Although Andrew Jackson operated as a strong Chief Executive, he did not always defend
greater federal power.
As his first term neared an end, Jackson made a decision that would alter the role the federal
government played in the economy.
What was that decision?
The Second Bank of the United States was given a twenty-year charter by Congress in 1816.
This charter granted the bank the power to act as the government’s financial agent.
The bank held the country’s deposits, made loans, and regulated the currency.
The bank also transferred federal funds between states, issued bank notes, and handled payments
and receipts for the US government.
Although the bank’s operations were supervised by the president and Congress, around 80%
of the bank was privately owned, and its profits benefited a large number of wealthy American
and foreign stockholders.
Many states, especially in the South, strongly opposed the Second Bank of the United States.
In the early years of its existence, it had been riddled by poor financial management
and corruption.
A great number of small farmers believed that the bank existed mainly to benefit the wealthy,
ruling elite and that the institution gave foreign investors too much influence in US
policy.
Although Jackson realized the important role the bank played in the US economy, he distrusted
the institution and even questioned the constitutionality of its existence.
He believed that the states, not Congress, should have the power to control America’s
banking system.
The large number of political opponents who profited from the bank also caused Jackson
great ire.
The first notable resistance to the Second Bank of the United States came in the form
of a lawsuit filed by the state of Maryland.
The state attempted to pass a tax that would limit the bank’s operations within Maryland’s
borders.
The cashier for the federal bank in Maryland, James McCullough, refused to pay the tax and
the case went to the Supreme Court.
In the landmark case McCullough v. Maryland, the Court ruled that the bank was constitutional
and that it did not have to pay the tax.
Realizing the unpopularity of the bank with President Jackson, the bank’s director,
Nicholas Biddle, attempted to force the renewal of the Second Bank of the US’s charter through
during Jackson’s reelection year in 1832.
Biddle felt that Jackson, who had vetoed more bills than any previous president, would be
much less likely to veto the charter if that action could be used against him during his
campaign.
Jackson, who believed the bank held too much power, campaigned aggressively for the bill’s
defeat.
Of Biddle’s political ploy, Jackson told his future Vice President Martin Van Buren,
“The bank is trying to kill me, but I will kill it!”
Jackson overwhelmingly won reelection and vetoed the bill when Congress sent it to him.
With many members of Congress not wanting to face a backlash from pro-Jackson voters,
they were unable to override the president’s veto.
Jackson, true to his character, determined to destroy the bank before its charter expired
in 1836.
Jackson ordered most of the US government’s funds to be moved out of the bank and into
state banks, which his political opponents dubbed “pet banks.”
With the new flow of money into the smaller banks, a large number of them used the funds
to offer loans to people who hoped to purchase land in the West.
The tactic led to massive land grabs on the American frontier, but it also caused rapid
inflation.
In the final year of his presidency, Jackson attempted to slow this inflation.
He issued the Specie Circular, an executive order which required payment for government
land to be in gold and silver, rather than paper state-bank notes.
The action did little to help the ailing economy, but Jackson remained popular.
Despite his widespread support, he chose not to run for reelection in 1836.
The Democrats nominated Vice President Martin Van Buren in hopes of maintaining control
of the White House.
With Jackson’s backing, Van Buren easily won the election.
Soon after Van Buren took office, a severe economic depression known as the Panic of
1837 occurred.
The depression lasted well into the 1840s, and the money system collapsed as banks refused
to redeem paper money at face value.
Nearly half of the banks in the US closed, unemployment reached 25% in many cities, and
large numbers of businesses failed.
The economic crisis was the result of many factors, but Jackson’s banking policies
and his attempt to halt the resulting inflation were partly responsible.
The crisis doomed Van Buren to defeat in his reelection bid.
With the election of William Henry Harrison in 1840, the Age of Jackson officially came
to an end.