197-584: The Bank War was a political struggle that developed over the issue of rechartering the Second Bank of the United States (B.U.S.) during the presidency of Andrew Jackson (1829–1837). The affair resulted in the shutdown of the Bank and its replacement by state banks. The Second Bank of the United States was established as a private organization with a 20-year charter, having the exclusive right to conduct banking on
394-473: A Roman villa than a Greek temple. Since the bank's closing in 1841, the edifice has performed a variety of functions. Today, it is part of Independence National Historical Park in Philadelphia. The structure is open to the public free of charge and serves as an art gallery, housing a large collection of portraits of prominent early Americans painted by Charles Willson Peale and many others. The building
591-563: A bank, it might emancipate a slave". Jackson was both the champion and beneficiary of the revival of the Jeffersonian North–South alliance. The Jacksonian movement reasserted the Old Republican precepts of limited government , strict construction , and state sovereignty . Federal institutions that conferred privileges producing "artificial inequality" would be eliminated through a return to strict constructionism. The "planter of
788-515: A bill that Jackson found acceptable, the President would "sign it without hesitation". In the words of historian Bray Hammond , "This was a very large 'if,' and the secretary came to realize it." Jackson decided that he had to destroy the Bank and veto the recharter bill. Many moderate Democrats, including McLane, were appalled by the perceived arrogance of the pro-Bank forces in pushing through early recharter and supported his decision. Indeed, Livingston
985-589: A branch in Pensacola . He also signed a certificate with recommendations for president and cashier of the branch in Nashville. The Bank had largely recovered in the public eye since the Panic of 1819 and had grown to be accepted as a fact of life. Its role in managing the nation's fiscal affairs was central. The Bank printed much of the nation's paper money, which made it a target for supporters of hard money, while also restricting
1182-484: A central bank may include: Central banks implement a country's chosen monetary policy . At the most basic level, monetary policy involves establishing what form of currency the country may have, whether a fiat currency , gold-backed currency (disallowed for countries in the International Monetary Fund ), currency board or a currency union . When a country has its own national currency, this involves
1379-540: A central banking role to banks that were effectively or even legally foreign. A seminal case was the Imperial Ottoman Bank established in 1863 as a French-British joint venture, and a particularly egregious one was the Paris-based National Bank of Haiti (est. 1881) which captured significant financial resources from the economically struggling albeit independent nation of Haiti . Other cases include
1576-419: A chapter of his 1842 travelogue American Notes for General Circulation , Philadelphia, and its solitary prison: We reached the city, late that night. Looking out of my chamber-window, before going to bed, I saw, on the opposite side of the way, a handsome building of white marble, which had a mournful ghost-like aspect, dreary to behold. I attributed this to the sombre influence of the night, and on rising in
1773-852: A common central bank. Examples include the Eastern Caribbean Currency Authority , the Central Bank of West African States , and the Bank of Central African States . The concept of supranational central banking took a globally significant dimension with the Economic and Monetary Union of the European Union and the establishment of the European Central Bank (ECB) in 1998. In 2014, the ECB took an additional role of banking supervision as part of
1970-506: A creditor would argue that he was performing a service and was entitled to profit from it. Biddle joined most observers in predicting that Jackson would veto the bill. Not long after, Jackson became ill. Van Buren arrived in Washington on July 4, and went to see Jackson, who said to him, "The Bank, Mr. Van Buren, is trying to kill me, but I shall kill it." Contrary to the assurances Livingston had been rendering Biddle, Jackson determined to veto
2167-569: A crucial role in macroeconomic forecasting, which is essential for guiding monetary policy decisions, especially during times of economic turbulence. Central banks in most developed nations are usually set up to be institutionally independent from political interference, even though governments typically have governance rights over them, legislative bodies exercise scrutiny, and central banks frequently do show responsiveness to politics. Issues like central bank independence, central bank policies and rhetoric in central bank governors discourse or
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#17328442041702364-563: A currency union, or indirectly on a currency board. In the latter case, exemplified by the Bulgarian National Bank , Hong Kong and Latvia (until 2014), the local currency is backed at a fixed rate by the central bank's holdings of a foreign currency. Similar to commercial banks, central banks hold assets (government bonds, foreign exchange, gold, and other financial assets) and incur liabilities (currency outstanding). Central banks create money by issuing banknotes and loaning them to
2561-511: A major readjustment to the relative powers of the government branches. The executive branch, Jackson averred, when acting in the interests of the American people, was not bound to defer to the decisions of the Supreme Court, nor to comply with legislation passed by Congress. He believed that the Bank was unconstitutional and that the Supreme Court, which had declared it constitutional, did not have
2758-651: A man for a stormy sea and a lee shore". Biddle believed that the Bank had the right to operate independently from Congress and the Executive, writing that "no officer of the Government, from the President downwards, has the least right, the least authority" to meddle "in the concerns of the Bank". The end of the War of 1812 was accompanied by an increase in white male suffrage. Most states abolished their property ownership requirements for voting, meaning that nearly all white male adults in
2955-480: A multi-year, interregional public relations campaign designed to secure a new Bank charter. He helped finance and distribute thousands of copies of pro-B.U.S. articles, essays, pamphlets, philosophical treatises, stockholders' reports, congressional committee reports, and petitions. One of the first orders of business was to work with pro-B.U.S. Jacksonians and National Republicans in Congress to rebut Jackson's claims about
3152-469: A national financial crisis, would be avoided, or at least mitigated. It was just this mechanism that the local private banks found objectionable, because it yoked their lending strategies to the fiscal operations of the national government, requiring them to maintain adequate gold and silver reserves to meet their debt obligations to the U.S. Treasury. The proliferation of private-sector banking institutions – from 31 banks in 1801 to 788 in 1837 – meant that
3349-486: A national scale. The goal behind the B.U.S. was to stabilize the American economy by establishing a uniform currency and strengthening the federal government. Supporters of the Bank regarded it as a stabilizing force in the economy due to its ability to smooth out variations in prices and trade, extend credit, supply the nation with a sound and uniform currency, provide fiscal services for the treasury department, facilitate long-distance trade, and prevent inflation by regulating
3546-414: A number of services as part of its charter, including holding and transfer of all U.S. deposits, payment and receipt of all government transactions, and processing of tax payments. In other words, the bank was "the depository of the federal government, which was its principal stockholder and customer." The chief personnel for the bank comprised 25 directors, five of whom were appointed by the President of
3743-510: A platform on banking and finance reform, because to do so "might upset Jackson's delicately balanced coalition". Jackson and other advocates of hard money believed that paper money was part of "a corrupting and demoralizing system that made the rich richer, and the poor poorer". Gold and silver was the only way of having a "fair and stable" currency. The aversion to paper money went back before the American Revolution . Inflation caused during
3940-483: A political liability—recharter would easily pass both Houses with simple majorities—and as such, would confront him with the dilemma of approving or disapproving the legislation ahead of his reelection. A delay would obviate these risks. Jackson remained unconvinced of the Bank's constitutionality. Jackson acceded to McLane's pleas for the upcoming annual address to Congress in December, assuming that any efforts to recharter
4137-519: A proposal to pay down the national debt. Jackson welcomed the offer and personally promised Biddle he would recommend the plan to Congress in his upcoming annual address, but emphasized that he had doubts as to the Bank's constitutionality. This left open the possibility that he could stymie the renewal of the Bank's charter should he win a second term. In his annual address to Congress on December 8, 1829, Jackson praised Biddle's debt retirement plan, but advised Congress to take early action on determining
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#17328442041704334-477: A purveyor of corruption and fraudulent republicanism, and a menace to American democracy. At the heart of the campaign was the conviction that Andrew Jackson had been denied the presidency in 1824 only through a "corrupt bargain"; a Jackson victory promised to rectify this betrayal of the popular will. Although slavery was not a major issue in Jackson's rise to the presidency, it did sometimes factor into opposition to
4531-499: A ratio between the gold reserves held by the Bank of England and the notes that the bank could issue. The Act also placed strict curbs on the issuance of notes by the country banks. The Bank of England took over a role of lender of last resort in the 1870s after criticism of its lacklustre response to the failure of Overend, Gurney and Company . The journalist Walter Bagehot wrote on the subject in Lombard Street: A Description of
4728-466: A recharter strategy, Jacksonian Senator Thomas Hart Benton of Missouri launched an attack against the legitimacy of the Bank on the floor of the Senate, demanding an open debate on the recharter issue. He denounced the Bank as a "moneyed tribunal" and argued for "a hard money policy against a paper money policy". After the speech was over, National Republican Senator Daniel Webster of Massachusetts called for
4925-513: A reform package. The product presented to Jackson included provisions through which the federal government would reduce operations and fulfill one of Jackson's goals of paying down the national debt by March 1833. The debt added up to approximately $ 24 million, and McLane estimated that it could be paid off by applying $ 8 million through the sale of government stock in the Bank plus an additional $ 16 million in anticipated revenue. The liquidation of government stock would necessitate substantial changes to
5122-469: A renewal of the Bank's twenty-year charter four years before the charter was set to expire, intending to pressure Jackson into making a decision prior to the 1832 presidential election , in which Jackson would face Clay. When Congress voted to reauthorize the Bank, Jackson vetoed the bill. His veto message was a polemical declaration of the social philosophy of the Jacksonian movement that pitted "the planters,
5319-422: A reprieve on the Bank's fate. The following day, McLane delivered his report to Congress. The report praised the Bank's performance, including its regulation of state banks, and explicitly called for a post-1832 rechartering of a reconfigured government bank. The enemies of the Bank were shocked and outraged by both speeches. The Jacksonian press, disappointed by the president's subdued and conciliatory tone towards
5516-403: A resolution to investigate allegations that the Bank had violated its charter. The intent was to put pro-Bank forces on the defensive. These delaying tactics could not be blocked indefinitely since any attempt to obstruct the inquiry would raise suspicions among the public. Many legislators benefited from the largesse supplied by Bank administrators. The plan was approved, and a bipartisan committee
5713-563: A response to a currency crisis in 1797, Thornton wrote in 1802 An Enquiry into the Nature and Effects of the Paper Credit of Great Britain , in which he argued that the increase in paper credit did not cause the crisis. The book also gives a detailed account of the British monetary system as well as a detailed examination of the ways in which the Bank of England should act to counteract fluctuations in
5910-401: A single alternate institution that would regulate currency and prevent over-speculation—the primary purposes of the B.U.S. The practical implications of the veto were enormous. By expanding the veto, Jackson claimed for the president the right to participate in the legislative process. In the future, Congress would have to consider the president's wishes when deciding on a bill. The veto message
6107-466: A source of credit for the US government, and as the only chartered interstate bank, but lacked the powers of a modern central bank : It did not set monetary policy , regulate private banks, hold their excess reserves , or act as a lender of last resort , and could issue only money backed by its capitalization and not fiat money . President Madison and Treasury Secretary Albert Gallatin supported recharter of
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6304-492: A unitary central bank. In the second half of the 20th century, the dismantling of colonial systems left some groups of countries using the same currency even though they had achieved national independence. In contrast to the unraveling of Austria-Hungary and the Ottoman Empire after World War I , some of these countries decided to keep using a common currency, thus forming a monetary union , and to entrust its management to
6501-439: A veto, which they hoped would damage Jackson and lead to his defeat. They did however assure Biddle that Jackson would not veto the bill so close to the 1832 election. The proposals included some limited reforms by placing restrictions on the Bank's powers to own real estate and create new branches, give Congress the ability to prevent the Bank from issuing small notes, and allow the president to appoint one director to each branch of
6698-653: A vote to end discussions on the Bank. It succeeded by a vote of 23 to 20, closer than he would have liked. According to Benton, the vote tally was "enough to excite uneasiness but not enough to pass the resolution". The Globe , which was vigorously anti-B.U.S., published Benton's speech, earning Jackson's praise. Shortly after, the Globe announced that the President intended to stand for reelection. After replacing most of his original cabinet members, Jackson included two Bank-friendly executives in his new official cabinet: Secretary of State Edward Livingston of Louisiana and Secretary of
6895-459: Is a potential measure that could be applied by Central banks to achieve a low-carbon transition. Although there is a historical bias toward high-carbon companies, included in Central banks portfolios due to their high credit ratings, innovative approaches to quantitative easing could invert this trend to favor low-carbon assets. Considering the potential impact of central banks on climate change, it
7092-405: Is a rather recent phenomenon. At the start of the 20th century, approximately two-thirds of sovereign states did not have a central bank. Waves of central bank adoption occurred in the interwar period and in the aftermath of World War II. In the 20th century, central banks were often created with the intent to attract foreign capital, as bankers preferred to lend to countries with a central bank on
7289-489: Is actually created, which is called "credit". This money has to be paper; otherwise, a bank can only lend as much as it takes in and hence new currency cannot be created out of nothing. Paper money was therefore necessary to grow the economy. Banks making too many loans would print an excess of paper money and deflate the currency. This would lead to lenders demanding that the banks take back their devalued paper in exchange for specie, as well as debtors trying to pay off loans with
7486-533: Is an institution that manages the currency and monetary policy of a country or monetary union. In contrast to a commercial bank , a central bank possesses a monopoly on increasing the monetary base . Many central banks also have supervisory or regulatory powers to ensure the stability of commercial banks in their jurisdiction, to prevent bank runs , and in some cases also to enforce policies on financial consumer protection and against bank fraud , money laundering , or terrorism financing . Central banks play
7683-537: Is as bad as it can possibly be—a new version of Alexander Hamilton's reports on a National Bank and manufacturers, and totally unsuited to this age of democracy and reform." Secretary of the Senate Walter Lowrie described it as "too ultra federal". The Globe refrained from openly attacking Secretary McLane, but in lieu of this, reprinted hostile essays from anti-Bank periodicals. After this, McLane secretly tried to have Blair removed from his position as editor of
7880-676: Is classified as unintended unemployment. For example, structural unemployment is a form of unintended unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Macroeconomic policy generally aims to reduce unintended unemployment. Keynes labeled any jobs that would be created by a rise in wage-goods (i.e., a decrease in real-wages ) as involuntary unemployment : Economic growth can be enhanced by investment in capital , such as more or better machinery. A low interest rate implies that firms can borrow money to invest in their capital stock and pay less interest for it. Lowering
8077-546: Is important to consider the mandates of central banks. The mandate of a central bank can be narrow, meaning only a few objectives are given, limiting the ability of a central bank to include climate change in its policies. However, central bank mandates may not necessarily have to be modified to accommodate climate change-related activities. For example, the European Central Bank has incorporated carbon-emissions into its asset purchase criteria, despite its relatively narrow mandate that focuses on price stability. The functions of
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8274-480: Is located nearby in Philadelphia. This can be seen in the more Roman-influenced Federal structure's ornate, colossal Corinthian columns of its façade, which is also embellished by Corinthian pilasters and a symmetric arrangement of sash windows piercing the two stories of the façade. The roofline is also topped by a balustrade , and the heavy modillions adorning the pediment give the First Bank an appearance more like
8471-440: Is not central banks' role to conduct climate policy. China is among the most advanced central banks when it comes to green monetary policy. It has given green bonds preferential status to lower their yield and uses window policy to direct green lending. The implications of potential stranded assets in the economy highlights one example of the embedded transition risk to climate change with potential cascade effects throughout
8668-782: Is now known as a central bank was often referred to as a bank of issue ( French : institut d'émission , German : Notenbank ). The reference to central banking in the current sense only became widespread in the early 20th century. Names of individual central banks include, with references to the date when the bank acquired its current name: In some cases, the local-language name is used in English-language practice, e.g. Sveriges Riksbank (est. 1668, current name in use since 1866), De Nederlandsche Bank (est. 1814), Deutsche Bundesbank (est. 1957), or Bangko Sentral ng Pilipinas (est. 1993). Some commercial banks have names suggestive of central banks, even if they are not: examples are
8865-500: The Bank War and placed the fate of the bank at center of the 1832 presidential election . Jackson mobilized his political base by vetoing the recharter bill and, the veto sustained, easily won reelection on his anti-bank platform. Jackson proceeded to destroy the bank as a financial and political force by removing its federal deposits, and in 1833, federal revenue was diverted into selected private banks by executive order, ending
9062-589: The Bank of Java (est. 1828 in Batavia ), Banque de l'Algérie (est. 1851 in Algiers ), or Hongkong and Shanghai Banking Corporation (est. 1865 in Hong Kong ), operated from the colony itself. Following the generalization of the transcontinental use of the electrical telegraph using submarine communications cable , however, new colonial banks were typically headquartered in the colonial metropolis; prominent examples included
9259-622: The Bank of Spain in 1782. The Russian Assignation Bank , established in 1769 by Catherine the Great , was an outlier from the general pattern of early national central banks in that it was directly owned by the Imperial Russian government, rather than private individual shareholders. In the nascent United States , Alexander Hamilton , as Secretary of the Treasury in the 1790s, set up the First Bank of
9456-569: The Belgium–Luxembourg Economic Union established in 1921, under which Luxembourg had no central bank, but that was managed by a national central bank (in that case the National Bank of Belgium ) rather than a supranational one. The present-day Common Monetary Area of Southern Africa has comparable features. Yet another pattern was set in countries where federated or otherwise sub-sovereign entities had wide policy autonomy that
9653-448: The Era of Good Feelings —favored the development of national programs and institutions, including a protective tariff , internal improvements and the revival of a Bank of the United States . Southern and western support for a bank, led by Republican nationalists John C. Calhoun of South Carolina and Henry Clay of Kentucky, was decisive in the successful chartering effort. The charter
9850-435: The Globe reported these efforts by the B.U.S. president in the legislative process as evidence of the Bank's corrupting influence on free government. After months of debate and strife, pro-B.U.S. National Republicans in Congress finally prevailed, winning reauthorization of the Bank's charter in the Senate on June 11 by a vote of 28 to 20. The House was dominated by Democrats, who held a 141–72 majority, but it voted in favor of
10047-434: The Globe . Jackson found out about this after Blair offered to resign. He assured Blair that he had no intention of replacing him. Troubled by accusations that he had switched sides, Jackson said, "I had no temporizing policy in me." Although he did not fire McLane, he kept him at a greater distance. Taney's influence meanwhile continued to grow, and he became the only member of the President's official cabinet to be admitted to
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#173284420417010244-478: The Hungarian National Bank operated alongside three other major state-owned banks. For earlier periods, what institutions do or do not count as central banks is often not univocal. Correlatively, different scholars have held different views about the timeline of emergence of the first central banks. A widely held view in the second half of the 20th century has been that Stockholms Banco (est. 1657), as
10441-757: The Mechanics National Bank (also in Philadelphia). He also designed the second building for the main U.S. Mint in Philadelphia in 1833, as well as the New Orleans , Dahlonega , and Charlotte branch mints in the mid-to-late 1830s. Strickland's design for the Second Bank is in essence based on the Parthenon in Athens , and is a significant early and monumental example of Greek Revival architecture. The hallmarks of
10638-451: The National Bank of Czechoslovakia . Brazil established a central bank in 1945, which was a precursor to the Central Bank of Brazil created twenty years later. After gaining independence, numerous African and Asian countries also established central banks or monetary unions. The Reserve Bank of India , which had been established during British colonial rule as a private company, was nationalized in 1949 following India's independence. By
10835-542: The Panic of 1837 and lasting approximately seven years. The bank suspended payment from October 1839 to January 1841, and permanently in February 1841. It then started a lengthy liquidation process, complicated by lawsuits, that ended in 1852 when it assigned its remaining assets to trustees and surrendered the state charter. The bank maintained the following branches. Listed is the year each branch opened. The Second Bank
11032-616: The Revolutionary War by printing enormous amounts of paper money added to the distrust, and opposition to it was a major reason for Hamilton's difficulties in securing the charter of the First Bank of the United States. Supporters of soft money tended to want easy credit. Aspiring entrepreneurs, a number of them on the cotton frontier in the American southwest, resented the Bank not because it printed paper money, but because it did not print more and loan it to them. Banks have to lend more money than they take in. When banks lend money, new money
11229-550: The State Bank of India and Central Bank of India , National Bank of Greece , Banco do Brasil , National Bank of Pakistan , Bank of China , Bank of Cyprus , or Bank of Ireland , as well as Deutsche Bank . Some but not all of these institutions had assumed central banking roles in the past. The leading executive of a central bank is usually known as the Governor , President , or Chair . The widespread adoption of central banking
11426-498: The Supreme Court ruled that the Bank was both constitutional and that, as an agent of the federal government, it could not be taxed. In 1819, Monroe appointed Nicholas Biddle of Philadelphia as Government Director of the Bank. In 1823, he was unanimously elected its president. According to early Jackson biographer James Parton , Biddle "was a man of the pen—quick, graceful, fluent, honorable, generous, but not practically able; not
11623-559: The United Kingdom and the United States respectively, Montagu Norman and Benjamin Strong , agreed on a definition of central banks that was both positive and normative . Since that time, central banks have been generally distinguishable from other financial institutions, except under Communism in so-called single-tier banking systems such as Hungary's between 1950 and 1987, where
11820-630: The financial system . In response, four broad types of interventions including methodology development, investor encouragement, financial regulation and policy toolkits have been adopted by or suggested for central banks. Achieving the 2°C threshold revolve in part around the development of climate-aligned financial regulations. A significant challenge lies in the lack of awareness among corporations and investors, driven by poor information flow and insufficient disclosure. To address this issue, regulators and central banks are promoting transparency, integrated reporting , and exposure specifications, with
12017-495: The " hard-money " Andrew Jackson administration and eastern banking interests in the Bank War . Failing to secure recharter, the Second Bank became a private corporation in 1836, and underwent liquidation in 1841. There would not be national banks again until the passage of the National Bank Act . The political support for the revival of a national banking system was rooted in the early 19th century transformation of
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#173284420417012214-509: The 12th century, a network of professional banks emerged primarily in Southern Europe (including Southern France, with the Cahorsins ). Banks could use book money to create deposits for their customers. Thus, they had the possibility to issue, lend and transfer money autonomously without direct control from political authorities. The Taula de canvi de Barcelona , established in 1401, is
12411-613: The 19th century. The Bank of Finland was founded in 1812, soon after Finland had been taken over from Sweden by Russia to become a grand duchy . Simultaneously, a quasi-central banking role was played by a small group of powerful family-run banking networks, typified by the House of Rothschild , with branches in major cities across Europe, as well as Hottinguer in Switzerland and Oppenheim in Germany. The theory of central banking, even though
12608-439: The American public as to the efficacy of paper money, and in whose interests a national system of finance operated. Upon this widespread disaffection the anti-bank Jacksonian Democrats would mobilize opposition to the bank in the 1830s. The bank was in general disrepute among most Americans when Nicholas Biddle , the third and last president of the bank, was appointed by President James Monroe in 1823. Under Biddle's guidance,
12805-488: The B.U.S. Many people demanded more limited Jeffersonian government, especially after revelations of fraud within the Bank and its attempts to influence elections. Andrew Jackson , previously a major general in the United States Army and former territorial governor of Florida , sympathized with these concerns, privately blaming the Bank for causing the Panic by contracting credit. In a series of memorandums, he attacked
13002-430: The B.U.S. branch bank in Nashville. The Second Bank's reputation in the public eye partially recovered throughout the 1820s as Biddle managed the Bank prudently during a period of economic expansion. Some of the animosity left over from the Panic of 1819 had diminished, though pockets of anti-B.U.S. sentiment persisted in some western and rural locales. According to historian Bray Hammond, "Jacksonians had to recognize that
13199-591: The B.U.S. until December 1829. When Jackson entered the White House in March 1829, dismantling the Bank was not part of his reform agenda. Although the President harbored an antipathy toward all banks, several members of his initial cabinet advised a cautious approach when it came to the B.U.S. Throughout 1829, Jackson and his close advisor, William Berkeley Lewis , maintained cordial relations with B.U.S. administrators, including Biddle, and Jackson continued to do business with
13396-422: The Bank emerged from the White House. Jackson's cabinet members were opposed to an overt attack on the Bank. The Treasury Department maintained normal working relations with Biddle, whom Jackson reappointed as a government director of the Bank. Lewis and other administration insiders continued to have encouraging exchanges with Biddle, but in private correspondence with close associates, Jackson repeatedly referred to
13593-451: The Bank president that Jackson would not veto a recharter bill. McLane and Lewis, however, told Biddle that the chances of recharter would be greater if he waited until after the election of 1832. "If you apply now," McLane wrote Biddle, "you assuredly will fail,—if you wait, you will as certainly succeed." Most historians have argued that Biddle reluctantly supported recharter in early 1832 due to political pressure from Clay and Webster, though
13790-459: The Bank president was also considering other factors. Thomas Cadwalader, a fellow B.U.S. director and close confidant of Biddle, recommended recharter after counting votes in Congress in December 1831. In addition, Biddle had to consider the wishes of the Bank's major stockholders, who wanted to avoid the uncertainty of waging a recharter fight closer to the expiration of the charter. Indeed, Jackson had predicted in his first annual message of 1829 that
13987-403: The Bank promoted. Jackson cast himself in populist terms as a defender of original rights, writing: It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of
14184-431: The Bank to reverse its tight money policies, but its chances of being rechartered were all but finished. The economy did well during Jackson's time as president, but his economic policies, including his war against the Bank, are sometimes blamed for contributing to the Panic of 1837 . The First Bank of the United States was established at the direction of Treasury Secretary Alexander Hamilton in 1791. Hamilton supported
14381-457: The Bank would not begin until after the election. McLane would then present his proposals for reform and delay of recharter at the annual Treasury Secretary's report to Congress shortly thereafter. Despite McLane's attempts to procure a modified Bank charter, Attorney General Roger B. Taney , the only member of Jackson's cabinet at the time who was vehemently anti-B.U.S., predicted that ultimately Jackson would never relinquish his desire to destroy
14578-551: The Bank's board of directors, and contributed Bank funds directly to the Adams campaign. Some of these allegations were unproven and even denied by individuals who were loyal to the President, but Jackson continued to receive news of the Bank's political meddling throughout his first term. To defuse a potentially explosive political conflict, some Jacksonians encouraged Biddle to select candidates from both parties to serve as B.U.S. officers, but Biddle insisted that only one's qualifications for
14775-430: The Bank's charter, which Jackson supported. After the liquidation of the debt, future revenues could be applied to funding the military. Another part of McLane's reform package involved selling government lands and distributing the funds to states, a measure consistent with Jackson's overall belief in reducing the operations of the central government. With this accomplished, the administration would permit re-authorization of
14972-466: The Bank's constitutionality and added that the institution had "failed in the great end of establishing a uniform and sound currency". He went on to argue that if such an institution was truly necessary for the United States, its charter should be revised to avoid constitutional objections. Jackson suggested making it a part of the Treasury Department. Many historians agree that the claim regarding
15169-692: The Bank's currency was factually untrue. According to historian Robert V. Remini , the Bank exercised "full control of credit and currency facilities of the nation and adding to their strength and soundness". The Bank's currency circulated in all or nearly all parts of the country. Jackson's statements against the Bank were politically potent in that they served to "discharge the aggressions of citizens who felt injured by economic privilege, whether derived from banks or not". Jackson's criticisms were shared by "anti-bank, hard money agrarians" as well as eastern financial interests, especially in New York City, who resented
15366-464: The Bank's currency. A March 1830 report authored by Senator Samuel Smith of Maryland served this purpose. This was followed in April by a similar report written by Representative George McDuffie of South Carolina. Smith's report stated that the B.U.S. provided "a currency as safe as silver; more convenient, and more valuable than silver, which ... is eagerly sought in exchange for silver". This echoed
15563-537: The Bank's federal deposits. In 1833, he arranged to distribute the funds to dozens of state banks. The new Whig Party emerged in opposition to his perceived abuse of executive power, officially censuring Jackson in the Senate . In an effort to promote sympathy for the institution's survival, Biddle retaliated by contracting Bank credit, inducing a mild financial downturn. A reaction set in throughout America's financial and business centers against Biddle's maneuvers, compelling
15760-492: The Bank's foreign stockholders, including the amount of shares they owned; would face stiff penalties if it held onto property for longer than five years, and would not issue notes in denominations of less than twenty dollars. Jacksonians argued that the Bank often cheated small farmers by redeeming paper with discounted specie, meaning that a certain amount was deducted. They alleged that this was unfair to farmers and allowed creditors to profit without creating tangible wealth, while
15957-478: The Bank's public–private organization to be unconstitutional, and argued that the institution's charter violated state sovereignty . To them, the Bank symbolized corruption while threatening liberty. In early 1832, the president of the B.U.S., Nicholas Biddle , in alliance with the National Republicans under Senators Henry Clay (Kentucky) and Daniel Webster (Massachusetts), submitted an application for
16154-460: The Bank's standing in public esteem was high." Unfortunately for Biddle, there were rumors that the Bank had interfered politically in the election of 1828 by supporting Adams. B.U.S. branch offices in Louisville, Lexington, Portsmouth, Boston, and New Orleans, according to anti-Bank Jacksonians, had loaned more readily to customers who favored Adams, appointed a disproportionate share of Adams men to
16351-494: The Bank's stockholders would submit an early application to Congress. On January 6, 1832, bills for Bank recharter were introduced in both houses of Congress. In the House of Representatives, McDuffie, as Chairman of the Ways and Means Committee, guided the bill to the floor. Fellow Jacksonian George M. Dallas introduced the bill into the Senate. Clay and Webster secretly intended to provoke
16548-455: The Bank, launched fresh and provocative assaults on the institution. McLane's speech, despite its call for radical modifications and delay in recharter, was widely condemned by Jacksonians. They described it as "Hamiltonian" in character, accused it of introducing "radical modifications" to existing Treasury policy and attacked it as an assault on democratic principles. For example, Representative Churchill C. Cambreleng wrote, "The Treasury report
16745-408: The Bank. In 1815, Secretary of State James Monroe told President Madison that a national bank "would attach the commercial part of the community in a much greater degree to the Government [and] interest them in its operations…This is the great desideratum [essential objective] of our system." Support for this "national system of money and finance" grew with the post-war economy and land boom, uniting
16942-602: The Bank. The alliance between Biddle and Clay triggered a counter-offensive by anti-B.U.S. forces in Congress and the executive branch. Jackson assembled an array of talented and capable men as allies. Most notably, these were Thomas Hart Benton in the Senate and future president James K. Polk , member of the House of Representatives from Tennessee, as well as Blair, Treasury Auditor Kendall, and Attorney General Roger Taney in his cabinets. On February 23, 1832, Jacksonian Representative Augustin Smith Clayton of Georgia introduced
17139-749: The Financial System (NGFS) to evaluate the way in which central banks can use their regulatory and monetary policy tools to support climate change mitigation . Today more than 70 central banks are part of the NGFS. In January 2020, the European Central Bank has announced it will consider climate considerations when reviewing its monetary policy framework. Proponents of "green monetary policy" are proposing that central banks include climate-related criteria in their collateral eligibility frameworks, when conducting asset purchases and also in their refinancing operations. But critics such as Jens Weidmann are arguing it
17336-416: The First Bank in 1811. These interests played significant roles in undermining the institution during the administration of U.S. President Andrew Jackson (1829–1837). The Second Bank was a national bank. However, it did not serve the functions of a modern central bank : It did not set monetary policy , regulate private banks, hold their excess reserves , or act as a lender of last resort . The bank
17533-406: The First Bank in 1811. They cited "expediency" and "necessity", not principle. Opponents of the Bank defeated recharter by a single vote in both the House and Senate in 1811. State banks opposed recharter of the national bank because when state bank notes were deposited with the First Bank of the United States, the Bank would present these notes to state banks and demand gold in exchange, which limited
17730-459: The Greek Revival style can be seen immediately in the north and south façades, which use a large set of steps leading up to the main level platform, known as the stylobate . On top of these, Strickland placed eight severe Doric columns, which are crowned by an entablature containing a triglyph frieze and simple triangular pediment . The building appears much as an ancient Greek temple, hence
17927-418: The House and Senate. Clay and Massachusetts Senator Daniel Webster warned Americans that if Jackson won reelection, he would abolish the Bank. They felt secure that the B.U.S. was sufficiently popular among voters that any attack on it by the President would be viewed as an abuse of executive power . The National Republican leadership aligned themselves with the Bank not so much because they were champions of
18124-428: The Jackson administration in December 1829, on the grounds that it had failed to produce a stable national currency, and that it lacked constitutional legitimacy. Both houses of Congress responded with committee investigations and reports affirming the historical precedents for the bank's constitutionality and its pivotal role in furnishing a uniform currency. Jackson rejected these findings, and privately characterized
18321-542: The London-based Imperial Bank of Persia , established in 1885, and the Rome-based National Bank of Albania , established in 1925. The State Bank of Morocco was established in 1907 with international shareholding and headquarters functions distributed between Paris and Tangier , a half-decade before the country lost its independence. In other cases, there have been organized currency unions such as
18518-653: The Money Market , in which he advocated for the bank to officially become a lender of last resort during a credit crunch , sometimes referred to as "Bagehot's dictum". The 19th and early 20th centuries central banks in most of Europe and Japan developed under the international gold standard . Free banking or currency boards were common at the time. Problems with collapses of banks during downturns, however, led to wider support for central banks in those nations which did not as yet possess them, for example in Australia. In
18715-465: The Paris-based Banque de l'Indochine (est. 1875), Banque de l'Afrique Occidentale (est. 1901), and Banque de Madagascar (est. 1925). The Banque de l'Algérie's head office was relocated from Algiers to Paris in 1900. In some cases, independent countries which did not have a strong domestic base of capital accumulation and were critically reliant on foreign funding found advantage in granting
18912-411: The Second Bank as both constitutionally illegitimate and a direct threat to Jeffersonian agrarianism, state sovereignty and the institution of slavery , expressed by Taylor's statement that "...if Congress could incorporate a bank, it might emancipate a slave." Hostile to the regulatory effects of the national bank, private banks—proliferating with or without state charters —had scuttled rechartering of
19109-598: The Second Bank faced strong opposition from this sector during the Jackson administration. The architect of the Second Bank was William Strickland (1788–1854), a former student of Benjamin Latrobe (1764–1820), the man who is often called the first professionally trained American architect . Latrobe and Strickland were both disciples of the Greek Revival style. Strickland went on to design many other American public buildings in this style, including financial structures such as
19306-399: The Second Bank in 1836. In return, McLane asked that Jackson not mention the Bank in his annual address to Congress. Jackson enthusiastically accepted McLane's proposal, and McLane personally told Biddle about his success. Biddle stated that he would have preferred that Jackson, rather than remaining silent on the question of recharter, would have made a public statement declaring that recharter
19503-488: The Second Bank, as chartered by Congress in 1816, was to restrain the uninhibited proliferation of paper money (bank notes) by state or private lenders, which was highly profitable to these institutions. In this capacity, the bank would preside over this democratization of credit, contributing to a vast and profitable disbursement of bank loans to farmers, small manufacturers and entrepreneurs, encouraging rapid and healthy economic expansion. Historian Bray Hammond describes
19700-503: The Second Bank, specifically among those in the South who were suspicious of how augmented federal power at the expense of the states might affect the legality of slavery. Democrat Nathaniel Macon remarked, "If Congress can make banks, roads and canals under the Constitution, they can free any slave in the United States." In 1820, John Tyler of Virginia wrote that "if Congress can incorporate
19897-530: The South and the plain Republican of the North" would provide the support, with the aid of universal white male suffrage. In the end, Jackson won the election decisively, taking 56 percent of the popular vote and 68 percent of the electoral vote. The Jacksonian coalition had to contend with a fundamental incompatibility between its hard money and paper money factions, for which reason Jackson's associates never offered
20094-482: The Treasury Louis McLane of Delaware. McLane, a confidant of Biddle, impressed Jackson as a forthright and principled moderate on Bank policy. Jackson called their disagreements an "honest difference of opinion" and appreciated McLane's "frankness". The Treasury Secretary's goal was to ensure that the B.U.S. survived Jackson's presidency, even in a diminished condition. He secretly worked with Biddle to create
20291-535: The U.S. markets collapsed in the Panic of 1819 —a result of global economic adjustments —the bank came under withering criticism for its belated tight money policies—policies that exacerbated mass unemployment and plunging property values. Further, it transpired that branch directors for the Baltimore office had engaged in fraud and larceny. Resigning in January 1819, Jones was replaced by Langdon Cheves , who continued
20488-498: The United States despite heavy opposition from Jeffersonian Republicans . Central banks were established in many European countries during the 19th century. Napoleon created the Banque de France in 1800, in order to stabilize and develop the French economy and to improve the financing of his wars. The Bank of France remained the most important Continental European central bank throughout
20685-503: The United States , the Second Bank was chartered by President James Madison , who in 1791 had attacked the First Bank as unconstitutional, in 1816 and began operations at its main branch in Philadelphia on January 7, 1817, managing 25 branch offices nationwide by 1832. The efforts to renew the bank's charter put the institution at the center of the general election of 1832 , in which the bank's president Nicholas Biddle and pro-bank National Republicans led by Henry Clay clashed with
20882-494: The United States were eligible to vote. Jackson, as a war hero, was popular with the masses. With their support, he ran for president in 1824 . The election turned into a five-way contest between Jackson, Calhoun, John Quincy Adams , William H. Crawford , and Clay. All were members of the Republican Party, which was still the only political party in the country. Calhoun eventually dropped out to run for vice president, lowering
21079-441: The United States, subject to Senate approval. Federally appointed directors were barred from acting as officials in other banks. Two of the three Bank presidents, William Jones and Nicholas Biddle, were chosen from among these government directors. Headquartered in Philadelphia, the bank was authorized to establish branch offices where it deemed suitable, and these were immune from state taxation . The primary regulatory task of
21276-547: The United States, the role of a central bank had been ended in the so-called Bank War of the 1830s by President Andrew Jackson . In 1913, the U.S. created the Federal Reserve System through the passing of The Federal Reserve Act . Following World War I , the Economic and Financial Organization (EFO) of the League of Nations , influenced by the ideas of Montagu Norman and other leading policymakers and economists of
21473-412: The absolute necessity of a national banking system". The push for the creation of a new national bank occurred during the post-war period of American history known as the Era of Good Feelings . There was a strong movement to increase the power of the federal government. Some people blamed a weak central government for America's poor performance during much of the War of 1812. Humiliated by its opposition to
21670-467: The activities of smaller banks, which created some resentment from those who wanted easy credit. As of 1830, the Bank had $ 50 million (~$ 1.6 billion in 2023) in specie in reserve, approximately half the value of its paper currency. It tried to ensure steady growth by forcing state-chartered banks to keep specie reserves. This meant that smaller banks lent less money, but that their notes were more reliable. Jackson would not publicly air his grievances with
21867-471: The arguments of Calhoun during the charter debates in 1816. After the release of these reports, Biddle went to the Bank's board to ask for permission to use some of the Bank's funds for printing and dissemination. The board, which was composed of Biddle and like-minded colleagues, agreed. Another result of the reports was that the Bank's stock rose following the drop that it experienced from Jackson's remarks. In spite of Jackson's address, no clear policy towards
22064-498: The bank as a corrupt institution, dangerous to American liberties. Biddle made repeated overtures to Jackson and his cabinet to secure a compromise on the bank's rechartering (its term due to expire in 1836) without success. Jackson and the anti-bank forces persisted in their condemnation of the bank, provoking an early recharter campaign by pro-bank National Republicans under Henry Clay . Clay's political ultimatum to Jackson —with Biddle's financial and political support —sparked
22261-433: The bank evolved into a powerful institution that produced a strong and sound system of national credit and currency. From 1823 to 1833, Biddle expanded credit steadily, but with restraint, in a manner that served the needs of the expanding American economy. Albert Gallatin , former Secretary of the Treasury under Thomas Jefferson and James Madison , wrote in 1831 that the bank was fulfilling its charter expectations. By
22458-424: The bank handled all fiscal transactions for the U.S. government, and was accountable to Congress and the U.S. Treasury . Twenty percent of its capital was owned by the federal government, the bank's single largest stockholder . Four thousand private investors held 80 percent of the bank's capital, including three thousand Europeans. The bulk of the stocks were held by a few hundred wealthy Americans. In its time,
22655-462: The bank was chartered from February 1816 to January 1836. The bank's formal name, according to section 9 of its charter as passed by Congress, was "The President, Directors, and Company, of the Bank of the United States". While other banks in the US were chartered by and only allowed to have branches in a single state, it was authorized to have branches in multiple states and lend money to the US government. A private corporation with public duties ,
22852-439: The central bank. Indeed, he was convinced that Jackson had never intended to spare the Bank in the first place. Jackson, without consulting McLane, subsequently edited the language in the final draft after considering Taney's objections. In his December 6 address, Jackson was non-confrontational, but due to Taney's influence, his message was less definitive in its support for recharter than Biddle would have liked, amounting to merely
23049-439: The central government. Division during his administration led to the end of the single party era. Supporters of Adams began calling themselves National Republicans . Supporters of Jackson became known as Jacksonians and, eventually, Democrats . In 1828 , Jackson ran again. Most Old Republicans had supported Crawford in 1824. Alarmed by the centralization in the Adams administration, most of them flocked to Jackson. The transition
23246-448: The contraction in credit in an effort to stop inflation and stabilize the bank, even as the economy began to correct. The bank's reaction to the crisis—a clumsy expansion, then a sharp contraction of credit—indicated its weakness, not its strength. The effects were catastrophic, resulting in a protracted recession with mass unemployment and a sharp drop in property values that persisted until 1822. The financial crisis raised doubts among
23443-483: The country from simple Jeffersonian agrarianism towards one interdependent with industrialization and finance. In the aftermath of the War of 1812 , the federal government suffered from the disarray of an unregulated currency and a lack of fiscal order; business interests sought security for their government bonds. A national alliance arose to legislate a national bank to address these needs. The political climate —dubbed
23640-553: The early 17th century in leading northwestern European commercial centers, namely the Bank of Amsterdam in 1609 and the Hamburger Bank in 1619. These institutions offered a public infrastructure for cashless international payments. They aimed to increase the efficiency of international trade and to safeguard monetary stability. These municipal public banks thus fulfilled comparable functions to modern central banks. The Swedish central bank, known since 1866 as Sveriges Riksbank ,
23837-422: The early 21st century, most of the world's countries had a national central bank set up as a public sector institution, albeit with widely varying degrees of independence. Before the near-generalized adoption of the model of national public-sector central banks, a number of economies relied on a central bank that was effectively or legally run from outside their territory. The first colonial central banks, such as
24034-564: The farmers, the mechanic and the laborer" against the "monied interest", benefiting the wealthy at the expense of the common people. The B.U.S. became the central issue that divided the Jacksonians from the National Republicans. Although the Bank provided significant financial assistance to Clay and pro-B.U.S. newspaper editors, Jackson secured an overwhelming election victory. Fearing economic reprisals from Biddle, Jackson swiftly removed
24231-635: The federal government for widespread abuses and corruption. These included theft, fraud, and bribery, and they occurred regularly at branches of the National Bank. In Mississippi, the Bank did not open branches outside of the city of Natchez , making small farmers in rural areas unable to make use of its capital. Members of the planter class and other economic elites who were well-connected often had an easier time getting loans. According to historian Edward E. Baptist , "A state bank could be an ATM machine for those connected to its directors." One such example
24428-475: The federal level was deemed necessary by Republican nationalists to promote expansion and encourage private enterprise. At the same time, they tried to "republicanize Hamiltonian bank policy." John C. Calhoun , a representative from South Carolina and strong nationalist, boasted that the nationalists had the support of the yeomanry , who would now "share in the capital of the Bank". Despite opposition from Old Republicans led by John Randolph of Roanoke , who saw
24625-575: The first example of municipal, mostly public banks which pioneered central banking on a limited scale. It was soon emulated by the Bank of Saint George in the Republic of Genoa , first established in 1407, and significantly later by the Banco del Giro in the Republic of Venice and by a network of institutions in Naples that later consolidated into Banco di Napoli . Notable municipal central banks were established in
24822-512: The foreign exchange market. Goals frequently cannot be separated from each other and often conflict. Costs must therefore be carefully weighed before policy implementation. In the aftermath of the Paris agreement on climate change , a debate is now underway on whether central banks should also pursue environmental goals as part of their activities. In 2017, eight central banks formed the Network for Greening
25019-515: The form of gold and silver coins . The mere issuance of paper currency or other types of financial money by a government is not the same as central banking. The difference is that government-issued financial money, as present e.g. in China during the Yuan dynasty in the form of paper currency, is typically not freely convertible and thus of inferior quality, occasionally leading to hyperinflation . From
25216-450: The foundation of a national bank because he believed that it would increase the authority and influence of the federal government, effectively manage trade and commerce, strengthen the national defense, and pay the debt. It was subject to attacks from agrarians and constructionists led by Thomas Jefferson and James Madison . They believed that it was unconstitutional because the Constitution did not expressly allow for it, would infringe on
25413-419: The gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society-the farmers, mechanics, and laborers-who have neither
25610-561: The global economy, the US Federal Reserve plays an outsized role in the international monetary market. Being the main supplier and rate adjusted for US dollars, the Federal Reserve implements a set of requirements to control inflation and unemployment in the US. Frictional unemployment is the time period between jobs when a worker is searching for, or transitioning from one job to another. Unemployment beyond frictional unemployment
25807-464: The goal of promoting long-term, low-carbon emission goals, rather than short-term financial objectives. These regulations aim to assess risk comprehensively, identifying carbon-intensive assets and increasing their capital requirements. This should result in high-carbon assets becoming less attractive while favoring low-carbon assets, which have historically been perceived as high-risk, and low volatility investment vehicles . Quantitative easing
26004-512: The gold standard. The use of money as a unit of account predates history. Government control of money is documented in the ancient Egyptian economy (2750–2150 BCE). The Egyptians measured the value of goods with a central unit called shat . Like many other currencies, the shat was linked to gold . The value of a shat in terms of goods was defined by government administrations. Other cultures in Asia Minor later materialized their currencies in
26201-435: The government-owned share. It was required to remit a "bonus" payment of $ 1.5 million, payable in three installments, to the government for the privilege of using the public funds, interest free, in its private banking ventures. The institution was answerable for its performance to the U.S. Treasury and Congress and subject to Treasury Department inspection. As exclusive fiscal agent for the federal government, it provided
26398-521: The highest quality. Under that definition, municipal banks of the late medieval and early modern periods, such as the Taula de canvi de Barcelona (est. 1401) or Bank of Amsterdam (est. 1609), issued central bank money and count as early central banks. There is no universal terminology for the name of a central bank. Early central banks were often the only or principal formal financial institution in their jurisdiction, and were consequently often named "bank of"
26595-421: The idealized "plain republican" and the "real people"—virtuous, industrious and free—against a powerful financial institution—the "monster" Bank, whose wealth was purportedly derived from privileges bestowed by corrupt political and business elites. Jackson's message distinguished between "equality of talents, of education, or of wealth", which could never be achieved, from "artificial distinctions", which he claimed
26792-468: The inner circle of advisors in the Kitchen Cabinet. National Republicans continued to organize in favor of recharter. Within days of Jackson's address, party members gathered at a convention on December 16, 1831, and nominated Senator Clay for president. Their campaign strategy was to defeat Jackson in 1832 on the Bank re-authorization issue. To that end, Clay helped introduce recharter bills in both
26989-543: The institution as being "a hydra of corruption" and "dangerous to our liberties". Developments in 1830 and 1831 temporarily diverted anti-B.U.S. Jacksonians from pursuing their attack on the B.U.S. Two of the most prominent examples were the Nullification Crisis and the Peggy Eaton Affair . These struggles led to Vice President Calhoun's estrangement from Jackson and eventual resignation, the replacement of all of
27186-421: The institution was the largest monied corporation in the world. The essential function of the bank was to regulate the public credit issued by private banking institutions through the fiscal duties it performed for the U.S. Treasury, and to establish a sound and stable national currency . The federal deposits endowed the bank with its regulatory capacity. Modeled on Alexander Hamilton 's First Bank of
27383-418: The institution, but more so because it offered what appeared to be the perfect issue on which to defeat Jackson. Administration figures, among them McLane, were wary of issuing ultimatums that would provoke anti-B.U.S. Jacksonians. Biddle no longer believed that Jackson would compromise on the Bank question, but some of his correspondents who were in contact with the administration, including McDuffie, convinced
27580-409: The interest is therefore considered to encourage economic growth and is often used to alleviate times of low economic growth. On the other hand, raising the interest rate is often used in times of high economic growth as a contra-cyclical device to keep the economy from overheating and avoid market bubbles. Further goals of monetary policy are stability of interest rates, of the financial market, and of
27777-456: The interests of eastern financiers with southern and western Republican nationalists. The roots for the resurrection of the Bank of the United States lay fundamentally in the transformation of America from a simple agrarian economy to one that was becoming interdependent with finance and industry. Vast western lands were opening for white settlement, accompanied by rapid development, enhanced by steam power and financial credit. Economic planning at
27974-440: The issue of some form of standardized currency, which is essentially a form of promissory note : "money" under certain circumstances. Historically, this was often a promise to exchange the money for precious metals in some fixed amount. Now, when many currencies are fiat money , the "promise to pay" consists of the promise to accept that currency to pay for taxes. A central bank may use another country's currency either directly in
28171-544: The job and knowledge in the affairs of business, rather than partisan considerations, should determine hiring practices. In January 1829, John McLean wrote to Biddle urging him to avoid the appearance of political bias in light of allegations of the Bank interfering on behalf of Adams in Kentucky. Biddle responded that the "great hazard of any system of equal division of parties at a board is that it almost inevitably forces upon you incompetent or inferior persons in order to adjust
28368-432: The lending practices of state banks. Jacksonian Democrats cited instances of corruption and alleged that the B.U.S. favored merchants and speculators at the expense of farmers and artisans, appropriated public money for risky private investments and interference in politics, and conferred economic privileges on a small group of stockholders and financial elites, thereby violating the principle of equal opportunity. Some found
28565-413: The local banks was in specie i.e. silver and gold coin, the pressure for settlement automatically regulated local banking lending: for the more the local banks lent the larger amount of their notes and checks in use and the larger the sums they had to settle in specie. This loss of specie reduced their power to lend. Under this banking regime, the impulse towards over-speculation, with the risks of creating
28762-468: The manner in which it was cut, has begun to deteriorate due to weak parts of the stone being exposed to the elements. This phenomenon is most visible on the Doric columns of the south façade. Construction lasted from 1819 to 1824. The Greek Revival style used for the Second Bank contrasts with the earlier, Federal style in architecture used for the First Bank of the United States , which also still stands and
28959-434: The mechanism by which the bank exerted its anti-inflationary influence: Receiving the checks and notes of local banks deposited with the [Bank] by government collectors of revenue, the [Bank] had constantly to come back on the local banks for settlements of the amounts which the checks and notes called for. It had to do so because it made those amounts immediately available to the Treasury, wherever desired. Since settlement by
29156-407: The morning looked out again, expecting to see its steps and portico thronged with groups of people passing in and out. The door was still tight shut, however; the same cold cheerless air prevailed: and the building looked as if the marble statue of Don Guzman could alone have any business to transact within its gloomy walls. I hastened to inquire its name and purpose, and then my surprise vanished. It
29353-459: The name was not yet widely used, evolved in the 19th century. Henry Thornton , an opponent of the real bills doctrine , was a defender of the bullionist position and a significant figure in monetary theory. Thornton's process of monetary expansion anticipated the theories of Knut Wicksell regarding the "cumulative process which restates the Quantity Theory in a theoretically coherent form". As
29550-466: The national bank was engaged in promoting a democratized expansion of credit to accommodate laissez-faire impulses among eastern business entrepreneurs and credit-hungry western and southern farmers. Under the management of its first president William Jones , the bank failed to control paper money issued from its branch banks in the West and South, contributing to the post-war speculative land boom. When
29747-409: The national bank's restrictions on easy credit. They claimed that by lending money in large amounts to wealthy well-connected speculators, it restricted the possibility for an economic boom that would benefit all classes of citizens. After Jackson made these remarks, the Bank's stock dropped due to the sudden uncertainty over the fate of the institution. A few weeks after Jackson's address, Biddle began
29944-437: The newly established policy of European banking union . The primary role of central banks is usually to maintain price stability, as defined as a specific level of inflation. Inflation is defined either as the devaluation of a currency or equivalently the rise of prices relative to a currency. Most central banks currently have an inflation target close to 2%. Since inflation lowers real wages , Keynesians view inflation as
30141-607: The number of candidates to four. Jackson won decisive pluralities in both the Electoral College and the popular vote. He did not win an electoral majority, which meant that the election was decided in the House of Representatives, which would choose among the top three vote-getters in the Electoral College. Clay finished fourth. However, he was also Speaker of the House , and he maneuvered the election in favor of Adams, who in turn made Clay Secretary of State, an office that in
30338-545: The numerical balance of directors". By October 1829, some of Jackson's closest associates, especially Secretary of State Martin Van Buren , were developing plans for a substitute national bank. These plans may have reflected a desire to transfer financial resources from Philadelphia to New York and other places. Biddle carefully explored his options for persuading Jackson to support recharter. He approached Lewis in November 1829 with
30535-573: The official cabinet. In his second annual address to Congress on December 7, 1830, the president again publicly stated his constitutional objections to the Bank's existence. He called for a substitute national bank that would be wholly public with no private stockholders. It would not engage in lending or land purchasing, retaining only its role in processing customs duties for the Treasury Department. The address signaled to pro-B.U.S. forces that they would have to step up their campaign efforts. On February 2, 1831, while National Republicans were formulating
30732-641: The original cabinet members but one, as well as the development of an unofficial group of advisors separate from the official cabinet that Jackson's opponents began to call his " Kitchen Cabinet ". Jackson's Kitchen Cabinet, led by the Fourth Auditor of the Treasury Amos Kendall and Francis P. Blair , editor of the Washington Globe , the state-sponsored propaganda organ for the Jacksonian movement, helped craft policy, and proved to be more anti-Bank than
30929-634: The original issuer of banknotes , counted as the oldest central bank, and that consequently its successor the Sveriges Riksbank was the oldest central bank in continuous operation, with the Bank of England as second-oldest and direct or indirect model for all subsequent central banks. That view has persisted in some early-21st-century publications. In more recent scholarship, however, the issuance of banknotes has often been viewed as just one of several techniques to provide central bank money , defined as financial money (in contrast to commodity money ) of
31126-415: The past had served as a stepping stone to the presidency. Jackson was enraged by this so-called " corrupt bargain " to subvert the will of the people . As president, Adams pursued an unpopular course by attempting to strengthen the powers of the federal government by undertaking large infrastructure projects and other ventures which were alleged to infringe on state sovereignty and go beyond the proper role of
31323-570: The people, for the purpose of turning against them the prejudices and resentments of other classes. It is a State paper which finds no topic too exciting for its use, no passion too inflammable for its address and its solicitation. Second Bank of the United States The Second Bank of the United States was the second federally authorized Hamiltonian national bank in the United States. Located in Philadelphia , Pennsylvania ,
31520-404: The power to do so without the "acquiescence of the people and the states". Further, while previous presidents had used their veto power, they had only done so when objecting to the constitutionality of bills. By vetoing the recharter bill and basing most of his reasoning on the grounds that he was acting in the best interests of the American people, Jackson greatly expanded the power and influence of
31717-423: The premises of macroeconomic policies ( monetary and fiscal policy ) of the state are a focus of contention and criticism by some policymakers, researchers and specialized business, economics and finance media. The notion of central banks as a separate category from other banks has emerged gradually, and only fully coalesced in the 20th century. In the aftermath of World War I , leading central bankers of
31914-495: The president. He characterized the B.U.S. as merely an agent of the executive branch, acting through the Department of the Treasury. As such, declared Jackson, Congress was obligated to consult the chief executive before initiating legislation affecting the Bank. Jackson had claimed, in essence, legislative power as president. Jackson gave no credit to the Bank for stabilizing the country's finances and provided no concrete proposals for
32111-399: The recharter bill on July 3 by a tally of 107 to 85. Many Northern Democrats joined the anti-Jacksonians in supporting recharter. The final bill sent to Jackson's desk contained modifications of the Bank's original charter that were intended to assuage many of the President's objections. The Bank would have a new fifteen-year charter; would report to the Treasury Department the names of all of
32308-455: The recharter bill. The veto message was crafted primarily by members of the Kitchen Cabinet, specifically Taney, Kendall, and Jackson's nephew and aide Andrew Jackson Donelson . McLane denied that he had any part in it. Jackson officially vetoed the legislation on July 10, 1832, delivering a carefully crafted message to Congress and the American people. One of the most "popular and effective documents in American political history", Jackson outlined
32505-448: The regulatory role of the Second Bank. In hopes of extorting a rescue of the bank, Biddle induced a short-lived financial crisis that was initially blamed on Jackson's executive action. By 1834, a general backlash against Biddle's tactics developed, ending the panic, and all recharter efforts were abandoned. In February 1836, the bank became a private corporation under Pennsylvania law. A shortage of hard currency ensued, causing
32702-484: The relevant city's or country's name, e.g. the Bank of Amsterdam , Bank of Hamburg , Bank of England , or Wiener Stadtbank . Naming practices subsequently evolved as more central banks were established. The expression "central bank" itself only appeared in the early 19th century, but at that time it referred to the head office of a multi- branched bank, and was still used in that sense by Walter Bagehot in his seminal 1873 essay Lombard Street . During that era, what
32899-429: The revival of a national bank as purely Hamiltonian and a threat to state sovereignty, but with strong support from nationalists such as Calhoun and Henry Clay , the recharter bill for the Second Bank of the United States was passed by Congress. The charter was signed into law by Madison on April 10, 1816. The Second Bank of the United States was given considerable powers and privileges under its charter. Its headquarters
33096-415: The rights of the states, and would benefit a small group while delivering no advantage to the many, especially farmers. Hamilton's view won out and the Bank was created. More states and localities began to charter their own banks. State banks printed their own notes which were sometimes used out-of-state, and this encouraged other states to establish banks in order to compete. The bank, as established, acted as
33293-409: The same deflated currency, seriously disrupting the economy. Because of the failure to emphasize the distinction between hard money and paper money, as well as the Bank's popularity, the Second Bank of the United States was not a major issue in the 1828 elections. In fact, Biddle voted for Jackson in the election. Jackson himself, though naturally averse to the Bank, had recommended the establishment of
33490-399: The same time, the prices of American goods abroad collapsed. This led to the failure of state banks and the collapse of businesses, turning what could have been a brief recession into a prolonged depression. Financial writer William M. Gouge wrote that "the Bank was saved and the people were ruined". After the Panic of 1819, popular anger was directed towards the nation's banks, particularly
33687-504: The sole authorized distributor of banknotes, or to function as a lender of last resort to banks suffering a liquidity crisis . In the early 18th century, a major experiment in national central banking failed in France with John Law 's Banque Royale in 1720–1721. Later in the century, France had other attempts with the Caisse d'Escompte first created in 1767, and King Charles III established
33884-401: The solution to involuntary unemployment. However, "unanticipated" inflation leads to lender losses as the real interest rate will be lower than expected. Thus, Keynesian monetary policy aims for a steady rate of inflation. Central banks as monetary authorities in representative states are intertwined through globalized financial markets. As a regulator of one of the most widespread currencies in
34081-431: The state banks' ability to issue notes and maintain adequate reserves of specie, or hard money. At that time, bank notes could be exchanged for a fixed value of gold or silver. The arguments in favor of reviving a national system of finance, as well as internal improvements and protective tariffs, were prompted by national security concerns during the War of 1812 . The chaos of the war had, according to some, "demonstrated
34278-413: The stylistic name. The interior consists of an entrance hallway in the center of the north façade flanked by two rooms on either side. The entry leads into two central rooms, one after the other, that span the width of the structure east to west. The east and west sides of the first large room are each pierced by a large arched fan window. The building's exterior uses Pennsylvania blue marble , which, due to
34475-410: The time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. To those who believed that power and wealth should be linked, the message was unsettling. Daniel Webster charged Jackson with promoting class warfare. He proclaimed on the Senate floor: It manifestly seeks to influence the poor against the rich. It wantonly attacks whole classes of
34672-523: The time of Jackson's inauguration in 1829, the bank appeared to be on solid footing. The Supreme Court had affirmed its constitutionality in McCulloch v. Maryland , the 1819 case which Daniel Webster had argued successfully on its behalf a decade earlier, the Treasury recognized the useful services it provided, and the American currency was healthy and stable. Public perceptions of the national bank were generally positive. The bank first came under attack by
34869-726: The time, took an active role to promote the independence of central banks, a key component of the economic orthodoxy the EFO fostered at the Brussels Conference (1920) . The EFO thus directed the creation of the Oesterreichische Nationalbank in Austria , Hungarian National Bank , Bank of Danzig , and Bank of Greece , as well as comprehensive reforms of the Bulgarian National Bank and Bank of Estonia . Similar ideas were emulated in other newly independent European countries, e.g. for
35066-564: The value of the pound. In the United Kingdom until the mid-nineteenth century, commercial banks were able to issue their own banknotes, and notes issued by provincial banking companies were commonly in circulation. Many consider the origins of the central bank to lie with the passage of the Bank Charter Act 1844 . Under the 1844 Act, bullionism was institutionalized in Britain, creating
35263-586: The war, the Federalist Party , founded by Hamilton, collapsed. Nearly all politicians joined the Republican Party , founded by Jefferson. It was hoped that the disappearance of the Federalist Party would mark the end of party politics. But even in the new single party system, ideological and sectional differences began to flare up once again over several issues, one of them being the campaign to recharter
35460-427: Was "a brilliant political manifesto" that called for the end of monied power in the financial sector and a leveling of opportunity under the protection of the executive branch. Jackson perfected his anti-Bank themes. He stated that one fifth of the Bank's stockholders were foreign and that, because states were only allowed to tax stock owned by their own citizens, foreign citizens could more easily accumulate it. He pitted
35657-415: Was "a losing fight" and that the recharter bill would certainly pass. Biddle, working through an intermediary, Charles Jared Ingersoll , continued to lobby Jackson to support recharter. On February 28, Cambreleng expressed hope that if the recharter bill passed, the President would "send it back to us with his veto—an enduring moment of his fame". The following day, Livingston predicted that if Congress passed
35854-426: Was America's national bank, comparable to the Bank of England and the Bank of France , with one key distinction – the United States government owned one-fifth (20 percent) of its capital. Whereas other national banks of that era were wholly private, the Second Bank was more characteristic of a government bank. Under its charter, the bank had a capital limit of $ 35 million, $ 7.5 million of which represented
36051-406: Was a matter for Congress to decide. Nonetheless, he agreed to the overall plan. These reforms required a rapprochement between Jackson and Biddle on the matter of recharter, with McLane and Livingston acting as liaisons. The President insisted that no bill arise in Congress for recharter in the lead up to his reelection campaign in 1832, a request to which Biddle assented. Jackson viewed the issue as
36248-641: Was achieved through harnessing the widespread social resentments and political unrest persisting since the Panic of 1819 and the Missouri Crisis of 1820. The Panic was caused by the rapid resurgence of the European economy after the Napoleonic Wars , where improved agriculture caused the prices of American goods to drop, and a scarcity of specie due to unrest in the Spanish American colonies. The situation
36445-631: Was alone in the cabinet, for only he opposed a veto, and Jackson ignored him. Taney's influence grew immensely during this period, and Cambreleng told Van Buren that he was "the only efficient man of sound principles" in Jackson's official cabinet. Biddle traveled to Washington, D.C. to personally conduct the final push for recharter. For the past six months he had worked in concert with B.U.S. branch managers to elicit signatures from citizens for pro-B.U.S. petitions that would be aired in Congress. Congressmen were encouraged to write pro-Bank articles, which Biddle printed and distributed nationally. Francis Blair at
36642-598: Was designated a National Historic Landmark in 1987 for its architectural and historic significance. The Wall Street branch in New York City was converted into the United States Assay Office before it was demolished in 1915. The federal-style façade was saved and installed in the American Wing of the Metropolitan Museum of Art in 1924. The Second Bank building was described by Charles Dickens in
36839-510: Was echoed to varying degrees in the organization of the central bank itself. These included, for example, the Austro-Hungarian Bank from 1878 to 1918, the U.S. Federal Reserve in its first two decades, the Bank deutscher Länder between 1948 and 1957, or the National Bank of Yugoslavia between 1972 and 1993. Conversely, some countries that are politically organized as federations, such as today's Canada, Mexico, or Switzerland, rely on
37036-407: Was established in Philadelphia, but it could create branches anywhere. It enjoyed the exclusive right to conduct banking on a national basis. It transferred Treasury funds without charge. The federal government purchased a fifth of the Bank's stock, appointed a fifth of its directors, and deposited its funds in the Bank. B.U.S. notes were receivable for federal bonds. The rise of Jacksonian democracy
37233-434: Was exacerbated by the B.U.S. under Bank President William Jones through fraud and the rapid emission of paper money. He eventually began to call in loans, but nonetheless was removed by the Bank's directors. Langdon Cheves , who replaced Jones as president, worsened the situation by reducing the Bank's liabilities by more than half, lessening the value of Bank notes, and more than tripling the Bank's specie held in reserve. At
37430-607: Was founded in Stockholm in 1664 from the remains of the failed Stockholms Banco and answered to the Riksdag of the Estates , Sweden's early modern parliament. One role of the Swedish central bank was lending money to the government. The establishment of the Bank of England was devised by Charles Montagu, 1st Earl of Halifax , following a 1691 proposal by William Paterson . A royal charter
37627-460: Was granted on 27 July 1694 through the passage of the Tonnage Act . The bank was given exclusive possession of the government's balances, and was the only limited-liability corporation allowed to issue banknotes . The early modern Bank of England, however, did not have all the functions of a today's central banks, e.g. to regulate the value of the national currency, to finance the government, to be
37824-462: Was in Kentucky, where in 1817 the state legislature chartered forty banks, with notes redeemable to the Bank of Kentucky. Inflation soon rose and the Kentucky Bank became in debt to the National Bank. Several states, including Kentucky, fed up with debt owed to the Bank and widespread corruption, laid taxes on the National Bank in order to force it out of existence. In McCulloch v. Maryland (1819),
38021-436: Was launched in the midst of a major global market readjustment as Europe recovered from the Napoleonic Wars . It was charged with restraining uninhibited private bank note issue—already in progress —that threatened to create a credit bubble and the risks of a financial collapse. Government land sales in the West, fueled by European demand for agricultural products, ensured that a speculative bubble would form. Simultaneously,
38218-457: Was made relatively easy by the fact that Jackson's own principles of government, including commitment to reducing the debt and returning power to the states, were largely in line with their own. Jackson ran under the banner of "Jackson and Reform", promising a return to Jeffersonian principles of limited government and an end to the centralizing policies of Adams. The Democrats launched a spirited and sophisticated campaign. They characterized Adams as
38415-403: Was sent to Philadelphia to look into the matters. Clayton's committee report, once released, helped rally the anti-Bank coalition. The months of delay in reaching a vote on the recharter measure served ultimately to clarify and intensify the issue for the American people. Jackson's supporters benefited in sustaining these attacks on the Bank even as Benton and Polk warned Jackson that the struggle
38612-473: Was signed into law by James Madison on April 10, 1816. Subsequent efforts by Calhoun and Clay to earmark the bank's $ 1.5 million establishment "bonus", and annual dividends estimated at $ 650,000, as a fund for internal improvements , were vetoed by President Madison, on strict constructionist grounds. Opposition to a new bank emanated from two interests. Old Republicans , represented by John Taylor of Caroline and John Randolph of Roanoke , characterized
38809-549: Was the Tomb of many fortunes; the Great Catacomb of investment; the memorable United States Bank. The stoppage of this bank, with all its ruinous consequences, had cast (as I was told on every side) a gloom on Philadelphia, under the depressing effect of which it yet laboured. It certainly did seem rather dull and out of spirits. Central bank Heterodox A central bank , reserve bank , national bank , or monetary authority
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