why was it good to have a favored national bank?

Answer 1

I am not sure I did not understand this question if could not relate the same with first question.

In case I am thinking on different line. I would say it is always better to have atleast one favoured national bank as that help iron out kinks in economy when currency is moving erratically without any reason or interest rates are not moving in smooth direction then this bank can intervene and help.

Answer 2

The First Bank of the United States was proposed by Alexander Hamilton to relieve the war debt from the United States Revolutionary War, develop a national currency, and dispose of the western territories. Housed in Philadelphia, Pennsylvania (in Carpenters' Hall for several years) when that city was the capital, it was designed by Samuel Blodgett and James Windrim. It was chartered in 1791 for 20 years, and thus expired in 1811. It followed the Bank of North America and it was succeeded by the Second Bank of the United States.

The establishment of the bank raised early questions of constitutionality in the new government. Hamilton, then Secretary of the Treasury, argued that the Bank was an effective means to achieve the authorized powers of the government implied under the Necessary and Proper clause of the constitution. Secretary of State Thomas Jefferson argued that the Bank violated traditional property laws and that its relevance to constitutionally authorized powers was weak.

Tenets the bank was based on include:

1. Sound finance, with a balanced government budget, except during wartime emergency
2. Sound banking, with reserves in gold and silver
3. Being a lender of last resort
4. The currency notes issued could serve as instruments of national policy
5. Regulating the national economy

The Second Bank of the United States helped create a robust economy with strong interregional connections and provided a convenient way for the government to handle its affairs. Enemies of all banks and modernization generally, combined with some jealous bankers, urged Andrew Jackson to destroy it as a monstrous threat to American liberties. The head of the Second Bank was Nicholas Biddle. The bank was created after James Madison and Albert Gallatin found the government unable to finance the War of 1812 after the closing of the First Bank of the United States in 1811.

After the war an economic boom created a need for a strong bank. American agricultural products were in demand in Europe, due to the devastation of the Napoleonic Wars. The Bank aided this boom through its uncontrolled lending. At the time, land sales for speculation were being encouraged. This lending allowed almost anyone to borrow money and speculate in land, sometimes doubling or even tripling the prices of land. The land sales for 1819, alone, totaled some 55 million acres (220,000 km²). With such a boom, hardly anyone noticed the widespread fraud occurring at the Bank.

In the summer of 1818, the national bank managers realized the bank's massive over-extension, and instated a policy of contraction and the calling in of loans. This recalling of loans simultaneously curtailed land sales and slowed the US production boom due to the recovery of Europe. The result was the Panic of 1819 and the situation leading up to McCulloch v. Maryland 17 U.S. 316 (1819).

Maryland adopted a policy to restrict banks, by placing a tax on any bank that was not chartered by the state legislature. This tax was either 2% of all assets or a flat rate of $15,000. That meant that the Baltimore Branch would have to pay this hefty tax. McCulloch filed suit against the state in a county court. The case made its way through the courts, all the way up to the United States Supreme Court, where the tax by the state of Maryland was ultimately struck down.