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Historical Glossary

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Bank of Augusta [Ga.] v. Earle

In 1839 the Supreme Court ruled that state-chartered corporations did not have all the rights guaranteed to “legal persons” by the Constitution. States might consequently limit or exclude other states' corporations from doing business within their own borders, although the Court recognized the general right of corporations to conduct business anywhere under the principle of “interstate comity.” The opinion that corporations were not legal persons with full constitutional rights was overturned in  Santa Clara County v. Southern Pacific Railroad Company.

Bank of the United States v. Deveaux

n 1809 the Supreme Court set a rigorous test for federal jurisdiction over cases concerning state-chartered corporations: unless all the company's owners lived in different states than their legal adversaries, then federal courts must refer the case to a state venue. The ruling greatly limited the number of issues concerning corporations resolved by federal judges, until its reversal by Louisville Railroad Company v. Letson.

Bank of the United States, first

On 13 December 1790, Alexander Hamilton issued his Report on a National Bank, in which he proposed that Congress charter a bank. Modeled upon the Bank of England, Hamilton's bank would serve the Treasury as a depository for its surplus funds, a source of short-term credit, and a supplemental source of currency through its issue of bank notes; it would also serve the private sector by providing capital for commercial and industrial loans. The bank would be a semi-public entity, in which the US government subscribed 20 percent of its initial stock and named 20 percent of its directors. The bank stimulated the first debate over loose constructionism, and received a 20-year charter 25 February 1791. In 1811, despite support by Albert Gallatin, a bill extending the bank's charter was defeated by the House (24 January) and Senate (20 February), in part because two-thirds of its stock was then held by British investors. The bank was then liquidated among the shareholders.

Bank of the United States, second

On 10 April 1816, a second Bank of the United States received a national charter. The US government subscribed $7,000,000 of its $35,000,000 capitalization and named a fifth of its 25 directors. In return for safeguarding Treasury surpluses without having to give government interest, the bank paid the US a bonus of $1,500,000, which funded the Bonus Bill. The 1816 charter otherwise resembled the first bank's charter of 1791. The panic of 1819 left widespread resentment against the bank in the south and west, where the panic was blamed on its hard money policies. Nicholas Biddle was its president (1823–36). On 10 July 1832, Andrew Jackson vetoed an extension of its charter as unconstitutional; on 10 September 1833, he ordered all Treasury funds in the bank to be withdrawn and placed in pet banks. On 23 September he dismissed Treasury Secretary William Duane for refusing to do so, and replaced him with Roger Taney, whom the Senate refused to confirm on 24 June 1834, due to Henry Clay's opposition. Before the bank's federal charter expired on 1 March 1836, it received a state charter in February as the Bank of the United States of Pennsylvania, which failed in 1841 but paid off all its debts. It was eventually replaced by the Independent Treasury.

Bank panic of 1933

The crash of 1929 precipitated a spiraling number of bank failures resulting from uncollectable loans and depreciated mortgage collateral. Attempts to break this cycle with loans from the Reconstruction Finance Corporation (RFC) failed because the RFC lacked sufficient capital to offset bank losses. From 1930 to March 1932, 5,504 banks had closed with deposits of $3.4 billion. In late 1933, a financial panic swept the US as depositors demanded their savings and forced banks to close. Between 4 February and 3 March, almost every state closed its banks, or left them open subject to severe restrictions. On 5 March, a day after taking office, Franklin D. Roosevelt declared a bank holiday to halt the panic.