An account of the history, structure, and operation of the First
and Second Banks of the United States, this study examines how the
banks performed as national and central institutions, and what
happened to the economy when the charter of the Second Bank was
allowed to expire in 1836. Historians have paid little recent
attention to the early history of central banking in the United
States, and many Americans believe that the Federal Reserve,
created in 1913, was our first central bank. The economic crisis
during the American Revolution actually led to the founding of a
national bank, called the Bank of North America, during the period
of Confederation. Although it became a private bank before the
Constitution was ratified in 1788, it proved to be such a success
that in 1791 Alexander Hamilton, the first Secretary of the
Treasury, was able to convince President Washington that a similar
bank should be established.
While the First Bank of the United States performed well during
its tenure, its charter was allowed to lapse in 1811. A Second Bank
of the United States was created five years later in 1816, and it
prospered under the leadership of its third president, Nicholas
Biddle, from 1823 to 1830, when central banking was practiced. This
success ended with the 1828 election of Andrew Jackson, who refused
to recharter the bank and withdrew the government's funds in 1833.
Severely weakened, the Bank continued, but its charter finally
expired in 1836, much to Biddle's dismay.
General
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