You Read it First at FrumForum
When the U.S. went to war with Great Britain over a range of issues in June of 1812, it lacked a central bank to help fund the war effort. This placed the U.S. in financial straits that not only almost caused it to lose the war but also prolonged the fighting, as the British, aware of America’s financial condition, stalled on peace negotiations. (Consider that when you hear Ron Paul say that abolishing the Fed will keep the U.S. out of “unnecessary wars.”)
The federal government’s desperation for funds was such that it even pulled troops away from the strategic St. Lawrence Valley in upstate New York — and into disadvantageous positions further west — to secure a loan from a financier named David Parish, who wanted to protect the area’s cross-border trade with the British, an episode recounted in historian Alan Taylor’s recent book The Civil War of 1812.
The war ended in 1815 after the U.S. had scrapped together enough money to achieve a military stalemate (while Britain was preoccupied with the Napoleonic Wars). The following year, Madison signed a bill granting a 20-year charter to the Second Bank of the United States. The new central bank had legislative supporters including Henry Clay and John Calhoun, prominent opponents of the first one.