Jackson Slays the Bank of the United States
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Internet Biography of Andrew Jackson
Continued from Nullification
President Andrew Jackson continued to have problems with his personal finances as he entered his second term of office. The Hermitage did not run as well with him absent. He entertained and supported a large contingent of young relatives. His overseer at the Hermitage reported that he owned 58 Negro children of his other slaves, but they would not be easily converted into spending money until they had grown to be field hands. In addition several of the President's oldest and best friends died, among them John Overton, William Hume, and John Coffee.
Jackson's political troubles centered on the Bank of the United States. A naive person might have thought that Jackson's reelection on the platform of terminating the Bank would have brought an end to this battle. But however popular Jackson was with the voters, he had powerful enemies in Congress, and a formidable rival in Nicholas Biddle and the Bank's money. Biddle had loaned money so freely to politicos and newspaper editors that the bank was unable to raise $6 million dollars required to retire some 3% government bonds. Despite that, Congress passed a resolution finding that the Bank was sound and that the government should keep its money there. A minority report showed that the bank had many troubling issues.
After considerable deliberation with his cabinet, Jackson decided to cease putting new federal funds into the Bank. The plan was to put the money in a variety of state banks, with special regulations to insure that it would not be misused or lost.
Meanwhile, while on a tour of the northern states, on June 6, 1833, Andrew Jackson became the first president to ride on a modern railroad, traveling 12 miles on the Baltimore and Ohio Railroad. Crowds throughout the north welcomed Jackson with enthusiasm. Harvard awarded him an honorary Doctor of Laws.
While on the trip Jackson wrote a letter to his new Secretary of the Treasury William Duane instructing him to cease making federal deposits at the Bank of the United States on September 15, 1833. After that date the ordinary expenses of the government would be drawn out until there was no deposit left. But Duane sought reasons to delay the action, and Jackson suffered severe hemorrhages in his lungs.
Jackson rallied, determined to kill the Bank. Most of the state banks, however, would not cooperate at first. They did not like the regulations that came with the federal money, and Biddle was able to put pressure on them by recalling funds the Bank had lent them.
On September 10 the President held a cabinet meeting on the Bank and, given the problems with the state banks, allowed for a delay to October 1. Only Attorney General Taney and Levi Woodbury supported him. Jackson urged William Duane to stop the deposits or resign, but Duane refused. Biddle tightened credit, causing many powerful men to scream for the Bank's continuance. On September 23, Jackson dismissed Duane and made Taney Secretary of the Treasury. "The new Secretary of the Treasury lost no time giving official notice that Government deposits would not be made in the Bank of the United States after the last day of the month." At that time the government had somewhat less than $10 million in deposits there. [James p. 650]
Biddle's plan to counter the lack of federal deposits depended on the Bank's ability to survive for some time without federal deposits, loans he had made to state banks that undermined their independence, and the continuing hope of influencing Congress. He also tightened credit across the nation again, but in particular in the south and west. Roger Taney, in turn issued to the few cooperating state banks in New York, Baltimore, and Philadelphia drafts upon federal deposits at the Bank. The drafts were to be used only in emergency, but the Baltimore bank's president, Thomas Ellicott, cashed his drafts. Then the Philadelphia bank cashed and one New York bank cashed theirs. Biddle noted the drafts were not on the Treasury statements, and called the banks "pet" banks. The Baltimore bank almost failed, but pulled through.
The fight became a protracted war. The economy slumped. The state banks' currency was not believed to be as sound as the Bank's, so that western federal employees had to suffer a substantial discount to redeem the notes they received in payment. Both camps fought it out in the newspapers they controlled. Metallic currency was hoarded. Jackson's popularity fell. Congress would return on December 2, 1833, and Jackson's opponents Webster, Clay and Calhoun were ready to topple the man they saw as a tyrant. In his annual message to Congress, Jackson wrote as if nothing were amiss in the economy. Panic struck the banks in January 1834, but Biddle responded by tightening credit even further.
Eventually the Jackson team admitted to the great economic distress and blamed Biddle for it. Biddle arranged for petitions against Jackson to pour into Congress from across the nation. Crowds sought out Jackson at the White House. Eventually he found the right phrase to deal with them. If they wanted currency, "Go to Nicholas Biddle!" Jackson used the phrase again and again, and people started to echo his cry.
By February 1834 the public was beginning to think that Jackson was right, that the Bank of the United States had too great a concentration of power. Biddle miscalculated in refusing to lend the State of Pennsylvania $300,000. Its legislature then passed a resolution "That the present bank of the United States ought not to be rechartered by Congress." [James 372] Starting with New York, states began to effectively create money for their own banks to put into circulation. The New York City business community turned against Biddle.
In Congress the Bank's supporters found they needed to retreat. Webster had to table his own bill to recharter the Bank on a temporary basis. Clay managed to pass a censure of Jackson by a vote of 26 to 20 in the U.S. Senate, but it was too little, too late. On April 4, 1834 the House of Representatives voted, 134 to 82, that the Bank should not be rechartered. Other votes carried declaring that the federal deposits should go to state banks and that Congress should investigate the Bank and its relation to the commercial crisis. Biddle refused to turn over his books to Congress, causing most people to believe that he had a great deal to hide.
On July 11, 1834, Nicholas Biddle surrendered. He allowed money to pour back into commerce, which revived remarkably quickly. The Bank would limp on until its charter expired in February 1836.
Andrew Jackson had won a great victory, in a war that had lasted much longer than the War of 1812.
Main source: The Life of Andrew Jackson by Marquis James, Bobbs-Merrill company, 1938.
Learn more: President Andrew Jackson main page
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