Bank of the United States Acts 1 Stat. 191 (1791) 3 Stat. 266 (1816)
BANK OF THE UNITED STATES ACTS 1 Stat. 191 (1791) 3 Stat. 266 (1816)
The first Bank of the United States (1791–1811) was chartered by Congress on a plan submitted by Secretary of the Treasury alexander hamilton as part of his financial system. Modeled on the century-old Bank of England, the national bank harnessed private interest and profit for public purposes. It received an exclusive twenty-year charter. It was capitalized at $10,000,000, of which the government subscribed one-fifth and private investors the remainder, one-fourth in specie and three-fourths in government stock. Located at Philadelphia and authorized to establish branches, it was to be the financial arm of government (a ready lender, a keeper and tranferrer of funds); through its powers to mount a large paper circulation and advance commercial credit, the bank would also augment the active capital of the country and stimulate enterprise. james madison had opposed the bank bill in Congress entirely on constitutional grounds. His arguments, turning on the absence of congressional power and invasion of the reserved rights of the states, were repeated in opinions submitted to President george washington by Attorney General edmund randolph and Secretary of State thomas jefferson. They were answered, convincingly in Washington's mind, by Hamilton's argument on the doctrine of implied powers.
The Second Bank of the United States (1816–1836) was an enlarged and revised version of the first. Republican constitutional objections had finally prevailed when Congress refused to recharter the first bank in 1811. But the disorganization of the country's finances during the War of 1812 led the Madison administration to propose a national bank. After several false starts, a plan was agreed upon by Congress in 1816. In 1791, there had been three state-chartered banks; in 1816 there were 260, and Congress acted to recover its abandoned power to regulate the currency. As the constitutional issue receded, controversy shifted to practical and technical questions of banking policy. Inept management, state bank jealousy, and severe financial pressure in 1818–1819 produced demands for revocation of the bank's charter. Aided by the Supreme Court's decision in mcculloch v. maryland (1819), the bank weathered this storm and under the efficient direction of Nicholas Biddle not only prospered but gained widespread public support in the 1820s. Nevertheless, President andrew jackson attacked the bank on financial, political, and constitutional grounds. Biddle and his political friends decided to make the bank the leading issue in the 1832 presidential election by seeking immediate renewal of the charter not due to expire until 1836. Congress obliged, and Jackson vetoed the recharter bill with a powerful indictment of the bank as a privileged moneyed institution that trampled on the Constitution. (See jackson ' s veto of the bank bill.)Asserting the independence of the three branches of government in the interpretation of the Constitution, he declared, "The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both." After Jackson's reelection, the ties between the government and the bank were quickly severed.
Merrill D. Peterson