N 1836 the charter of the Second Bank of the United States was to expire. This institution was not in the later sense a national bank. It was a banking corporation, located in Philadelphia, privately controlled, but possessing unique and profitable relations with the government. To its capital of thirty-five million dollars, the government had subscribed one fifth. It served as repository of the public funds, which it could use for its own banking purposes without payment of interest. It could issue bank notes up to the physical ability of the president and cashier to sign them; after 1827 it evaded this limitation by the invention of "branch drafts," which looked and circulated like notes but were actually bills of exchange. The Bank was not to be taxed by the states and no similar institution was to be chartered by Congress. In return for these privileges the Bank paid a bonus of one and a half million dollars, transferred public funds and made public payments without charge, and allowed the government to appoint five out of the twenty-five directors. The Secretary of the Treasury could remove the government deposits provided he laid the reasons before Congress.
Even advocates of the Bank conceded that this charter bestowed too much power. That staunch conservative Hezekiah Niles, writing in the heat of the fight for renewal, declared he "would not have the present bank re-chartered, with its present power . . . for the reason that the bank has more power than we would grant to any set of men, unless responsible to the people" (though he ultimately supported the Bank). Nathan Appleton, who had tried vainly to modify the charter in 1832, wrote carefully but emphatically in 1841: "A great central power, independent of the general or state governments, is an anomaly in our system. Such a power over the currency is the most tremendous which can be established. Without the assurance that it will be managed by men, free from the common imperfections of human nature, we are safer without it."1
There could be no question about the reality of the Bank's power. It enjoyed a virtual monopoly of the currency and practically complete control over credit and the price level. Biddle's own testimony disclosed its extent: --
Q.3. Has the bank at any time oppressed any of the State banks?
A. Never. There are very few banks which might not have been destroyed by an exertion of the powers of the bank. None have ever been injured.____________________
From The Age of Jackson by Arthur M. Schlesinger Jr., copyright 1945 by Arthur M. Schlesinger Jr. Reprinted by permission of Little, Brown and Company. This excerpt comprises chapters 7-10.