, observing the prosperity and usefulness to the commercial community and the financial operations of the government, of the Bank of North America, Bank of New York, and Bank of Massachusetts
, which held the entire banking capital of the country before 1791, recommended the establishment of a government bank in his famous report on the finances (1790), as Secretary of the Treasury
His suggestion was speedily acted upon, and an act for the purpose was adopted Feb. 8, 1791. President Washington
asked the written opinion of his cabinet concerning its constitutionality.
They were equally divided.
The President, believing it to be legal, signed the bill, and so made it a law. The bank received a charter, the existence of which was limited to twenty years. It soon went into operation, with a capital of $10,000,000, of which amount the government subscribed $2,000,000 in specie and $6,000,000 in stocks of the United States
The measure was very popular.
The shares of the bank rose to 25 and 45 per cent. premium, and it paid an average dividend of 8 1/2 per cent. on its capital.
The shares were $400 each.
The bank was established at Philadelphia
, with branches at different points.
In 1808--or three years before the charter would expire — application was made to Congress for its renewal.
A sort of bank mania had succeeded the original establishment of the institution, and local banks rapidly increased.
They became favorites of the people, for they furnished business facilities that were of great importance to the whole commercial community.
This local hank interest combined to prevent a renewal of the charter of the United
States Bank, on the grounds, first, that it was unconstitutional; second, that too much of the stock was owned by foreigners; and, third, that the local banks better accommodated the public.
Though the Secretary of the Treasury
) reported in favor of a renewal of the charter, nothing was done by Congress until within a few weeks before the time when the bank would cease to exist.
The bill for its recharter was defeated by the casting vote of the Vice-President
) in the Senate.
and the bank closed its affairs, giving to the stockholder 8 1/2 per cent. premium over the par value.
The finances of the country were in a wretched state at the close of the war, in 1815.
The local banks had all suspended specie payments, and there was very little of other currency than depreciated bank-notes.
There was universal dissatisfaction, and the people clamored for another United States Bank as a cure for financial evils.
One was chartered in the spring of 1816 (April 3). A bill to that effect had been vetoed by President Madison
in January, 1815; now it received his willing signature.
Its charter was for twenty years, and its capital was $35,000,000, of which amount the United States
subscribed $7,000,000, and the remaining $28,000,000 by individuals.
The creation of this bank compelled the State
banks to resume specie payments or wind up. Many of them were aided in resumption by the great bank, but many, after a struggle more or less prolonged, closed their doors.
Of the 246 State banks, with an aggregate capital of about $90,000,000 in 1816, a very large number were compelled to go into liquidation.
From 1811 to 1830 165 banks, with a capital of $30.000,000, closed their business, and the loss of the government and of individuals by these banks was estimated at $5,000,000, or one-sixth of their capital.
The second United States Bank went into operation in Philadelphia
, in 1817, to continue until March, 1836.
In it were deposited the funds of the government, the use of which gave the bank great facilities for discounting, and so aiding the commercial community.
It soon controlled the monetary affairs of the country; and when General Jackson
of the United States
, in 1829, he expressed his decided hostility to the government bank, as a dangerous institution.
He began a war upon it. which ended in its destruction.
In his first annual message to Congress (December, 1829), he took strong ground against a renewal of the charter, which would expire in 1836.
His reasons were that it had failed in the fulfilment of the promises of its creation — namely, to establish a uniform and sound currency for the whole nation; and, also, that such an institution was not authorized by the national Constitution.
in his annual messages in 1830 and 1831, he attacked the bank, and renewed his objections.
At the close of 1831 the proper officers of the bank petitioned, for the first time, for the renewal of its charter.
The petition was presented in the Senate Jan. 9, 1832, and on March 13 a select committee, to whom it was referred, reported in favor of renewing the charter for fifteen years. Long debates ensued, and finally a bill for rechartering the bank passed both Houses of Congress — the Senate on June 11, by 28 against 20, and the House of Representatives. July 3, by a vote of 107 against 85.
The President vetoed it, and as it failed to receive the constitutional vote of two-thirds of both Houses, the bank charter expired by limitation in 1836.
The commercial community, regarding such an institution as essential to their prosperity, were alarmed, and prophecies of panics and business revulsions, everywhere uttered, helped to accomplish their own speedy fulfilment.
Again, in his annual message (December. 1832), Jackson
's hostility to the bank was manifested by a recommendation to remove the public funds in its custody, and a sale of the stock of the bank belonging to the United States. Congress, by a decided vote, refused to authorize the measure; but after the adjournment of that body the President
assumed the responsibility of performing the act. He directed the Secretary of the Treasury
) to withdraw the government funds — about $10,000,000--from the bank, and deposit them in certain State banks.
would only consent to appoint an agent to inquire upon what terms the local banks would receive the funds on deposit.
Then the President
gave him a peremptory order to remove them from the bank.
refused compliance, and was dismissed from office.
His successor, Roger B. Taney
of the United States
), obeyed the President
, and in October, 1833, the removal was accomplished.
The effect produced was widespread commercial embarrassments and distress.
The business of the country was plunged from a height of prosperity to the depths of adversity, because its intimate connection with the national bank rendered any paralysis of the operations of that institution fatal to commercial activity.
The vital connection of the bank with the business of the country, evidenced by the confusion, confirmed the President
's conviction of the danger to be apprehended from such an enormous moneyed institution.
Failing to have its charter renewed, the operations of the bank expired by limitation in March, 1836.
It was rechartered the same year by the legislature of Pennsylvania, with the same capital.
It was compelled to suspend specie payments, with all the local banks.
in 1837, and again in 1839; and in February, 1840, it made a final suspension, and closed up its affairs.
There remained nothing for the stockholders.
The entire capital had been spent, and widespread distress was the consequence.
bankruptcy laws, past and present