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The Bank of the United States

September 5, 2018

If a particular private bank doesn’t perform according to a customer’s expectations, there is always the option to choose another private bank.  But what happens when the government favors one bank over all others?  Is that ever necessary, and is it okay?  Is the nation better served when the government deposits its funds into such a bank?  The Founders did not all agree on the answers to these questions.

Washington and Hamilton supported the creation of the Bank of the United States.  Jefferson and Madison were against it, but after the War of 1812, Madison changed his mind.  Lincoln was pro-bank and was disappointed when bank legislation was vetoed in 1841.

When we speak of the first or second Bank of the United States, the ordinal designations pertain to different eras of American political history.  The first B.U.S. was created by Congress in 1791, the second in 1816.  There would have been a third, but President Jackson vetoed the legislation in 1832, and President Tyler vetoed similar legislation nine years later.

Lincoln’s argument in favor of the B.U.S., stated in an 1843 Whig campaign circular, can be summarized as follows: (1)Washington signed the legislation for the first B.U.S. while the Constitution was still fresh in everyone’s mind; (2)Madison, the “Father of the Constitution,” signed legislation to create the second B.U.S.; and (3)the Supreme Court, led by Chief Justice John Marshall, affirmed the second B.U.S. in McCullough vs. Maryland.  Therefore, Congress acted within the Constitution when it created the B.U.S.

Although something might be constitutional, it might not be necessary or desirable.  Perhaps the strongest argument in favor of the B.U.S. was the fact that Madison had changed his mind.  What caused Madison to reconsider his original opposition to a national bank?

 

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