Alexander Hamilton, the great first Secretary of the Treasury in Washington’s cabinet, advocated the charter of a central national bank as one portion of his larger plan of national financiering.  His purpose was realized in the chartering, in 1791, of the First Bank of the United States, for a period of twenty years.  The capital for this institution was in small part subscribed by the government, but mostly by private capitalists.  The management of the bank was left almost entirely in private hands.  The central bank established branches in many parts of the country, issued bank notes which circulated everywhere without depreciation, acted as the governmental depository of funds and as governmental agency in various ways.  It seems to have been successful and useful as a banking institution until the expiration of its charter in 1811, but it was touched by the contemporary controversies over state rights and was from the first opposed by those who feared the growth of a strong central government.  This opposition prevented the extension of its charter.

In 1816, however, after only a moderate discussion, the Second Bank of the United States was chartered for a period of twenty years.  This also, in its purely banking aspects, seems to have been distinctly successful, conducting numerous branches in various parts of the country, maintaining at all times the parity of its notes, facilitating domestic exchange throughout the country, and enjoying unquestioned credit and solvency.  However, this bank became, even in a greater degree than did the First Bank, the creature of political rivalries.  In the period of rising democratic sentiment typified and led by Andrew Jackson, the bank came to be looked upon as the embodiment, or the stronghold, of plutocratic interests, and Congress permitted its charter to expire by limitation in 1836, near the close of Jackson’s administration.

Sec. 2. #Banking from 1836 to 1863#.  The Federal Government, which up to that time had deposited its funds in the central bank and its branches and in local state banks, established the “independent treasury,” in 1840 (abolished in 1841 and re-established in 1846).  By this plan the government kept its money of all kinds in various depositories (or sub-treasuries) in charge of public officials.  While from 1792 to 1836 almost continuously a central banking system was in operation, other banks, organized under state charters, were steadily increasing in number.  They received deposits, issued bank notes under state laws, and cared for local commercial needs.  The abolition of the central national bank in 1836 left to the various state banks for twenty seven years all the banking functions of the country.  The banks of some states (notably those of New England and New York), under careful regulation and held to strict standards by public sentiment, for the most part maintained a high credit; but many banks, under lax laws and regulations, were guilty of great abuses of credit and of downright dishonest practices.  The evils were more especially evident in connection with excessive issues of bank notes.