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Formation of the Union By Albert Bushnell Hart Characters: 2783

Updated: 2017-12-06 00:02

[Sidenote: Banks and currency.]

The first evidence of this change of feeling was a demand for the renewal of the bank which had been allowed to expire in 1811 (§ 110). The country had been thrown entirely upon banks chartered by the States; the pressure of the war had caused their suspension, and the currency and banking capital of the United States had thus been thrown into complete confusion. For example, the Farmers Exchange Bank of Gloucester, R. I., was started, with a capital of $3,000; accumulated deposits so that one of the directors was able to steal $760,000; and then it failed, with specie assets of $86.46. In 1811 there were eighty-eight State banks; in 1816 there were two hundred and forty-six.

[Sidenote: Bank bill of 1814.]

[Sidenote: The Bank Act.]

Since the re-charter bill of 1811 had failed by only one vote, Dallas, Secretary of the Treasury in 1814, again proposed a national bank. Congress accepted the principle, but an amendment proposed by John C. Calhoun so altered the scheme that upon Dallas's advice Madison cast his first important veto against it on Jan. 30, 1815. What Dallas desired was a bank which would lend money to the government; what Congress planned was a bank which would furnish a currency based on specie. In the next session of Congress Madison himself urged the creation of a bank, and this time Calhoun supported him. The Fe

deralists, headed by Daniel Webster,- remnants of the party which had established the first national bank,- voted against it on the general principle of factious opposition. A small minority of the Republicans joined them, but it was passed without much difficulty, and became a law on April, 10, 1816.

[Sidenote: Bank charter.]

The bank was modelled on its predecessor (§ 78), but the capital was increased from $10,000,000 to $35,000,000, of which the United States government held $7,000,000. It was especially provided that "the deposits of the money of the United States shall be made in said bank or branches thereof." In return for its special privileges the bank agreed to pay to the government $1,500,000. The capital was larger than could safely be employed; it was probably intended to absorb bank capital from the State banks. The prosperity of the country, aided by the operations of the bank, secured the renewal of specie payments by all the sound banks in the country on Feb. 20, 1817.

[Sidenote: Loose construction accepted.]

The striking feature in the bank was not that it should be established, but that it should be accepted by old Republicans like Madison, who had found the charter of a bank in 1791 a gross perversion of the Constitution. Even Henry Clay, who in 1811 had powerfully contributed to the defeat of the bank, now came forward as its champion.

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