4. The period 1811 to 1816.—The charter of the First United States Bank expired in 1811 and a bill authorizing the continuation of its existence for another twenty years failed to pass Congress. The objections to the bank urged in 1790 were revived and the state banking interests were in strong opposition. Some of Hamilton's arguments in its favor, presented in 1790, did not apply with equal force in 1811 on account of the multiplication of state banks, and the fact that a large part of its stock was owned by foreigners, operated powerfully against it at this particular time because of our strained relations with England.

The prospective and actual removal of the competition of this powerful institution resulted in a rapid increase in the number of state banks. One authority * estimates the number established between Jan. 1, 1811, and Jan. 1, 1815, at one hundred and twenty. "The state of Pennsylvania alone, by a single act of the 21st of March, 1814, created forty-one banks with a capital of about $17,000,000, thirtyseven of which went into operation" (Ibid.). In 1812 war was declared against England and the struggle on land and sea thus inaugurated and continued for two years nearly destroyed our foreign commerce, financially embarrassed the federal treasury and, combined with other influences, in 1814, caused the suspension of specie payments in all parts of the country except New England. In the middle states, the south and the west, bank-notes fell to a discount varying according to the reputation for soundness of the issuing institution and its distance from the commercial centers; specie disappeared from circulation; prices rose; and speculation became rampant. The embarrassment of the Treasury was greatly increased by the necessity of receiving its revenues in depreciated notes of local currency *Pitkin's Statistics, p. 429.

only and by the necessity of depositing its funds in nonspecie-paying state banks.

5. The second United States Bank.-The remedy for these unfortunate financial conditions, proposed and ultimately adopted, was a second United States Bank, the charter for which was enacted into law in 1816. It was modeled after that of the first bank differing from it in the following particulars chiefly: its capital was fixed at $30,000,000 that of the first bank being $10,000,000; of the twenty-five directors the President was authorized to select five, whereas in the case of the first bank the government voted its stock like any other stockholder; the section providing for the establishment of branches was much more specific and elaborate in the second than in the first charter, the bank being required to establish a branch in the District of Columbia when Congress should demand it and one in any state upon application of its legislature and on condition that at least two thousand shares of its stock be held in said state; a penalty for the suspension of specie payments was imposed, the amount being fixed at 12 per cent. interest per annum on the obligations of the bank; there was no such penalty specified in the first charter; the funds of the United States were to be deposited in the bank, unless the Secretary of the Treasury should direct otherwise, in which case he was obliged to lay before Congress his reasons for such action. No provision regarding this matter appeared in the first charter. The amount which might be loaned to the United States Government without further authorization from Congress was fixed at $500,000, this amount in the first charter having been $100,000. Congress reserved the right to inspect the books and to examine into the proceedings of the bank through committees appointed by either house for that purpose. No such clause appeared in the first charter.

The organization of this bank was completed during the last half of 1816 and by the end of 1817 branch offices had been established at New York, New Orleans, Boston, Portsmouth, N. H., Providence, R. I., Pittsburg, Pa., Baltimore, Washington, Richmond and Norfolk, Va., Fayetteville, N. C., Charleston, S. C., Savannah, Ga., Louisville and Lexington, Ky., Cincinnati and Chillicothe, O., and Middletown, Conn. Subsequently branches were opened at Hartford, Conn., Mobile, Ala., Nashville, Tenn., Portland, Me., St. Louis, Mo., Buffalo and Utica, N. Y., Burlington, Vt., and Natchez, Miss. One of the first tasks imposed on the bank was the securing of the resumption of specie payments throughout the country. This it ultimately accomplished aided by an agreement with the state banks by which the transfer of the public deposits was facilitated. During the years 1818 and 1819 the management of the bank was bad and the commercial crisis through which the country passed in those years created conditions unfavorable to its development and reputation. Under the able administration of Nicholas Biddle, however, who became its president in 1823, the bank became a strong and highly useful institution, checking the tendencies of the state banks toward, overtrading and other unsafe practices, aiding the govern ment in the conduct of its financial affairs and furnishing commerce with a uniform currency convertible on demand into specie and with better facilities for loans and for domestic and foreign exchange than it ever before enjoyed.

Because of the bad management of early years, mistakes of judgment and policy occasionally made subsequently and various circumstances over which its officers had no control, the bank made many enemies who became strong enough in 1834 to defeat a bill introduced into Congress providing for its recharter. The most formidable of these enemies were the state banks, the people, principally poli

ticians, whose personal interests and feelings had been injured from time to time by the measures Biddle and his associates had found it necessary or desirable to execute in the interests of the bank, and President Jackson. The latter was possessed of a deep seated antipathy against and a fear of all banks and some of his party associates and advisors, who were violent enemies of this particular institution used their influence to convince him that it not only ought not to be rechartered, but that it was an unsafe place for the government deposits. The war against the bank began in earnest in 1832 during the campaign for Jackson's election to the Presidency for a second term and resulted in the removal of the public deposits in the autumn of 1833 and a defeat of the bill for recharter in 1834. After the expiration of its charter the bank continued to operate for a time as a state institution under a charter granted by the legislature of Pennsylvania.

6. The establishment of the Independent Treasury System. After the withdrawal of the government deposits from the second United States Bank the public funds were placed in selected state banks conveniently located in different parts of the Union. The crisis of 1837 brought most of these into a state of suspended specie payments and many of them into bankruptcy. The public deposits were thus rendered either unavailable or payable only in depreciated state bank notes, and the government suffered greatly from the resulting financial embarrassment. Out of the agitation which followed sprang our Independent Treasury System.

The act for the establishment of this system was passed in 1840, repealed in 1841, and reënacted in 1846. The main provisions of the latter act were as follows: So-called subtreasuries were to be established at Philadelphia, New York, Boston, Charleston, St. Louis, New Orleans, San Francisco,

Denver, Carson City and Boise City * to be presided over by assistant treasurers. In the safes and vaults to be provided at these places and at the main treasury at Washington were to be kept the funds of the government, receiving and distributing officers being required to deposit therein, instead of in banks, whatever funds should come into their hands after Apr. 1, 1847. All payments to and from the government were to be made in coin. Provision was made. for the transfer of funds from one sub-treasury to another and for the other necessary details of the system. This method of managing the public funds subsequently modified in important particulars has continued to the present day.

7. The growth and reputation of state banks.—State banks increased rapidly in numbers throughout the period of the life of the second United States bank and down to the outbreak of the Civil War. Their distribution among the various states and territories varied considerably in different years, but every state was fairly well supplied at most times.

To the student the most interesting and important phase of the history of these institutions not yet considered is the effort of the various states or of the banks themselves to provide safeguards and suitable regulations for the business. In this work the states of Massachusetts and New York were leaders. In the former legislation with this end in view began as early as 1792 and has continued at intervals down to the present day. It was not always consistent and was frequently ineffective, but it improved with time and on the whole does credit to the state. This legislation was incorporated in charters granted to banking institutions and in general laws of which the most important were passed in 1805, 1806, 1809, 1829, 1835, and 1860. Charters were

*By subsequent acts the sub-treasuries at Charleston, Denver, Carson City, and Boise City were discontinued, and others established at Baltimore, Cincinnati, and Chicago.