What Hath God Wrought: The Transformation of America, 1815-1848

by Daniel Walker Howe

The Second Bank of the United States was the largest corporation in the country; indeed, it was the only really nationwide business. Modeled on its precursor, the Bank Hamilton had founded, the Second BUS held the Treasury’s tax receipts on deposit and handled the federal government’s financial transactions. Like most other banks of the time, it issued its own paper currency; unlike most of theirs, its notes were legal tender and could always be exchanged for gold and silver. The government itself issued no paper money, only coins. By presenting the paper money of state banks for redemption, the national bank could limit their extensions of credit. The BUS made loans to other banks as well as to other businesses and individuals; unlike the Federal Reserve Bank of today, which is the debtor of its member banks, the Second Bank of the United States was the creditor of state banks. Like the Federal Reserve Bank of today, it marketed the Treasury’s securities to buyers from all over the world. The BUS handled virtually all foreign exchange transactions, a vital function for a debtor country with a chronically unfavorable trade balance.