Although foreign ownership was not a problem (foreigners owned about 20% of the Bank's stock), the Second Bank was plagued with poor management and outright fraud (Galbraith). The Bank was supposed to maintain a "currency principle" -- to keep its specie/deposit ratio stable at about 20 percent.
Andrew Jackson hated the National Bank for a variety of reasons. Proud of being a self-made "common" man, he argued that the bank favored the wealthy. Believing many Americans supported the bank, they intended to force Jackson to veto the renewal of the charter which might cause him to lose the election.
The Bank War was the name given to the campaign begun by President Andrew Jackson in 1833 to destroy the Second Bank of the United States, after his reelection convinced him that his opposition to the bank had won national support.
President Andrew Jackson removed all federal funds from the bank after his reelection in 1832, and it ceased operations as a national institution after its charter expired in 1836. The Bank of the United States was established in 1791 to serve as a repository for federal funds and as the government's fiscal agent.
United StatesAll are now defunct. In the modern United States, the term national bank has a precise meaning: a banking institution chartered and supervised by the Office of the Comptroller of the Currency ("OCC"), an agency in the U.S. Treasury Department, pursuant to the National Bank Act.
Reconstituted in 1816, the Bank of the United States continued to stir controversy and partisanship, with Henry Clay and the Whigs ardently supporting it and Andrew Jackson and the Democrats fervently opposing it. The bank ceased operation in 1841.
In 1791, the Bank of the United States was one of the three major financial innovations proposed and supported by Alexander Hamilton, first Secretary of the Treasury.
This bill passed Congress, but Jackson vetoed it, declaring that the Bank was "unauthorized by the Constitution, subversive to the rights of States, and dangerous to the liberties of the people." After his reelection, Jackson announced that the Government would no longer deposit Federal funds with the Bank and would
However, the arguments against the Bank were too strong. Foreign ownership, constitutional questions (the Supreme Court had yet to address the issue), and a general suspicion of banking led the failure of the Bank's charter to be renewed by Congress. The Bank, along with its charter, died in 1811.
Washington, the 1st President of the United States, greatly contributed to foundation of the banking and finance industry. He supported Alexander Hamilton's programs to satisfy all federal and state debts that resulted in an efficient tax system and created a national bank.
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Alexander Hamilton, a true wordsmith: “There are approximately 1010300 words in the English language, but I could never string enough words together to properly explain how much I want to hit you with a chair.”
Chartered in 1816, the Second Bank of the United States aimed to bring order and stability to a chaotic financial situation in the U.S. Instead, the bank's loose credit and paper money helped create the conditions for the Panic of 1819. The end of the bank led to the return of economic disorder and the Panic of 1837.
Why was Jackson so opposed to the Bank? Jackson also distrusted credit — another function of banks — believing people should not borrow money to pay for what they wanted. Jackson's distrust of the Bank was also political, based on a belief that a federal institution such as the Bank trampled on states' rights.
Thomas Jefferson opposed this plan. He thought states should charter banks that could issue money. Jefferson also believed that the Constitution did not give the national government the power to establish a bank. Hamilton disagreed on this point too.
