President Jackson Attacks the Bank of the United States
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Andrew Jackson was a President of the United States of America and the founder of the Democratic Party. Before his election he murdered many of his fellow men and lived a life of depravity unmatched, so far as we know, by any other American President.
Continued from The Tariff, States Rights, and Indian Removal
Banks, like private corporations, were viewed with suspicion by many colonial and revolutionary era American citizens. The Bank of England had been created by Parliament in 1694, but it had established no branches in the American colonies. The first bank was not established in the United States until 1780, when the Pennsylvania Bank was opened in Philadelphia [Hammond p. 45]. In 1790 just four banks operated in the United States, one each in Philadelphia, New York City, Boston, and Baltimore [Hammond p. 66-67].
The Bank of the United States was chartered by Congress in 1791 for twenty years, based on a proposal from Alexander Hamilton, the Secretary of the Treasury under President George Washington. It was set up as a private company that would hold federal funds, but act as a bank to commercial enterprises. From the beginning some political figures opposed it and believed that its creation was not a power granted to Congress by the Constitution. In 1811 Congress refused to recharter the bank (by a vote of 64 to 65). The War of 1812 created such financial chaos in the United States that the bank was issue a new charter in 1816.
Despite having become a wealthy man [see Andrew Jackson Gets Rich], Andrew Jackson had managed his personal affairs with little help from banks. Credit from merchants and IOU's served like the loan function of banks for most Americans. Jackson himself wrote promissory notes to pay to stock his stores and to buy slaves and land. Hard money, even paper money was scarce; few families had enough of it to need a bank to keep it safe. However, Jackson understood the two schools of thought about the role of credit in the economy, and had lived through a couple of credit boom and bust cycles. Credit expansion could lead economic expansion, but when that led to excessive prices for land, a bust would follow.
Jackson's attitude toward the bank was also influenced by his take on the roll of state governments. He was against the nullification states' rights theories current in South Carolina, or any attempt by a state to leave the union, but he was not for unlimited federal power. He believed that a central, national bank concentrated too much economic power in one place and questioned the constitutionality of a federally chartered bank. He believed in sound money and limited credit, which put him at odds with most voters in his new Democratic Party, who favored money and credit creation. As prosperity had returned to the nation back in 1826 the politicians who had called for debt holidays needed a new cause. They hated the Bank of the United States and its pro-creditor, sound money policy. They joined Jackson's bandwagon and influenced him with their hatred of the Bank. Others in his inner circle, however, were pro-Bank. [James, p. 556-558]
The Bank of the United States was run by Nicholas Biddle, whose father had been a banker. Jackson did not, initially, accuse Biddle of wrongdoing. Rather, he believed, the Bank's great power gave it the potential for abuse. Biddle, learning of Jackson's desire to terminate the Bank, did his best to win over Jackson's men, including offering favorable loan terms to them. "A batch of Jackson politicians were named [Bank] branch directors." [James, p. 562]
Finally, in late 1829, Biddle sat down to talk the President Jackson himself, having brought a plan to finish paying the national debt by January 1833. The President told the Banker he did not believe Congress had the power to charter the Bank outside of the District of Columbia. Biddle soon put pressure on Jackson's cabinet members, who in turn resisted planning to declare the bank unconstitutional.
In his December 8, 1829 State of the Nation address to Congress, the President noted the Bank had helped the Treasury with "judicious arrangements," for the payment of the national debt. But then he said,
In other words, he did not wish to recharter the bank in 1836, when its existing charter would expire.
The Bank of the United States, however, still had its supporters. Committees in both the House of Representatives and the Senate declared the Bank's notes were a "circulating medium more uniform than specie," and recommended that the bank be rechartered. [James, p. 564.]
Jackson did not believe in a credit based economy, having suffered himself from the collapse of a credit budget. There was little support for this view among the rich and powerful at this time. The time for rechartering would come after the Presidential election of 1832. Perhaps, Biddle and his allies thought, President Jackson might lose the election, or soften his views towards the Bank over time.
Main source: The Life of Andrew Jackson by Marquis James, Bobbs-Merrill company, 1938.
Also a source for this page: Banks and Politics in America by Bray Hammond, Princeton University Press, 1957.
Learn more: President Andrew Jackson main page
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