President Andrew Jackson opposed the Bank of the United States for both centralizing the U.S. economy and supporting his political enemies.
When Andrew Jackson assumed office as the 7th U.S. president, he railed against the Second Bank of the United States. Jackson believed that this financial institution, which was the forerunner of today’s Federal Reserve System, was destructive because it held too much power over the U.S. economy and it served the privileged elite at the expense of the working class. Perhaps more importantly, Jackson opposed the Bank because it supported many of his political opponents. Consequently, Jackson set out to destroy the Bank.
The Second Bank of the United States
Following the War of 1812, Congress chartered the Second Bank of the United States (the First Bank’s charter had expired in 1811). Inflation had run rampant during the war, and the Bank was created to stabilize the economy. However the Bank ultimately made matters worse by printing paper money and increasing lending to banks and businesses. This led to a boom of economic prosperity in the late 1810s that crashed with the Panic of 1819.
When the Bank attempted to offset inflation by contracting the paper money in existence (i.e., deflation), many people could no longer cover their loans. A massive wave of bankruptcies, foreclosures and bank failures ensued in what became the worst economic depression in U.S. history up to that time. The depression ended within two years, but many did not forget the Bank’s role in the economic crisis.
The Bank Seeks Renewal
The Bank’s charter was set to expire in 1836, meaning that Congress would have to approve a renewal if the Bank was to remain in business. Those in Congress who supported the Bank sought to renew the charter four years early to coincide with the 1832 presidential election. In the election, one of the Bank’s most influential supporters, National Republican Henry Clay, was opposing the incumbent Democrat Andrew Jackson.
Bank President Nicholas Biddle used many questionable tactics to help his supporters. These included altering lending practices for political gain, redirecting funds to friendly sources, and publishing scathing newspaper articles about opponents. The Bank directly contributed $100,000 to Clay’s presidential campaign. Indirectly, the Bank controlled thousands of potential voters. To many, including President Jackson, the Bank posed both a constitutional and a political threat.
Jackson Opposes the Re-Charter
Clay helped ensure that Congress passed the re-charter bill. Many thought that Jackson would sign the bill into law rather than risk re-election by opposing it. However they were stunned when Jackson answered with a stern veto. Jackson cited several reasons for vetoing the Bank’s re-charter, including:
- The Bank dangerously centralized financial power in a single institution
- The Bank represented an unconstitutional monopoly on finance that only helped the rich get richer
- The Bank exposed the U.S. government to control by foreign and special interests
- The Bank exercised too much control over members of Congress
- The Bank favored northeastern states (where most finance was located) over southern and western states
However the one reason that Jackson did not cite was perhaps the most important: the Bank in general and Nicholas Biddle in particular supported Jackson’s political enemies.
The End of the Bank
The National Republicans underestimated public resentment toward the Bank. They printed copies of Jackson’s veto message and distributed it throughout the country, hoping to sway public opinion against “King Andrew.” However most people sided with Jackson, and he easily won re-election in November.
After winning a second term, Jackson pressed his advantage by ordering the withdrawal of all federal funds from the Bank’s vaults. He fired two treasury secretaries before finding one who carried out his order. Without federal funds, the Bank’s lending power was severely curtailed. This crippled the Bank until it died out when its charter expired in 1836. Jackson’s victory was complete.
Precedent
In 1834, the Senate censured Jackson for firing his treasury secretaries and withdrawing funds from the Bank. This marked the first and only time that a president was censured in history, even though it was revoked three years later by a more sympathetic majority.
Jackson’s victory in the “Bank war” was very important because it increased the power of the presidency and set a trend for future presidents to exert more authority. This enhanced authority enabled Jackson and future presidents to use patronage and influence to expand the federal government.
Sources:
- Schweikart, Larry and Allen, Michael: A Patriot’s History of the United States (New York, NY: Penguin Group, Inc., 2004)
- DiLorenzo, Thomas J.: Hamilton’s Curse (New York, NY: Crown Forum, 2008)
