The new bank was capitalized at $35,000,000, in $ioo shares, one-fifth to be subscribed by the government and four-fifths by pri vate subscribers. No one subscription was to exceed $390,000. Subscriptions were payable within a year, one-fourth in specie, and the remainder in either specie or government bonds. The board of directors consisted of 25 members, 5 of whom were ap pointed annually by the President of the United States from several states, and the other 20 by the stockholders under a system of restricted voting. Not all the directors were eligible for re-election and no director could be a director of any other bank.
The bank was authorized to deal in bills of exchange and bullion and to sell goods pledged for loans, but was not to deal in any public stock. Loans to the United States were limited to $500,000, and to any state to $so,000. Debts, excluding deposits, were not to exceed the capital. The smallest denomination of bank note issued was $5. All bank notes below $ioo denomina tion were payable upon demand, and were legal tender in pay ments to the government. The larger notes could run for terms up to 6o days. The organization of branches of the bank was required under certain conditions, and control of the branch was lodged with the parent institution by the appointment of the branch directors.
The bank was required to transmit public moneys at par and free of charge. The Treasurer was directed to deposit the govern ment funds in the bank or its branches; and if for any reason he did not do so, he was to report the reasons to Congress. In case of the suspension of specie payments, the obligations of the bank were subject to I 2 per cent interest until resumption of such pay ments. The bank was to make periodical statements, not more often than once a week, to the Secretary of the Treasury, and he was empowered to inspect its books. A bonus of $1,5oo,000 was levied upon the bank for its franchise.
History of Second Bank Professor Dewey summarizes the history of the bank some what as follows. The bank was chartered on April ro, 1816, and on April 3o Congress ordered the resumption of specie payments to go into effect on February 20, 1817. The bank was quickly organized under the presidency of one Jones, and began operations in January, 18r 7. Owing to mismanagement, Jones was forced to resign in 1818, and Langdon Cheves became president. He held
office until 1823, when he was succeeded by Nicholas Biddle. In June, 1829, Senator Woodbury of New Hampshire brought com plaints against Jeremiah Mason, manager of the Portsmouth branch; in the following December President Jackson in his an nual message questioned the constitutionality of the bank and accused it of failing to establish a sound currency. On April 3o, 1830, a committee of the House of Representatives reported at length on the questions raised by Jackson, its conclusions being entirely favorable to the bank. A Senate report was likewise friendly. In 1831 Senator Benton supported a resolution against rechartering the bank. In January, 1832, the bank petitioned for recharter. This petition was favorably acted upon by committees of the Senate and the House and a bill for recharter was passed. The bill, however, was vetoed by Jackson, July ro, 1832. In the autumn of the same year Jackson was re-elected President, and he interpreted the vote as an indorsement of his opposition to the bank. In December, 1832, he raised the question as to whether the funds of the government were safe in the custody of the bank. An investigation was ordered by the House, and a majority report of the Committee on Ways and Means upheld the policy of the bank and was adopted March 2, 1833, by a vote of too to 46. Notwithstanding this recommendation the President determined to remove the deposits, and in order to accomplish his purpose, on September 23 he dismissed Duane, Secretary of the Treasury, who objected to the removal, and appointed Taney in his place. The latter, on September 26, ordered that deposits henceforth be made in certain state banks, and on December 3, 1833, he re ported to the Senate his reasons for their removal. In 1836 the charter of the bank expired.
Weaknesses in Operation of Second Bank A number of weaknesses developed in the operations of the second bank during its earlier years. The subscription to its stock by means of stock notes was a mistake in that the method of pay ment amounted to a margin purchase of the stock and was there fore speculative in character; besides, the payments on the notes were very dilatory and renewals were freely made.