These banks had existed since 1781, in parallel with the Banks of the United States. They could issue bank notes against specie ( gold and silver coins) and the states heavily regulated their own reserve requirements, interest rates for loans and deposits, the necessary capital ratio etc. In this period, only state-chartered banks existed. Main articles: Independent Treasury, Wildcat banking, Suffolk Bank, Suffolk System, The Forstall System, Safety Fund System, and The Clearing House § History Period Despite congressional corruption, Biddle was eventually arrested and charged with fraud. The Bank then flatly denied a subpoena to examine its records and its chief, Nicholas Biddle, bemusedly observed that it would be ironic if he went to prison "By the votes of members of Congress because I would not give up to their enemies their confidential letters". Jackson attempted to counteract this by executive order requiring all federal land payments to be made in gold or silver, in accordance with his interpretation of The Constitution of the United States, which only gives Congress the power to "coin" money, not emit bills of credit. He was unable to get the bank dissolved, but refused to renew its charter. His destruction of the bank was a major political issue in the 1830s and shaped the Second Party System, as Democrats in the states opposed banks and Whigs supported them. Andrew Jackson, who became president in 1829, denounced the bank as an engine of corruption. It was essentially a copy of the First Bank, with branches across the country. James Madison signed the charter with the intention of stopping runaway inflation that had plagued the country during the five-year interim. Second Bank of the United States Īfter five years, the federal government chartered its successor, the Second Bank of the United States (1816–1836). Absent the federally chartered bank, the next several years witnessed a proliferation of federally issued Treasury Notes to create credit as the government struggled to finance the War of 1812 a suspension of specie payment by most banks soon followed as well. In 1811 its twenty-year charter expired and was not renewed by Congress. Thomas Jefferson saw it as an engine for speculation, financial manipulation, and corruption. ![]() Several founding fathers bitterly opposed the Bank. It was responsible for only 20% of the currency supply state banks accounted for the rest. Also, it was not solely responsible for the country's supply of bank notes. For example, it was partly owned by foreigners, who shared in its profits. The First Bank of the United States was modeled after the Bank of England and differed in many ways from today's central banks. As a result, the First Bank of the United States (1791–1811) was chartered by Congress within the year and signed by George Washington soon after. In 1791, former Morris aide and chief advocate for Northern mercantile interests, Alexander Hamilton, the Secretary of the Treasury, accepted a compromise with the Southern lawmakers to ensure the continuation of Morris's Bank project in exchange for support by the South for a national bank, Hamilton agreed to ensure sufficient support to have the national or federal capitol moved from its temporary Northern location, New York, to a "Southern" location on the Potomac. Main article: First Bank of the United States ![]() ![]() However, it was thwarted in fulfilling its intended role as a nationwide national bank due to objections of "alarming foreign influence and fictitious credit", favoritism to foreigners and unfair policies against less corrupt state banks issuing their own notes, such that Pennsylvania's legislature repealed its charter to operate within the Commonwealth in 1785. As ratification in early 1781 of the Articles of Confederation had extended to Congress the sovereign power to generate bills of credit, it passed later that year an ordinance to incorporate a privately subscribed national bank following in the footsteps of the Bank of England. Robert Morris, as Superintendent of Finance, helped to open the Bank of North America in 1782, and has been accordingly called by Thomas Goddard "the father of the system of credit and paper circulation in the United States". Others were strongly in favor of a national bank. Some Founding Fathers were strongly opposed to the formation of a national banking system the fact that England tried to place the colonies under the monetary control of the Bank of England was seen by many as the "last straw" of oppression which led directly to the American Revolutionary War.
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