ALONE among the great nations of
the world the United States still
lacks a highly centralized banking sys-
tem. The reasons for this are largely his-
torical; they stem from the struggle over
the attempt to recharter the second Bank
of the United States. The bitterness of
that controversy and the fear and hatred
of the second Bank were such that only
very slowly and with the greatest reluc-
tance has this country permitted the cre-
ation of something approaching a central
banking institution.

Following the expiration of the charter
of the second Bank of the United States
in 1836 the state banks were entirely on
their own. The Independent Treasury
System of the federal government, estab-
lished in 1846 (it also existed for a brief
period in 1840-1841), was little more
than a receiving and disbursing instru-
ment for the federal treasury. But in
connection with the need for funds dur-
ing the Civil War, and also to bring
about a safer and more uniform cur-
rency, the National Banking System was
inaugurated in 1864. Particularistic and
without central direction, this system,
though it brought about improved cur-
rency conditions, proved inadequate to
meet those situations which required
financial leadership and concerted ac-
tion. Only after fifty years and a succes-
sion of serious financial crises were old
prejudices against central direction suffi-
ciently overcome to permit the establish-
ment of the Federal Reserve System in
1914. And even then the system estab-
lished was not unitary but federal, and a
serious attempt was made to avoid giving
complete power over its operations either
to private business or to the federal
government.

The beginnings of this struggle which
has had such a lasting effect on our finan-
cial institutions go back to the first years
of our national history, when the Fed-
eralists under the leadership of Hamilton
secured the chartering of the first Bank
of the United States. This institution,
modeled after the Bank of England, was
regarded by the dominant merchant class
of that time as a financial institution
necessary to the orderly and efficient
functioning of both public and private
business. To the agrarians led by Jeffer-
son and to their chief spokesman, John
Taylor of Caroline, it was an instrument
of concentrated power threatening the
interests of farmers and planters. Alarm
over the threat of the Bank died down
somewhat after the Anti-Federalists came
into power, but when the charter expired
in 1811 it was not renewed.

The history of the second Bank of the
United States is briefly traced in the first
of the readings contained in this volume.
This is followed by a set of documents
contemporary with the great struggle be-
tween Jackson and the Bank. Jackson's
veto message is perhaps the best-known
presidential veto in our history. The reply
by Daniel Webster represents the well-
considered view of the chief spokesman

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