Second Bank History

1008 Words5 Pages
The history of the american banking system began when the American Revolution started, the Continental Congress printed the new nation's first paper money. Known as "continentals," the notes were originally intended to be redeemable on demand. However, the congress reneged on its promise and issued notes in such quantity that they led to inflation, which, though mild at first, rapidly accelerated as the war progressed. Eventually, people lost faith in the notes, and the phrase "not worth a continental" came to mean "utterly worthless."After the Revolutionary War ended, the nation had substantial debt, a significant portion of which was issued by the individual states. There was no common currency, as many states printed their own money. These…show more content…
Like the First Bank, it was headquartered in Philadelphia; over the time it operated, it had offices in 29 major cities around the country. Unlike the First Bank, however, the Second Bank was poorly managed at its outset and was on the verge of insolvency within a year-and-a-half after it opened. But after a congressional inquiry into the Second Bank's problems, Langdon Cheves was brought in as president in 1819 and saved it from collapse. Cheves was succeeded by Nicholas Biddle in 1822, and the Second Bank is generally considered to have operated effectively under their…show more content…
Their preferred status as the government's banker caused others to view them as more secure, which led to their holding deposits and serving as a "banker's bank." That, along with an expanded role in payments and lending, led to their taking on a regulatory role, since they needed to ensure the quality of banks with which they were doing business. And finally, their power over the issuing of currency and tremendous capital holdings led to the development of monetary policy, for which central banks are now best known. In designing the new Bank, Glass and Willis took lessons from the First and Second banks. They removed the private role of the bank in commercial lending, so that the new bank would be a largely public institution. Profits in excess of cost were handed over to the U.S. Treasury. and the feds were given power over the banking system. Financial transfers and check processing that were handled by private clearinghouses would now be conducted by the Fed, with the fees for such services going to run the

More about Second Bank History

Open Document