Bank of the United States


Also found in: Acronyms, Encyclopedia, Wikipedia.

Bank of the United States

The American Revolutionary War resulted in the emergence of a new country faced with the task of establishing a fundamental basis for government embodying the principles of freedom for which the colonists had fought. The need for a sound financial system was most urgent, and this was remedied by the creation of the First Bank of the United States in 1791.

Alexander Hamilton, first U.S. secretary of the treasury, devised the original plan for the bank. It was argued that the Constitution did not empower Congress to institute such a bank, and that the bank was partial to commercial interests as opposed to those of farmers. Congress, nonetheless, endorsed the passage of the bank's charter.

The bank, located in Philadelphia, began with assets of $10 million, one-fifth of this money furnished by the federal government, the remainder provided by outside investors. Its affairs were administered by twenty-five directors. The bank's powers were limited to commercial enterprises, and loans were processed at six percent interest. The first bank performed well, but renewal of its charter in 1811 was thwarted by the argument against its constitutionality and by the opposition of agricultural workers. The First Bank of the United States closed for business in 1811 with a profit.

The need for a second national bank became apparent in 1816, after the War of 1812 catapulted the country into a financial crisis. However, the constitutionality of such a bank was still in dispute. In mcculloch v. maryland, the Supreme Court, in an opinion by Chief Justice John Marshall, held that Congress possessed the authority to create a national bank and that the states lacked the power to tax it (17 U.S. [4 Wheat.] 316, 4 L. Ed. 579 [1819]).

The new bank began on a grander scale, with capital amounting to $35 million. For the first three years it tottered on the verge of disaster under the mismanagement of its chief administrator, William Jones. When Jones left the bank in 1819, Langdon Cheeves assumed his duties, and the bank became sound. By the time Nicholas Biddle became president in 1823, the bank was functioning efficiently, and it remained a reliable system of finance for the next ten years.

In 1832, Biddle requested renewal of the charter, which was due to expire in 1836. The bank again met opposition by those who believed it had become too powerful. President Andrew Jackson led the opposition, and the controversy became an issue in his presidential election campaign in 1832 against Henry Clay. Clay, an advocate of the bank, had encouraged Biddle to apply for the charter renewal earlier than necessary.

The reelection of Andrew Jackson sounded the death knell for the Second Bank of the United States. He rejected the renewal of the charter and in 1833 deposited federal monies into selected state banks, termed "pet banks." The loss of federal funds greatly crippled the effectiveness of the bank, and it closed in 1836, the year its charter expired.

Further readings

Brown, Marion A. 1998. The Second Bank of the United States and Ohio, 1803–1860: A Collision of Interests. Lewiston, N.Y.: Edwin Mellen.

Cowen, David Jack. 2000. The Origins and Economic Impact of the First Bank of the United States, 1791-1797. New York: Garland.

Cross-references

Banks and Banking.

References in periodicals archive ?
Government's official export credit agency, The Export-Import Bank of the United States has been promoting trade in developing markets since 1934.
The addition of the Export-Import Bank of the United States as a client represents a big step for Mayer Hoffman McCann P.
Export-Import Bank of the United States is an independent federal government agency that helps finance the sale of U.
6 /PRNewswire/ -- The Export-Import Bank of the United States today signed two loan guarantees to support the sale of $379.
The amount of freedom afforded by solutions based on open source, their low cost and the fast pace of innovation that they encourage have driven the Federal Reserve, the central bank of the United States, like many other organizations, to make investments in Linux-based infrastructure.
A: The agreement is between the Export-Import Bank of the United States, the Ministry of Fuel and Energy of the Russian Federation, the Ministry of Finance of the Russian Federation and the Central Bank of the Russian Federation.
Copa Airlines announced today that it has received loan guarantees from the Export-Import Bank of the United States (Ex-Im Bank) to support the purchase of Boeing 737-700 aircraft, eight winglet ship sets and a spare engine.
Brody has been sworn in as the 17th head of the Export-Import Bank of the United States after being nominated by President Clinton and confirmed by the U.
Chicago-based Loop Capital Markets has arranged medium-term financing from the Export-Import Bank of the United States (Ex-Im Bank) for the state government of Jigawa, Nigeria to purchase $6 million of U.
Macomber, immediate past-president of the Export- Import Bank of the United States, has been elected to the board of directors, effective Feb.
The report identified the following ECAs as the leading sources of financing for energy-intensive projects and exports: the Compagnie Francaise d'Assurance pour le Commerce Exterieur (France), the Export Credit Guarantee Department (United Kingdom), the Export Development Corporation (Canada), Export Import Bank of Japan (now the Japan Bank for International Cooperation), the Export-Import Bank of the United States, Hermes Kreditversicherung-AG (Germany), Kreditanstalt fur Wiederaufbau (Germany), the Overseas Private Investment Corporation (United States), and Sezione Speciale Per l'Assicurazione Del Credito All'Esportazione (Italy).