Alone among the great nations of the world the United States still lacks a highly centralized banking system. The reasons for this are largely historical; 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 reluctance has this country permitted the creation 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, established in 1846 (it also existed for a brief period in 1840-1841), was little more than a receiving and disbursing instrument for the federal treasury. But in connection with the need for funds during the Civil War, and also to bring about a safer and more uniform currency, the National Banking System was inaugurated in 1864. Particularistic and without central direction, this system, though it brought about improved currency conditions, proved inadequate to meet those situations which required financial leadership and concerted action. Only after fifty years and a succession of serious financial crises were old prejudices against central direction sufficiently overcome to permit the establishment of the Federal Reserve System in 1914. And even then the system established 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 financial institutions go back to the first years of our national history, when the Federalists 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 Jefferson 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 between 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 . . .