Nicholas Biddle (banker) - The Bank of The United States

The Bank of The United States

After Biddle moved to the Pennsylvania State Senate, he lobbied for the rechartering of the Second Bank of the United States. The Bank was rechartered in 1816, and President Monroe appointed Biddle as a federal government director. Upon the resignation of Bank president Langdon Cheves in 1822, Biddle became president. During his association with the Bank, he was directed by Monroe, under authority from Congress, to prepare a "Commercial Digest" of the laws and trade regulations of the world. For many years after, it was regarded as an authority on the subject.

During the Panic of 1819, a banking crisis and economic recession, critics charged that the Bank was to blame because of its tight credit policy. In late 1818, $4 million of interest payments on the bonds sold in 1803 to pay for the Louisiana Purchase was due, in either gold or silver, to European investors. The government had to get its hands on silver or gold. The Bank, as the government's fiscal agent, was required to make this payment on behalf of the government. The Bank was forced to demand the commercial banks that had been lent money in the form of fiat paper now repay in gold or silver—specie. This specie was sent to Europe. This rather sudden contraction of the monetary base after three years of inflated currency and rampant speculation based on debt led to the panic of 1819.

In Tennessee, Andrew Jackson was hard-pressed to pay his debts in this period. He developed a lifelong hostility to all banks that were not completely backed by gold or silver. This meant, above all, hostility to the Second Bank of the United States.

As Bank president, Biddle occasionally engaged in the techniques of central banking - controlling the nation's money supply, regulating interest rates, lending to state banks, and acting as the government's fiscal agent. When state banks became excessive in their lending practices, Biddle's Bank acted as a restraint. In a few instances, he even rescued state banks to prevent the risk of contagion spreading. He was important in the establishment of Girard College under the provisions of the founder's will. Girard had been the original promoter of the Second Bank and its largest investor. Girard died in 1831.

On August 26, 1831, Biddle's brother, Thomas, a War of 1812 veteran, was killed in a duel on Bloody Island (Mississippi River) at St. Louis, Missouri with Congressman Spencer Pettis. Thomas had taken offense to Pettis' criticizing Nicholas at the bank. After an exchange of letters to the editor Biddle accosted an ill Pettis in his hotel room. After Pettis recovered he challenged Thomas to a duel and both were killed when they exchanged shots from five feet apart.

The "Bank War" began when President Jackson began criticizing the Bank early in his first term. Biddle, at the urging of Henry Clay and other Bank supporters, upped the ante when he applied for the Bank's re-charter in January 1832. This was four years before the charter was scheduled to expire and the hope was to force Jackson into making an unpopular decision that might cost him during an election year. But, once challenged, Jackson decided to veto the bill to re-charter the bank. Jackson, well known for his stubborn personality and steadfast leadership, still harbored ill will toward Clay from the 1824 presidential election. Clay's strategy failed and he lost to Jackson in November despite significant financial support from the Bank.

In early 1833, Jackson, despite opposition from his cabinet, decided to withdraw the government's funds out of the Bank. The secretary of the treasury, Louis McLane, professed moderate support for the Bank. He refused to withdraw the funds and would not resign, so Jackson transferred him to the state department to become secretary of state. McLane's successor, William J. Duane, was opposed to the Bank, but would not carry out Jackson's orders. After waiting four months, Jackson summarily dismissed Duane as well, replacing him with attorneys-general Roger B. Taney when Congress was out of session. In September 1833, Taney helped transfer the public deposits to seven state-chartered "pet" banks that were friendly to the administration. Faced with the loss of the federal deposits, Biddle decided to raise interest rates and deliberately induce a recession. A mild financial panic ensued from late-1833 to mid-1834. Meanwhile, Biddle and other Bank supporters attempted to renew the Bank's charter on numerous occasions. All of them failed.

In April 1836, the Bank's charter expired, but the institution continued as a state-chartered bank for several more years. In 1839, Biddle resigned from his post, and in 1841, amidst the panic of 1837, the Bank failed. Biddle was arrested and charged with fraud; he was later acquitted. He died soon after while still involved in civil suits.