Bank of the United States Essay Example

economic development of the United States, playing a crucial role in establishing a stable national currency widely used for transactions. It also assisted in clearing public debts remaining from the American Revolution.

Initially, the bank started with $10 million in capital, with the federal government being the largest shareholder owning 25% of it. European investors also made substantial contributions and became the second-largest group of shareholders (David, p.23).

Overall, the bank successfully implemented Hamilton's fiscal policy and aimed to regulate the private banks chartered by different states. During this time, issuing bank notes was more prominent than depositing money in the banking industry. Consequently, bank notes circulated widely, especially as banks lent money to borrowers. Due to the high demand for loans, the bank imposed restrictions on borrowing as the states were still developing. Additionally, as the government's depository institution, the bank regularly received revenues from private banks.

The central bank was established as a result of the redemption of gold and silver, which served to protect the states from inflation and prevent excessive credit extension. This economic achievement led to the bank being referred to as a central bank (Rodrik, p.973).

Economic Challenges

Despite its success, the bank encountered political opposition due to significant changes taking place in the states. Much of this resistance stemmed from the constraints imposed by the central bank on state-chartered and private banks.

Furthermore, this was also perceived as an assault on states' rights, categorizing the government's restrictions on the bank as illegal. However, Nicholas Biddle of Philadelphia, the bank's president, acknowledged and established the central banking obligations just as effectively as the Bank of England, if not more so (Rodrik, p.979). Banks detested these

obligations as they were typically imposed limits and voiced strong complaints about the oppression. The rapid development of American industry and transportation was increasing the nation's wealth, which led businesspeople to associate democracy with free enterprise and capitalism. Consequently, the circumstances that necessitated credit restraint also made it controversial. Simultaneously, a growing populism rooted in agriculture, particularly in the South and West, and among the impoverished across the country, embraced democracy as a means to benefit both the poor and the wealthy.

As a result, the bank became infamous as "the monster" and the enemy of the general public. These same oppositions against the bank united under Jackson's leadership, who became president in 1829 (Millon, p.213). His attacks on it were persistent and aggressive, garnering widespread support. Challenges to the bank's legality continued, even though a decade earlier the Supreme Court, in McCulloch v.Maryland, had ruled that the agreement was protected under the doctrine of implied powers.

Democrats intentionally brought the bank question into President Jackson's presidential campaign, in order to oppose the bank renewal. President Jackson considered the bank's reestablishment to be illegal and disregarded the Supreme Court decision, stating that officeholders were obligated to uphold the constitution as they understood it. In a demagogic veto message, he referred to the bank as a surrender of government to the interests of a few at the expense of the many. These issues led to the "bank war" and ultimately the economic failure of the bank in 1836.

Conclusion

In conclusion, the Bank of the United States was primarily established as the primary government fiscal agent and repository for federal funds.

However, despite the bank achieving significant economic developments, it

failed to consider the economic needs of the common citizens. Both the democrats and President Jackson argued that the bank was established to serve federal and eastern commercial interests. Despite several renewals, the bank still ultimately failed.

Work Cited

• Kotz, David Michael. Bank control of large corporations in the United States. Univ of California Press, 1978: 23-167.
• Peek, Joe, and Eric S. Rosengren. "Collateral damage: Effects of the Japanese bank crisis on real activity in the United States." American Economic Review (2000): 30-45.
• Rodrik, Dani. "Goodbye Washington consensus, hello Washington confusion? A review of the World Bank's economic growth in the 1990s: learning from a decade of reform." Journal of Economic literature 44.4 (2006): 973-987.
• Saunders, Anthony, Marcia Millon Cornett, and Patricia Anne McGraw.Financial institutions management: A risk management approach. Vol.

8. McGraw-Hill/Irwin, 2006: 1-415.