Siteseen Logo

Second Bank of the United States

James Madison

Second Bank of the United States: James Madison was the 4th American President who served in office from March 4, 1809 to March 4, 1817. One of the important events during his presidency was the establishment of the Second Bank of the United States that played an important role in the economic plan referred to as Henry Clay's American System.

The Second Bank of the United States
The name 'Bank of the United States' was given to the two national banks established by the U.S. Congress to serve as government fiscal (financial) agents and as depositories (stores) for federal funds.

The First Bank of the United States was in existence from 1791 to 1811. The Second Bank of the United States was in existence from 1816 to 1836.

History of the Second Bank of the United States for kids: Background History of the First Bank
The American Currency History started in the Colonial Era, before the Revolutionary War. The First Bank of the United States was chartered by a private company for a term of twenty years, by the United States Congress from 1791 to 1811. Its was established in order to handle the massive Revolutionary war debt and to create a standard form of currency. When the 20 year charter was up, Congress would be required to approve or deny renewal of its charter. The institute was well managed and paid good dividends but its charter was not renewed. Many politicians objected to the position played by the private sector in its operations believing it should be under complete government control. States began to open their own banks and issue their own currency . The bill to re-charter failed in the House of Representatives on January 24, 1811.

History of the Second Bank of the United States for kids: War of 1812
The need to establish the Second Bank of the United States
arose quickly when the War of 1812 erupted beginning on June 18, 1812 and lasting for 2 years and 8 months ending when the Treaty of Ghent was signed on December 24, 1814. Once again the United States was faced with another colossal war debt. The War of 1812 against the British ended with a stalemate but the United States government realized that they needed to become independent from all the European countries in both a commercial and economic sense. The government needed to pay its war debts and create a climate in which American trade would flourish by providing money and credit to the industrialists. The Second Bank of the United States was part of a plan to reach these goals. President James Madison, with the approval of Congress, granted the charter in 1816.

The American System
The need to establish the Second Bank of the United States coincided with the ideas of
Henry Clay and the 'American System'. The American System was a broad economic plan aimed at improving the economy of the US. Establishing the Second Bank of the United States would provide the opportunity to offer easy credit to Americans.

The Banknotes
Unlike the promissory banknotes issued by state banks, the Second's banknotes would be accepted throughout the country and would become the only banknotes accepted for payment of federal taxes.

Facts about the Second Bank of the United States for kids
Interesting History Facts about the History of the Second Bank of the United States are detailed below.

Its twenty year charter ran from February 1816 to January 1836. Plans were initially formulated in 1814 by James J. Dallas, secretary of the treasury
The charter was signed into law by President James Madison on April 10, 1816
It began operations at its main branch in Philadelphia on January 7, 1817
By 1832 it had 25 branches which helped to reach Henry Clay's goals in the American Plan of cheap loans for farmers, economic growth and westward expansion

The United States government owned 20% of its capital but Second Bank of the United States while private investors owned the rest - it was still a privately held banking corporation.

The Second was the envy of state banks because, although a commercial enterprise, it received all of the government’s deposits including foreign customs duties, it could make more loans.

The institution was answerable to the US Treasury and Congress and subject to Treasury Department inspection

The institution comprised of 25 directors, of which 5 were appointed by the President, subject to Senate approval

It was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank

It was the only banking institute permitted to have offices across the nation.

The first president of the institute was William Jones, a political appointee who had gone bankrupt

The institute was poorly run under William Jones, first extending far too much credit, then quickly restricting it.

The restrictions on credit led to the Panic of 1819, often described as the first Important financial crisis in the United States.

William Jones resigned his position in 1819 and was replaced by Langdon Cheves, a politician and attorney from South Carolina

The Panic of 1819 was followed by a steep recession that saw unemployment soar, interest rates spike and the prices of farm goods plummet

Poor management practices continued under Langdon Cheves who resigned in 1823

A wealthy politician from Philadelphia called Nicholas Biddle, who had already served on the Board of Directors, was elected to replace Langdon Cheves

Nicholas Biddle successfully turned the institute around bringing a new period of economic expansion

In 1824 its new building was opened at 420 Chestnut Street in Philadelphia

In 1828 Andrew Jackson was elected President of the U. S. and brought with him a strong distrust of banks in general which started the Bank War and a fight against unfair business practices.

In 1832 a request was submitted to Congress to renew the charter four years before the charter was due to expire.

President Andrew Jackson vetoed the bill to re-charter in 1832

In 1833 President Andrew Jackson ordered all federal government deposits to be removed from the Second Bank of the United States and deposited into state banks.

The Second Bank’s charter expired in 1836 and the bank closed

Nicholas Biddle attempted to keep the institution going as a commercial bank, but the project failed and closed in 1841.

US American History
1801-1828: Evolution Era

Privacy Statement

Cookie Policy

© 2017 Siteseen Ltd