Andrew Jackson & the Bank War

The History of the Bank of The United States (BUS)

The Revolutionary War win of America over Great Britain in 1783 resulted in a struggling economy and a large debt. The new country’s government created the First Bank of the United States to address these issues from the federal level. Some 30 years later, Jackson led the U.S. to victory at the Battle of New Orleans, ending the War of 1812. Now that the nation had defended its existence with military force, it had to develop stronger financial systems to ensure the nation’s long-term success.

After several years of debate and formulation, the United States Congress authorized the Second Bank of the United States (BUS) as a public-private enterprise in 1816 for a period of 20 years. The institution’s capital, reach and responsibilities were more expansive than those of the First Bank. Key duties were to hold the country’s money, revenue generation as through loans and to pay off the national debt. The Bank profits benefited private stockholders as well as the U.S. government.

The strategy of providing extensive credit, then quickly recalling it, raised funds to resolve the financial upheaval and led to the panic of 1819, which resulted in a recession. New leadership attempted to improve conditions in different ways, but eventually, the changes saw little success to remedy challenges, leading to a depression. This resulted in questioning the Bank’s role in some economic hardships occurring in the U.S. Under the direction of its new president Nicholas Biddle in 1823, lending practices increased in a more balanced and stabilized way, as well as requiring hard currency backing, produced an improved financial climate.

In a lengthy battle over a national banking system, President Andrew Jackson reshaped the American economy to run without a central bank until the Federal Reserve was created in 1913. He strengthened the Executive branch’s role in ways that reverberate today, demonstrating the president can take a strong role in national affairs.

Did the Constitution give Congress the right to create such an institution?

This question about the BUS loomed over the country for almost 40 years. Initially, Federalists argued for it, and Anti-Federalists argued against it. When Andrew Jackson was elected president in 1828, he brought the promise to reform government with him, and high on his list was the “corrupt” and “monstrous” Bank of the United States. His position was that Congress did not have the Constitutional authority to create it.

Reforming the “Corrupt” and “Monstrous” Second Bank of the United States

Andrew Jackson realized the important role banks played in the U.S. economy. However, by the time he was elected president in 1828, his general distrust led him to believe that the Bank of the United States held too much power and could wield it at any moment to ruin the U.S. economy.

Jackson’s Distrust of the Bank

Jackson realized their important role in the U.S. economy, but his distrust in banks in general led him to believe the Bank of the United States held too much power and could wield it at any moment to ruin the U.S. economy.

  • Private Corporation

    The United States government owned 20 percent of the stock. Five of the 25 directors were appointed by the president and confirmed by the Senate. The Second Bank of the United States opened in 1817 to conduct business mainly as a private corporation.

  • Managed Banking

    BUS notes, as well as states’ bank notes, were backed by the country’s substantial gold reserves, providing a more stable national currency. By managing its lending policies and the flow of funds through its accounts, the Bank altered the supply of money and credit, as well as the interest rates charged to borrowers.

  • A National Threat

    Jackson thought the Bank put too much power in the hands of too few wealthy American private citizens, and the majority of stockholders were foreign investors with allegiances to other governments.

Andrew Jackson Vetoes the Request to Re-Charter the Bank

Although the Bank charter ran through 1836, anti-Jackson politicians persuaded Bank President Nicholas Biddle to petition for an early re-charter prior to the election of 1832. The charter passed both houses of Congress, but one week later, on July 10, 1832, Jackson issued his veto message, one of the most important documents of his presidency—possibly one of the most important vetoes in any presidency.

Jackson’s Position for the Bank War Veto

Despite the Supreme Court’s ruling that the Bank was constitutional, Jackson continued to challenge the charter constitutionally as well as philosophically. Attorney General Roger Taney and Kitchen Cabinet member Amos Kendall wrote most of the text, but the ideas were Jackson’s. In the message, Jackson outlined his positions for the veto.

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth cannot be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society–the farmers, mechanics, and laborers–who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.

The First Step to “Kill” the Bank of the United States

Although the bill to re-charter the Bank passed in Congress, it did not have enough support to overcome the veto. Jackson’s veto was the first step in a several year process to “kill” the Bank. In response, Biddle severely restricted loans to raise the public’s anger. To hasten the institution’s end, Jackson ordered no additional federal funds be deposited into the BUS and the remaining government deposits (20 percent of total funds) be withdrawn and deposited in state banks to perform the various duties of the BUS.  The weakened Bank continued to function until the charter expired in 1836. By this time, Jackson’s assessment that the Bank was created to serve the interests of the wealthy, not to meet the nation’s financial needs, was well-supported.

Frequently Asked Questions about the Bank War

What was the Bank War?

The Bank War was the name given to the campaign Andrew Jackson began in 1832 to decentralize, and eventually dissolve, the Bank of the United States.

Why did Andrew Jackson distrust the Bank of the United States?

Andrew Jackson believed that if any government institution became too powerful, it stood as a direct threat to states’ rights and individual liberty. When Biddle continually challenged Jackson’s calls for an investigation into the corruption of the banks’ branches, it enraged Jackson and confirmed his preconceived notions about the role of banks serving a northeastern aristocracy.

What is a presidential veto?

The President holds the constitutional right to refuse to approve a bill or joint resolution passed by Congress. This veto option provides an opportunity for “checks and balances” between the two branches of government during the lawmaking process.

Why was Jackson’s veto of the Second BUS unprecedented?

Jackson had to support his veto based on several criteria: 1. He opposed the BUS because he believed Congress did not have the Constitutional authority to create it; 2. He feared the Bank fueled wealth for the few; and 3. His claim that the President has the right to interpret the Constitution as do Congress and the Supreme Court.

Was the Bank War a worthy conflict?

Although Jackson was successful in shutting down the Bank, historians give mixed reviews to the results. Bank President Nicholas Biddle’s loan restrictions tightened the monetary supply. Jackson’s veto of the Bank charter and the removal of the federal deposits to the state banks worsened the Panic of 1837. (However, Andrew Jackson and his distrust of power in the hands of a privileged few extended the meaning of American democracy to the farmers, mechanics and laborers – not just the merchants and the bankers.)

What were hard times tokens?

During the Bank War and the resulting economic downturn, businesses and others issued tokens called by coin collectors “hard times tokens.” These copper tokens were privately made as unofficial currency in America between 1833 through 1843 and spread merchant, political and satirical messages. Several of these tokens that poke fun at Jackson and the banking issue are in The Hermitage collection.

What additional resources are available for further reading?

Roger Lowenstein, America’s Bank: the Epic Struggle to Create the Federal Reserve
Robert V. Remini, Andrew Jackson and the Bank War 
Robert V. Remini, Andrew Jackson, Volume 2: The Course of American Freedom

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