JACKSON’S BANK WAR
It has been called a war throughout history, yet no blood was shed, no lives lost, no weapons fired.
There were, however, two strong, opposing sides that waged a bitter struggle for what each firmly believed.
Although Congress made no formal declaration, the issue of the Second Bank of the United States can easily be considered a war…
The Bank of the United States was established in 1791 to serve as a repository for federal funds. Initially proposed by Alexander Hamilton, the First Bank was granted a twenty-year charter by Congress.
The Bank, based in Philadelphia with branches in eight cities, conducted general commercial business, as well as acting for the government.
It was both well managed and profitable, but it competed with state banks, thus creating animosity.
These critics succeeded in preventing renewal of the charter in 1811, and the First Bank went out of operation.
Soon, however, problems associated with the financing of the War of 1812 led to an interest in a central bank; so, in 1816, the Second Bank of the United States was established.
But, resentment led several states to try to restrict the Bank's operations.
Finally, in McCulloch v. Maryland (1819), the Supreme Court held that the Constitution had granted Congress the implied power to create a central bank.
This decision did not settle the controversy, however.
State banks and western entrepreneurs continued to criticize the Bank as an instrument of federal control and of eastern commercial interests…
TWO SIDES OF THE WAR…
The primary players included President Andrew Jackson, who fought against the bank…
…and Nicholas Biddle, president of the bank, who fought in loyal support of it.
The war on the Bank was unique, perhaps unlike any of its kind, having little to no personal interaction between these two key figures…
In attempting to gain a better understanding of this war, it is necessary to become familiar with the key figures and events, then attempt to determine the reasons each side took their respective positions.
By the time Andrew Jackson was elected as the 7th president of the United States, he had already lived a tumultuous life, marked by an unflattering reputation as "Old Hickory."
His beloved wife, Rachel, had died after suffering a heart attack shortly before his first inauguration in March of 1829.
Jackson blamed John Quincy Adams and Henry Clay for causing her death.
He reasoned that they were responsible because of the personal mud-slinging campaign the two men used.
Opposing Jackson was Nicholas Biddle, who served one term in the Pennsylvania House of Representatives.
James Monroe appointed him as one of the directors of the Second Bank of the United States in 1819.
As president of the Bank, he would lead a program to stabilize the currency.
BACKGROUND BEHIND THE WAR
The Second Bank of the United States was under private control, operating under a charter by the federal government.
Because of the unique relationship between it and the government, the Bank was awarded special privileges, among these were its being a storehouse for public funds.
The Bank could use these government funds for its own purposes without paying interest.
It could also issue bank notes and was not required to pay state taxes.
Bank of the United States “banknotes.”
When Biddle went to the Second Bank, it was plagued with poor management and outright fraud.
Not until Nicholas Biddle became the Bank's president in 1823 did it begin to function as hoped, restoring some financial stability.
THE BATTLE BEGINS
Jackson believed that the nation's money supply should consist only of gold or silver coin minted by the U.S. Treasury.
This view was impractical.
The gold and silver stocks of the U.S. were inadequate to provide a sufficient money supply for a growing nation.
The U.S. at that time had no substantial gold or silver mines of its own, so there was no dependable method to increase the money supply under the monetary system Jackson wanted.
(Jackson’s proposed monetary system was later defeated by the Supreme Court in 1837.
It ruled that state-chartered banks and the banknotes they created were fully Constitutional.)
Biddle understood that Jackson was opposed to the Second Bank, but he requested Congress to recharter the Bank in 1832, four years before its charter would expire.
Cartoon satirizing Biddle, presenting the re-charter in the form of a demon’s head.
Jackson placed vetoed the re-charter.
In his veto message, he stated that the Bank was "subversive of the rights of the states.”
Jackson used this historic veto to inform the American public of the evils of the Bank, calling it a monopoly where most of the stock was held by foreigners (although foreigners owned only 20% of the Bank's stock.)
THE BANK WAR ESCALATES
The election of 1832 was unique by the standards of the time.
The election served more of a purpose than just electing the president, it also served as a referendum for the Bank issue.
Political cartoon, Biddle and Jackson boxing…
Biddle threatened to make Jackson "pay” for vetoing the charter. He spent $100,000 on the election and sent out thousands of copies of the veto message hoping that Jackson's own words would be his undoing.
The Jacksonians did the same thing, calling the institution a "gambler's” bank.
Jackson was re-elected, despite the efforts of Biddle and his supporters…
Shortly after the election, the war escalated. In September of 1833, Attorney General Taney entered into the war, siding with Jackson.
Taney bolstered Jackson’s plan to remove all government deposits from the Bank and place them in state banks!
Despite the opposition of his Cabinet, Jackson held firm on his decision to remove the deposits.
The secretary of the treasury refused, and Jackson removed him, appointing a new secretary.
He also refused, and Jackson removed him, too!
Political Cartoon: Jackson’s cabinet, “rats fleeing.”
This third Secretary of the Treasury, Roger Taney, did as Jackson ordered, placing the money in 89 state banks, mostly run by Jackson supporters…
(Jackson later appointed him as chief justice of the Supreme Court as a reward for his loyalty.)
Congress considered Jackson's order illegal, eventually censuring Jackson- the first time it ever censured a president!
The now-unregulated state banks irresponsibly printed large quantities of their own bank notes…
These banknotes (currency) exceeded the worth in gold and silver that the banks had in their vaults.
Cartoon satirizing the value of a state banknote.
(This uncontrolled printing of state banknotes was one of many factors which contributed to a serious financial depression known as the Panic of 1837.)
Soon, the minting of a new federal dollar was announced and the democrats proclaimed that it was Andrew Jackson who had restored "real money" to the nation!
END OF THE BANK WAR
Without the federal deposits, the power of the Second Bank began to wane. Its banknotes no longer enjoyed such a strong reputation…
No other bill came from Congress to renew the Bank's charter, so the Second Bank of the United States expired in 1836.
Cartoon of Jackson crushing the Second Bank.
Biddle continued to believe that the Bank was a reputable institution which was needlessly killed by Jacksona matter that has since been left for history to decide.
The next president, Martin Van Buren would inherit a severe downturn in the American economy…
The U.S. would be without a central bank until 1913 when the Federal Reserve System was formed.
JACKSON’S BANK WAR
Created for Edmond Public Schools
Source: “From Revolution to Reconstruction”