The First Bank of the United States is established, thanks to strong lobbying from Secretary of the Treasury Alexander Hamilton, who cites the need for a central bank to manage the government's money and regulate the country's credit. Headquartered in Philadelphia, the bank begins with a capital stock of $10 million.
The charter for the First Bank of the United States expires during the presidency of James Madison, an early opponent of the bank. For the next several years, inflation soars as the high cost of the War of 1812 plunges the government into debt. A proliferation of private banks issues different notes leading to disarray in the economy.
The Second Bank of the United States is chartered for 20 years. Larger than its predecessor, with an initial capital stock of $35 million, it enjoys the support of many of the central bank's original opponents.
President Andrew Jackson uses his opposition to the Second Bank as a major platform in his reelection campaign, citing his distrust and suspicion of centralized financial power. He sails to victory.
The charter for the Second Bank of the United States expires. For nearly three decades, state-chartered banks flourish with little regulation during the "free banking era."
The National Bank Act is passed by Congress, establishing a national charter for banks. These banks follow federal rules on administering loans and holding minimum amounts of capital. The act also applies a steep tax on notes issued by state banks in an attempt to eliminate non-federal currency from circulation.
The Panic of 1873, caused in part by the demonetization of silver and a burst bubble in the railroad industry, kicks off a severe economic depression.
Additional railroad bankruptcies trigger a series of bank runs. Only the intervention of financier J.P. Morgan, who creates a syndicate to loan the government gold, stabilizes the economy.
Wall Street stock manipulation schemes set off widespread financial panic and bank runs, first in New York and then around the country. Once again, J.P. Morgan is called in to avert disaster, gathering together some of the country's richest men to pool funds and issue positive statements to the press to restore confidence.
Congress passes the Aldrich-Vreeland Act, designed to allow national banks to issue emergency currency during shortages. Demands for a central bank grow louder.