Introduction
The Second Bank of the United States is a privately owned institution managed by a board of directors under the presidency of Nicholas Biddle, a time when Andrew Jackson was the president of the United States. Its actions being the only bank then had a great effect on the financial status of the nation. The term Bank War refers to the controversy that ensued when the then president, Andrew Jackson attempted to destroy it. He viewed it as a monopoly and so vetoed renewal of its charter in the year 1832. This has had a great impact in his definition as a United States president (Remini 112).
The Second Bank of the USA
Since its creation, the Second Bank of the United States raised controversy as majority felt that it favored the Northerners more than Westerners and Southerners. This is in regard to its lending policies and generally the services that they offered, which saw many opponents to it, top among them being President Jackson. However, it had its supporters who held the notion that the bank had greatly stabilized financial circulation and improved the nation’s commercial well being in the years. The bank itself was formed as a revival of the First Bank of the United States, the later having been formed in 1791.
The First Bank’s charter expired in 1811 which consequently saw formation of the Second Bank around 1816, whose aim was to control inflation eminent from the debt of the 1812 war. This paper will discuss the bank war in detail, source, its timeline, risks, aftermath consequences including present day effect and the key players. On the key players, it is important to recap on the life of Andrew Jackson, especially his political influences, as it is in his time that the foresaid event took place (Remini 120).
Andrew Jackson
Andrew Jackson was the seventh President of the United States and his term of service lasted between 1829 and 1837, serving as president a record eight years. Before then he was in the military as governor of Florida in 1821 and as commander of the American forces at the Battle of New Orleans in 1815. He is famous for his ambition to protect democracy and his support for Indian removal and slavery. He was quite tough yet humane giving him the nickname ‘Old Hickory’ and King Mob. Besides he was the first president associated with the American frontier (wilentz 78).
In the Military, he was appointed Major General after defeating the Red Stick Creeks at the Battle of Horseshoe Bend in 1814 where he also imposed the Treaty of Fort Jackson and took around twenty-million acres for settlement of whites from all Creeks. He again served during the First Seminole War. This was received with criticism and threat of censure for him after he attacked a Spanish territory that was not at war with the United States.
He was however defended on the grounds of his success and Spain’s weakness which actually saw ceding of Florida to the United States. His wars were marked by bravery and success which ensured Jackson’s popularity even in the political scene something that made people view him as presidency material way before he vied for the post. He did not succeed the 1824 presidential elections after the House of Representatives took mandate of electing the president, something that his supporters regarded as a corrupt deal. However, 1928 elections saw his success and subsequently an inauguration party, which allowed people of all calibers into the white house hence the name King Mob. He equally easily won the 1932 elections again under the Democratic Party (Wilentz 8-35).
Events in the term as president
In his term as president, a series of events of national interest followed key among them being offsetting the federal debt, attempting to abolish the Electoral College, introduction of the spoils system, the bank war itself, the Indian removal and the nullification crisis. He is acknowledged as the only US president to have offset a federal debt that there was in 1835. The following regime was however met with a depression that only increased the debt far more than it ever was within their first year of service. Jackson’s legacy of encouraging rotation in office was carried on by later government systems. He imposed it as he felt it would reduce development of a corrupt culture, which his supporters did by replacing previous employees with friends and party affiliates (wilentz 78).
Crisis
The nullification crisis was because of South Carolina conceding that some federal tariffs were null in their boundaries. South Carolina was the most affected by the economic downturn of the 1820s, and they felt that Jackson’s administration did not take into account their grievances and so were to take the matter into their hands and nullify the tariff themselves. The issue was solved with the tariff rates reduced while nullification rights by states were denied by the nation as a whole. Jackson was an advocate of the Indian removal even way before his election as president. His action as president on the issue was a great bone of contention in his regime and to today any historian would criticize it.
His policies saw many Indians ceding their land to foreigners, yet these Indians natively held to it as their only source of originality. There was more pressure on tribal land in the South where gold had been discovered. When they failed to honor the proposed removal, most were forced out leaving a number of them dead. Although this was done by Jackson’s successor, we can conclude that he initiated war on the Indians (Remini 117-200).
His war on the Bank was perhaps the most notable of his actions as far as its ramifications are concerned. He publicly showed his hatred for the banking system and imposed his powers to bring it to its knees. He outlined a number of reasons in his veto message dated July 10th 1832. He particularly disliked the monopoly that was, the Second Bank of the US being the only nationwide bank at the time. He thus says, “It (the Bank) enjoys an exclusive privilege of banking under the authority of the General Government, a monopoly of its favor, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange.” (The Avalon Project par 3).
And again at paragraph five that “every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent…..It is due to them, therefore, if their Government sell monopolies and exclusive privileges, that they should at least exact for them as much as they are worth in open market”. He justifies his removal of the bank on the grounds that it is a favor (monopoly) bestowed upon it by the Government hence equally one that can be withdrawn for the best interests of the public. He also implied that selling out the whole corporation would give its stakeholders full benefit of what the monopoly had before.
In summary, he said the bank was to be abolished because; first it concentrated all of the nation’s strength in a single institution-monopoly in this case. Second, it put the government at risk of control by foreign interests, these being interests of other independent states. Third, it was for the rich and he felt it only made them richer, the philanthropic democrat he was wanted riches fairly shared as exemplified earlier in the quote where he emphasizes that the public should get a “fair equivalent”. He strongly supported the culture of agriculture, though he felt that the bank left farmers and laborers out in favor of the more ‘sophisticated’ industrialists and businessmen.
Fourth, he conceded that the bank overly controlled members of Congress. He said that not all powers exercised by the bank were constitutional. All financial matters were handled by the bank; it is notable that the bank also had its political affiliations, in that not all its members were supporters of Jackson after all. Fifth it was argued by its opponents that the bank was more in favor of northern states over its southern and western counterparts, something that Jackson also considered. Armed with these and other reasons not mentioned, Jackson vetoed its 1832 re-charter even when Biddle then president of the bank and his associates had applied for its charter renewal earlier than necessary (The Avalon Project 6).
He was censured by the US Senate for applying his veto powers so liberally. He however proved support by states like Maine, Ohio and New Jersey something that the Senate later ruled as constitutional. After vetoing, he finished off the bank by withdrawing all US deposits in the bank in 1833. To make it easier, he replaced two of treasury secretaries for a more agreeable fellow while denying federal deposits to the bank. It is called a war because the bank’s president responded by soliciting loans, a move that was deemed to bring a financial crisis, which would see the president seek a central bank. It however did not work and its supporters were irked by its actions. It therefore lost its charter in 1836 and could no longer be in business by 1841 ((wilentz 23).
The first repercussion
What were the repercussions? First the money withdrawn had to be kept somewhere. Jackson and his people formed “pet banks” where excess government funds were channeled. These banks were fully controlled by Jackson and his administration; the rotation system had served its purpose and his supporters were well rewarded by the action. Other than pet banks, other banks sprawled. Most failed and basically the banking system became unstable.
The result was the panic of 1837, which was characterized by closed banks and high levels of unemployment. The instability was in part because of the Specie Circular that Jackson had passed to have people use coins rather than paper money. The economy went down and only picked up later in 1843 when the gross national product was observed to increase (wilentz 71).
The second repercussion
Secondly, Jackson formed a big circle of opponents. The Whig Political party for example came to talk against what they felt was monarchy in Jackson’s era. It came from the same group that Jackson hated; the elite industrialists, Southern landowners and prominent merchants. Jackson did not vie for a third term because of health related problems but his opponents were campaigning against his successor to be – Martin Buren. The low earners he advocated for also had their grievances, probably those angered by the Indian removal or other actions not explained. It is said that he was the first president on whom an assassination attempt was actually done though the assassin was later regarded insane (Remini 119).
The third repercussion
Third, Jackson’s war on the bank set ground for today’s dislike for the elites. They were thought to be the contributors of the problems which were being faced at that time. Populism is a tool that has been used by many politicians to present themselves to the people as representatives and advocates of the ordinary person’s wishes. The ordinary person of course is the majority in any social setting and they (politicians) know they have nothing to lose by affiliating themselves with the crowd ((The Avalon Project8).
Conclusion
The bank war marked the beginning of financial crises in America. These crises were in the year 1931 and most recently the 2007 crisis which hit the world at large is but a reminder of how it all started. The housing bubble is very much related to the 1837 panic. Past mistakes/crisis at times help persons to learn and gain more knowledge in order to handle future problems. It has often been said that history repeats itself, but where it negatively affects the lives of subjects, it is best that we learn from past mistakes else we will forever criticize yet act similarly.
Works Cited
Remini, Robert. “Andrew Jackson and the course of America’s freedom, 1822-1832”. 1981. New York: Harper & Row. Print.
The Avalon Project, Yale Law School. ”President Jackson’s Veto Message Regarding the Bank of the United States; July 10, 1832”. 2008. Web.
Wilentz, Sean. “Andrew Jackson”. 2005. New York: Henry Holt and Company. Print.