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KING ANDREW AND THE BANK.
Lexile: 1310L
Publication: Humanities(Jan/Feb2008)
Author: Feller, Daniel
ON JULY 10, 1832, PRESIDENT ANDREW JACKSON SENT A MESSAGE TO THE UNITED STATES
SENATE. HE RETURNED UNSIGNED, WITH HIS OBJECTIONS, A BILL THAT EXTENDED the charter
of the Second Bank of the United States, due to expire in 1836, for another fifteen years. As Jackson
drily noted, the bill was presented to him on the Fourth of July, a day freighted with portent.
Today Jackson's Bank Veto and the political conflagration known as the "Bank War" that it touched
off seem arcane and nearly incomprehensible. While misdeeds among the rich and powerful still
garner headlines and incite congressional inquiries, the core instruments of our economic system-the network of banks capped by the Federal Reserve; the corporate form of business enterprise; the
very dollars in our wallets, issued and guaranteed by the federal government--are utterly taken for
granted. That these could have been the subject of controversy, that anyone could seriously
contemplate organizing American capitalism differently, seems nearly unthinkable. Andrew Jackson is
recalled today, when recalled at all, for other things, primarily as the architect of forced Indian
removal. His face on the $20 bill is a mystery to many, an outrage to some, and, to the knowing, a
curious irony.
Yet, in its day, nothing galvanized American political conflict more than banking, currency, and
finance. In the republic's first haft-century, no subject, save foreign relations and war, gave greater
vexation to American statesmen or aroused more heated public debate. The creation of the original
Bank of the United States in 1791 sparked the first major division within President George
Washington's administration, which later ripened into the Federalist and Democratic-Republican
parties. Jackson's veto in 1832 repeated the process: It became the touchstone issue in his reelection
campaign and precipitated the organization of the Whig and Democratic parties, the latter, still
surviving, now the oldest mass political party in the world. The very language of Jackson's veto,
departing sharply from all that came before, furnished a political grammar since claimed by Populists,
Progressives, New Deal liberals, socialists, free marketeers, libertarians--in short, by just about
everybody.
Clearly, one cannot fully appreciate Jacksonian, and indeed American, politics without confronting his
Bank Veto. Yet to make sense of the document requires imagining a world in some ways very different
from our own. Americans were already by the time of the Revolution a famously enterprising people,
yet their enterprise required capital far beyond available means. Credit was vital but often uncertain.
The country's only legal money, gold and silver coin, was in chronic shortage, never plentiful enough
to serve in everyday exchange. Banking in the early United States therefore grew by the forced hand
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of government. By special individualized acts of legislation, state and federal governments
incorporated banks and authorized them to lend their own credit in the form of banknotes.
Ostensibly redeemable in specie, these notes passed in lieu of coin in daily commerce, serving in
practice, though not in law, as money.
The connection of banks and government was fraught with financial and political peril, especially in a
young republic whose citizens craved riches and yet resented every hint of aristocratic privilege.
Banking was poorly understood, not yet professionalized, and its amateur practitioners sometimes
wreaked disaster on their customers. Indeed, men commonly sought bank charters not as an outlet
for investment, but as a source of credit--not looking to lend, but to borrow. In a financial sleight of
hand, the required paid-in capital to start a bank often consisted of IOUs to be redeemed by the
bank's own profits.
That lawmakers could ordain credit, and hence create wealth, by merely waving a legislative wand
struck many citizens as strange and malign. Corporations themselves were a novel form of business
organization, not yet standardized or widely utilized. To many simple farmers and tradesmen, the
granting of special favors, including the prize of limited liability, by means of legislative bank charters
recalled the hated British system of monopoly and corruption. Paper money was also suspect--with
good reason, since if issued imprudently it had a way of becoming worthless. No less than former
President John Adams in 1813 damned chartered banking as a giant swindle, a "Sacrifice of public and
private Interest to a few Aristocratical Friends and Favourites."
In 1790, Treasury Secretary Alexander Hamilton proposed to incorporate a Bank of the United States.
Modeled on the Bank of England, it was intended frankly to buttress the new government by
entangling its finances with the interests of moneyed men. Though serving public purposes, the Bank
was to be a profit-making institution, with private shareholders holding four-fifths of its stock and
electing four-fifths of its directors. It was, said Hamilton, "an essential ingredient" in inspiring
confidence in its prudent management that a national bank "be under a private not a public direction,
under the guidance of individual interest, not of public policy." Opposed by Secretary of State Thomas
Jefferson and his ally James Madison, Hamilton's Bank nonetheless passed Congress and became
law. In operation it accomplished all its architects had hoped, stabilizing the country's chaotic
currency and helping retire its Revolutionary debt. But many Jeffersonians never accepted it, and
when its twenty-year charter came up for renewal in 1811, with Congress in their control, they killed
it.
The government's ensuing flirtation with bankruptcy in the War of 1812 taught them their mistake. In
1816, Congress chartered a Second Bank, again for twenty years. Like its predecessor, it was a
predominantly private entity serving public purposes. The four-to-one private-public ratio in
ownership and directorate was retained, and the Bank's capital was advanced from $10 to $35
million, a huge sum in those days. Authorized to establish branches throughout the states, the Bank
was the country's only financial institution of truly national reach. While competing with statehttp://modulecreator.com/ModuleCreator/#moduleId=36297&step=ReviewandPublish&page=review
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chartered banks for private business (and controlling their lending by collecting their notes for
redemption), it would also be the federal government's banker, charged with brokering its loans and
with receiving, storing, transporting, and disbursing federal funds. The Bank's notes were legal tender.
In return for its "exclusive privileges and benefits," including a congressional pledge to create no
competing institution, the Bank was to pay the government a bonus of $1.5 million.
Opening for business in the midst of a postwar boom, the Second Bank promptly discredited itself by
speculation, stock-jobbing, and, at some branches, outright fraud. But under the discreet
management of its second president, Langdon Cheves, and his successor, Nicholas Biddle, it soon
repaired its condition and reputation. By the end of the 1820s it had proved not only useful but, to
many eyes, indispensable.
But not to Andrew Jackson. Jackson came to the presidency with a deep sense of grievance against
his enemies, real and imagined, in the existing political establishment and with a conviction that the
government had fallen from Jeffersonian austerity into profligacy and corruption. This he was
determined to reverse. The Bank was barely mentioned in Jackson's 1828 successful campaign
against incumbent John Quincy Adams. But, after assuming office, Jackson learned of branch officers
using the Bank as what one Jackson partisan called "an engine of political oppression" against his
followers. Asked to explain, Bank president Biddle pronounced the charges "entirely groundless." He
affirmed the Bank's forbearance from politics--and its complete independence from executive
control.
Then, in November 1829, Biddle approached Jackson with a proposition. The Bank would assume the
last of the dwindling national debt to enable its full discharge before the end of Jackson's term, an
object that Biddle knew was dear to the president's heart. The quid for this quo was an early recharter
for the Bank, which would send its stock soaring and provide a windfall for shareholders.
Intended to placate Jackson by showing the Bank's friendship and usefulness, Biddle's offer had the
opposite effect. To Jackson it was a backstairs deal smelling of privilege and corruption, something
close to a bribe. Already suspicious of the Bank, from that moment he turned irrevocably against it. In
his first annual message to Congress just a few weeks later, he startled everyone by raising the
question of recharter and declaring his opposition. The Bank's constitutionality and expediency were
"well questioned," said Jackson, "and it must be admitted by all that it has failed in the great end of
establishing a uniform and sound currency." It was a statement at variance with facts. The Bank's
notes, unlike those of many state-chartered banks, circulated everywhere at face value, their integrity
unquestioned. They were as good as gold.
To Jackson it did not matter. In the Bank, Jackson found a concrete focus for all his fears of
aristocratic subversion--fears he shared with many citizens. "I was aware that the Bank question
would be disapproved by all the sordid, & interested, who prised serf interest more than the
perpetuity of our liberty, & the blessings of a free republican government," he confided shortly after
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the annual message. "This monied aristocracy" was everywhere at work, buying up voters and
lawmakers and "silencing opposition, by its corrupting influence, & preparing for a renewal of its
charter, which I viewed as the death blow to our liberty."
The recipient of this disclosure was none other than James Alexander Hamilton, son of the late
Treasury secretary and himself a federal district attorney and Jackson confidant. Hamilton had helped
craft the passage opposing recharter in the annual message. Now, at Jackson's prompting, he
prepared a detailed critique, arraying objections to the Bank under two heads. The Bank was
unconstitutional, because Congress had no power to charter corporations and withdraw them from
the regulatory and taxing power of the states. (This was the Jeffersonian position, which the Supreme
Court under Chief Justice John Marshall had rejected in the landmark case of McCulloch v. Maryland
in 1819.) The Bank was also dangerous to liberty, because its concentrated power gave it a "fearful
influence" over citizens' lives and an unchecked sway over government, inviting corruption and
oppression.
Jackson copied Hamilton's headings into his private memorandum book. Over the next two years, he
recopied and reworked his bill of particulars, always under the same two heads: The Bank was
unconstitutional, and it was dangerous to liberty. Meanwhile, the question of recharter simmered. In
his 1830 and 1831 annual messages, Jackson reiterated his opposition to the Bank. He proposed in its
stead a wholly government institution--in name a bank, but in effect an arm of the Treasury, without
power to make loans, acquire property, or issue notes.
In 1832, Congress acted, but not as Jackson recommended. A bill to extend the charter, slightly
modified, of the existing Bank passed both houses by healthy majorities, though less than the twothirds required to override a veto. To Jackson the bill's timing confirmed his strictures about the
Bank's meddling in politics. Biddle had decided to press for recharter at the urging of Senator Henry
Clay, Jackson's opponent in the presidential election only months away. In effect, they dared Jackson
to veto.
He did, in a message that became the rhetorical apex of his presidency. Treasury official Amos Kendall
and other wordsmiths helped hone the Veto, but the governing ideas, drawn straight from Jackson's
memoranda, were dearly his own. Following Jefferson, and contradicting the Supreme Court in
McCulloch, Jackson denied the Bank's constitutionality and affirmed his right to judge that question
independent of Congress or the courts. Ingeniously, and perversely, he targeted foreign stockholders
for special censure. Much of the Bank's stock was, in fact, held abroad, especially in Britain. The
charter screened management from foreign interference by barfing noncitizens from serving as
directors or voting their shares. They could invest, but not control. By an economist's rationale, a
more benign vehicle for inviting capital into America's developing economy could hardly be contrived.
Yet Jackson's arguments turned investment into subversion. Bank dividends, he complained,
siphoned off American money overseas, and the immunity of foreign stockholders from domestic
taxation would lure ever more stock abroad, concentrating the Bank's control within a narrowing
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sphere of domestic holders and inviting their subservience to foreign dictation. "If we must have a
bank," Jackson warned, "it should be purely American."
But the real heart of the Veto was its attack on exclusivity and favoritism. Sounding the loaded words
"monopoly" and "privilege" over and over like a tocsin, Jackson laid out his core theme: The Bank's
charter gave its stockholders a promise of pelf and power not accessible to other citizens. It made
them "a privileged order, clothed both with great political power and enjoying immense pecuniary
advantages from their connection with the Government." Jackson's peroration conveyed both the
Veto's essential meaning and its inescapable ambiguity:
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 can not 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 all the presidential messages--inaugurals, annuals, vetoes--that came before, there is nothing like
this. Other presidents had sometimes warned Americans of foreign perils, or the dangers of
factionalism and divisiveness among equally well-disposed and meritorious citizens. Andrew Jackson
warned them against their government--and each other.
And yet, what exactly does it mean? Jackson's frank branding of Americans by occupation and
circumstance, his bold counterposing of rich and poor, and his solicitude for the working "farmers,
mechanics, and laborers" against the "rich and powerful" seemed to many then and later a
promulgation of class warfare--an anathema to some, a battle cry for others. Yet his acknowledgment
of inevitable wealth disparities and his solution of "equal protection" and minimalist government
echo more of market economics than of the welfare state. Some historians see Jackson in a straight
line of working-class champions, foes of capitalist dominion, running from Thomas Jefferson through
Franklin Roosevelt. Others see him as the spokesman of enterprise, assailing a confining, repressive
politico-economic establishment to liberate the wealth-creating energies of "superior industry,
economy, and virtue." There is strong evidence on both sides.
And still another question lurks. If Jackson pointedly stretched the ranks of people who mattered
politically to include "farmers, mechanics, and laborers," did that portend a further extension, beyond
the white male electorate, to include women, slaves, and Indians? Without question, Jackson did not
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himself intend so. But words once spoken may have a life of their own. Whether one sees Jackson's
invocation of "the humble members of society" as weighing on the side of inclusion or exclusion,
erecting boundaries or breaking them down, has everything to do with how one judges his legacy and
reputation.
The veto held up in Congress, as all knew it would. In the ensuing campaign, both sides, remarkably,
distributed the message as a campaign document--Jacksonians to show his patriotism and
egalitarianism, foes to exhibit his ignorance and demagoguery. Jackson trounced Clay in the election.
Afterwards, to defang the Bank, whose present charter was still in effect and whose political
resourcefulness was by no means exhausted, Jackson withdrew the federal government's deposits
and lodged them with various state-chartered banks. Biddle retaliated by curtailing loans, causing
business distress. Intended to force a recharter, his action instead discredited the Bank by reinforcing
Jackson's warnings of its irresponsible power. Jackson's removal of the deposits prompted his foes to
coalesce under the name of Whigs, a term denoting opponents of royal prerogative. In 1834, a Whig
Senate formally censured Jackson--which Jacksonians, now calling themselves Democrats, expunged
from the Senate record as soon as they gained a majority. The defeated Bank accepted a charter from
the Pennsylvania legislature and continued after 1836 as a state institution.
The destruction of the Bank loosed American enterprise from its only central restraint. Gorged with
federal deposits and with no one to control their note issues, state banks went on a lending spree that
built up a speculative bubble and ended, just as Jackson left office in 1837, in a sickening crash.
Jackson's culpability for the ensuing depression is still debated. Jackson himself came to oppose all
chartered banks and banknotes, state as well as federal, and to favor a return to gold and silver "hard
money"--a radical deflation which Whigs charged would throw progress back a century. In Jackson's
Farewell Address on retiring from office, he elaborated the language of the Veto, condemning bank
paper as an engine of oppression and warning of the insidious "money power" and of the growing
control exerted by faceless corporations over ordinary citizens' lives.
Jackson's Democratic successors Martin Van Buren and James K. Polk cemented his victory over the
Bank. A new Independent Treasury assumed the handling of government finances, realizing Jackson's
aim of severing government from the business of banking. For a generation, that business remained
semi-organized and essentially directionless. The exigencies of the Civil War forced the first steps
toward nationalizing the banking system and the currency, a process completed with the creation of
the Federal Reserve in 1913.
The immediate circumstances that prompted Andrew Jackson's ringing expostulations have long
since passed away. Whether his words carry an enduring message would be for later generations,
including our own, to decide for themselves.
To learn more about America's seventh president, watch Andrew Jackson: Good, Evil and the
Presidency, an NEH-funded documentary airing January 2, 2008, on PBS.
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PHOTO (COLOR): OPPOSITE, "JACKSON SLAYING THE MANY-HEADED MONSTER," 1828.-Private collection, Peter Newark American Pictures/Bridgeman Art Library EARLY AMERICAN
COINS --Courtesy of the National Namismatic Collection of the National Museum of American
History
PHOTO (COLOR): ANDREW JACKSON'S REFUSAL TO RECHARTER THE SECOND BANK OF THE
UNITED STATES OPENED UP THE FREE BANKING ERA. WHEN PRIVATE BANKS PRINTED THEIR
OWN NOTES.
PHOTO (COLOR): "DOWNFALL OF MOTHER BANK" BY HENRY R. ROBINSON, 1833. --©
Collection of the New-York Historical Society/Bridgeman Art
By Daniel Feller
Daniel Feller is a professor of history at the University of Tennessee--Knoxville and director of The
Papers of Andrew Jackson, a project supported by NEH. The Papers of Andrew Jackson, Volume 7,
1829, which covers the first year of Jackson's presidency, was published by the University of
Tennessee Press in December.
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