Nicholas Biddle

Financier

• Born: January 8, 1786
• Birthplace: Philadelphia, Pennsylvania
• Died: February 27, 1844
• Place of death: Philadelphia, Pennsylvania

American financier

Biddle was the outstanding figure in American banking during the early nineteenth century. By combining superb managerial skills and a keen understanding of finance and banking, he made the Bank of the United States a prototype for modern central banking systems.

Area of achievement Government and politics

Early Life

Nicholas Biddle was descended from one of the most distinguished families in Pennsylvania. His father, Charles Biddle, was a successful merchant and had become vice president of the Supreme Executive Council of Pennsylvania. His mother, Hannah Shepard Biddle, was the daughter of a North Carolina merchant. Nicholas was extremely precocious and was admitted at the age of ten to the University of Pennsylvania. His parents transferred him before he was graduated, and he was entered in Princeton as a sophomore at the age of thirteen. Nicholas was graduated in September, 1801, at the age of fifteen, as the valedictorian.

Biddle began the study of law, but his personal interests seemed to mark him for a literary career. He contributed two pieces to Joseph Dennie’s literary magazine, The Port Folio, which showed considerable talent. Then, in the fall of 1804, Biddle went with General John Armstrong, Jr., who had been appointed minister to France, as his secretary. He assisted ably in the duties of handling claims authorized in the Louisiana Purchase, gaining valuable insights into the problems and techniques of international finance. After a year, he departed on a grand tour of Europe, including a visit to Greece. He served briefly as secretary for James Monroe in London, and he finally returned to the United States in September, 1807.

Biddle had reached his adult height of five feet, seven inches. He had a handsome oval face, a high forehead, and chestnut eyes and hair. He had a serious and dignified demeanor and an aristocratic bearing. He decided to practice law, but he also found time to make contributions to Dennie’s The Port Folio. In 1810, he was persuaded by William Clark to edit the journals of the Lewis and Clark expedition. Biddle did most of the work, but the journals were eventually published under another editor’s name.

In October, 1810, Biddle was elected to the Pennsylvania legislature. The highlight of his service was his eloquent defense of the first Bank of the United States. He displayed a knowledge of finance that impressed all listeners. Biddle declined renomination. One reason was that he had met and later married Jane Craig, whose father’s estate was one of the largest in Philadelphia. During the War of 1812, he returned to the Pennsylvania legislature and vigorously supported the war effort, parting company with his fellow Federalists.

Secure financially, Biddle spent the next few years managing his country estate, “Andalusia,” and engaging in civic and philanthropic activities. In 1818, he was defeated in a race for Congress, in part because his republicanism was still suspect and because of internal splits in Pennsylvania. President Monroe, although a good friend, hesitated to appoint Biddle to office. When mismanagement occurred in the operation of the second Bank of the United States, however, and the president of the bank, William Jones, was removed early in 1819, Biddle was one of the directors chosen by the government. For the next twenty years, his life revolved around the bank.

Life’s Work

Langdon Cheves of South Carolina, who replaced Jones as president of the bank, followed a policy of retrenchment. “The bank was saved,” as they said in the southwestern part of the United States, “but the people were ruined.” When Cheves resigned in 1822, Biddle was chosen as the bank’s third president. The position he assumed was one of the most important in the United States. The bank was in sound financial condition, but Cheves’s policies had alienated many. Biddle gradually dropped many of the restrictions imposed upon the operations of the branch banks. Enlargement of the credit operations stimulated the economy, which was still suffering from the effects of the Panic of 1819. He also increased the profits of the bank and gradually gained complete control over its operations.

From his splendid Greek Revival building on Chestnut Street in Philadelphia, Biddle controlled the operations of eventually twenty-nine branches, from New Hampshire to New Orleans. He used the power of the bank to expand and contract the credit and money supply according to the fluctuations in business activity. He was a superb administrator: The result was a sound banking system and a stable currency that greatly benefited the country.

Biddle’s success won for him many friends and growing support for the bank. He sought to avoid involving the bank in politics and tried to remain neutral in the presidential race between President John Quincy Adams and Andrew Jackson in 1828. Biddle was well aware that there were still many powerful people who were hostile toward the bank, and that one was Jackson himself.

After Jackson’s election, some members of his party attempted to gain control of the bank. Allegations were made that some branches had exercised an improper influence in the past election by refusing loans to Jacksonians. Biddle was overly sensitive about bank operations. He tended to be defensive rather than to investigate fully charges of mismanagement. At first, Biddle did not appreciate the depth of President Jackson’s hostility to the Bank of the United States. Jackson had a prejudice against all banks based on little more than economic ignorance and some bad personal experiences with bank notes.

A large number of voters also believed that the bank, with one-fifth of the country’s loans and bank notes in circulation, and one-third of the total bank deposits and specie (gold and silver), had too much money and power for the safety of the republic. The bank was further opposed by a group who believed that it unfairly restricted loans and denied them economic opportunities, and by yet another group of state bankers and their stockholders who resented the size, wealth, and controlling influence of the bank. Despite this opposition, a substantial majority of the American people supported the bank and favored its recharter.

Jackson’s attitude and the hostility of many of the advisers around him toward the bank made Biddle uncertain about the prospect of rechartering the bank. Despite conflicting advice, he chose to ask for the rechartering in 1832, four years early, basically because it was an election year and Biddle believed that Jackson would not oppose the bank for fear of losing popularity.

The recharter bill passed both houses in the summer of 1832 by comfortable margins. Biddle had miscalculated: Jackson was not easily intimidated. He responded with a veto and denounced the Bank of the United States as a monopoly, under too much foreign influence, and unconstitutional, and he asserted that it was an institution of the rich and powerful. The message was blatantly misleading, but it was undeniably a powerful and cleverly written polemic, well calculated to appeal to the prejudices of the mass of American people. Despite the goodwill that Biddle had built up for the bank, Jackson successfully changed the debate from the utility of the bank to whether it was a bastion of aristocratic privilege. He portrayed himself as saving the republic from the “monster.”

Although his victory was more a personal triumph than approval of his stand against the bank, Jackson resolved to destroy the bank. He directed the removal of government deposits, which would be placed in state banks, dubbed “pet banks” by opponents. Biddle responded by curtailing loans. While this action may have been necessary to protect the bank from a reduction of funds (and almost ten million dollars in government deposits were withdrawn), the effect of this restriction on credit staggered commercial and manufacturing interests. Business failures and bankruptcies multiplied, and wages and prices declined. Biddle was not entirely to blame; in fact, he thought that it would ultimately force Jackson to restore the deposits. Neither man was willing to budge. Public opinion, initially anti-Jackson, slowly turned against Biddle. Jackson was unrelenting. He administered a final blow to the Bank of the United States, declaring that the government would no longer accept branch drafts for the payment of taxes.

In 1836, with the death of the bank imminent, Biddle secured a charter from the Pennsylvania legislature to operate it as a state bank. There was no longer a central bank to keep the state banks in order by calling upon them for specie or refusing to receive their bills. Moreover, the American economy was overheating as a result of speculation in large measure stimulated by government deposits in pet banks, which then numbered approximately ninety. The country was inundated with paper money.

The frenzy of speculation was brought to an abrupt end by the Panic of 1837. The Bank of the United States was forced in May, 1837, to suspend payment of specie for the redemption of notes, as did all other banks in the country. Biddle was still the most prominent banker in the country, and he played an important role in trying to shore up the nation’s banking system and restore specie payments. Biddle also intervened massively in the cotton market exchange, thus preventing the collapse of that important part of the American economy. He also turned a profit for his bank.

Resumption of specie payments began again in August, 1838. The economy seemed to be recovering, and Biddle, in March, 1839, intending to devote his remaining years to leisure, resigned. In the summer of 1839, however, largely because of the operations of the Bank of England, the United States and the remainder of the world was plunged again into depression. Biddle may have had the grim satisfaction of knowing that the lack of a national bank only made the situation worse, but it was small consolation, because it was also the source of the bank’s and Biddle’s ruin. Falling cotton prices and mismanagement by the bank’s directors led to a second suspension of specie payments in October, 1839. The bank continued to operate, but its situation grew steadily worse, and the bank closed its doors forever in February, 1841.

Biddle’s personal fortune, as well as the bank’s, collapsed. In his last years, he was harassed by lawsuits, and at one point in 1842, he was arrested on charges of criminal conspiracy, but he was exonerated. Other litigation followed and were only brought to an end by his death on February 27, 1844, from complications arising from bronchitis accompanied by dropsy.

Significance

Despite his failures, Biddle was an imposing figure in American history. He had the qualities of a statesman who saw the potential of the American economy and formulated the means for realizing it. He wanted to establish American prosperity and to make the country stronger and more secure. His views were guided by a considerable intelligence, but by inclination he displayed more the traits of the idealist and the romantic than the hardheaded, pragmatic businessperson. He showed a preference more for what ought to be than the situation as it was. His naïveté, even arrogance, that reason and truth would prevail in his battle with Jackson proved disastrous for the bank.

Biddle was a brilliant administrator who maintained complete control over the Bank of the United States; yet he also gave an aristocratic tone to the bank and lent credibility to the charge of its having excessive power. Because he saw the value of the bank to the nation’s economy, he believed that all men of reason must see it as well. Jackson, he assumed, could not possibly destroy an institution that was in the best interest of the country. Even at the end, his actions were still guided by a larger view of the good of the country rather than the practicalities of sound business.

Perhaps, in retrospect, the country needed the laissez-faire economics that dominated the United States for the next three quarters of a century. The exuberant economic growth, however, was characterized by wild speculation and the persistence of monetary evils. The Bank of the United States offered a more “managed” economic growth and a more stable currency, but it might have dampened the enterprising spirit of American business. When the abuses of the “robber barons” brought on a reform movement during the early twentieth century, one reform was to reestablish a central banking system very similar to Biddle’s bank.

Bibliography

Brown, Marion A. The Second Bank of the United States and Ohio, 1803-1860: A Collision of Interests. Lewiston, N.Y.: Edwin Mellen Press, 1998. A more recent study of the bank, not as good as Catterall’s book (see below).

Catterall, Ralph C. H. The Second Bank of the United States. Chicago: University of Chicago Press, 1903. Although dated both in content and interpretation, this classic work is still the most comprehensive study of the bank.

Govan, Thomas Payne. Nicholas Biddle: Nationalist and Public Banker, 1786-1844. Chicago: University of Chicago Press, 1959. The only satisfactory biography of Biddle. The author is partial to his subject and presents a sensitive portrayal of Biddle’s role in running the bank. The book is well researched and well written.

Hammond, Bray. Banks and Politics in America from the Revolution to the Civil War. Princeton, N.J.: Princeton University Press, 1957. A Pulitzer Prize-winning book that is not simply about banking. Hammond pays particular attention to Biddle and gives a fair appraisal of him. Hammond’s interpretation of the Bank War, while controversial, broke new ground.

Kaplan, Edward S. The Bank of the United States and the American Economy. Westport, Conn.: Greenwood Press, 1999. Chapter 6 focuses on Biddle and the Second Bank of the United States.

McFaul, John M. The Politics of Jacksonian Finance. Ithaca, N.Y.: Cornell University Press, 1972. A good general study of the issues involved in the Bank War. The positions of probank and antibank forces are carefully analyzed.

Remini, Robert V. Andrew Jackson and the Bank War. New York: W. W. Norton, 1968. A good, short introduction to the Bank War. Remini is partial to Jackson, but his account is generally a fair, succinct exposition of the issues.

Temin, Peter. The Jacksonian Economy. New York: W. W. Norton, 1969. Temin presents a provocative, revisionary interpretation of the sources of the Panic of 1837. While his analysis is not entirely convincing, he adds a new dimension to the study of the Bank War.

Wilburn, Jean Alexander. Biddle’s Bank: The Crucial Years. New York: Columbia University Press, 1967. Wilburn refutes the Jacksonian allegation of the unpopularity of the bank. She shows support for the bank’s services from the people, their congressional representatives, and many local bankers.

Related Articles in Great Events from History: The Nineteenth Century

April, 1816: Second Bank of the United States Is Chartered; July 10, 1832: Jackson Vetoes Rechartering of the Bank of the United States; March 17, 1837: Panic of 1837 Begins; August 1, 1846: Establishment of Independent U.S. Treasury; February 25, 1863-June 3, 1864: Congress Passes the National Bank Acts.