Bank of the United States, the name of two federal banks chartered by Congress in the early years of the United States. The first one was chartered in 1791. It was a key part of the financial system by which Secretary of the Treasury Alexander Hamilton hoped to create a sound economic basis for the new national government. The bank was located in Philadelphia and operated branches in eight cities. One-fifth of its capital of $10,000,000 was subscribed by the government. The bank carried on a commercial business and served as the government's fiscal agent.
Although well managed and beneficial to the government, the bank was opposed by the states'-rights Jeffersonian Republicans (later called "Democrats"), who felt that their basically rural interests were being ignored by the Eastern bankers. In 1811 Congress allowed its charter to expire.
In 1816, however, a more nationalistic Jeffersonian Republican Congress chartered a second bank. It was similar to the first but had a capital of $35,000,000 and operated 25 branches. It was grossly mismanaged for a while but began to prosper in 1823 when Nicholas Biddle became its president.
The second bank aroused even stronger opposition than the first. It curbed inflationary issue of notes by state banks and made numerous foreclosures of mortgages. These actions antagonized private bankers and western and southern farmers. Maryland's attempt to tax the Baltimore branch led to a historic Supreme Court decision in McCulloch v. Maryland (1819). The right of Congress to create the bank was upheld, thus establishing the doctrine of implied powers; and the tax was declared unconstitutional, thus establishing the doctrine of federal supremacy. Despite the decision, opposition became so strong by 1828 that Andrew Jackson, who was elected President that year, decided that the bank should be abolished.
The issue came to a head in 1832. Biddle and Henry Clay persuaded Congress to pass a bill rechartering the bank. Jackson vetoed the bill, calling the bank un-American. Clay, the nominee of the National Republicans, then made the bank an issue in the Presidential campaign. Reelected, Jackson ordered Secretary of the Treasury Roger B. Taney to withdraw government funds and put them in selected state banks. The bank ceased to function as a national bank when its federal charter expired in 1836. It operated under a state charter as the Bank of the U.S. of Pennsylvania from 1836 to 1841.