An important part of the vigorous policy outlined by Dallas when he took charge of the treasury department in 1814 was the establishment of another United States Bank For this there were two reasons: at first emphasis was placed upon the advantage which the bank would afford in supplying financial resources to an embarrassed treasury, and later it was held indispensable for the restoration of a national currency. Dallas appropriately recognized the services of a few of the State banks during the war; but declared that " the charter restrictions of some of the banks, the mutual relation and dependence of the banks of the same State, and even of the banks of the different States, and the duty which the directors of each bank conceive they owe to their immediate constituents upon points of security or emolument, interpose an insuperable obstacle to any voluntary arrangement upon national considerations alone for the establishment of a national medium through the agency of the State banks." In Dallas' view a national bank could conciliate, aid, and lead State banks in the restoration of the currency to a specie basis; the government in turn would find its benefit in the rise of value of public securities and in increased confidence in the treasury notes.

Constitutional objections to a bank reappeared, but President Madison, Secretary Dallas, and the legislative leaders agreed in putting that argument aside and devoting attention to the financial and economic elements involved in the question at issue. For a time it was impossible for the advocates of a bank to agree on details which they could all support; hence a brief discussion of the various projects brought forward is desirable in order to illustrate the conflicting state of public opinion, although not one of them was finally adopted in its entirety. Three distinct and often conflicting purposes stood out in the debates : the need of a bank to give financial support to the government; the fear of governmental participation in banking; and the necessity of properly securing the note circulation, ideas which were the key-notes of similar discussions during the next twenty-five years. Dallas originally proposed (in a report, October 17, 1814) a bank with a capital of $50,000,000; recognizing, however, that it would be impossible to secure so large a subscription in coin, he advised that of the $50,000,000 but $6,000,000 be subscribed in specie, and the remainder in government stock and treasury notes. Provision was made that the government should hold stock in the bank, and that the bank should lend $30,000,000 to the government; and in the bill reported in the House from the committee on ways and means, November 7, the president was given discretionary power to allow suspension of payment of specie by the bank. The chief purpose of this plan was to secure loans to the government; the capital of the bank was to consist largely of government credit in the shape of stock, and in return the bank was not absolutely bound down to pay on demand its obligations outstanding in the form of circulating notes.

Calhoun objected to a financial partnership of this character in which the government would borrow back its own credit, and in a second plan proposed that the government should use its own credit directly without the intervention of a bank, that one-tenth of the capital should be in specie and the remainder in treasury notes to be thereafter issued; beyond this indirect relation the United States was to have no stock in the bank, no control over its operations, and no (?wer) to suspend specie payments. This plan would give support to treasury notes to the disadvantage of government stock, but as treasury notes by this time had many friends it was for the moment favored by the House. Dallas came out strong in opposition, because the fresh issue of treasury notes would gratuitously give an advantage to a single class of creditors and would tend to depreciate the value of the rest of the public debt; more than that he held that it would be extremely difficult to get $45,000,000 of treasury notes into circulation, either with or without depreciation. In later years Calhoun had to meet repeatedly the charge of inconsistency for his support at this time of a federal banking institution. His answer was always frank : he supported a national bank as an instrument of compulsion to force the local banks to resume specie payments; distrust of the State banks led him to waive for the time being his political philosophy.

In the course of the debate (December 29, 1814) Webster proposed still a third plan, a bank with a capital of $30,000,000, with no obligation on the part of the bank to loan money to the government, with no permission to suspend specie payments, and with a penalty on a refusal by the bank to redeem its notes. In support of his measure Mr. Webster delivered an instructive speech : he thought that the advantages to result from a bank were overrated; for banks are not revenue; the foundations of revenue must be sunk deeper; and the principal good from a bank was in the future, not in the present. The bank proposed by Calhoun seemed to him most extraordinary and alarming; with a capital of $5,000,000 in specie and $45,000,000 in government notes, such an institution looked less like a bank than a paper-money department of the government: " the government is to grow rich because it is to borrow without the obligation of repaying, and it is to borrow of a bank which issues paper without liability to redeem it."

The first bill passed was along the lines suggested by Webster; the capital authorized was $30,000,000, of which the United States might subscribe $5,000,000 in government stock; of the private subscription of $25,000,000 one-half was to be in treasury notes, one-third in stock, and one-sixth in coin. No loan was to be made to the government exceeding $500,000 ; the bank could not purchase government indebtedness ; and no permission was given to suspend specie payments. This bill did not meet the approval of Secretary Dallas, and was vetoed by President Madison, January 30,1815, for the following reasons: the amount of the stock to be subscribed would not be sufficiently in favor of the public credit to cause any considerable or lasting elevation of the market price of government stock; the people would reap no adequate benefits, since the bank was free from all legal obligations to make loans to the government; and the bank as constituted would not provide a sufficient circulating medium, for it would be obliged to pay its notes in specie or be subject to loss of its charter. In brief, Madison's objection was that the bank as proposed would fail to provide a reliable circulating medium, or to furnish loans to the government in return for its franchise.

In December, 1815, Secretary Dallas again placed the subject before Congress, with some modification of his previous propositions: he now recommended a bank with a capital of but $35,000,000, to consist three-fourths of government stock (with no mention of treasury notes) and one-fourth of specie; instead of demanding that the bank make loans to the United States it was under obligation to pay a bonus to the government in return for the benefits of its charter ; and, finally, he insisted that no opportunity should be given for a suspension of specie payments in case of emergency. In accordance with these principles a bill was introduced early in 1816. Calhoun gave his support, together with a violent attack upon State banks, which he accused of circulating $170,000,000 of banknotes on not more than $15,000,000 of specie in their vaults. . " The metallic currency has left our shores," said he ; " we have treated it with indignity ; it leaves us and seeks a new asylum on foreign shores." Smith of Maryland coincided with Calhoun that a bank was necessary but resented the attack upon the State institutions; during the war, he said, " they had been the pillars of the nation, now they were the caterpillars." John Randolph opposed the bill specifically and in general. A bank " would be an engine of irresistible power in the hands of any administration; it would be in politics and finance what the celebrated proposition of Archimedes was in physics, a place, the fulcrum, from which at the will of the executive the whole nation could be hurled to destruction." " Every man present in the House or out of it, with some rare exceptions, was either a stockholder, president, cashier, clerk, or doorkeeper, runner, engraver, paper-maker, or mechanic in some way or other to a bank." " It was as much swindling to issue notes with the intent not to pay as it was burglary to break open a house." " But a man might as well go to Constantinople to preach Christianity as to get up here and preach against banks." Clay, then speaker of the House, favored the bank, although formerly, when a member of the Senate, he had opposed the renewal of the charter of the first bank. In explanation he assigned his former opposition to three causes: first, he had been instructed to oppose the charter by the legislature of his own State; secondly the old bank had abused its powers in the interest of a political party; and, thirdly, he had previously doubted the constitutional authority of Congress to establish the bank. The situation in his opinion was changed in 1816, since it was now clear that such an institution was indispensable to treasury operations.

Finally, on March 14, 1816, the new bill, framed more in accordance with the ideas of the administration, was passed by the House by a vote of 80 to 71 ; of the minority 38 were Federalists and 31 were Republicans. The bill passed the Senate and was approved by the president April 10.