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THE SECOND BANK

THE LIBRARY COMPANY OF PHILADELPHIA

A C H A P T E R I N T H E H I S TO RY O F C E N T R A L B A N K I N G

ACKNOWLEDGMENTS
The Federal Reserve Bank of Philadelphia thanks John Van Horne, director of The Library
Company of Philadelphia, and his staff, particularly Sarah Weatherwax and Nicole Joniec,
for their help in providing many of the images that appear in this publication. The Bank
also thanks the staff at Independence National Historical Park, particularly Karen
Stephens, for providing images and for their help in finding information.

THE SECOND BANK
A Chapter in the History of Central Banking

D

ecember 24, 1814. On

England states had threatened to secede from the

that day, representatives

Union and had offered little financial support to

of the U.S. government,

pay for the war. In addition, Congress had failed to

meeting in Belgium,

adequately address the question of financing the

signed the Treaty of

war and, consequently, had imposed no new taxes. It

Ghent, which ended

wasn’t until a year after the war started that Congress

hostilities between the U.S. and Great Britain in

raised $2 million by levying new taxes. Then the

the War of 1812.1 However, given the lack of swift

federal government assessed $3 million in taxes on

communications in those days, it would be several

the states, but this revenue wasn’t collected until 1814.

weeks before news of the treaty reached U.S. shores.

Ultimately, to pay for the war, the government sold

In the meantime, unaware that England and

short-term Treasury notes and long-term Treasury

her former colonies were once again at peace, Major

bonds.4 Nevertheless, the government’s credit had

General Andrew Jackson led his troops against the

declined because the war, overall, had produced no

British army just outside of New Orleans in January

decisive victories for the U.S. or England and because

1815. Jackson and his men defeated the British, and

the New England states were reluctant to aid the

the Battle of New Orleans made the military man

federal government in this fight. But the government’s

a national hero.2 Later, as President of the United

chief problem was a lack of tax revenue.5

States, the general would figure prominently in

In the years leading up to the war, which

another battle: the one over the second Bank of the

started in June 1812, the country’s economy was on an

United States.

upswing. With Napoleon waging war across Europe,

The conflict between the U.S. and England,

demand for U.S. goods had risen. America’s neutrality

which was often derided as “Mr. Madison’s War,”

during the Napoleonic wars meant that U.S. ships

was not popular in many quarters.3 In fact, the New

could ferry supplies, especially manufactured goods

The Second Bank of the United States

1

THE LIBRARY COMPANY OF PHILADELPHIA

The Bank, Mr. Van
Buren, is trying to kill
me, but I will kill it.

bank would restore a stable currency, which would

(which was called stock at the time). By early

pay its bills, the government could

help to avoid bouts of inflation and which would

1814, these three men, as well as Barker, Dallas,

neither borrow money nor make

be a boon to their business interests. Being lenders,

and Calhoun, were convinced that re-establishing

payments very easily.

financiers lost money and wealth when the country

a national bank was the only way to raise war

experienced periods of inflation.

finances, stabilize the currency, and increase the

Proposing a
Solution to
the Country’s
Economic Woes

-Andrew Jackson
To Martin Van Buren, 1832

and agricultural products, to Europe. Although the

	

Embargo Act of 1807 caused a “drastic decline” in

similar situation in 1783, Alexander Hamilton, the

trade in 1808, the economy managed a “substantial

first Secretary of the Treasury, proposed a solution to

recovery” until 1812.6

the nation’s economic problems: establish a national

Then war with Great Britain changed all that.

When the country had found itself in a

Hamilton prevailed and the first Bank of the United

carried goods along the eastern seaboard were idled,

States (often called the First Bank) was created.9

and goods had to be sent over land, an expensive

	

and time-consuming option. By 1814, exports had

expired in March 1811. So by January 1815, the

declined to $7 million (compared with $61 million

country had been without a national bank for

in 1811) and imports to $13 million (compared

almost four years. Many people thought that

with $53 million in 1811).7 The decrease in foreign

another national bank would again provide relief

trade had widespread implications, affecting other

for the country’s ailing economy and help in paying

industries such as shipbuilding and agriculture and

its war debt.

Creating a Second
National Bank
Despite general support for a bank, the
road to creating one was not entirely smooth. In
April 1813, Parish, Astor, Girard, and Dallas met

In January 1814, Congress received a
petition signed by 150 businessmen from New York
City, urging the legislative body to create a second
national bank. In February 1814, Calhoun put forth
a plan to create a bank that would be headquartered
in the District of
Columbia. The bill
didn’t pass.
In April
1814, President
Madison, who

But the First Bank’s 20-year charter had

Six men figured prominently in establishing

many goods. The decline in imports also reduced the

the second Bank of the United States (commonly

amount of customs duties collected, and therefore,

called the Second Bank): financiers John Jacob Astor,

the government couldn’t depend on these duties as a

David Parish, Stephen Girard, and Jacob Barker;

source of financing the war with Great Britain.8

Alexander Dallas, who would become Secretary

Consequently, by early 1815, much like it

value of government issues of debt.10

bank. After much debate between opposing factions,

America’s foreign trade all but ceased. Even ships that

resulting in significant increases in the prices for

2

debt and manage its revenues and

had opposed the
creation of the
first Bank of the
United States in
1791, reluctantly
admitted to the
This bill of exchange is made out for 500 pounds.
Merchants used bills of exchange to receive more
timely payment for their goods. Banks helped
merchants by issuing bills of exchange and in
doing so provided short-term loans to merchants.
Courtesy, Independence National Historical Park

need for another national bank. That same month, a
congressman from Tennessee proposed a motion in
the House to establish a committee that would look
into the issue of a national bank. But rumors that
England wanted peace led Madison to withdraw his
support for the bank. He believed that a bank was

of the Treasury in 1814; and Representative John

had at the end of the Revolutionary War, the U.S.

C. Calhoun of South Carolina. These men thought

with Secretary of the Treasury Albert Gallatin, who

necessary only to finance the war, so the committee

found itself heavily in debt after fighting a war with

that re-establishing a national bank would solve

“desperately needed funds to continue the war.” As

was dissolved. However, the government’s financial

England and the economy was in a slump. With no

some of the country’s economic woes. In particular,

a result of this meeting, Astor, Girard, and Parish

position continued to worsen.

national bank to help the federal government issue

Astor, Parish, Girard, and Barker felt that a national

agreed to buy $9 million in government securities

The Second Bank of the United States

Later that year, Dallas was named Secretary of

The Second Bank of the United States

3

TIMELINE FOR THE SECOND BANK OF THE UNITED STATES

1816

1817

P
OM
YC
AR

AN Y

OF PHILADELPHIA

In April President
Madison signs
the bill creating
the second Bank
of the United
States

In January,
the Second
Bank opens
for business in
Philadelphia

1828

1824

The bank moves into its
new building at 420 Chestnut
Street in Philadelphia

1826

A bank branch opens
in Mobile, Alabama

1836

1832

A bank
branch
opens in
Portland,
Maine

The Second Bank’s
charter expires and
the bank closes its
doors.

Request is submitted to Congress to
renew the bank’s charter—four years
before it’s set to expire. President
Jackson vetoes the bill to re-charter.

T HE

23

24

25

1823

Eighteen branches
of the bank also
open for business

Nicholas Biddle
becomes president of
the Second Bank.

27

28

29

1827

A branch opens in
Nashville, Tennessee

30

1829

Branches open
in Buffalo and
St. Louis

31

32

33

1830

Branches open in
Burlington, VT; Utica,
NY, and Natchez, MS.

34

35

36

President Jackson
orders that all
federal government
deposits be
removed from the
Second Bank and
deposited in state
banks.

R

by the news, Congress voted to indefinitely postpone

bank. Finally, after more debate, the measure passed.

In October, a

a vote on the national bank and refused to consider

The Senate followed suit, passing the bill, but with

congressional

the question for the rest of that session.13

amendments to which the House agreed. On April 10,

When Congress reconvened in December

1816, Madison signed the bill into law.15

sent Dallas a

1815, Madison urged its members to tackle the

	

letter asking

question of a uniform currency. State banks had

no longer a consideration. But the government still

him about the

stopped redeeming their notes, mostly because of a

had to deal with such issues as establishing a stable

condition of the

lack of specie. Madison felt that the time had come for

currency, dealing with war debt, re-establishing trade,

country’s credit.

Congress to move the country toward a more uniform

and pulling the economy out of its slump.

Dallas sent a

paper currency. Dallas agreed and in his annual

lengthy reply

report noted that “a national bank would be the best

that included an outline of a plan for a new
national bank.11 But Congress turned the plan
down. In November, Calhoun introduced a new

Receipt for seven shares of stock in the Second Bank
purchased by order of General Thos. Cadwalader, August
22, 1828, receipted by E. R. Biddle for Thos. & Jno. G Biddle.
Courtesy, Independence National Historical Park

and perhaps the only adequate resource to relieve
the country and the government from the present
embarrassments.”14
But at the end of January 1816, Madison

measure in the House of Representatives, but it

By this time, of course, financing the war was

Bank Structure and
Operations
The Second Bank opened for business in
Philadelphia in January 1817. The bank had much

vetoed yet another bank bill that had been passed by

in common with its forerunner. Like the First Bank,

1815, Congress came close to passing another bank

both chambers of Congress. Taking up the question

it was originally housed in Carpenters’ Hall on

Congress agreed on a bill outlining a new national

bill, but that month, word of the peace treaty with

once again in February, the House of Representatives

Chestnut Street, moving into a new building up the

bank, but President Madison vetoed it. In February

England finally reached the American capital. Excited

considered still another bill to create a national

block at 420 Chestnut Street in 1824.

also failed.12
Early the following year, both Houses of

The Second Bank of the United States

37

1833

the Treasury.

committee

4

26

THE LIBRARY COMPANY OF PHILADELPHIA

22

OF PHILADELPHIA

In July,
subscriptions to
the Second Bank
go on sale

1817

21

AN Y

1816

20

MP
CO

19

Y
AR

18

LIB

17

T HE

LIB

16

The Second Bank of the United States

5

R

Also, the bank’s functions and structure

rate at 6 percent. Its board consisted of 25 directors,

be paid in specie

were similar to those of the First Bank. It would act

with five of its members appointed by the President

and the rest in

as fiscal agent for the government — holding its

and confirmed by the Senate.17

government bonds

deposits, making its payments, and helping it issue

However, capitalization for the Second

debt to the public— and regulate the economy by

Bank was $35 million, considerably higher than

the setup with the

issuing and redeeming banknotes and keeping

the $10 million underwriting of the First Bank

First Bank. However,

state banks’ issuance of notes in check.16 Also like

and a great deal of money at that time.18 But

subscriptions to the

its predecessor, the Second Bank had a 20-year

subscriptions (or scrips) would be sold in the

Second Bank sold

charter; was a commercial bank that accepted

same proportion: 20 percent would be held by the

for $100 each, not the

deposits and made loans to the public, both

government and 80 percent by private investors.

$400 per share of its

businesses and individuals; and capped its loan

Furthermore, one-quarter of the share price would

predecessor.

Panics, Recessions,

AND

Banking Crises

1819	 Often described as the first major financial

1837 Banks had to suspend redeeming their

crisis in the U.S., this panic was part of a worldwide

notes for specie because of a lack of gold and silver.

crisis. In the U.S. the panic had its roots in the

As a result, many banks were illiquid, and many

Second Bank’s operations. The bank had extended

banks failed. This crisis was fueled in part by a lack

a large number of loans shortly after it opened.

of confidence in the nation’s paper currency.

of specie, the bank had to contract its lending and
extensions of credit. This credit contraction led, in
turn, to bankruptcies. Foreclosures, bank failures, a
drop in real estate prices, and a slump in agriculture
and manufacturing ensued.

1825 This panic was triggered by a stock market
crash due to speculative investments in Latin

A bill of exchange issued by the Second Bank in Philadelphia and signed
by Nicholas Biddle.

Coinage Act of 1873 depressed the price of silver,

they could pay off their debts with cheaper dollars.

hurting the interests of U.S. silver mines and further

The act also responded to mining interests; mining

contributing to the country’s economic problems.

companies had extracted a large quantity of silver

This economic crisis led to a recession that lasted

from mines in the West. Furthermore, the failure of

until 1879.

a major railroad and the withdrawal of European
investment led to a stock market crash, a banking

1882-85 The recession of these years was
mostly due to the end of the railroad construction

But as an increasing trade deficit led to an outflow

1857 The collapse of the Ohio Life Insurance and
Trust Company and a bank panic in the fall of 1857
led to an economic crisis. More than 5,000 businesses
failed during the first year of the panic.

1907 The failure of the Knickerbocker Trust

particularly iron and steel.

Company in New York led to runs on other trust
companies. A general panic ensued. The panic

1884 Coming in the midst of the 1882-85
recession, this panic occurred when European gold

1873 The collapse of Jay Cooke and Co., the
largest bank in the U.S. at that time, in September

reserves were depleted and banks called in loans.

1893 The Sherman Silver Purchase Act, which

Cooke’s bank was the exclusive agent for the sale

was passed in 1890, increased the amount of silver

of Northern Pacific Railroad bonds. When the

the federal government had to purchase each

firm could not sell a sufficient number of railroad

month. The act was intended to lessen the fears of

bonds to investors to cover its obligations, the stock

many farmers who were in debt and couldn’t pay

during these years. An expansion fueled by land

market reacted negatively, and runs on several other

off those debts because of deflation. They wanted

speculation followed.

large financial institutions led to their failure. The

the government to, in effect, cause inflation so that

it also led to a decline in economic activity in the U.S.

1833-34 The U.S. underwent a brief recession

collapse, and a run on the U.S. gold supply.

boom. The end of the boom affected other industries,

1873 triggered a panic on the stock exchange.

America. The crisis hit England particularly hard, but

6

— again, similar to

triggered hundreds of bank failures, a significant
decrease in the money supply, and a deep recession.
Financier J.P. Morgan formed a syndicate with his
fellow bankers, who were able to put sufficient
liquidity into the economy to quell the panic. This
panic led to the creation of a federal commission to
study the economy and ways to reduce the number
of crises and panics. The findings of this commission
eventually led to the creation of the Federal Reserve
System in 1913.
Sources: Kindleberger and Aliber; Glasner; Bordo and Haubrich

7

Subscriptions went on sale in

of the Second Bank greatly aided the country’s

July 1816, and the sale period was set

westward expansion and its economic growth

at three weeks. To make it easier for

in several ways. The branches took in revenues

investors to buy subscriptions, sales

from the sale of federal land. They also provided

were held in 20 cities. However, when,

credit to businesses and farmers, and these loans

14

after three weeks, $3 million of scrips

helped to finance the production of goods and

33

remained unsold, Stephen Girard

agricultural output and the shipment of these

bought them.19

goods to domestic and foreign destinations.

MAP OF SECOND BANK AND ITS BRANCHES

21
24
25
10

22

15

12
12

55

18

6
9

23

16

8

13
77

20
11
17
26

22

44

19
11

Philadelphia, Pennsylvania (1817)

13

Norfolk, Virginia (1817)

1

Augusta, Georgia (1817)*

14

Portsmouth, New Hampshire (1817)

2

Baltimore, Maryland (1817)

15

Providence, Rhode Island (1817)

3

Boston, Massachusetts (1817)

16

Richmond, Virginia (1817)

4

Charleston, South Carolina (1817)

17

Savannah, Georgia (1817)

5

Chillicothe, Ohio (1817)

18

6

Cincinnati, Ohio (1817)

7

Because the Second Bank
also functioned as a commercial

foreign trade were deposited in the branches.

bank and made loans to individuals

Moreover, the network helped move the

and companies, its banknotes (paper

money deposited in the branches to other

currency) most commonly entered

parts of the nation, facilitating both the

circulation as part of the loan process

government’s ability to make payments and

rather than through the purchase of

the branches’ ability to supply credit.

U.S. government securities. Many state

Unlike modern central banks,

banks envied the Second Bank because

the second Bank of the United States did

it received all of the government’s

not officially set monetary policy. Nor

deposits and therefore could make

did it regulate other banks. Nonetheless,

more loans. Although state banks

its prominence as one of the largest

issued their own banknotes when

corporations in America and its branches’

making loans, these banks did not

broad geographic position in the

have the size or geographic scope of

expanding American economy allowed

the Second Bank.

it to conduct a rudimentary monetary

Indeed, the Second Bank’s

policy. The bank’s notes, backed by substantial gold

reach was far greater than that of its

reserves, gave the country a more stable national

Washington, D.C. (1817)

predecessor. Shortly after the bank

currency. By managing its lending policies and the

Cover of a report submitted to the Senate
of Pennsylvania, arguing in favor of having
the government’s deposits returned to the
Second Bank.

19

Mobile, Alabama (1826)

flow of funds through its accounts, the bank could

20

Nashville, Tennessee (1827)

opened, it had 18 branches and later

Courtesy, Independence National Historical Park

Fayetteville, North Carolina (1817)

8

Lexington, Kentucky (1817)

21

Portland, Maine (1828)

added eight more. But one closed, so

— and did — alter the supply of money and credit

the bank ultimately ended up with

in the economy and hence the level of interest rates

25 branch offices around the country

charged to borrowers.

banks. In the course of business, the Second Bank
(again, similar to the First Bank) would accumulate

9

Louisville, Kentucky (1817)

22

Buffalo, New York (1829)

10

Middletown, Connecticut (1817)

23

St. Louis, Missouri (1829)

11

New Orleans, Louisiana (1817)

24

Burlington, Vermont (1830)

12

New York City, New York (1817)

25

Utica, New York (1830)

(see the map).20 The First Bank, in

	

26

Natchez, Mississippi (1830)

comparison, had only eight branches.

today’s monetary policy actions, can be seen most

the notes of the state banks and hold them in

clearly in the Second Bank’s interactions with state

its vault. When it wanted to slow the growth of

* Closed that same year

The extensive branch network

8

Customs duties collected as a result of

The Second Bank of the United States

These actions, which had effects similar to

The Second Bank of the United States

9

money and credit, it would present the notes for
collection in gold or silver, thereby reducing state
banks’ reserves and putting the brakes on state
banks’ ability to circulate new banknotes (paper
currency). To speed up the growth of money and
credit, the bank would hold on to the state banks’
notes, thereby increasing state banks’ reserves and
allowing those banks to issue more banknotes
through their loan-making process.
	

In addition, banknotes issued by the Second

Bank were widely accepted throughout the country.
And unlike notes issued by state banks, Second
Bank notes were the only ones accepted for payment
of federal taxes.

Bank Leadership
	

The first president of the Second Bank

was William Jones, a political appointee and
a former Secretary of the Navy who had gone
bankrupt. Under Jones’s leadership, the bank
“proceeded to run the economy into the ground
by first extending far too much credit, then
quickly restricting it. A financial panic ensued,
followed by a steep recession that saw interest

This political cartoon, called “The Experiment in Full Operation,” shows Andrew Jackson (on pedestal at right) as a
king (note the crown) cracking the whip over the ship of state. Vice President Martin van Buren is leaning against the
pedestal. Jackson (in the words above his head) is saying, “… Andrew Jackson knows what’s best for the country…
don’t I, Martin?” Van Buren is urging Jackson not to give up the ship or “I shall not succeed you.” Note that the chest
to the right of Van Buren is marked “Deposits” and “No Bank.” The “crew members” are grumbling among
themselves about having no commerce and no trade to protect.
Courtesy, The Library Company of Philadelphia

rates spike, farm produce prices plummet, and
unemployment soar.”21
When Jones resigned in 1819,
shareholders elected Langdon Cheves, an

10

branches.22 He presented state banknotes for specie,

cause in the U.S. was the mismanagement of the

a request that sent many financial institutions into

Second Bank. This widely held view that the bank

bankruptcy because they didn’t have enough gold

contributed to bad economic times helped turn
public opinion against it.

Political cartoons depicting the battle over
the Second Bank were quite common during
Jackson’s administration. Here Jackson is
shown as “King Andrew”; many people felt
that Jackson was acting like a monarch, taking
too much power for himself.

attorney from South Carolina who had served

and silver on hand.23 A depression soon followed

as Speaker of the House of Representatives, as

the imposition of these harsh measures. (See Panics,

In 1823, when Cheves withdrew his name

president of the bank. Cheves cut in half the number

Recessions, and Banking Crises.) Prices collapsed and

from consideration for re-election to the top bank

of notes in circulation, made fewer loans, foreclosed

unemployment was high. Although the economic

post, Nicholas Biddle, a member of a wealthy and

Courtesy, The Library Company of Philadelphia

on mortgages, and exerted more control over the

slump was part of a worldwide downturn, the main

prominent Philadelphia family, became head of the

The Second Bank of the United States

The Second Bank of the United States

11

bank. Biddle had previously served on the bank’s

rumors during the election campaign of 1828 that

board of directors and in the Pennsylvania legislature.

Henry Clay, a congressman from Kentucky, was

With Biddle’s guidance, animosity toward

manipulating the Second Bank to help Jackson’s

the bank lessened somewhat. In fact, under Biddle,

opponent, John Quincy Adams, win re-election

“the Bank became a valuable ally to business just as

to the presidency.26 In addition, by the time of the

the country moved into a new period of expansion

election, the bank had become a “financial colossus”

and economic thrust. Providing the necessary capital

that could effectively drain specie from state

for this expansion, the bank helped to advance a

banks and regulate currency according to its own

decade of hitherto unparalleled prosperity.”24 After

perceptions of what was needed.27

he took office, Biddle increased the number of notes

The bank did become an issue in the election

issued by the Second Bank, and he
attempted to stem

The Second Bank Building:

the flow of state
banks’ notes by

BANK, CUSTOMS HOUSE, AND PORTRAIT GALLERY

pressing state banks
to redeem their own

	

notes in specie.25
Then in
1828, Andrew
Jackson, hero of
the Battle of New Orleans and a
determined foe of banks in general

Check from the Second Bank, dated January 27, 1825, for $6,643.05,
signed by E.L. Burd, the bank’s chief cashier.
Courtesy, Independence National Historical Park

and the Second Bank in particular,

of 1832, which sent Jackson back to the White House

was elected President of the United States. During

for a second term. A request to renew the bank’s

this former soldier’s time in the White House, he

charter was sent to Congress in January 1832, four

fought another battle — one that would ultimately

years before the charter was set to expire. A bill to

defeat the Second Bank.

renew the charter passed both the House and Senate,

Battle over the Second Bank
The Second Bank wasn’t an issue in the

12

expired in 1836, the building continued in use as

the United States still stands at 420 Chestnut Street

a bank until 1841, when Nicholas Biddle’s state-

in Philadelphia. The Greek revival structure, built

chartered successor to the Second Bank went out of

between 1819 and 1824 and designed by architect

business. The structure sat vacant until the federal

William Strickland, was modeled on the Parthenon

government bought it in 1845 to use as a Customs

in Athens. Like its predecessor, the first Bank of the

House for the port of Philadelphia.

United States, the Second Bank opened for business

	

in Carpenters’ Hall, moving into the new building

larger space, and in 1939, the Treasury Department

on Chestnut Street in 1824.

sold the building to the National Park Service with
Constructed

In 1935, the Customs House moved to

the stipulation that the Park Service find a suitable

of Pennsylvania blue

tenant. That tenant turned out to be the Carl Schurz

marble, the building

Foundation, which used the building for its national

cost half a million

headquarters as well as a research library and

dollars. It contained a

exhibits.

but Jackson vetoed it and there weren’t enough votes

vestibule and a main

	

to override the veto.

lobby, which opened

gallery featuring paintings of many colonial leaders

on to the central

and other prominent figures in American history.

Why was Jackson so opposed to the Second

him to Washington a strong distrust of banks in

first swept Jackson into office. However, Jackson’s

general, stemming, at least in part, from a land

dislike of the Second Bank may have been fueled by

deal that had gone sour more than two decades

Today, the building is home to a portrait

banking room, the

Bank? On a personal level, Jackson brought with

presidential campaign of 1828, the election that

The Second Bank of the United States

The building that housed the second Bank of

*

largest space on the
first floor.
Carpenters’ Hall at 320 Chestnut
Street in Philadelphia

After the
Second Bank’s charter

*This description of the Second Bank building draws heavily on
“Historic Structures Report Part III: Architectural Data Section.
The Interior of the Second Bank of the United States,” prepared
by Norman Souder (architect) for Independence National
Historical Park.

The Second Bank of the United States

13
13

states’ rights. In addition, he

Jackson’s order met with heavy criticism from

felt that the bank put too much

members of his administration, by the end of 1833,

power in the hands of too few

most of the government’s money had been moved

private citizens, power that could

out of the Second Bank and into state banks. The loss

be used to the detriment of the

of the federal government’s deposits caused the bank

government. The bank also lacked

to shrink in both size and influence.31

an effective system of regulation. In
other words, it was too far outside

responded to Jackson’s action by calling a meeting

the jurisdiction of Congress, the

at which he announced that he would limit credit

President, and voters.29

and call in loans in the hopes of creating a backlash

Nicholas Biddle, president
Issued in October 1837, this stock certificate states that Francis
Holladay of Bristol, England, is entitled to 40 shares of the capital
stock of the Bank of the United States. By that time, the Second Bank
had lost its national charter and was operating as a Pennsylvania
state-chartered bank.
Courtesy, Independence National Historical Park

of the Second Bank from 1823 until

against Jackson. Biddle thought that putting pressure
on financial markets might force Jackson to relent

its demise in 1836, was the scion of an

and re-deposit government funds in the Second Bank.

influential Philadelphia family. Biddle

He further hoped that Jackson would even consider

was 37 years old when he assumed

renewing the bank’s charter. But Biddle’s move

the presidency of the Second Bank.

backfired: In the end, it helped to support Jackson’s

Although Biddle was smart and well-

claim that the Second Bank was an institution created

before. In that deal, Jackson had accepted paper

educated (he graduated from Princeton at age 15),

to serve the interests of the wealthy, not to meet the

notes — essentially paper money — in payment

he was also vain and arrogant. Unfortunately, those

nation’s financial needs.32

for some land that he sold. When the buyers who

traits wouldn’t allow him to accept any criticism

had issued the notes went bankrupt, leading to a

of the Second Bank’s operations, especially claims

series of problems for Jackson, the paper he held

about the mismanagement of some of the bank’s

became worthless. Although Jackson managed to

branches. Biddle also wasn’t above allowing the

save himself from financial ruin, he never trusted

bank to make loans to his friends while denying

paper notes again. In Jackson’s opinion, only specie

loans to those who were deemed not so friendly.

— silver or gold coins — qualified as an acceptable

His actions subjected the bank to public criticism.

medium for transactions. And since banks issued

However, despite Biddle’s vanity, arrogance, and

paper notes, Jackson had “developed a deep

sometimes dubious loan decisions, he was an

suspicion about banking practices.” Jackson also

excellent administrator who understood banking.30

distrusted credit — another function of banks —

Jackson saw his win in the election of 1832

believing that people should not borrow money to

as “proof” that people wanted him to get rid of the

pay for what they wanted.28

Second Bank. Shortly after the election, Jackson

Politically, Jackson believed that a federal
institution such as the Second Bank trampled on

14

Meanwhile, in Philadelphia, Biddle

The Second Bank of the United States

ordered that federal deposits be removed from the
national bank and put into state banks. Although

Closing of the Second Bank
of the United States
One event that foreshadowed the bank’s
demise was its supporters’ inability to muster a
two-thirds majority to override Jackson’s veto in
1832. More damaging still, the removal of federal
deposits resulted not only in a reduction in the
bank’s size but also in its ability to influence the
nation’s currency and credit. Then, in April 1834,
the House of Representatives voted not to re-charter
the bank and also confirmed that federal deposits
should remain in the state banks. All of these
factors, coupled with Jackson’s determination to do
away with the bank and the widespread defeat of
the bank-favorable Whig party in the congressional
elections held in the spring of 1834, heralded the
bank’s ultimate fate.33
	

It would be more than 75 years before the

United States made another attempt to establish
a central bank. During that time, the
U.S. economy seemed to move
from one financial crisis to another.
(See Panics, Recessions, and Banking
Crises.) But after the Panic of 1907,
which resulted in numerous bank
failures and a deep recession,
Congress established a commission
to look into ways to effectively smooth
out the economy’s ups and downs.
Ultimately, the commission’s findings

Checks drawn on the Second Bank (note the words in the upper-left
corner), dated February 12, 1824, for $300, and February 3, 1824, for
$24.84, and signed by Nicholas Biddle.

would lead to the creation of the
Federal Reserve System in 1913.

Courtesy, Independence National Historical Park

The Second Bank of the United States

15

EN DNOT E S
Explanations of terms in bold italics can be found in the
Glossary.
2
Brief biographies of the people mentioned in the text can be
found in the Biographical Sketches.
3
See the Glossary for more information about the War of 1812.
4
See Chester Wright, p. 225-27. Wright also says that Congress
failed to bolster the U.S. naval fleet, which had 16 warships
compared with England’s 600. Historian Edward Kaplan notes
that “many congressmen…remained unconcerned about the
financing of the war because they believed it would be over
within weeks” (Kaplan, p. 39).
5
See Chester Wright, p. 226.
6
See Chester Wright, pp. 201-02. In 1807, President Thomas
Jefferson had urged Congress to pass the Embargo Act, which
essentially banned all foreign trade with the United States. The
act proved to be so unpopular that it was repealed in 1809.
7
These numbers come from Chester Wright, p. 227-28. Some
economic historians give slightly different dollar estimates of
imports and exports in these years. In 2009 dollars, $7 million
would be more than $85 million; $61 million more than $990
million; $13 million more than $158 million; and $53 million more
than $860 million.
8
See Kaplan, p. 39.
9
For more on the history of the First Bank, see the Federal
Reserve Bank of Philadelphia’s 2009 publication, The First Bank of
the United States: A Chapter in the History of Central Banking.
10
See Walters, p. 118.
11
See Clarke and Hall, pp. 481-84.
12
See Hammond, p. 231.
13
This discussion is based on that in Hammond, pp. 231-32.
Historian Robert Wright agrees that “by time word that the war
was finally over reached the United States in early 1815, most
Americans had rediscovered the need for a Hamiltonian central
bank.” See Robert Wright, p. 72.
14
See Hammond, pp. 232-33.
15
See Hammond, pp. 233-34. Hammond also points out that,
unlike with the First Bank, the issue of whether a national bank
1

REF ERENC E S
Bordo, Michael D., and Joseph G. Haubrich. “Credit Crises,
Money, and Contractions: An Historical View,” Journal of
Monetary Economics, 57:1 (January 2010), pp. 1-18.
Catterall, Ralph C.H. The Second Bank of the United States.
Chicago: University of Chicago Press, 1903.
Clarke, M. St. Clair, and D.A. Hall. Legislative and
Documentary History of the Bank of the United States,
Including the Original Bank of North America. Washington,
Gales and Seaton, 1832.

16

was unconstitutional was no longer an important consideration.
He notes that although there were a few “die-hards” who still
raised the issue of the bank’s unconstitutionality, no one paid
them much attention. Even James Madison, who, 25 years before,
had ardently argued against the First Bank on the grounds of its
unconstitutionality, had by this time come to see the necessity of
such an institution. One congressman who opposed the bank was
John Eppes of Virginia, Thomas Jefferson’s son-in-law. Like his
father-in-law’s opposition to the First Bank, Eppes’s opposition
to the Second Bank was based on a belief that a national bank
was unconstitutional. See Kaplan, p. 50. For more about Thomas
Jefferson and the First Bank, see the Federal Reserve Bank of
Philadelphia’s 2009 publication The First Bank of the United States:
A Chapter in the History of Central Banking.
16
The first Bank of the United States was in operation from 1791
until 1811. For more information, see the Federal Reserve Bank of
Philadelphia’s booklet, The First Bank of the United States: A Chapter
in the History of Central Banking.
17
See Chester Wright, p. 368, and Kaplan, p. 55. The President did
not appoint board members of the First Bank.
18
The sum of $35 million would be approximately $485 million
today; $10 million would be more than $220 million today.
19
This description of the subscription sales is based on Kaplan,
pp. 55-56. This sale stands in stark contrast to the initial public
offering of subscriptions to the First Bank, during which scrips
sold out so quickly that many investors were left out.
21
See Robert Wright, p. 72.
22
See Chester Wright, p. 368.
23
See Remini, pp. 27-28.
24
See Remini, p. 32.
25
See Chester Wright, p. 369.
26
See Meacham, p. 75.
27
See Remini, p. 39.
28
See Remini, pp. 18-20.
29
See Remini, pp. 43-45.
30
See Remini, p. 35.
31
See Meacham, pp. 267-71, and Remini, pp. 125-26.
32
See Meacham, pp. 267-271.
33
See Hammond, p. 438 and Meacham, pp. 278-79. See Catterall,
pp. 355-58, for more about the Whigs’ defeat.

Kaplan, Edward S. The Bank of the United States and the
American Economy. Westport, CT: Greenwood Press, 1999.
Kindleberger, Charles P., and Robert Aliber. Manias, Panics,
and Crashes: A History of Financial Crises, 5th ed. New York:
John Wiley & Sons, 2005.
Meacham, Jon. American Lion: Andrew Jackson in the White
House. New York: Random House, 2008.
Remini, Robert. Andrew Jackson and the Bank War: A Study
in the Growth of Presidential Power. New York: W.W. Norton
and Company, 1967.

Federal Reserve Bank of Philadelphia. The First Bank of the
United States: A Chapter in the History of Central Banking.
Federal Reserve Bank of Philadelphia, June 2009.

Walters, Raymond, Jr. “The Origins of the Second Bank of
the United States,” Journal of Political Economy, 53:2 (June
1945), pp. 115-31.

Glasner, David, ed. Business Cycles and Depressions: An
Encyclopedia. New York: Garland Publishing, Inc., 1997.

Wright, Chester Whitney. Economic History of the United
States. New York: McGraw-Hill Book Company, 1949.

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

Wright, Robert E. The First Wall Street: Chestnut Street,
Philadelphia, and the Birth of American Finance. Chicago:
University of Chicago Press, 2005.

The Second Bank of the United States

GL O S SARY
BANKNOTE
A negotiable instrument; a promissory note (promise to
pay) that is used as money.
BATTLE OF NEW ORLEANS
The final battle of the War of 1812. Andrew Jackson
and his troops engaged the British in New Orleans in
December 1814 and defeated them in January 1815.
The battle was fought after the peace treaty (see Treaty
of Ghent) was signed. But because it took a long time
for information to travel in those days, word about the
treaty didn’t reach the United States until February
1815. The battle made Jackson a national hero.
CENTRAL BANK
A governmental institution responsible for issuing
currency and monetary policy, which involves the
overall growth of money and credit and the level of
short-term interest rates. The Federal Reserve is now
the central bank of the United States.
CUSTOMS DUTIES
A form of tax levied on goods traded internationally.
FISCAL AGENT
An organization that handles finances for another
organization. The Second Bank (like the First Bank)
acted as the government’s fiscal agent. Today the
Federal Reserve fills the role of fiscal agent for the U.S.
government.
INITIAL PUBLIC OFFERING (IPO)
A company issues common stock or shares to the
public for the first time.

SPECIE
Money in the form of gold or silver. In the colonial
period and in the early years of the United States,
specie often referred to gold or silver coins.
TREATY OF GHENT
The peace treaty that ended the War of 1812. In
December 1814, representatives of the American and
British governments met in Ghent (in modern-day
Belgium) to sign the treaty that ended the war between
England and its former colonies.
WAR OF 1812
A war between the United States and Great Britain
that started in June 1812. The United States declared
war on Great Britain because Britain tried to curtail
trade between the United States and France, England’s
long-standing foe. In addition, British naval ships were
stopping American vessels on the seas searching for
experienced English sailors who had left or deserted
from the British navy, also sometimes pressing Britishborn American sailors into service in the British
navy as well. The Americans also saw the war as an
opportunity to make Canada part of the United States,
thereby removing British influence from the North
American continent. However, the U.S. failed in its
attempt to take Canada from the British.
WHIG PARTY
A political party that existed in the United States
roughly from the 1830s to the 1850s. Party members
generally opposed Andrew Jackson’s policies. The
party took its name from an English political party that
was opposed to the monarchy.

SUBSCRIPTIONS (OR SCRIPS)
Down payments on the purchase of new shares of stock
in a company or bank; an initial partial payment of the
full amount required to purchase a share of stock, with
the remainder paid in installments over a period of
time. Scrips were tradable and could be purchased after
their initial issuance by others seeking to acquire the
company’s or bank’s stock.

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17

Biddle proved to be an able administrator. However,

Born in Germany, John Jacob Astor

this well-educated and scholarly Philadelphian clashed

came to the newly formed United

with the country-bred self-made man in the White

States in early 1784. Over time, he

(1779-1871)
Born in Maine to Quaker parents,

law. In 1826, Barker was accused of a conspiracy to
defraud, involving the failure of a large insurance
company. He was convicted of the crime, but the
conviction was overturned. Barker declared bankruptcy
in 1867 and spent his last few years living with his son

THE LIBRARY COMPANY OF PHILADELPHIA

in Philadelphia.

Nicholas Biddle
(1786-1844)
Nicholas Biddle was the son of a
wealthy and influential Philadelphia
family. He graduated from Princeton
at age 15, and while touring Europe

as a young man, he became interested in Greek history
and culture. He brought numerous pieces of art and
sculpture from Greece for his estate, Andalusia, just
outside Philadelphia. Biddle served in the Pennsylvania
legislature and on the board of directors of the second

18

The Second Bank of the United States

COLLECTION OF
THE U.S. HOUSE OF REPRESENTATIVES

eventually moved to New Orleans, where he practiced

A South Carolinian by birth,

he returned to Philadelphia to practice law. He died in

John C. Calhoun graduated from

New Jersey in 1817.

Yale, studied law, and eventually
returned to his home state to

Washington, D.C. in 1850.

along with several other wealthy men, pushed Congress
to establish the second Bank of the United States. He

of a second national bank. After leaving Washington,

the United States under John Quincy Adams. He died in

also a lawyer and financier, who,

the United States. He also supported the establishment

(1782-1850)

a representative and a senator and was vice president of

while still a young man. He was

financial footing and to create a uniform currency for

John C. Calhoun

practice. He served his state as both

Jacob Barker made a fortune in trade

post, he worked to get the government back on sound

THE LIBRARY COMPANY OF PHILADELPHIA

COLLECTION OF THE NEW-YORK
HISTORICAL SOCIETY. NEG. #83851d

Jacob Barker

THE LIBRARY COMPANY OF PHILADELPHIA

establish the second Bank of the United States. When
United States.

Madison named Dallas Secretary of the Treasury. In that

Philadelphia in 1844.

of his affluent contemporaries to convince Congress to
Astor died in 1848, he was the wealthiest person in the

he moved to Philadelphia. In 1814 President James

was not a success and closed in 1841. Biddle died in

wealth during the War of 1812 and worked with several

Dallas was sent to Great Britain by

he went to the West Indies. After three years there,

institution going as a commercial bank, but this venture

and eventually amassed a fortune. He added to his

Born in Kingston, Jamaica, Alexander

After completing his education,

battle over the Second Bank. He tried to keep the

the fur trade, bought up real estate in New York City,

(1759-1817)

his English parents for an education.

House, Andrew Jackson. Ultimately, Biddle lost the

built up a prosperous business in

Alexander J. Dallas

Albert Gallatin
(1761-1849)
Born in Switzerland, Albert Gallatin
came to the United States in 1780,

time at sea, sailing to various ports, including some
in the United States. He eventually made his home
in Philadelphia. During the yellow fever epidemic in
that city in 1793, as others fled, Girard stayed to help
care for the sick. When the first Bank of the United
States was dissolved in 1811, Girard bought many of its
assets, including the building on Third Street. There,
he started his own bank, which supplied credit to the
U.S. government during the War of 1812. Girard Bank
remained a Philadelphia financial institution until it
merged with Mellon Bank in 1983. Along with several
other wealthy businessmen, Girard supported the
establishment of a second national bank. He died in
Philadelphia in 1831.

landing in Boston. He served in
Congress from 1795 until 1801 and

Langdon Cheves

often found himself at odds with Treasury secretary

(1776-1857)

Alexander Hamilton, although he ultimately supported

Born in a small town in South

Hamilton’s plan for a national bank. Gallatin was

Carolina, Langdon Cheves

initially appointed Secretary of the Treasury by Thomas

eventually moved to Charleston,

Jefferson in 1801, and reappointed to the post by James

where he continued his education,

Madison in 1809, he continued as secretary until 1814,

studied law, and opened a practice. After holding

the longest tenure of any secretary in the Treasury’s

various positions in the state government, Cheves

history. As secretary in 1813, Gallatin looked for ways

represented his home state as a member of the House of

to help the government finance the War of 1812. He

Representatives. He succeeded Henry Clay as Speaker

prevailed upon several wealthy Americans to buy $9

of the House, but he declined an offer from President

million in government securities (called stock back

James Madison to become Secretary of the Treasury.

then), thus bolstering the government’s revenues.

He became president of the second Bank of the United

Gallatin died in New York in 1849.

States in 1819 and resigned his post in 1823. He died in
Columbia, South Carolina in 1857.

in his adopted country. In his early years, he spent

THE LIBRARY COMPANY OF PHILADELPHIA

(1763-1848)

THE LIBRARY COMPANY OF PHILADELPHIA

THE LIBRARY COMPANY OF PHILADELPHIA

of the bank in 1823. Despite being vain and arrogant,

Alexander Hamilton
(1757-1804)
Alexander Hamilton was born
on the island of Nevis in the
British West Indies. When George
Washington was elected the nation’s

first president in 1789, he appointed Hamilton the first
Secretary of the Treasury. The following year, Hamilton
wrote “Report on a National Bank,” in which he laid
out his plans to establish a single national bank. One
year later, Hamilton’s proposed financial institution
materialized in the form of the Bank of the United
States. Hamilton died in 1804, one day after being
mortally wounded in a duel with Aaron Burr.
THE LIBRARY COMPANY OF PHILADELPHIA

Bank of the United States. He was named president

John Jacob Astor

COLLECTION OF THE NEW-YORK
HISTORICAL SOCIETY. NEG. #83852d

Biographical Sketches

Andrew Jackson
(1767-1845)
Andrew Jackson was born in 1767
on the border between North and
South Carolina, the third son of
Irish immigrants. Jackson’s father

Stephen Girard

died before he was born. Although Jackson’s family

(1750-1831)

was not wealthy, his mother had enough money to send

French by birth, Stephen Girard
became a U.S. citizen and ended
up being one of the wealthiest men

Andrew to school. Jackson eventually became a licensed
attorney and, at age 21, made his way to the territory
that would become Tennessee, where he served as a

The Second Bank of the United States

19

district attorney and a judge. Jackson was the first man
elected to the House of Representatives from Tennessee
and also served in the Senate. He was a major general
during the War of 1812, leading American troops
against the British in a battle just outside New Orleans.

THE LIBRARY COMPANY OF PHILADELPHIA

Biographical Sketches

The battle made the general a national hero. In 1828,
Jackson was elected to the presidency. Often portrayed
as “King Andrew” in political cartoons of the day (see
page 10), Jackson freely used his veto power and often
would not concede to Congress on matters of policy.
Re-elected to a second term in 1832, Jackson began a
battle to defeat the second Bank of the United States.
“Old Hickory,” the country lawyer who had attained
the presidency, clashed with the wealthy urbanite
Nicholas Biddle over the bank’s fate. Through a series
of maneuvers designed to destroy the bank, Jackson
ultimately won the fight. Jackson died at his Tennessee
home, the Hermitage, in June 1845.

William Jones

James Madison
(1751-1836)
Often called the Father of the
Constitution, James Madison
became the fourth president of the
United States in 1808. Before that,

he served in the Virginia Assembly and was a delegate
to the Continental Congress. He was one of the authors
of the “Federalist Papers,” essays often credited with
contributing to the ratification of the Constitution.
He is also credited with helping to frame the Bill of
Rights. Like his fellow Virginian Thomas Jefferson,
Madison opposed the creation of the first Bank of the
United States in 1791. In 1811, during Madison’s first
administration, the bank’s charter expired. However,
after the War of 1812, the government once again found
itself with mounting debt and the country was in
increasing economic distress. But there was no central
bank to help ease these conditions. In 1816, Madison
signed the bill chartering the second Bank of the

(1760-1831)

United States. Madison died at his Virginia plantation,

Born in Philadelphia, William Jones served in the

Montpelier, in June 1836.

Revolutionary War. He moved to Charleston, South
Carolina, but eventually returned to his home state,
which elected him to the House of Representatives. He
was Secretary of the Navy in President James Madison’s
administration. He was appointed the first president of
the second Bank of the United States, holding that post
from 1816 to 1819. He died in Bethlehem, Pennsylvania,
in 1831.

20

The Second Bank of the United States

David Parish
(1778-1826)
Like John Jacob Astor, David Parish was born in
Germany, the son of an Englishman who had set up
business there. Parish eventually made his way to
the United States, settling in New York state, near the
Canadian border. He died in 1826.

www.philadelphiafed.org
DECEMBER 2010