Bank of the United States

Bank of the United States, name for two national banks established by the U.S. Congress to serve as government fiscal agents and as depositories for federal funds; the first bank was in existence from 1791 to 1811 and the second from 1816 to 1836.

The First Bank

The first bank was established under the auspices of the Federalists as part of the system proposed by Alexander Hamilton to establish the new government on a sound economic basis. Congress approved a charter for the bank despite the argument that the Constitution did not give Congress power to establish a central bank and the charge that the bank was designed to favor mercantile over agrarian interests.

The bank had a head office in Philadelphia and branches in eight other cities. The government subscribed one fifth of the capital of $10 million, but a loan of $2 million was immediately made to the government. In addition to acting as a fiscal agent for the government, the bank conducted a general commercial business.

It was well managed and paid good dividends, but its conservative policies and its restraining influence on state banks, through its refusal to accept state bank notes not redeemable in specie, antagonized more exuberant business elements, especially in the West. These interests combined with agrarian opponents of the bank to defeat its rechartering, despite the support given the bank by the Madison administration. The bank concluded its affairs and repaid its shareholders.

The Second Bank

Financing the War of 1812 proved difficult because of the lack of a central bank, and by the end of the war the financial system of the country was in chaos. Enough support was forthcoming in Congress and a new bank was chartered for 20 years. The second bank, capitalized at $35 million, operated much as did the first one, 25 branches being established.

After an initial period of difficulty during the presidency (1816–19) of William Jones, the bank was placed on a sound basis by Langdon Cheves (1819–22). It became especially prosperous under the management of Nicholas Biddle, but was criticized by state banks and frontiersmen on the grounds that it was too powerful and that it operated in the interests of the commercial classes of the East.

Opponents of the bank came into power with the election (1828) of Andrew Jackson. Although the bank's charter did not expire until 1836, Henry Clay persuaded Biddle to apply to Congress for a renewal in 1832. President Jackson vetoed the bill for its recharter, and the bank became a leading issue in his fight for reelection against Clay. Interpreting his victory at the polls as an expression of popular will on the subject, Jackson did not wait for the expiration of the bank's charter but began in 1833, through his new Secretary of the Treasury Roger B. Taney, to deposit government moneys in state banks, referred to by his opponents as "pet banks." Under Martin Van Buren's administration the Independent Treasury System was established to handle the government's funds.


See R. C. H. Catterall, The Second Bank of the United States (1902, repr. 1960); W. B. Smith, Economic Aspects of the Second Bank of the United States (1953); J. A. Wilburn, Biddle's Bank (1967).

The Columbia Encyclopedia, 6th ed. Copyright© 2018, The Columbia University Press.

Bank of the United States: Selected full-text books and articles

Biddle's Bank: The Crucial Years By Jean Alexander Wilburn Columbia University Press, 1967
Economic Perspective on the Political History of the Second Bank of the United States By Green, Edward J Economic Perspectives, Vol. 27, No. 1, Spring 2003
A Financial History of the United States By Margaret G. Myers Columbia University Press, 1970
Librarian's tip: Chap. 4 "The War of 1812 and the Second Bank of the United States"
The Jacksonian Economy By Peter Temin W. W. Norton, 1969
Librarian's tip: Chap. 2 "Jackson's Veto of the Second Bank of the United States"
Wall Street: A History: From Its Beginnings to the Fall of Enron By Charles R. Geisst Oxford University Press, 2004
Librarian's tip: "Biddle's Bank" begins on p. 22
The Coming of Age of American Business: Three Centuries of Enterprise, 1600-1900 By Elisha P. Douglass University of North Carolina Press, 1971
Librarian's tip: "The Second Bank of the United States" begins on p. 136
Independent Central Banks: New and Old By Wood, John H The Cato Journal, Vol. 26, No. 3, Fall 2006
Peer-reviewed publications on Questia are publications containing articles which were subject to evaluation for accuracy and substance by professional peers of the article's author(s).
Looking for a topic idea? Use Questia's Topic Generator
Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.