Hailey Johnson
The veto of the Second Bank of the United States' charter by US President Andrew Jackson in 1832 was the first step in a multi-year process to kill the Bank. Jackson's decision was influenced by his belief that the Bank threatened states' rights and individual liberty, his anti-paper money stance, and his view that the Bank served the interests of the wealthy. The veto led to a reduction in the Bank's size and influence, with federal deposits being removed and placed in state banks. This, in turn, contributed to an economic downturn and the widespread defeat of the pro-Bank Whig Party in the 1834 congressional elections. The Bank's charter ultimately expired in 1836, and it would be over 75 years before the US attempted to establish another central bank.
| Characteristics | Values |
|---|---|
| Year of Veto | 1832 |
| President | Andrew Jackson |
| Bank President | Nicholas Biddle |
| Bank | Second Bank of the United States |
| Reason for Veto | Jackson believed the bank was a threat to states' rights and individual liberty, and that Congress did not have the constitutional authority to create it |
| Outcome | The bank's size and influence were reduced, and it continued to function until its charter expired in 1836 |
| Impact | Widespread defeat of the pro-Bank Whig Party in the 1834 congressional elections, economic downturn, and the Panic of 1837 was worsened |
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What You'll Learn
Jackson's win in 1832 validated anti-bank sentiment
In 1832, US President Andrew Jackson vetoed an attempt by Congress to renew the charter of the Second Bank of the United States, an institution that was set to expire in 1836. Jackson's win in 1832 validated anti-bank sentiment. Jackson's opponents, the National Republicans, had attempted to embarrass the president and guarantee the election of their candidate, Henry Clay, by forcing Jackson to take a stand on the national bank. Clay supported the American System, which proposed using a strong central bank and high tariffs to fund internal improvement projects.
Jackson's veto was based on several criteria. Firstly, he believed that Congress did not have the constitutional authority to create a national bank. Secondly, he argued that the bank was created to serve the interests of the wealthy, not to meet the nation's financial needs. Finally, Jackson believed that if any government institution became too powerful, it stood as a direct threat to states' rights and individual liberty.
Jackson's actions ignited protests, even from within his administration. His veto of the Bank charter and the removal of federal deposits to state banks also worsened the Panic of 1837. However, Jackson's distrust of power in the hands of a privileged few extended the meaning of American democracy beyond merchants and bankers to include farmers, mechanics, and laborers.
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Jackson's personal distrust of banks
US President Andrew Jackson's personal distrust of banks was a significant factor in his decision to veto the recharter of the Second Bank of the United States during his presidency from 1829 to 1837. This period was marked by the "Bank War," a political struggle over the future of the national bank. Jackson's distrust of banks was shaped by a combination of personal, economic, and political factors.
On a personal level, Jackson had a long-standing distrust of banks, stemming from a land deal that soured decades earlier. In this deal, Jackson accepted paper notes as payment for land he sold. However, when the buyers went bankrupt, the paper notes became worthless, and Jackson narrowly avoided financial ruin. This experience left him suspicious of banking practices, particularly the issuance of paper notes, and he believed only specie (gold or silver coins) was a reliable medium of exchange. Additionally, Jackson disapproved of credit, another core function of banks, arguing that people should not borrow money to purchase goods.
Economically, Jackson recognized the importance of banks in the US economy, but his general distrust led him to believe that the Second Bank of the United States held too much power and posed a threat to the economy. He feared that the bank, with its substantial gold reserves and influence over currency and credit, could ruin the economy if its power was misused. Jackson also believed that the bank served the interests of a northeastern aristocracy, favouring wealthy merchants and speculators over farmers, mechanics, and labourers.
Politically, Jackson's distrust of the bank was rooted in his belief in states' rights and his opposition to a powerful federal institution. He argued that the Constitution did not grant Congress the power to create a national bank and that the bank infringed on the rights of individual states. Jackson saw his 1832 victory as a mandate to curb the power of the bank and decentralize financial power by transferring federal deposits to state banks.
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The Bank War
In 1816, President James Madison established the Second Bank of the United States, which could loan money to the federal government during wartime and encourage economic development by providing American businesses with capital. However, the bank's charter was set to expire in 1836, and Jackson was elected in 1828 with the bank's fate weighing on his mind.
In 1832, Jackson vetoed a bill to renew the bank's charter, arguing that the Constitution did not grant Congress the power to create a national bank. This veto was a significant moment in Jackson's presidency and the first step in a multi-year process to "kill" the bank. Despite the Supreme Court ruling that the bank was constitutional, Jackson continued to challenge it on constitutional and philosophical grounds.
Following Jackson's veto, Bank President Nicholas Biddle restricted loans to the public, which angered people. Jackson further weakened the bank by ordering the removal of federal deposits and placing them in state banks, reducing the bank's size and influence. By 1836, the bank's charter expired, and Jackson's assessment that the bank served the interests of the wealthy was supported.
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The Second Bank of the United States
However, the Second Bank soon became a cornerstone of political debate, with critics arguing that it served the interests of the wealthy and cheated small farmers. Andrew Jackson, who became president in 1828, was a vocal opponent of the Bank and believed that it threatened states' rights and individual liberty. He also held a strong personal distrust of banks, stemming from a land deal that had gone sour decades earlier.
In 1832, Jackson vetoed a bill to renew the Bank's charter, arguing that the Constitution did not grant Congress the power to create a national bank. This decision, known as the Bank War, sparked a political showdown and widespread debate. Jackson's veto was the first step in a process to "kill" the Bank, and he ordered the removal of federal deposits from the Second Bank, transferring them to state banks. This significantly reduced the Bank's size and influence.
Despite the criticism and opposition, the Bank's president, Nicholas Biddle, managed it expertly during his tenure. He worked to provide permanence to the institution, which was set to expire in 1836, by communicating with Jackson and his administration. However, Jackson remained steadfast in his opposition, and the Bank's charter ultimately expired in 1836. The Second Bank's demise resulted in a several-year period without a central bank, during which the US economy experienced several banking crises.
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The demise of the Bank
The Second Bank of the United States was established in 1816 following an economic downturn. The institution's charter was set to expire in 1836. In 1828, Nicholas Biddle became president of the bank. He was an excellent administrator who understood banking, but he refused to accept any criticism of the bank's operations.
In 1832, Jackson was re-elected as president. He had a strong distrust of banks, and he believed that the bank was created to serve the interests of the wealthy. Jackson vetoed the bill to renew the bank's charter, arguing that the Constitution does not grant Congress the power to create a national bank. This was the first step in a several-year process to "kill" the bank.
In response to Jackson's veto, Biddle restricted loans to the public, which tightened the monetary supply. Jackson ordered that no additional federal funds be deposited into the bank and that the remaining government deposits be withdrawn and deposited in state banks. By late 1833, most of the government's money had been moved out of the bank, causing the bank to shrink in both size and influence.
In April 1834, the House of Representatives voted against rechartering the bank and confirmed that federal deposits should remain in state banks. These developments, coupled with the widespread defeat of the pro-Bank Whig Party in the 1834 congressional elections, sealed the bank's fate. The bank continued to function until its charter expired in 1836. It would be more than seventy-five years before the United States made another attempt to establish a central bank.
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Frequently asked questions
Jackson's veto was the first step in a several-year process to "kill" the Bank. In the immediate aftermath, Bank President Nicholas Biddle restricted loans to the public, which reduced the money supply and angered the public.
Jackson believed that the Bank served the interests of the wealthy and threatened states' rights and individual liberty. He also believed that Congress did not have the constitutional authority to create it.
The Bank's federal deposits were removed in 1833, reducing its size and influence. The Bank continued to function until its charter expired in 1836. It would be 75 years before the US attempted to establish another central bank.
Jackson's veto was criticised by some as an "unprecedented expansion" of the veto power. However, Jackson's stance resonated with Americans who were not merchants or bankers, including farmers, mechanics and labourers.
