Second Bank

Definition

The Second Bank of the United States was a federally authorized national bank established in 1816 to stabilize the American economy and provide a uniform currency. It played a crucial role in regulating state banks, controlling inflation, and managing federal funds, which made it central to debates over federal power and state rights during Andrew Jackson's presidency.

5 Must Know Facts For Your Next Test

1. The Second Bank was chartered for 20 years in 1816 as a response to the economic turmoil after the War of 1812, which highlighted the need for a stable financial system.
2. Andrew Jackson strongly opposed the Second Bank, viewing it as an institution that favored wealthy elites and undermined individual liberties and states' rights.
3. In 1832, Jackson vetoed the recharter of the Second Bank, arguing that it was unconstitutional and detrimental to democracy, which sparked significant political conflict.
4. After the closure of the Second Bank, many state-chartered banks emerged, leading to a period of financial instability known as the 'Free Banking Era' characterized by unregulated bank practices.
5. The dissolution of the Second Bank led to inflationary pressures and contributed to the Panic of 1837, a severe economic depression that followed shortly after Jackson left office.

Review Questions

• How did the establishment of the Second Bank reflect the economic challenges faced by the United States in the early 19th century?
  • The establishment of the Second Bank was largely driven by economic instability following the War of 1812. The nation faced issues such as high inflation, a lack of a stable currency, and widespread bank failures. By creating a national bank, Congress aimed to regulate state banks, provide a uniform currency, and foster economic growth, reflecting a need for a centralized financial institution during turbulent economic times.
• Assess Andrew Jackson's opposition to the Second Bank and its implications for federal power during his presidency.
  • Andrew Jackson's opposition to the Second Bank represented a significant challenge to federal authority and centralized banking. He viewed the bank as a symbol of corruption and elitism that undermined democracy. By vetoing its recharter in 1832, Jackson reinforced his belief in limited government and states' rights, shaping future debates about federal power and paving the way for greater local control over banking.
• Evaluate the long-term consequences of Jackson's dismantling of the Second Bank on America's financial system and economy.
  • The dismantling of the Second Bank had profound long-term consequences for America's financial system. It led to an era without a central banking authority, resulting in increased bank failures and financial instability. The subsequent rise of state-chartered banks contributed to unchecked speculation and inflationary pressures that culminated in the Panic of 1837. This period highlighted both the necessity for a stable banking system and set the stage for future calls for reform and eventual establishment of a more regulated banking system in later decades.

Related terms

First Bank of the United States:

The First Bank of the United States was established in 1791 to serve as a national bank, but it faced opposition and was dissolved in 1811 due to concerns about federal overreach.

Bank War: The Bank War refers to the political struggle between President Andrew Jackson and supporters of the Second Bank, culminating in Jackson's decision to dismantle the bank in 1832.

National Currency: A national currency is a uniform currency issued by the federal government, aimed at creating stability and facilitating trade across states.