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The Bank War refers to the political struggle that developed over the issue of rechartering the Second Bank of the United States (BUS) during the presidency of Andrew Jackson (1829–1837). The affair resulted in the destruction of the bank and its replacement by various state banks.

Bank War
Old Hickory and Bully Nick.jpg
Cartoon depicting the political conflict between Andrew Jackson and Nicholas Biddle over the Second Bank of the United States
Lead figures

Anti-Bank Jacksonian Democrats were mobilized in opposition to the national bank’s re-authorization on the grounds that the institution conferred economic privileges on a small group of financial elites, violating Constitutional principles of social equality, that it interfered in the political process, and was given a charter that violated state sovereignty, posing an implicit threat to Southern agrarian society dependent upon slavery.[1][2] With the Bank charter due to expire in 1836, the President of the Bank of the United States, Nicholas Biddle, in alliance with the National Republicans under senators Henry Clay (KY) and Daniel Webster (MA), decided to make rechartering a referendum on the legitimacy of the institution in the elections of 1832.

When Congress voted to reauthorize the Bank, Jackson, as incumbent and candidate in the race, vetoed the bill. His veto message justifying his action was a polemical declaration of the social philosophy of the Jacksonian movement pitting "the planters, the farmers, the mechanic and the laborer" against the "monied interest" and arguing against the Bank’s constitutionality.[3] Pro-Bank National Republicans warned the public that Jackson would abolish the Bank altogether if granted a second term. In the presidential election of 1832, the B.U.S. served as the central issue in mobilizing the opposing Jacksonian Democrats and National Republicans. Jacksonians successfully concealed the incompatibility of their "hard money" and "paper money" factions in the anti-Bank campaign,[4] allowing Jackson to score an overwhelming victory against Henry Clay, despite the Bank providing major financial assistance to Clay.

Fearing economic reprisals from Biddle and the Bank, Jackson moved swiftly to remove federal deposits from the institution. In 1833, he succeeded in distributing the funds to several dozen private banks throughout the country. The new Whig Party emerged in opposition to his perceived abuse of executive power, officially censuring Jackson in the Senate. In an effort to promote sympathy for the institution’s survival, Biddle retaliated by contracting Bank credit, inducing a serious and protracted financial downturn.[5] A reaction set in throughout America’s financial and business centers against Biddle’s economic warfare, compelling the Bank to reverse its tight money policies. By the close of 1834, recharter was a "lost cause."[6] Rather than permitting the Bank to go out of existence, Biddle arranged its conversion to a state chartered corporation in Pennsylvania just weeks before its federal charter expired in March 1836. This episode in the Bank’s decline and fall ended in 1841 with liquidation of the institution. Jackson’s campaign against the Bank had triumphed.


The Resurrection of a National Banking SystemEdit

President James Madison and Treasury Secretary Albert Gallatin both supported recharter of the First Bank of the United States in 1811. They cited "expediency" and "necessity" as opposed to principle. Opponents of the First Bank of the United States defeated recharter by a single vote in both the House and Senate in 1811.[7] Opposition came from several fronts, including states’ rights advocates opposed to the doctrine of implied powers, private banking interests who objected to the regulatory effects of the B.U.S. (Bank of the United States), state banks, and big mercantilists, including John Jacob Astor, who had disputes with the Bank’s directors.[8][9][10]

The north façade of the Second Bank of the United States, facing Chestnut Street (2013)

The practical arguments in favor of reviving a national system of finance, as well as internal improvements and protective tariffs, were prompted by national security concerns during the War of 1812 and its aftermath.[11] The chaos of the war had, according to some, "demonstrated the absolute necessity of a national banking system."[10]

The roots for the resurrection of the Bank of the United States lay fundamentally in the transformation of America from a simple agrarian economy to one that was becoming interdependent with finance and industry.[12][13] Vast western lands were opening for white settlement,[14] accompanied by rapid development, enhanced by steam power and financial credit.[15] Economic planning at the federal level was deemed necessary by Republican nationalists to promote expansion and encourage private enterprise.[16] At the same time, they tried to "republicanize" Bank policy. Calhoun boasted that the nationalists had the support of the yeomanry, who would now "share in the capital of the Bank."[17]

In 1815, Secretary of State James Monroe informed President James Madison that a national bank "would attach the commercial part of the community in a much greater degree to the Government [and] interest them in its operations…This is the great desideratum [essential objective] of our system."[18] Support for this "national system of money and finance" grew with the post-war economy and land boom, uniting the interests of eastern financiers with southern and western Republican nationalists who sought to "Republicanize Hamiltonian bank policy"[17] and "employ Hamiltonian means to Jeffersonian ends."[19] Despite opposition from Old Republicans led by John Randolph of Roanoke, who saw the revival of a national bank as purely Hamiltonian and a threat to state sovereignty,[20] but with strong support from nationalists such as John C. Calhoun and Henry Clay, the recharter bill for the Second Bank of the United States was passed by Congress.[21][22] The charter was signed into law by Madison on April 10, 1816.[23]

"Jackson and Reform": Implications for the BUSEdit

President Andrew Jackson

Andrew Jackson’s victory in the 1828 presidential election was achieved through harnessing the widespread social resentments and political unrest persisting since the Panic of 1819 and the Missouri Crisis of 1820.[24] After the Panic of 1819, popular anger was directed towards the nation's banks, particularly the B.U.S.[24] Overall, the people demanded more limited Jeffersonian government, especially after revelations of fraud within the Bank and its attempts to influence elections.[25] Jackson sympathized with these concerns, himself privately blaming the Bank for causing the Panic by contracting credit. In a series of "memorandums," he attacked the Federal Government for widespread abuses and corruption. These included theft, fraud, and bribery, and they occurred regularly at branches of the National Bank.[26] In Mississippi, the Bank did not open branches outside of the city of Natchez, making small farmers in rural areas unable to make use of its capital. Members of the planter class and other economic elites who were well-connected often had an easier time getting loans. According to historian Edward E. Baptist, "A state bank could be an ATM machine for those connected to its directors."[27]

One such example was in Kentucky, where in 1817 the state legislature chartered forty banks, with notes redeemable to the Bank of Kentucky. Inflation soon rose and the Kentucky Bank came in debt to the National Bank. Several states, including Kentucky, fed up with debt owed to the Bank and widespread corruption, laid taxes on the National Bank in order to force it out of existence. In McCulloch v. Maryland (1819), the Supreme Court ruled that the Bank was both constitutional and that, as an agent of the Federal government, it could not be taxed.[28] In 1819, Monroe appointed Nicholas Biddle of Philadelphia as Government Director of the Bank. In 1823, he was unanimously elected its president. According to early Jackson biographer James Parton, Biddle "was a man of the pen-quick, graceful, fluent, honorable, generous, but not practically able; not a man for a stormy see and a lee shore."[29] Biddle believed that the Bank had the right to operate independently from Congress and the Executive, writing that "no officer of the Government, from the President downwards, has the least right, the least authority," to meddle "in the concerns of the Bank."[27]

The 1824 election turned into a four-way contest between Jackson, John Quincy Adams, William H. Crawford, and Clay. Jackson won a plurality of the electoral vote, with 38%, and a strong plurality of the popular vote at 41%.[30] However, he did not win an electoral majority, which meant that the election was decided in the House of Representatives, which would chose among the top three vote-getters. Clay finished fourth. However, he was also Speaker of the House, and he maneuvered the election in favor of Adams, who in turn made Clay Secretary of State, an office that in the past had served as a stepping stone to the presidency. Jackson was enraged by this so-called "corrupt bargain" to subvert the will of the people.[31] In 1828, Jackson ran again. His forces were greatly strengthened by the revival of the Old Republican North-South agrarian alliance and its state sovereignty precepts. Most Old Republicans had supported Crawford in 1824. Alarmed by the centralization in the Adams administration, most of them flocked to Jackson.[32] The transition was made relatively easy by the fact that Jackson's own principles of government, including commitment to reducing the debt and returning power to the states, were largely in line with their own.[33]

President of the Second BUS, Nicholas Biddle

Jackson ran under the banner of "Jackson and Reform," promising a return to Jeffersonian principles of limited government and an end to the centralizing policies of Adams.[34] The Democratic Party launched a spirited and sophisticated campaign, better organized than any previous campaign in American history.[35] Adams was personified as a purveyor of corruption and fraudulent republicanism, and a menace to American democracy.[36][37] At the heart of the campaign was the conviction that Andrew Jackson had been denied the presidency in 1824 only through a "corrupt bargain" devised by Adams and Clay; a Jackson victory promised to rectify this betrayal of the popular will.[38][39]

Jackson was both the champion and beneficiary of the revival of the Jeffersonian North-South alliance, capitalizing on the fears building since the Panic of 1819 and the Missouri Compromise, building a base consisting of urban workers, small farmers, and Southern planters.[40][41][42] The Jacksonian movement reasserted the Old Republican precepts of limited government, strict construction, and state sovereignty.[33] Federal institutions that conferred privileges producing "artificial inequality" would be eliminated through a return to strict constructionism.[43] The "planter of the South and the plain Republican of the North"[44] would provide the support, wielding universal white male suffrage. These precepts would necessarily bring the Jacksonian Democracy politically into collision with the Second Bank of the United States.[45]

Although slavery was not a major issue in Jackson's rise to the presidency,[33] it did sometimes factor into opposition to the Second Bank, specifically among those in the South who were suspicious of how augmented federal power at the expense of the states might affect the legality of slavery. Old Republican Nathaniel Macon remarked, "If Congress can make banks, roads and canals under the Constitution, they can free any slave in the United States."[1] In 1820, John Tyler of Virginia wrote that "if Congress can incorporate a bank, it might emancipate a slave."[2]

So as to conceal the incompatibility of their hard money and paper money factions, Jackson’s associates never offered a platform on banking and finance reform,[46][47] because to do so "might upset Jackson's delicately balanced coalition."[47] As such, the Second Bank of the United States was not a major issue in the 1828 elections.[48] Many branches of the Bank did however provide financial resources to the Adams campaign.[49] Jackson would not publicly air his grievances with the B.U.S. until December 1829.[50]

Prelude to WarEdit

Initial attitudesEdit

When Jackson entered the White House in March 1829, dismantling the Bank was not part of his reform agenda. On principle, he opposed all banks, but hesitated from carrying out such a radical agenda.[51][52] His new administration, like others before it, made occasional efforts to enlist the Bank as a pro-Democratic Party institution. He proposed several men as candidates for office, many of whom had diverse political views. Biddle was uncooperative.[53] Jackson’s principled opposition to the B.U.S.[54][55] and his doubts as to its constitutionality, left open the door to thwart its renewal if he won a second term. Jackson entered office with a general aversion to banks, and may have already hoped to see the B.U.S. fail to win recharter.[51]

Amid a more sound economy and under Biddle's management, the Second Bank of the United States had attained a solid reputation by 1829. It had attained a significant amount of authority, "of a kind unimaginable today."[56] Popular distrust of the Bank had subsided, although distrust in some western and rural areas remained, although it too had been diminished.[57][58] Supreme Court decisions had approved its legitimacy and the country was experiencing general prosperity. According to historian Bray Hammond, "Jacksonians had to recognize that the Bank’s standing in public esteem was high."[59] Throughout 1829, Jackson and his close advisor William Lewis maintained cordial relations with B.U.S. administrators, including Biddle.[60] Jackson continued to do business with the B.U.S. branch bank in Nashville, Tennessee.[51]

By October, Jackson’s closest associates, especially his Secretary of State Martin Van Buren of New York, were developing plans to summarily end the B.U.S., without proposing any substitutes for the Bank’s fiscal functions. This was a plan anticipated to bring financial success, among other places, to New York. Meetings of Democrats in Richmond, Virginia in October 1829 helped develop an anti-Bank course.[61] Nicholas Biddle carefully explored his options in winning over the president to supporting recharter.[62] His methods included convincing pro-Jackson officials in the Bank's branches to intervene on the institution's behalf.[63] Biddle approached William Lewis in November 1829 with a proposal to facilitate paying down the national debt.[64] Jackson welcomed the offer and personally promised Biddle he would recommend the plan to Congress in his upcoming annual address, adding emphatically that he still held personal doubts as to the Bank’s constitutionality.[64] Jackson’s finance advisors urged him not to act too drastically, pointing out the need to find some alternative to the Bank that would restrain speculation and stabilized the currency. Jackson heeded these warnings.[65]

Annual Address to Congress, December 1829Edit

In his annual address to Congress on December 8, 1829,[66] Jackson praised Biddle's debt retirement plan, but followed this with a "bombshell."[50][67] The president advised Congress to take early action to determine whether the Bank deserved recharter on constitutional grounds, and further declared that the institution had "failed in the great end of establishing a uniform and sound currency." He went on to advise Congress that, if such an institution was truly necessary for the United States, its charter should be revised to avoid constitutional objections.[50]

The claim regarding the Bank’s failure was factually untrue,[50][68][69] as the Bank exercised "full control of credit and currency facilities of the nation and adding to their strength and soundness."[50] It was politically potent in that it served to "discharge the aggressions of citizens who felt injured by economic privilege, whether derived from banks or not."[70] Jackson’s criticisms resonated with "anti-bank, hard money agrarians"[68] as well as to eastern monied interests, especially in New York City, who resented the central bank’s power, prestige and its regulatory controls on easy credit.[71][72] Some opponents of the Bank disliked it precisely because it stabilized the economy, arguing that by lending most of its money in large amounts to wealthy well-connected speculators, it restricted the possibility for wider speculation and economic boom that would benefit all classes of white citizens.[73]

Both Houses of Congress categorically rejected Jackson’s assertions and upheld the Bank in committee reports issued in March and April 1830. Both declared that the U.S. Constitution not only permitted but required such a financial institution, because supposedly only the Bank notes, not specie, could provide the truly uniform currency that the Constitution mandated.[74] This echoed the arguments of Calhoun during the charter debates in 1816.[75] The House report was drawn up by George McDuffie, then a Jacksonian ally. After Jackson made these remarks, the Bank's stock dropped due to the sudden uncertainty over the fate of the institution, although it went back up after the Senate report.[76]

A political cartoon depicting Jackson battling the many-headed monster of the Bank

In the aftermath, no clear policy towards the Bank emerged from the White House.[77] Jackson’s official cabinet members were opposed to an overt attack on the Bank.[77] The Treasury Department maintained normal working relations with Biddle, who was renominated to his Bank director's post by the President.[77] Lewis and others of Jackson’s confidants continued to have encouraging exchanges with Biddle, but in his private correspondence to his associates, Jackson repeatedly referred to the institution as being "a hydra of corruption" and "dangerous to our liberties." He noted the supposed "demoralizing effects upon our citizenry."[78]

Annual Address to Congress, December 1830Edit

While pro-administration newspapers hardened their stance towards the Bank throughout 1830, official White House policy remained more neutral.[79][80] Jackson, however, had determined to oppose the rechartering of the Bank on constitutional grounds.[81] At his Annual Address to Congress on December 7, 1830, he launched his second public condemnation of the B.U.S., raising constitutional objects to its existence.[82][83] He proposed a substitute to the central bank.[84] The reformed bank would be wholly public, with no private stockholders. It would not engage in lending or land purchasing,[85] retaining only its role in processing custom duty fees for the Treasury.[86] The address reanimated the issue of recharter signaling the pro-B.U.S. forces that the re-authorization of the Bank was at risk, and a counter-campaign would be required to deflect Jackson’s criticisms.[62][87]

On February 2, 1831, while National Republicans were formulating a recharter strategy, Democratic Senator Thomas Hart Benton of Missouri launched an attack against the legitimacy of the Bank on the floor of the Senate, demanding an open debate on the recharter issue. He denounced the Bank, making a case for "a hard money policy against a paper money policy."[88] After the speech was over, Webster called for a vote to end discussions on the Bank. It succeeded 23-20, closer than he would have liked. According to Benton, it was "enough to excite uneasiness but not enough to pass the resolution."[89] Though Benton's assault was deflected by pro-Bank legislators, the Bank’s performance was now a matter of public – and politicized – scrutiny.[62][90] The Globe published the speech and carried editorials attacking the "moneyed tribunal," as Benton had called it. Jackson strongly approved of the speech. Shortly after, it was announced in the Globe that he intended to stand for reelection.[89]

The Failure of Compromise and WarEdit

The Post-Eaton Cabinet and Compromise EffortsEdit

Two developments in 1831 diverted Jacksonian Democrats temporarily from pursuing the Bank’s dismantling: the Nullification Crisis and the Peggy Eaton Affair.[65][91] These struggles led to Vice President Calhoun's estrangement from Jackson and eventual resignation,[91][92] the replacement of all of the original cabinet members but one, and to a new unofficial cabinet – a cabinet that Jackson regarded as an advisory body.[93] Jackson’s Kitchen Cabinet, led by Fourth Auditor of the Treasury Amos Kendall and newspaper editor Francis Blair, helped craft policy.[94] Jackson included two Bank-friendly executives in his new official cabinet: Edward Livingston of Louisiana (Secretary of State) and Louis McLane of Delaware (Secretary of the Treasury).[95][96] Their presence created the appearance of balance and open-mindedness — the rest of the official cabinet members were anti-Bank.[84] — leading to an attempt at compromise.[97][98]

McLane, a confidant of Nicholas Biddle,[80][99] impressed Jackson as a forthright and principled moderate on Bank policy. Jackson called their disagreements an "honest difference of opinion" and appreciated McLane's "frankness."[100] The Treasury Secretary's goal was to see to it that the B.U.S. survived Jackson’s presidency, even in a diminished condition.[101] He secretly worked with Biddle to create a reform package. The product presented to Jackson included provisions through which the federal government would adjust the tariff and, fulfilling one of Jackson's major goals, pay down the national debt before the end of Jackson’s first term in March 1833. The debt added up to approximately $24 million, and McLane estimated that it could be paid off by applying $8 million through the sale of government stock in the Bank plus an additional $16 million in anticipated revenue. The liquidation of government stock would necessitate strong changes to the Bank's charter, which Jackson would surely approve of. After the liquidation of the debt, future revenues could be applied to funding the military, which Jackson strongly supported. Another part of McLane's reform package involved selling government lands and distributing the funds to states, a measure consistent with Jackson's overall belief in reducing the operations of the central government. With this accomplished, the administration would permit re-authorization of the central bank in 1836. The perpetuation of the Bank would be secured. In return, McLane asked that Jackson not mention the Bank in his annual address to Congress. He argued that this could trigger a report by the House Ways and Means Committee, which was chaired by McDuffie, a Calhoun supporter, to recommend recharter, something that McLane warned Jackson he could not oppose.[102]

Jackson enthusiastically accepted McLane's proposal, and McLane personally told Biddle about his success. Biddle stated that he would have preferred that Jackson, rather than remaining silent on the question of recharter, would have made a public statement declaring that recharter was a matter for Congress to decide. Nevertheless, he consented to the overall plan.[103]

Secretary of the Treasury Louis McLane

These reforms required a rapprochement between Jackson and Biddle on the matter of recharter, with McLane and Livingston acting as liaisons.[84] The president insisted that no bill arise in Congress for recharter in the lead up to his reelection campaign in 1832, a request to which Biddle assented. Jackson viewed the issue as a political liability – recharter would easily pass both Houses with simple majorities — and as such, would confront him with the dilemma of approving or disapproving the legislation. A delay would obviate these risks.[104] Jackson, however, remained convinced of the Bank's unconstitutionality.[105]

Annual Address to Congress, December 1831Edit

Jackson conceded to McLane's pleas not to comment on recharter in the upcoming annual address to Congress in December, assuming that any efforts to recharter the Bank would not begin until after the election.[98] McLane would then present his proposals for reform and delay of recharter at the Annual Treasury Secretaries report to Congress shortly thereafter.[99][106]

In the original composite draft of the president’s address, McLane wrote a passage, under Jackson’s auspices, that explicitly deferred to Congress on the matter of the national bank.[106][107] Roger B. Taney, Attorney General, another of the cabinet's new appointees, objected strenuously to the wording, interpreting it as an acknowledgement of, and capitulation to, congressional authority, and entirely contrary to anti-Bank doctrine.[108]

Despite McLane's attempts to gain recharter of the Bank by a series of reforms,[109] Taney was confident that ultimately Jackson would never relinquish his desire to destroy the central bank.[106][110] Indeed, he was convinced that Jackson had ultimately never intended to spare the Bank in the first place.[111] Jackson subsequently edited the language in the final draft after considering Taney’s objections – without consulting McLane. In his December 6 address, Jackson was non-confrontational, but due to influence from Taney his message was less definite in its support for recharter than Biddle would have liked, and amounted to merely a reprieve on the Bank’s fate.[98][111][112] The following day, Secretary McLane delivered his report to Congress, in which he praised the Bank’s performance, including its regulatory functions regarding private banks,[113] and explicitly called for a post-1832 rechartering of a reconfigured government bank.[98][114]

The enemies of the Bank were shocked and outraged by both speeches.[101][111] The Jacksonian press, disappointed by the president’s subdued and conciliatory tone towards the Bank,[104] launched fresh and provocative assaults on the institution.[115] McLane’s speech, despite its call for radical modifications and delay in recharter,[102] was widely condemned by Jacksonians. They described it as "Hamiltonian" in character, accused it of introducing "radical modifications" to existing Treasury policy and attacked it as an assault on democratic principles. For example, Representative Churchill C. Cambreleng wrote, "The Treasury report is as bad as it can possibly be – a new version of Alexander Hamilton's reports on a National Bank and manufacturers, and totally unsuited to this age of democracy and reform." Secretary of the Senate Walter Lowrie described it as "too ultra federal."[116] The Washington D.C. Globe, Jackson’s pro-administration weekly under Francis Blair, refrained from openly attacking Secretary McLane, but in lieu of this, carried hostile essays from anti-Bank periodicals.[98][101][117] After this, McLane secretly tried to have Blair removed from his position as editor of the Globe. Jackson found out about this after Blair offered to resign. He assured Blair that he had no intention of replacing him. Troubled by accusations that he had switched sides, Jackson said, "I had no temporizing policy in me."[117] Although he did not fire McLane, he kept him at a greater distance.[118]

The National Republican Party OffensiveEdit

Senator Henry Clay

The Jacksonian anti-Bank backlash instantly provoked a political movement in their opposition, the National Republicans.[119] Within days of the speech, the party gathered in convention on December 16, 1831, and nominated Senator Henry Clay for president. Their campaign strategy was to defeat Jackson in 1832 on the Bank re-authorization issue.[115][119][120] To that end, Clay engineered the introduction of recharter bills in both the House and Senate.[121] Clay rejected any modifications to the bills that would make them more palatable to Jackson, seeking to provoke a veto; a veto Clay hoped would damage Jackson and lead to his defeat.[120][122]

Henry Clay and Senator Daniel Webster of Massachusetts warned Americans that if Jackson won reelection, he would abolish the Bank.[123] They felt secure that the central bank was sufficiently popular among voters that an attack on the Bank by Jackson would be viewed as an abuse of his executive power. The National Republican leadership aligned themselves with the Bank because it offered what appeared to be a perfect platform to defeat Jackson – and less so because they were champions of the B.U.S.[115][120]

Administration figures, among them McLane, were wary of making ultimatums that would provoke anti-Bank Jacksonians.[62][124] Nicholas Biddle no longer believed that Jackson would pursue reform and compromise on the Bank, but his informants close to the administration, including McDuffie, convinced him that Jackson would not veto re-authorization measures. He had also been urged to wait by both McLane and Lewis, who told him Jackson would likely veto a recharter bill and he would have a better chance of ensuring the Bank's survival by delaying and hoping for a compromise. "If you apply now," McLane wrote Biddle, "you assuredly will fail, — if you wait, you will as certainly succeed."[121] Under pressure from Clay and Webster, Biddle reluctantly decided to support the early recharter campaign.[120][121][125] On January 6, 1832, bills for Bank recharter were introduced in both houses of Congress without any of Jackson's proposed reforms.[106][121] In the House of Representatives, McDuffie guided the bill to the floor.[121]

The Jacksonian Counter-OffensiveEdit

The alliance between the central bank’s president, Nicholas Biddle, and Jackson’s political nemesis, Henry Clay, triggered a counter-offensive by Jackson’s anti-BUS forces.[120][126] Jackson assembled an array of talented and capable men:[127] Thomas Hart Benton in the Senate, James K. Polk, member of the House of Representatives from Tennessee, Francis Preston Blair of the Washington Globe, Treasury Auditor Amos Kendall, and Attorney General Roger Taney in his cabinets.[128] On February 23, 1832, as the debates opened, Representative Augustin Smith Clayton of Georgia called a motion to investigate alleged violations by the Bank of its charter in order to put pro-Bank forces on the offensive.[129][130] These Jacksonian delaying tactics could not safely be blocked by legislators, many of whom had benefited from the largesse supplied by Bank administrators.[129][131] Attempts to obstruct the inquiry would raise suspicions among the public.[106] The plan was approved, and a bipartisan committee was sent to Philadelphia to look into the matters. The memorandum, once released, helped rally the anti-Bank coalition, even though the bill was filled with innuendo and largely unproven allegations.[128]

The months of delay in reaching a vote on the recharter measure — a measure that would have passed easily had not anti-Bank forces mobilized[132] — served ultimately to clarify and intensify the issue for the American people.[133] Jackson’s supporters benefited in sustaining these attacks on the Bank[127] even as Benton and Polk warned Jackson that the struggle was "a losing fight" and that the recharter bill would certainly pass.[133] Through mediator C.J. Ingersoll, Biddle lobbied Jackson to support recharter. On February 28, Cambreleng, a Democrat and Jackson's primary spokesperson in the House, expressed the hope that it recharter were passed, the President would "send it back to us with his veto — an enduring moment of his fame." The following day, Livingston made the assurance that if a bill were to go before him that he found acceptable, the President would "sign it without hesitation." In the words of historian Bray Hammond, "This was a very large 'if,' and the Secretary came to realize it."[134] Many moderate Democrats, including McLane, were appalled by the perceived arrogance of the pro-Bank forces in pushing through early recharter with no reforms and supported his decision. Indeed, Livingston was alone in the cabinet, for only he opposed a veto, and Jackson ignored him. Taney's influence grew immensely during this period, and Cambreleng told Van Buren that he was "the only efficient man of sound principles" in Jackson's official cabinet.[127]

Biddle arrived in Washington, D.C. to personally conduct the defense of the Bank.[135][136] He coordinated pro-B.U.S. campaigns, in concert with branch Bank managers, to elicit citizen group petitions drives, sent to Congress to encourage recharter.[137] Congressmen were pressured to write pro-Bank articles, which Biddle printed and distributed nationally.[138] Francis Blair at the Globe reported these intrusions by the B.U.S. president in the legislative process as evidence of the Bank’s corrupting influence on free government.[135] Pro-recharter National Republicans finally prevailed after months of debate and strife, winning reauthorization in the Senate on June 11, (28-20) and in the House on July 3, 1832 (107-85). Biddle joined most observers in predicting that Jackson would veto the bill.[139] Not long after, Jackson became ill. Van Buren arrived in Washington on July 4, and went to see Jackson, who said to him, "The Bank, Mr. Van Buren, is trying to kill me, but I shall kill it."[138][140]


Contrary to the assurances Livingston had been rendering Biddle, practically immediately after its passage, Jackson determined to veto the recharter bill. The veto message was crafted primarily by Taney, Kendall, and Jackson's nephew and advisor Andrew Jackson Donelson. McLane officially denied that he had any part in it.[141] Jackson officially vetoed the legislation on July 10, 1832,[137] delivering a carefully crafted message to Congress and the American people.[142] One of the most "popular and effective documents in American political history,"[143] Jackson outlined a major readjustment to the relative powers of the government branches.[144]

The executive branch, Jackson averred, when acting in the interests of the American people,[145] was not bound to defer to the decisions of the Supreme Court, nor to comply with legislation passed by Congress.[146][147] Further, veto power was no longer limited to suppressing clear violations of the Constitution – it could be asserted on social, political or economic grounds.[148] Jackson characterized the BUS as merely an agent of the executive branch, acting through the Department of the Treasury. As such, declared Jackson, Congress was obligated to consult the chief executive before initiating legislation affecting the Bank. Jackson had claimed, in essence, legislative power as president.[149] Ignoring the Second Bank of the United States’ value in stabilizing the country’s finances,[143] Jackson's message provided no concrete proposals for a single alternate institution that would regulate currency and prevent over-speculation – the primary purposes of the B.U.S.[143][150][151] The practical implications of the veto were enormous. By expanding the veto, Jackson claimed for the president the right to participate in the legislative process. In the future, Congress would have to consider the president's wishes when deciding on a bill.[148]

Polemically, the veto message was "a brilliant political manifesto"[152] that called for the end of monied power in the financial sector and a leveling of opportunity under the protection of the executive branch.[153] Jackson perfected his anti-Bank themes. He stated that one fifth of the Bank's stockholders were foreign and that, because states were only allowed to tax the stock of Bank owned by their own citizens, foreign citizens could more easily accumulate it.[154] He pitting the idealized "plain republican" and the "real people" — virtuous, industrious and free[155][156] — against a powerful financial institution — the "monster" Bank,[157] whose wealth was purportedly derived from privileges bestowed by corrupt political and business elites.[158][52] Jackson's message distinguished between "equality of talents, of education, or of wealth," which could never be achieved, from "artificial distinctions," which he claimed the Bank promoted.[159] To those who believed that power and wealth should be linked, the message was unsettling. Daniel Webster charged Jackson with promoting class warfare.[150][160][161] Webster was at around this time annually pocketing a small salary for his "services" in defending the Bank.[162]

In presenting his economic program,[163] Jackson was compelled to obscure the fundamental incompatibility of the hard-money and easy credit wings of his party.[4] On one side were Old Republican idealists who took a principled stand against all paper credit in favor of metallic money.[164] Yet the bulk of Jackson’s supporters came from easy lending regions that welcomed banks and finance, as long as local control prevailed.[165] By diverting both groups in a campaign against the central bank in Philadelphia, Jackson cloaked his own hard-money predilections, which, if adopted, would be as fatal to the inflation favoring Jacksonians as the B.U.S. was purported to be.[166]

Despite some misleading or intentionally vague statements on Jackson's part in his attacks against the Bank, some of his criticisms are considered justifiable. It enjoyed enormous political and financial power, and there were no practical limits on what Biddle could do. It used loans and "retainer's fees," such as with Webster, to influence congressmen. It assisted certain candidates for offices over others.[167] It also regularly violated its own charter. Senator George Poindexter from Mississippi received a $10,000 loan from the Bank after supporting recharter. Several months later, he received an additional loan of $8,000 despite the fact that the original loan had not been paid. This process violated the Bank's charter.[168]

Too late, Clay "realized the impasse into which he had maneuvered himself, and made every effort to override the veto."[169] In a speech to the Senate, Clay strongly criticized Jackson for his unprecedented expansion, or "perversion," of the veto power. The veto was intended to be used in extreme circumstances, he argued, which was why previous presidents had used it rarely if at all. Jackson, however, routinely used the veto to allow the executive branch to interfere in the legislative process, an idea Clay thought "hardly reconcilable with the genius of representative government." Benton replied by criticizing the Bank for being corrupt and actively working to influence the 1832 election. Clay responded by sarcastically alluding to a brawl that had taken place between Thomas Benton and his brother Jesse against Andrew Jackson in 1813. Benton called the statement an "atrocious calumny." Clay demanded that he retract his statements. Benton refused and instead repeated them. A shouting match ensued in which it appeared the two men might come to blows. Order was eventually restored and both men apologized to the Senate, although not to each other, for their behaviors. The pro-Bank interests failed to muster a supermajority — achieving only a simple majority of 22-19 in the Senate[170] — and on July 13, 1832, the veto was sustained.[171]

Post-veto presidential race of 1832Edit

This cartoon, "King Andrew the First," depicted Jackson as a tyrannical king, trampling on the Constitution.

Jackson's veto immediately made the Bank the center of the 1832 election. With four months remaining until the November general election, both parties launched massive political offensives with the Bank at the center of the fight.[172][173] Jacksonians framed the issue as a choice between Jackson and "the People" versus Biddle and "the Aristocracy,"[172][174] while muting their criticisms of banking and credit in general.[175] "Hickory Clubs" organized mass rallies, while the pro-Jackson press "virtually wrapped the country in anti-Bank propaganda."[176] This, despite the fact that two-thirds of the major newspapers supported Bank recharter.[177][178]

The National Republican press countered by characterizing the veto message as despotic and Jackson as a tyrant.[179] Presidential hopeful Henry Clay vowed "to veto Jackson" at the polls.[136][180] Overall, the pro-Bank analysis tended to soberly enumerate Jackson's failures, lacking the vigor of the Democratic Party press.[181] Biddle mounted an expensive drive to influence the election, providing Jackson with copious evidence to characterize Biddle as an enemy of republican government and American liberty through meddling in politics. Some of Biddle's aides brought this to his attention, but he chose not to take their advice.[175] He also had tens of thousands of Jackson's veto messages circulated throughout the country, believing that those who read it would concur in his assessment that it was in essence "a manifesto of anarchy" addressed directly to a "mob."[182] "The campaign is over, and I think we have won the victory," Clay said privately on July 21.[183]

Jackson's campaign benefited from superior organization skills. They hosted parades and barbecues, and erected hickory poles as a tribute to Jackson, whose nickname was Old Hickory. Jackson typically chose not to attend these events, in keeping with the tradition that candidates not actively campaign for office. As Jackson travelled, he was swarmed by enthusiastic mobs. The National Republicans, meanwhile, developed popular political cartoons, some of the first to be employed in the nation. One such cartoon was entitled "King Andrew the First." It depicted Jackson in full regal dress, featuring a scepter, ermine robe, and crown. In his left hand he holds a document labelled "Veto" while standing on a tattered copy of the Constitution.[184] Clay was also damaged by the candidacy of William Wirt of the Anti-Masonic Party, which took National Republican votes away in crucial states, mostly in the northeast. In the end, Jackson won a major victory with 54.6% of the popular vote, and 219 of the 286 electoral votes.[185] In Alabama, Georgia, and Mississippi, Jackson won with absolutely no opposition. He also won the states of New Hampshire and Maine, fracturing the traditional Federalist/National Republican dominance in New England.[186]

Jackson's dismantling of the BUSEdit

Renewal of war and 1832 address to CongressEdit

Jackson regarded his victory as a popular mandate[187] to eliminate the B.U.S. before its 20-year term ended in 1836.[188][189] During the final phase of the 1832 election campaign, Kendall and Blair had convinced Jackson that the transfer of the federal deposits – 20% of the Bank's capital – into private banks friendly to the administration would be prudent.[190] Their rationale was that Biddle had used the Bank's resources to support Jackson's political opponents in the 1824 and 1828 elections, and additionally, that Biddle might induce a financial crisis in retaliation for Jackson's veto and reelection.[191] The president declared the Bank "Scotched, not dead."[189][192]

In his December 1832 State of the Union Address, Jackson aired his doubts to Congress whether the B.U.S. was a safe depository for "the people's money" and called for an investigation.[189][192] In response, the Democratic-controlled House conducted an inquiry, submitting a divided committee report (4-3) that declared the deposits perfectly safe.[193] The committee’s minority faction, under Jacksonian James K. Polk, issued a scathing dissent, but the House approved the majority findings in March 1833, 109-46.[192] Jackson, incensed at this "cool" dismissal, decided to proceed with his Kitchen Cabinet to remove the BUS funds by executive action alone.[194]

Search for a Treasury SecretaryEdit

Kendall and Taney began to seek cooperative private banks who would receive the government deposits. That year, Kendall went on a "summer tour" in which he found seven institutions friendly to the administration in which it could place government funds. The list grew to 22 by the end of the year.[195] Meanwhile, Jackson sought to prepare his official cabinet for the coming removal of the Bank's capital.[193][196] Vice President Martin Van Buren tacitly approved the maneuver, but declined to publicly identify himself with the operation, for fear of compromising his anticipated presidential run in 1836.[197][198] Treasury Secretary McLane balked at the removal, saying that tampering with the funds would cause "an economic catastrophe," and reminded Jackson that Congress had declared the deposits secure.[199] Jackson subsequently shifted both pro-Bank cabinet members to other posts: McLane to Department of State, and Livingston to Europe, as U.S. Minister to France.[200] The president replaced McLane with William J. Duane, a reliable opponent of the Bank from Pennsylvania, on June 1, 1833.[200] Duane was a distinguished lawyer from Philadelphia whose father, also William Duane, had edited the Philadelphia Aurora, a prominent Jeffersonian newspaper. Duane's appointment, aside from continuing the war against the Second Bank, was intended to be a sign of the continuity between Jeffersonian ideals and Jacksonian democracy. "He's a chip of the old block, sir," Jackson said of the younger Duane.[201] By the time Duane was appointed, Jackson and his Kitchen Cabinet were well-advanced in their plan to remove the deposits.[197][200] Despite their agreement on the Bank issue, Jackson did not seriously consider appointing Taney to the position. He and McLane had disagreed strongly on the issue, and his appointment would have been interpreted as an insult to McLane, who himself "vigorously opposed" the idea of Taney being appointed as his replacement.[202]

Treasury Secretary Roger B. Taney

Under the Bank charter terms of 1816, the U.S. Secretary of the Treasury was empowered, with Congress, to make all decisions regarding the federal deposits.[203] On his first day at his post, Secretary Duane was informed by Kendall, who was in name his subordinate in the Treasury Department, that Duane would be expected to defer to the President on the matter of the deposits.[194][204][205] Duane demurred, and when Jackson personally intervened to explain his political mandate[187] to ensure the Bank’s demise,[206] his Treasury Secretary informed him that Congress should be consulted to determine the Bank's fate.[207][208] Van Buren had cautiously supported delaying the matter until Congress could reconvene on January 1, 1834. Jackson declined. To Van Buren, he wrote, "Therefore to prolong the deposits until after the meeting of Congress would be to do the very act [the B.U.S.] wishes, that is, to have it in its power to distress the community, destroy the state Banks, and if possible to corrupt congress and obtain two thirds, to recharter the Bank." Van Buren capitulated.[209]

Jackson's position ignited protest not only from Duane but also McLane and Secretary of War Lewis Cass.[210] After weeks of clashing with Duane over these prerogatives, Jackson decided that the time had come to remove the deposits.[211][212] On September 18, Lewis asked Jackson what he would do in the event that Congress passed a joint resolution to restore the deposits, Jackson replied, "Why, I would veto it." Lewis then asked what he would do if Congress overrode his veto. "Under such circumstances," he said, standing up, "then, sir, I would resign the presidency and return to the Hermitage." The following day, Jackson sent a messenger to learn whether Duane had come to a decision. Duane asked to have until the 21st, but Jackson, wishing to act immediately, sent his nephew and aide Andrew Jackson Donelson to tell him that this was not good enough, and that he would announce his intention in Blair's Globe to summarily remove the deposits the next day, with or without Duane's consent. Sure enough, the following day, a notice appeared in the Globe stating that the deposits would be removed starting on or before October 1.[213] Secretary Duane had promised to resign if he and Jackson could not come to an agreement. When questioned by Jackson about this earlier promise, he said, "I indescreetly said so, sir; but I am now compelled to take this course." Under attack from the Globe,[214] Duane was dismissed by Jackson days later, on September 22, 1833.[207][211][215] Two days later, McLane and Cass, feeling Jackson had ignored their advice, met with the President and suggested that they resign. They eventually agreed to stay on the condition that they would attend to their own departments and not say anything publicly which would bolster the Bank's standing.[210]

Attorney General Taney was immediately nominated as Secretary of the Treasury[207][216] in order to authorize the transfers, and he designated Kendall as special agent in charge of removal. With the help of Navy Secretary Levi Woodbury, they drafted an order dated September 25 declaring an official switch from national to deposit banking. Beginning on October 1, all future funds would be placed in selected state banks, and the government would draw on its remaining funds in the B.U.S. to cover operating expenses until those funds were exhausted.[217]

Removal of deposits and panicEdit

Under Taney, the deposits began to be removed. The pro-administration private banks who received the federal funds were derisively known by opponents as "pet banks."[218] In the process of distributing funds to the pet banks, Secretary Taney attempted to move tactfully, so as not to provoke retaliation by the B.U.S. or eviscerate the central bank's regulatory influence too suddenly. Ineptly, Taney permitted the pet banks to draw prematurely on B.U.S. reserves for speculative ventures, and Biddle reacted with a punitive credit contraction. He stockpiled his reserves, thereby raising interest rates.[5] On October 7, 1833, Biddle held a meeting of the Bank's board members in Philadelphia. There, he announced a new strategy.[219] In the following months, Biddle presented to state banks notes for redemption, reduced discounts, and called in loans. In effect, Biddle instigated a financial crisis to force Congress to fight for the rechartering of the Bank. "Nothing but the evidence of suffering abroad will produce any effect in Congress," he wrote. At first, Biddle's strategy was successful. As credit tightened across the country, businesses closed and men were thrown out of work. Business leaders began to think that destructive deflation was the inevitable consequence of removing the deposits, and so flooded Congress with petitions in favor of Biddle's cause.[220] By December, James Alexander Hamilton remarked that business in New York was "really in very great distress, nay even to the point of General Bankruptcy [sic]."[221]

Jackson, however, believed that the people, who had reelected him despite his veto of the recharter bill, were behind him. They would force Congress to side with him in the event that pro-Bank congressmen attempted to impeach him for removing the deposits. Jackson, like Congress, received petitions begging him to do something to relieve the financial strain. He responded by referring them to Biddle.[222] When a New York delegation visited him to complain about problems being faced by the state's merchants, Jackson responded saying:

Go to Nicholas Biddle. We have no money here, gentlemen. Biddle has all the money. He has millions of specie in his vaults, at this moment, lying idle, and yet you come to me to save you from breaking. I tell you, gentlemen, it's all politics.[223]

The men took Jackson's advice and went to see Biddle, who they discovered was "out of town."[224] Not long after, it was announced in the Globe that Jackson would receive no more delegations to converse with him about money. In response, one House member drew up articles for his impeachment. He also scribbled a note alleging that the story of Jackson being wounded in the Revolutionary War was a lie. The paper was left accidentally on the floor of the House, and eventually ended up in the hands of Blair, who showed it to Jackson. Jackson called the congressman a "damned infernal scoundrel."[225] Jackson's strategy worked by increasing anti-Bank sentiment.[5] Objections arose within the Democratic Party as to the wisdom and legality of Jackson's move to terminate the Bank through executive means before its 1836 expiration.[226][227]

Congress reconvenesEdit

The Bank War continued to rage when Congress reconvened,[228][229] with removal of the federal deposits already an accomplished fact.[228] President Jackson in his address and Secretary Taney in his report both exhorted Congress to uphold the removals, pointing to Biddle's economic warfare as evidence that the central bank was unfit for public funds.[230]

The response of the Whig-controlled Senate was to try to express disapproval of Jackson by censuring him.[6][231] Henry Clay, spearheading the attack, described Jackson as a "backwoods Caesar" and his administration a "military dictatorship."[232] Jackson retaliated by calling Clay as "reckless and as full of fury as a drunken man in a brothel."[233] On March 28, Jackson was officially censured for violating the U.S. Constitution by a vote of 26-20.[234] The reasons given were both the removal of the deposits and the dismissal of Duane.[235] The opposing parties accused one another of lacking credentials to represent the people. Jacksonian Democrats pointed to the fact that Senators were beholden to the state legislatures that selected them; the Whigs pointing out that the chief executive had been chosen by electors, and not by popular vote.[236]

The Houses divided with the Senate over Jackson's Bank policies. On April 4, the House of Representative, now under Democratic control, passed resolutions in favor of the removal.[230][237] Led by Ways and Means Committee chairman James Polk, it declared that the Bank "ought not to be rechartered" and that the depositions "ought not to be restored." It also voted to continue to allow pet banks to be places of deposit and voted even more overwhelmingly to investigate whether the Bank had deliberately instigated the panic.[238] Jackson called the passage of these resolutions a "glorious triumph," for it had essentially sealed the Bank's destruction.[239]

By the spring of 1834, Jackson's enemies-who included National Republicans, states rights nullifiers, and some pro-Bank Democrats-coalesced to form the new Whig Party. The term was derived from the British party of the same name, and meant to signify opposition to monarchy, or, in the American case, what the party's members saw as executive tyranny. Philip Hone, a New York merchant, may have been the first to use the term in reference to anti-Jacksonians, and it became more popular after Clay used it in a Senate speech on April 14. "By way of metempsychosis," Blair jeered, "ancient Tories now call themselves Whigs."[240]

When House Committee members, as dictated by Congress, arrived in Philadelphia to investigate the Bank, they were treated by the Bank's directors as distinguished guests. The directors soon stated, in writing, that the members must state in writing their purpose for examining the Bank's books before any would be turned over to them. If a violation of charter was alleged, the specific allegation must be stated. The committee members refused, and no books were shown to them. Next, they asked for specific books, but were told that it may take up to 10 months for these to be procured. Finally, they succeeded in getting subpoenas issued for specific books. The directors replied that they could not produce these books because they were not in the Bank's possession. Having failed in their attempt to investigate, the committee members returned to Washington.[241] This episode caused an even greater decline in public opinion regarding the Bank, with many believing that Biddle had deliberately evaded a congressional mandate.[242] The Democrats did suffer a temporary setback. Polk ran for Speaker of the House to replace Andrew Stevenson. After southerners discovered his connection to Van Buren, he was defeated by fellow Tennessean John Bell, a Democrat-turned-Whig who opposed Jackson's removal policy.[243]

Jackson's opponents began to point out that several of his cabinet appointees, despite having acted in their positions for many months, had yet to be formally nominated and confirmed by the Senate. To them, this was blatantly unconstitutional. The unconfirmed cabinet members consisted of McLane for Secretary of State, Benjamin F. Butler for Attorney General, and Taney for Secretary of the Treasury. McLane and Butler would likely receive confirmation easily, but Taney would definitely be rejected by a hostile Senate. Jackson had to submit all three nominations at once, and so he delayed submitting them until the last week of the Senate session on June 23. As expected, McLane and Butler were confirmed. Taney was rejected by a vote of 28-18. He resigned immediately. To replace Taney, Jackson nominated Woodbury, who was confirmed unanimously on June 29.[244]

Demise of the Bank of the United StatesEdit

Censure was the "last hurrah" of the Pro-Bank defenders and soon a reaction set in. Business leaders in American financial centers became convinced that Biddle's war on Jackson was more destructive than Jackson's war on the Bank.[245][246][247] Biddle finally resumed his pre-contraction policies and by the close of 1834,[248] all recharter efforts were abandoned as a lost cause.[6] The national economy following the withdrawal of the remaining funds from the Bank was booming and the federal government through duty revenues and sale of public lands was able to pay all bills. On January 1, 1835, Jackson paid off the entire national debt, the only time in U.S. history that has been accomplished.[249] The objective had been reached in part through Jackson's reforms aimed at eliminating the misuse of funds, and through the veto of legislation he deemed extravagant.[250] In December 1835, Polk defeated Bell and was elected Speaker of the House.[251]

On January 30, 1835, what is believed to be the first attempt to kill a sitting President of the United States occurred just outside the United States Capitol. When Jackson was leaving through the East Portico after the funeral of South Carolina Representative Warren R. Davis, Richard Lawrence, an unemployed house painter from England, tried to shoot Jackson with two pistols, both of which misfired.[252] Jackson attacked Lawrence with his cane, and Lawrence was restrained and disarmed.[253] Lawrence offered a variety of explanations for the shooting. He blamed Jackson for the loss of his job. He claimed that with the President dead, "money would be more plenty," (a reference to Jackson's struggle with the Bank) and that he "could not rise until the President fell." Finally, Lawrence told his interrogators that he was a deposed English king—specifically, Richard III, dead since 1485—and that Jackson was his clerk.[254] He was deemed insane and was institutionalized.[255] Jackson initially suspected that a number of his political enemies might have orchestrated the attempt on his life. His suspicions were never proven.[256]

In January 1837, Benton introduced a resolution to expunge Jackson's censure from the Senate record. It began nearly 13 consecutive hours of debate. Finally, a vote was taken, and it was decided 25-19 to expunge the censure. Thereafter, the Secretary of the Senate retrieved the original manuscript journal of the Senate and opened it to March 28, 1834, the day that the censure was applied. He drew black lines through the text recording the censure and beside it wrote: "Expunged by order of the Senate, this 16th day of January, 1837." Jackson proceeded to host a large dinner for the "expungers."[257] Jackson left office on March 4 of that year and was replaced by Van Buren.[258] Including when taking into account the Biddle-engineered recession, the economy expanded at an unprecedented rate of 6.6% per year from 1830 to 1837.[259]

In February 1836, the Bank became a private corporation under Pennsylvania commonwealth law. This took place just weeks before the expiration of the Bank's charter. Biddle had orchestrated the maneuver in a desperate effort to keep the institution alive rather than allowing it to dissolve.[260] This managed to keep the Philadelphia branch operating at a price of nearly $6 million. In trying to keep the Bank alive, Biddle borrowed large sums of money from Europe and attempted to make money off the cotton market. Cotton prices eventually collapsed because of the depression (see below), making this business unprofitable. In 1839, Biddle submitted his resignation as Director of the B.U.S. He was subsequently sued for nearly $25 million and acquitted on charges of criminal conspiracy, but remained heavily involved in lawsuits until the end of his life.[261] The Bank suspended payment in 1839.[262] After an investigation exposed massive fraud in its operations, the Bank officially shut its doors on April 4, 1841.[263]

Panic of 1837Edit

In spite of economic success following Jackson's vetoes and war against the Bank, reckless speculation in land and railroads eventually caused the Panic of 1837. Jackson's war against the Bank is sometimes cited as a factor in the panic, for it caused western banks to relax their lending standards. Two other Jacksonian acts in 1836 contributed to the Panic of 1837: the Specie Circular, which mandated western lands only be purchased by money backed by gold and silver, and the Deposit and Distribution Act, which transferred federal monies from eastern to western state banks and in turn led to a speculation frenzy. Finally, there was a downturn in Great Britain's economy as well. As a result, the U.S. economy went into a depression, banks became insolvent, the national debt (previously paid off) increased, business failures rose, cotton prices dropped, and unemployment increased.[264]


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Further readingEdit