The Second Bank of the United States was the second federally authorized national bank in the United States. Modeled on Alexander Hamilton’s First Bank of the United States, the Second Bank was chartered by President James Madison, who in 1791 had attacked the First Bank as unconstitutional, in 1816 and began operations at its main branch in Philadelphia on January 7, 1817. The essential function of the bank was to regulate the public credit issued by private banking institutions through the fiscal duties it performed for the U.S. Treasury, and to establish a sound and stable national currency.
Bank War
By the time of Jackson’s inauguration in 1829, the bank appeared to be on solid footing. The Supreme Court had affirmed its constitutionality in McCulloch v. Maryland. The Treasury recognized the useful services it provided, and the American currency was healthy and stable. The bank first came under attack by the Jackson administration in December 1829, on the grounds that it had failed to produce a stable national currency, and that it lacked constitutional legitimacy. Both houses of Congress responded with committee investigations and reports affirming the historical precedents for the bank’s constitutionality and its pivotal role in furnishing a uniform currency. Jackson rejected these findings, and privately characterized the bank as a corrupt institution, dangerous to American liberties.
Jackson and the anti-bank forces persisted in their condemnation of the bank, provoking an early recharter campaign by pro-bank National Republicans under Henry Clay. Clay’s political ultimatum to Jackson sparked the Bank War.
Jackson mobilized his political base by vetoing the recharter bill and, the veto sustained, easily won reelection on his anti-bank platform. Jackson proceeded to destroy the bank as a financial and political force by removing its federal deposits, and in 1833, federal revenue was diverted into selected private banks by executive order, ending the regulatory role of the Second Bank.