The Bank War was the ensuing political struggle over the fate of America’s Second Bank during Andrew Jackson’s presidency. In 1832, Jackson vetoed a bank re-charter bill and launched a campaign that would eventually lead to its destruction.
Background
Banking, money and monetary policy were a source of great controversy in the early United States. In 1791, Congress created the first Bank of the United States, headed by Secretary of the Treasury Alexander Hamilton. The dispute over the Bank sparked a split in George Washington’s administration which later expanded to form the nation’s first two political parties: the Federalists of Hamilton and the Democratic Republicans, led by Thomas Jefferson.
Under Jeffersonian control, the original bank’s charter expired in 1811. But the country’s financial difficulties during the War of 1812 led Congress to charter the United States’ second bank for 20 years from 1816. and to finance it with 35 million dollars, a colossal sum at the time. After struggling in its early days, the Bank built a solid reputation in the late 1820s under the leadership of its third president, Nicholas Biddle.
Jackson and mistrust of the National Bank
Among those wary of America’s second largest bank was Andrew Jackson, the war hero from Tennessee elected president in 1828. As the champion of the common man, Jackson opposed the concentration of power between the United States. hands of a powerful few, like Biddle. , who came from a prominent Philadelphia family, at the expense of ordinary farmers and workers.
As president, Jackson made no secret of the fact that he opposed the Bank’s next re-charter in 1836. The bank was popular with many Americans, however, and Jackson’s opponents, including Senator Henry Clay of the Kentucky, convinced Biddle to request a first re-charter before the 1832 election, betting that Jackson would not veto the reload if Congress passed it.
Both houses of Congress passed the bill, which extended the bank’s charter for another 15 years. A week later, on July 10, 1832, Jackson returned the bill unsigned, accompanied by a message to Congress in which he announced his veto, declaring that the Bank was “unauthorized by the Constitution, subversive of the rights of states. and dangerous for the freedoms of the people.
Impact of Jackson’s veto
In his veto message, Jackson directly contradicted the 1819 Supreme Court decision in McCulloch v. Maryland, that the Bank of the United States was constitutional. He claimed the right for himself as president to judge his constitutionality, independently of Congress or the courts. The Bank’s charter gave the institution too much power over the country’s financial markets, he argued, power that enabled it to generate huge profits for its shareholders, most of whom were “foreigners.” and “our own wealthy citizens”. “If we are to have a bank with private shareholders, every consideration of sound policy and every impulse of American sentiment is a warning that it should be purely American,” Jackson wrote.
But the real evil of the Bank, according to Jackson, was its creation of a privileged class of Americans with too much money and political power. “It is unfortunate that the rich and powerful too often bend government actions for their selfish ends,” he wrote. It was unfair and dangerous for “the humble members of society – farmers, mechanics and laborers – who have neither the time nor the means to secure such favors.”
The Reload Bill returned to Congress, where despite unwavering support from Clay and Daniel Webster, it failed to secure the two-thirds majority support needed to override Jackson’s veto. The battle for the bank became a central issue in the presidential campaign that year, in which Jackson beat Clay to the ground to win a second term.
The lasting implications of the banking war
To weaken the bank before its charter ran out, Jackson ordered all U.S. government deposits to be withdrawn and deposited in various state chartered banks. In response, Biddle restricted the Bank’s lending, tightening the nation’s money supply in an attempt to inspire public outrage at Jackson’s policies and force re-charter. Instead, the ensuing financial distress inspired greater suspicion of the power of the Bank.
As the banking war continued, opponents of Jackson organized the Whig Party, named after the British term for opponents of monarchical power. In 1834, the Whig-dominated Senate formally censored Jackson for removing federal deposits, an action Jackson’s supporters – who now called themselves Democrats – voted to remove from the Senate record as soon as they took control in 1837.
The charter of the Second Bank of the United States expired in 1836, and a defeated Biddle accepted an offer from Pennsylvania to make it a state chartered bank. With the abolition of the Bank as a regulatory force, state banks began printing currencies and lending out exorbitant amounts of money. The resulting high inflation and Jackson’s policies favoring hard currencies (gold or silver) led many investors to panic and the closure of many banks due to insufficient reserves, during a known financial crisis. under the name of Panic of 1837.
Jackson’s Democratic successor Martin Van Buren has proposed the establishment of a new independent treasury system, which would fulfill Jackson’s goal of separating the nation’s finances from his government. Repealed by the Whigs in 1841 after Van Buren’s defeat to William Henry Harrison, the Independent Treasury Act was re-enacted by Democratic President James K. Polk in 1846. The independent treasury system would operate until 1914 , when it was replaced by the Federal Reserve. .
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Daniel Feller. “King Andrew and the Bank.” Social science, January / February 2008.
Marsha Mullin. “Andrew Jackson and the Bank War.” Andrew Jackson’s Hermitage.
KC Tessendorf. “Nicholas Biddle and Andrew Jackson in the Strangled Bank Affair.” Financial history, Issue 65 (1999).
