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This Month in Business History

Renewal of the Second Bank of the United States Vetoed

Carol Highsmith, photographer. Second Bank of the United States, Philadelphia, Pennsylvania. Between 1980-2006. Library of Congress Prints and Photographs Division.

The establishment of what became known as the Second Bank of the United States can be traced to the actions of several men John Jacob Astor, David Parish, Stephen Girard, and Jacob Barker; Alexander Dallas (become secretary of the Treasury in 1814) and Rep. John C. Calhoun of South Carolina.

A petition signed by businessmen from New York City was sent to Congress in 1814 urging them to create a second national bank and twice that year Calhoun introduced bills to create a bank, though neither passed. President James Madison supported the creation of a second Bank as a way to finance the war with Britain but with peace negotiations he pulled back. However, the war had hurt the economy and in April 10, 1816 (14 Stats. 266) Madison signed the act establishing the second Bank of the United States with a 20 year charter.

In January 1817 the Bank opened for business opened in Philadelphia with William Jones as its first president though he resigned that same year. He as followed by Langdon Cheves and in 1823 Nicholas Biddle. Much of the structure and mission differed little from its immediate predecessor but its reach was much broader—it ended up with 25 branches throughout the country. The first few years there was hostility toward the bank but that diminished somewhat. However, the fight over the Bank began again in 1828 with the election of Andrew Jackson as president, though it really heated up when he was reelected in 1832.

Beginning in 1832 a series of events signaled the end for the Bank - often referred to as the Bank War. On July 10, 1832 External President Andrew Jackson vetoed the re-chartering of the Bank, in 1833 federal deposits were removed, in April 1834, Congress could not override the President's veto, and by 1836 it was over. In February 1836, the bank became a private corporation under the Commonwealth of Pennsylvania law. External

There would be no central bank until after a commission investigating the Panic of 1907 led to the creation of the Federal Reserve System in 1913. One lasting impact of the Second Bank came in 1819 when the Supreme Court decided in McCulloch v. Maryland (17 U.S. (4 Wheat.) 316 (1819)). This case was focused around the question of whether the state could tax the federal government. The answer according to the decision was no, but the decision ultimately established that the "Necessary and Proper" Clause of the Constitution gives the federal government certain implied powers not explicitly enumerated in the Constitution, and that the American federal government is supreme over the states.

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