BANK OF THE UNITED STATES (SECOND NATIONAL BANK)

After the First National Bank ceased to exist in 1811 U.S. currency and state bank notes became unstable. They could not be converted to gold or silver coins. Bank notes had become a common means of payment by that time. Inflation increased when the holders of these notes could not exchange them at face value. The economic situation was worsened by the War of 1812 (1812–14), which the United States fought against Britain because of its interference in U.S. shipping. In 1816 the federal government created the Second Bank of the United States, which had an initial capitalization of 35 million. Since the U.S. government owned 20 percent of the institution (just as it did with the First Bank), it deposited $7 million in start-up capital. With branches across the country the bank's powers were similar to those of the First Bank: it could issue notes, hold deposits, make loans, pay the salaries of public officials, and monitor the states' issuance of bank notes (to ensure they could be converted to coin). U.S. banker Langdon Cheves (1776–1857) became president of the Second Bank of the United States in 1819. He rescued it from the brink of disaster by building up its resources, reorganizing it, and reducing the number of speculative loans it made. Cheves was followed as the bank's president in 1823 by U.S. financier Nicholas Biddle (1786–1844). Under Biddle the bank further restricted credit, sold branch drafts enabling business people to send money from state to state, managed foreign payments, and prevented state banks from issuing notes they could not pay. Biddle's advocates in Congress moved for renewal of the bank's charter in 1832. Since President Andrew Jackson (1767–1845) viewed the bank with suspicion, he vetoed the bill. The U.S. government removed its deposits from the bank and its federal charter was allowed to expire in 1836. The state of Pennsylvania granted the institution a charter that year, but the bank failed in 1841.