The Second Bank of the United States: An Instrument for an Interregional Monetary Union

Extract

The Second Bank of the United States, a public bank chartered by the Congress in the early part of 1816, was the pre-eminent banking institution of its period. Its historical prominence, however, is derived primarily from the emphasis that has been placed on its role in the Bank War—a major political controversy of the nineteenth century. Certainly, the legacy of that struggle, that is, its impact on American political and economic institutions, transcends the importance of the operations undertaken by the BUS in the more normal years that preceded the Bank War. Nevertheless, because of the extent of its influence on the American economy during its tenure, the economic character of BUS operations during its earlier years also deserves the attention of the economic historian. By the close of the 1820's, its operations touched virtually every aspect of the nation's economic life—ranging from its role as the largest single issuer of bank notes to the development of financial arrangements that played an instrumental role in the conduct of interregional and international trade. In addition, the Second Bank carried out under the provisions of its charter a variety of quasi-governmental functions— including the imposition of a uniform national currency. In the course of its emergence in the 1820's, then, the Second Bank forged a set of institutional arrangements that had an important impact on the nation's economic activity throughout the remaining years of its tenure.