page_title: History of the United States (1789–1849)
section_title: Banking
hierarchical_section_title: History of the United States (1789–1849) / Emergence of Second Party System / Banking
caption_attribution_description: A satire on Andrew Jackson's campaign to destroy the Bank of the United States and its support among state banks. Jackson, Martin Van Buren, and Jack Downing struggle against a snake with heads representing the states. Jackson (on the left) raises a cane marked "Veto" and says, "Biddle thou Monster Avaunt!! avaount I say! or by the Great Eternal I'll cleave thee to the earth, aye thee and thy four and twenty satellites. Matty if thou art true...come on. if thou art false, may the venomous monster turn his dire fang upon thee..." Van Buren: "Well done General, Major Jack Downing, Adams, Clay, well done all. I dislike dissentions beyond every thing, for it often compels a man to play a double part, were it only for his own safety. Policy, policy is my motto, but intrigues I cannot countenance." Downing (dropping his axe): "Now now you nasty varmint, be you imperishable? I swan Gineral that are beats all I reckon, that's the horrible wiper wot wommits wenemous heads I guess..." The largest of the heads is president of the Bank Nicholas Biddle's, which wears a top hat labeled "Penn" (i.e. Pennsylvania) and "$45,000,000." This refers to the rechartering of the Bank by the Pennsylvania legislature in defiance of the adminstration's efforts to destroy it.
context_page_description: George Washington, elected the first president in 1789, worked with the heads of the departments of State, Treasury, and War, along with an Attorney General, the group of which later became known as his cabinet. Based in New York, the new government acted quickly to rebuild the nation's financial structure. Enacting the program of Treasury Secretary Alexander Hamilton, the government assumed the Revolutionary War debts of the states and the national government, and refinanced them with new federal bonds. It paid for the program through new tariffs and taxes; the tax on whiskey led to a revolt in the west; Washington raised an army and suppressed it. The nation adopted a Bill of Rights as 10 amendments to the new constitution. Fleshing out the Constitution's specification of the judiciary as capped by a Supreme Court, the Judiciary Act of 1789 established the entire federal judiciary. The Supreme Court became important under the leadership of Chief Justice John Marshall, a federalist and nationalist who built a strong Supreme Court and strengthened the national government.
  The 1790s were highly contentious.
context_section_description: Even before the nullification issue had been settled, another controversy arose to challenge Jackson's leadership. It concerned the rechartering of the Second Bank of the United States. The First Bank of the United States had been established in 1791, under Alexander Hamilton's guidance and had been chartered for a 20-year period. After the Revolutionary War, the United States had a large war debt to France and others, and the banking system of the fledgling nation was in disarray, as state banks printed their own currency, and the plethora of different bank notes made commerce difficult. Hamilton's national bank had been chartered to solve the debt problem and to unify the nation under one currency. While it stabilized the currency and stimulated trade, it was resented by Westerners and workers who believed that it was granting special favors to a few powerful men. When its charter expired in 1811, it was not renewed.
  For the next few years, the banking business was in the hands of State-Chartered banks, which issued currency in excessive amounts, creating great confusion and fueling inflation and concerns that state banks could not provide the country with a uniform currency. The absence of a national bank during the War of 1812 greatly hindered financial operations of the government; therefore a second Bank of the United States was created in 1816.
  From its inception, the Second Bank was unpopular in the newer states and territories and with less prosperous people everywhere. Opponents claimed the bank possessed a virtual monopoly over the country's credit and currency, and reiterated that it represented the interests of the wealthy elite. Jackson, elected as a popular champion against it, vetoed a bill to recharter the bank. He also detested banks due to a brush with bankruptcy in his youth. In his message to Congress, he denounced monopoly and special privilege, saying that "our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress".
  In the election campaign that followed, the bank question caused a fundamental division between the merchant, manufacturing and financial interests (generally creditors who favored tight money and high interest rates), and the laboring and agrarian sectors, who were often in debt to banks and therefore favored an increased money supply and lower interest rates. The outcome was an enthusiastic endorsement of "Jacksonism". Jackson saw his reelection in 1832 as a popular mandate to crush the bank irrevocably; he found a ready-made weapon in a provision of the bank's charter authorizing removal of public funds.
  In September 1833 Jackson ordered that no more government money be deposited in the bank and that the money already in its custody be gradually withdrawn in the ordinary course of meeting the expenses of government. Carefully selected state banks, stringently restricted, were provided as a substitute. For the next generation, the US would get by on a relatively unregulated state banking system. This banking system helped fuel westward expansion through easy credit, but kept the nation vulnerable to periodic panics. It was not until the Civil War that the Federal government again chartered a national bank.
  Jackson groomed Martin van Buren as his successor, and he was easily elected president in 1836. However, a few months into his administration, the country fell into a deep economic slump known as the Panic of 1837, caused in large part by excessive speculation. Banks failed and unemployment soared.  It was a devastating economic and social Catastrophe that can be compared with the panic of 1893 and the Great Depression of 1929. event with repercussions every bit as deep as the Great Depression of the 1930s. There was an international dimension, for much of the growth In the private sector, as well as infrastructure investment by state governments (especially canals) had been financed by British capital. Several states and corporations defaulted permanently on their debts owed to London. Investment in Amer
caption: Jackson slays the many-headed monster that is the Bank of the United States
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