credit. Sec. 7. Periodical local congestion of
funds. Sec. 8. Unequal territorial distribution of banking facilities.
Sec. 9. Lack of provision for foreign financial operations. Sec. 10. The
"Aldrich plan."

Sec. 1. #The First and Second banks of the United States.#

A knowledge of the history of banking is helpful to an understanding
of the present banking system in our country. The form of our present
banking system has been affected by various economic and political
events which will be sketched here in broad outline to give a
background for our present study.

Alexander Hamilton, the great first Secretary of the Treasury in
Washington's cabinet, advocated the charter of a central national
bank as one portion of his larger plan of national financiering. His
purpose was realized in the chartering, in 1791, of the First Bank of
the United States, for a period of twenty years. The capital for this
institution was in small part subscribed by the government, but mostly
by private capitalists. The management of the bank was left almost
entirely in private hands. The central bank established branches
in many parts of the country, issued bank notes which circulated
everywhere without depreciation, acted as the governmental depository
of funds and as governmental agency in various ways. It seems to
have been successful and useful as a banking institution until
the expiration of its charter in 1811, but it was touched by the
contemporary controversies over state rights and was from the first
opposed by those who feared the growth of a strong central government.
This opposition prevented the extension of its charter.

In 1816, however, after only a moderate discussion, the Second Bank
of the United States was chartered for a period of twenty years. This
also, in its purely banking aspects, seems to have been distinctly
successful, conducting numerous branches in various parts of
the country, maintaining at all times the parity of its notes,
facilitating domestic exchange throughout the country, and enjoying
unquestioned credit and solvency. However, this bank became, even in
a greater degree than did the First Bank, the creature of political
rivalries. In the period of rising democratic sentiment typified
and led by Andrew Jackson, the bank came to be looked upon as the
embodiment, or the stronghold, of plutocratic interests, and Congress
permitted its charter to expire by limitation in 1836, near the close
of Jack