the American economy survived the crisis of 1839, it then experienced a period of exuberant economic growth characterized by wild speculation and uncertainty. By the late 1800s, the ruthless and sometimes illegal business activities of the so-called "robber barons" (including such notables as John D. Rockefeller, Jay Gould, and Cornelius Vanderbilt) had prompted calls for reform. One such change involved reestablishing a central banking system very similar to Biddle's bank. But the struggle continues among policymakers to establish a system of "managed" economic growth without curtailing freedom or the fiercely independent spirit that characterizes American entrepreneurs.
Sources of Information
Caterall, Ralph C.H. The Second Bank of the United States. Chicago: University of Chicago Press, 1903.
Govan, Thomas Payne. Nicholas Biddle: Nationalist and Public Banker, 1786-1844. Chicago: University of Chicago Press, 1959.
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.
Wilburn, Jean Alexander. Biddle's Bank: The Crucial Years. New York: Columbia University Press, 1967.
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
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.
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.
Nicholas Biddle (1786-1844) was president of the Second Bank of the United States from 1823 to 1836. He was an early advocate of the debated principle of central banking, and under his direction the Bank performed most of the functions of present-day central banks.
Nicholas Biddle was born into a prominent Philadelphia family on Jan. 8, 1786. He attended the University of Pennsylvania and graduated from the College of New Jersey at Princeton in 1801. He began the study of law, but, too young to enter practice, he lived in Europe from 1804 to 1807, first as secretary to John Armstrong, the U.S. minister to Napoleonic France, then as a traveler, and finally as a secretary to James Monroe, the U.S. minister in England.
Biddle then began practicing law but soon became dissatisfied. Between 1810 and 1823 he was the managing trustee of his wife's estate, one of the largest in Philadelphia; prepared the journals of the Lewis and Clark expedition for publication in 1814; edited (1812-1814) the Portfolio, a Philadelphia literary magazine; served in the lower house and senate of the Pennsylvania Legislature; prepared (1818) a digest of the Commercial Regulations of Foreign Countries with Which the United States Have Commercial Intercourse for the Department of State; and from January 1819 through 1821 was one of the five government directors of the Second Bank of the United States.
In January 1823 Biddle was elected president of the Bank—a mixed public and private institution—being acceptable to the government and the shareholders alike but serving as a director by presidential appointment. Under Biddle's administration the Bank, centered in Philadelphia with branches in the leading American commercial cities, performed a useful function for all economic interests and groups through facilitating the exchange of goods and payments in this predominantly commercial society. The currency supplied by the Bank, no matter where made payable, was received in most places at par, sometimes commanded a premium, and was never at a discount of more than 1/4 of 1 percent. Notes issued by local state banks circulated at par in the immediate vicinity of their issue, and this mixed national currency was elastic, uniform, sound, and completely adequate for the needs of the expanding economy. The developing transportation system, which united the vast geographical areas of the United States and connected them with Europe, was paralleled by a system of domestic and foreign exchange that facilitated payments and increased the profits of trade.
The American people as a whole seemed satisfied with the currency and credit system and the operations of the national bank, but President Andrew Jackson, who distrusted all banks, charged that the Second Bank of the United States was unconstitutional and that if its power was not checked it would enable a financial oligarchy to dominate the nation. Jackson began an assault upon the Bank in 1829, but many of the members of his party (the Democrats) in Congress did not agree. The Bank, in their opinion, was a useful and necessary arm of the Treasury, and they, in alliance with most of the opposition party (the National Republicans) rechartered the institution in 1832. President Jackson, angered by this defiance of his expressed will, vetoed the rechartering bill and in the fall of 1833 removed the government deposits from the Bank's custody.
Biddle refused to accept defeat. A successor bank, the United States Bank of Pennsylvania, was organized in 1836, and when the Panic of 1837—in part a product of Jackson's financial policies—struck the nation, Biddle almost single-handedly restored national prosperity within a year. He resigned from the Bank in April 1839, believing it and the nation safe and secure. But shortly afterward the Bank of England, itself in danger, renewed financial pressure on the United States, and 2 years later the United States Bank closed its doors.
This costly failure not only discredited Biddle but also the principle of central banking, and it was not until the early years of the 20th century that the United States, through the creation of the Federal Reserve Banks (1912), once more returned to the system that had provided the national economy with a uniform, sound, and elastic currency. Biddle, completely disgraced, died on Feb. 27, 1844, and the general verdict on him and his career was stated by William Cullen Bryant, a Jacksonian editor and poet, who reported that Biddle had died "at his country seat, where he had passed the last of his days in elegant retirement, which, if justice had taken place, would have been spent in the penitentiary."
The only biography of Nicholas Biddle is Thomas P. Govan, Nicholas Biddle: Nationalist and Public Banker (1959). Biddle's work as a banker has been extensively treated in Ralph C. H. Catterall, The Second Bank of the United States (1903); Fritz Redlich, The Molding of American Banking: Men and Ideas (2 vols., 1947-1951); Walter B. Smith, Economic Aspects of the Second Bank of the United States (1953); and Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (1957). An unfavorable view of Biddle is in Arthur M. Schlesinger, Jr., The Age of Jackson (1945). □
BIDDLE, NICHOLAS. (1750–1778). Continental naval officer. Pennsylvania. Born in Philadelphia on 10 September 1750, Nicholas Biddle went to sea at the age of 13, was shipwrecked on one voyage, and and joined the Royal Navy in 1770. Failing to get an assignment aboard a ship bound for polar exploration in 1773, Biddle gave up his naval commission and joined the expedition as a common seaman. On the subsequent exploration of the Arctic he made the acquaintance of Horatio Nelson, who also had sacrificed rank in the navy for this adventure.
Returning to America after this voyage, Biddle took the Patriot side and volunteered for duty. On 1 August 1775 he took charge of the Pennsylvania galley Franklin in the Delaware River defenses, but in December he became one of the first four captains of the Continental navy. Commanding the 14-gun Andrea Doria, which had a crew of 130, he took part in the naval operations led by Esek Hopkins in early 1776 that captured Forts Montague and Nassau in the Bahamas. After this, Biddle cruised in the North Atlantic, taking many supply ships whose cargoes were sent to General George Washington during the siege of Boston. In addition, he captured two armed transports carrying 400 Highlanders to Boston. He returned to Philadelphia with only five of his original crewmen, all the rest having been detached to man the captured ships. He replaced his original crew with volunteers taken from among his prisoners. Rewarded with command of the recently launched, 32-gun Randolph, Biddle was sent to the West Indies. There his prizes included the 20-gun True Briton and its convoy of three merchantmen, which he took into Charleston. He was held in that port for a time by the British blockade, but in February 1778 he sailed out with four small warships that had been fitted out by South Carolina and attached to him for operations.
Sighting a sail at 3 p.m. on 7 March 1778, Biddle made for it. Unfortunately it turned out to be the 64-gun British vessel, the Yarmouth, which destroyed the Randolph after a fierce twenty-minute action at close quarters. Biddle was wounded and so directed the battle from a chair on the quarterdeck. The Randolph blew up, and all but four of its 315 officers and men were lost.
revised by Michael Bellesiles