Second Bank of the United States

History

The push for a new national bank grew out of the early 19th-century shift from Jeffersonian agrarianism toward industrialization and finance. After the War of 1812, the federal government faced an unregulated currency and fiscal disorder, while business interests sought security for government bonds. A national alliance formed to legislate a bank, supported by the Era of Good Feelings and nationalists like John C. Calhoun and Henry Clay. The charter was signed into law by James Madison on April 10, 1816.

Efforts by Calhoun and Clay to use the bank's establishment bonus and dividends for internal improvements were vetoed by Madison on strict constructionist grounds. Opposition came from Old Republicans, who saw the bank as constitutionally illegitimate and a threat to agrarianism, state sovereignty, and slavery, and from private banks that had blocked recharter of the First Bank in 1811. These interests later undermined the institution during Andrew Jackson's administration.

The Second Bank did not set monetary policy, regulate private banks, hold their excess reserves, or act as a lender of last resort.

Terms of charter

The Second Bank was America's national bank, comparable to the Bank of England and the Bank of France, but with the U.S. government owning one-fifth of its capital. Its capital limit was $35 million, of which $7.5 million was the government share. It paid a $1.5 million bonus to the government in three installments for using public funds interest-free. The bank was answerable to the U.S. Treasury and Congress and subject to Treasury inspection.

As exclusive fiscal agent, it held and transferred all U.S. deposits, processed government transactions and tax payments. The bank had 25 directors, five appointed by the President with Senate approval; federally appointed directors could not serve as officials in other banks. Two of its three presidents, William Jones and Nicholas Biddle, came from these government directors. Headquartered in Philadelphia, it could establish branches where it chose, and they were immune from state taxation.

Regulatory mechanisms

The Second Bank's primary regulatory task was to restrain the proliferation of paper money by state and private lenders. It presided over the democratization of credit, contributing to loans for farmers, small manufacturers, and entrepreneurs.

The bank exerted anti-inflationary influence by requiring local banks to maintain adequate gold and silver reserves to meet their debt obligations to the U.S. Treasury. This mechanism yoked private lending strategies to national fiscal operations, which local banks found objectionable. The number of private banks grew from 31 in 1801 to 788 in 1837, creating strong opposition to the Second Bank during the Jackson administration.

Architecture

William Strickland, a former student of Benjamin Latrobe, designed the Second Bank in the Greek Revival style, basing it on the Parthenon in Athens. The north and south façades feature large steps leading to a stylobate, with eight severe Doric columns crowned by an entablature with a triglyph frieze and a triangular pediment, giving the building the appearance of an ancient Greek temple. The interior has an entrance hallway flanked by two rooms, leading to two central rooms spanning the width of the structure; the east and west sides of the first large room each have a large arched fan window.

The exterior is clad in Pennsylvania blue marble, which has deteriorated due to the cutting method exposing weak parts of the stone, most visible on the south façade's Doric columns. Construction lasted from 1819 to 1824. The Greek Revival style contrasts with the earlier Federal style of the nearby First Bank of the United States, which uses ornate Corinthian columns, pilasters, sash windows, a balustrade, and heavy modillions, resembling a Roman villa rather than a Greek temple.

Did You Know?

• The building now houses a portrait gallery with works by Charles Willson Peale, including a wooden statue of George Washington by William Rush.
• Charles Dickens described the building in his 1842 travelogue American Notes as 'the Tomb of many fortunes; the Great Catacomb of investment; the memorable United States Bank.'
• The Wall Street branch in New York City was demolished in 1915, but its federal-style façade was saved and installed in the American Wing of the Metropolitan Museum of Art in 1924.