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Andrew Jackson's Role in the Bank War of 1832

Instructor: Christina Boggs

Chrissy has taught secondary English and history and writes online curriculum. She has an M.S.Ed. in Social Studies Education.

Did you know that the United States has had two different national banks? But what happened to them? This lesson will discuss Andrew Jackson's role in the Bank War of 1832 and how that event brought an end to the Second Bank of the United States.

The First and Second Banks of the United States

When the United States first came into existence, the Founding Fathers had many different opinions about how the new country should be run. Who should have more power, the federal government or the states? Where should the new capital be, in the North or the South? How should the federal government manage its money? This last question was very controversial. Men like Alexander Hamilton thought the United States should have a national bank to hold its tax revenues and to pay off the country's debts. Others, such as Thomas Jefferson, disagreed; nowhere in the Constitution does it say the government can create its own bank. Ultimately, the First Bank of the United States was created in 1791 and had a 20-year charter. The bank would expire in 1811 unless Congress decided to renew its charter.

By 1811, the debate over a national bank was still very heated. The anti-bank faction let the First Bank of the United States die. For five years, the country went without a national bank, but the War of 1812 (which happened during this time) had created a problem: to fight a war against England, the U.S. had to borrow money from other countries. It was decided that there should once again be a central bank to help deal with the national debt. In 1816 the Second Bank of the United States was created, and like the First Bank, had a 20-year charter.

Problems with the Second Bank

The Second Bank, just like the first, met steep opposition. Northern and Eastern businessmen were in favor of the bank, largely because it gave them access to loans for their various ventures and speculations. Meanwhile, farmers in the South and West didn't trust the bank, and disliked that it catered to the interests of the North and East. Many questioned whether the Second Bank of the United States was constitutional, or something Congress could legally do based on the Constitution.

The way the Second Bank was run was also a concern. All of the federal government's money was deposited at the Second Bank, but the government was not actually in charge of running the bank. Instead, it was overseen by a board of directors made up of private citizens and businessmen. For many Americans, this did not make any sense...how could they be sure the board of directors would act responsibly? What if the directors were corrupt?

The Second Bank found itself in a sticky situation in 1819. The Supreme Court case McCulloch v. Maryland brought up the constitutionality of the bank. Ultimately, Chief Justice John Marshall ruled that the bank was in fact constitutional, but that did not do much to change the minds of the American public. That same year, the Second Bank took measures to help control inflation (the value of money relative to how much things actually cost) by calling in loans and decreasing the amount of credit it offered. Many businessmen were unable to pay back their debts; this along with falling crop prices sent the country into a depression. Referred to as the Panic of 1819, people across the country suffered, especially Western farmers. Even though the depression didn't last long, the image of the Second Bank was severely damaged.

The Bank War of 1832

The Second Bank was set to expire in 1836, but pro-bank advocates like Henry Clay and Daniel Webster saw a window of opportunity in 1832. At the time, President Andrew Jackson was running for his second term as president and Clay was running against him. Clay believed that even though public opinion was against the bank, Congress would still vote to extend the bank's charter. Jackson wasn't a huge fan of the national bank, but Clay was convinced that Jackson wouldn't speak out against it, especially if Jackson wanted to keep his voters in the North, who were in favor of the bank.

President Andrew Jackson
President Andrew Jackson

With the help of the Second Bank's president, Nicholas Biddle, Clay proposed a bill in Congress to extend the bank's charter. Clay had effectively made the Second Bank of the United States a campaign issue...the Bank War of 1832 was on! Congress decided to pass the bill. However, by this time, Jackson had won reelection and was determined to bring an end to the bank. He vetoed the bill and refused to sign it into law in 1833.

Nicholas Biddle, President of the Second Bank of the United States
Nicholas Biddle

Jackson knew that simply vetoing the extended charter was not enough. The Second Bank had three more years to secure its future. To make sure that this would not happen, Jackson decided to remove all federal funds from the Second Bank beginning in October of 1833. Instead of keeping the country's money in a national bank, Jackson selected 23 state banks, referred to as pet banks, to deposit the funds.

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