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Raucous crowds
celebrated Andrew Jackson's inauguration as president
in 1829, swarming through the streets of Washington and
trashing the White House (at least according to Jackson's
appalled opponents). Jackson, born in a log cabin and
hailing from the West, symbolized to many a new era in
American politics, an era which celebrated the common
man and the common man in turn celebrated his election.
Jackson believed that out of all the officials in the
federal government, the only one who truly represented
all the people was the president. Members of the House
of Representatives served only their own districts; senators
represented their own states (and were at this time chosen
by the state legislatures, not elected directly by the
voters); and Supreme Court justices and federal judges
were appointed, not elected. As president, then, he felt
a special responsibility to protect the people's rights
and interests. Jackson also believed that the government
should not favor any one person or group over others;
that is, it should not favor the few at the expense of
the many. This belief contributed to Jackson's decision
to veto the re-charter of the Second Bank of the United
States, unleashing what came to be called "the Bank
War." This lesson will examine Jackson's veto and
his opponents' response.
Objectives
- To
identify and evaluate the arguments for and against
re-chartering the Second Bank of the United States
as stated in Andrew Jackson's veto message and Daniel
Webster's reply.
- To evaluate
Jackson's claim to being the "president of the
people" by examining his veto of the bill re-chartering
the Second Bank of the United States.
Background
Alexander Hamilton, the first secretary
of the treasury, proposed that Congress charter a national
bank which would have branches around the country. Such
a bank, he argued, could assist the federal government
by providing a safe place to deposit tax money and other
revenue, allowing the government to make payments throughout
the country, and to market government bonds. Hamilton
also believed the bank could play a central role in the
economy by printing banknotes which could serve as currency,
encouraging trade among the various regions of the nation,
and making loans to fledgling industries. In 1791, in
response to Hamilton's recommendation, Congress chartered
the Bank of the United States, later known as the First
Bank of the United States.
Thomas Jefferson and members of his Democratic-Republican
party opposed the Bank for numerous reasons, including
a suspicion that it was unconstitutional. The Democratic-Republicans
were strict constructionists, arguing that the federal
government only had the powers specifically granted to
it in the Constitution. Since the Constitution did not
specifically state that Congress can charter a bank, the
Democratic-Republicans considered the Bank unconstitutional.
In 1811, when the Bank's charter was about to expire,
the Democratic-Republicans controlled both Congress and
the presidency. They decided to allow the Bank's charter
to lapse, and the Bank went out of business.
The
very next year, the nation became embroiled in the War
of 1812. The U.S. government had a hard time selling war
bonds and paying military suppliers and soldiers in an
orderly fashion. By the end of the war, President James
Madison had concluded that a national bank might not be
such a bad thing after all. At his urging, Congress in
1816 chartered another Bank of the United States, commonly
called the Second Bank of the United States. In the case
of McCulloch v. Maryland,
the Supreme Court in 1819 affirmed the Bank's constitutionality;
Congress, proclaimed the Court, did indeed have the authority
to charter a national bank, even though it was not explicitly
given that power in the Constitution.
That same year, the country's economic troubles
came to a head in the depression known as the Panic of
1819. Economic historians mostly agree that the Second
Bank did not play a major role in causing the crisis,
but many people at the time blamed the Bank. During the
Panic, the Bank called in many loans to protect its own
stability, and the financial hardship it caused led to
further resentment of the Bank.
Among
those who bitterly hated the Bank was Andrew Jackson.
He considered it the very embodiment of elite privilege
and power. And Jackson was by no means the Bank's only
enemy. Those who opposed the bank came from two groups--those
favoring "soft money" and those favoring "hard
money." The "soft money" advocates disliked
the Bank, because it informally regulated the state banks
by tightly controlling the money supply, which limited
financial opportunity. People in the West, who needed
loans for new farms and businesses, particularly resented
the Second Bank for this practice, as did investors and
other supporters of state banks.
"Hard money" advocates also criticized the Second
Bank but for a different reason. They believed that specie--gold
and silver coins--was the only safe currency. They thought
that no bank, regardless of how well run it might be,
should be able to issue bank notes. This was Jackson's
position. He had once speculated in a land deal with paper
credit, and his business had been ruined. The experience
left him suspicious of all banks.
In
1823, as the economy rebounded from the Panic, Nicholas
Biddle, an aristocratic Philadelphian, became president
of the Second Bank of the United States. He won wide recognition
as an excellent and responsible leader for what was, by
far, the nation's most important financial institution.
At first, Biddle tried to stay out of politics. However,
when he saw popular opposition to the Second Bank rising
during Jackson's first term as president of the United
States, he decided to become active politically to defend
the Bank's interests. In particular, he formed an alliance
with two powerful senators, Henry Clay and Daniel Webster.
Clay and Webster were nationalists who strongly supported
the national bank and believed the federal government
should be very active in economic matters, even if the
Constitution did not specifically grant it that power.
With
encouragement from Clay and Webster, Biddle applied for
a renewal of the Bank's charter in 1832, although the
original charter was not going to expire until 1836. The
three men believed the institution enjoyed public support.
Since Jackson was running for re-election as president,
they reasoned, he might not want to make the Bank an issue
and thus would sign the renewal. On the other hand, if
Jackson chose to veto it, he would lose support in key
states such as Pennsylvania, where the Bank had its headquarters.
That would benefit his opponent‹who happened to be Henry
Clay.
Clay, Webster, and Biddle badly misjudged Jackson's reaction.
When word got out that Congress was considering re-chartering
the Bank, Attorney General Roger B. Taney laid out the
situation as he saw it: "Now, as I understand the
application at the present time, it means in plain English
this--the Bank says to the President, your next election
is at hand--if you charter us, well--if not, beware of
your power." To Jackson, it sounded like a threat
to his presidency and a challenge to his integrity. It
was bad enough that the Bank had so much economic influence
in the country, but now Biddle was trying to manipulate
the presidency for the Bank's benefit. The Bank, said
Jackson, was an "undemocratic, hydra monster"
that was out of control. As the people's president, Jackson
believed he had the responsibility to destroy it. After
Congress passed a bill re-chartering the Bank, Jackson
exercised his power as president and vetoed it.
For Discussion
Have your students look at a dollar bill. Ask them
what they can learn from the front of the bill. What words
are on it? Why do we accept this money as having value?
(Answer: because it is issued with the backing of the
federal government and is legal tender, that is, it must
be accepted in payment of debts in this country.) Ask
the students to imagine what it would be like if the government
didn't issue money and instead any bank could print money.
Would they feel as confident of the value of the money?
Now tell them that they're going to be looking at a period
when, in fact, the government didn't issue money and banks
printed it, instead.
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