Bank of the United States
Facade of the First Bank of the United States
The Bank of the United States was established in Philadelphia, Pennsylvania, in 1791. Its purpose was to provide the United States with a stable monetary system. Previous governments, including the Articles of Confederation government, had printed exorbitant amounts of paper money. This money was supposed to be backed by gold. If a person had a ten-dollar bill, he or she was supposed to be able to take that bill to the federal government and receive ten dollars in gold. Due to the large number of bills in circulation, high inflation resulted, and paper money issued by the American government became virtually worthless. Members of the Federalist Party encouraged President George Washington to establish a national bank that would control the amount of money that the government issued. A stable currency would allow business to occur and help the new country to grow. Washington agreed, although members of the Democratic-Republican Party argued that the federal government did not have the power under the Constitution to create such a bank.
The Bank of the United States remained in operation until 1811. By that point in time, it had succeeded in creating a stable currency. Unfortunately for the National Bank however, the Democratic-Republicans, including President James Madison, refused to allow the National Bank to remain open. Following the War of 1812, Madison realized that the nation needed a national bank. It provided a sound currency that permitted the transaction of business. It also could provide loans to help develop the United States economically. The Second Bank of the United States, however, could not prevent downturns in the economy. Its actions partly resulted in the Panic of 1819, as well as the Banking Crisis of 1819. A deep distrust of banks developed among white Americans. Andrew Jackson used this hatred to help him build a coalition that elected him President of the United States in 1828. As president, Jackson destroyed the Second Bank of the United States.