Andrew Jackson & the National Bank

Photo from the author’s personal collection. President Andrew Jackson of Tennessee.
Photo from the author’s personal collection.
President Andrew Jackson of Tennessee.

By Ray Hill

 

If Senator K. D. McKellar was an accomplished feudist, another son of Tennessee was at the very least as accomplished in that art: General Andrew Jackson.  President Andrew Jackson carried the bullet in his body from a duel he fought until he died; the other fellow didn’t emerge from that encounter nearly so well.  Feuding with Andrew Jackson could literally be a lethal proposition.

Andrew Jackson was also the first President of the United States to be elected as a “man of the people.”  Many residents of the Capitol were horrified when Jackson threw open the doors of the White House to allow anyone and everyone to come and help him dispose of a gigantic wheel of cheese to celebrate his inauguration.

The Bank of the United States, the second such entity, was chartered in 1816.  Its life was to run for twenty years.  The reason the Bank of the United States had a time when it had to be renewed was due to the fact there were more than a few congressmen who disliked the notion of concentrating so much financial power in one institution.  The Bank of the United States was also the repository for federal funds.  Yet the Bank of the United States was not a federal institution; it was responsible not to Congress or the people.  The Bank of the United States was only responsible to its own Board of Directors.

The supporters of the Bank of the United States argued it was necessary to increase and expand both commercial ventures and industry in the country.  They claimed it also promoted a strong currency, as well as central control of the country’s economy.

When Andrew Jackson was elected president, the Bank of the United States was run by Nicholas Biddle.  While Biddle may well have been a shrewd businessman, he was no politician.  His father was prominent in the Biddle home city of Philadelphia and fought in the war of American Independence.  His uncle, for whom he was named, died during the American Revolution and was deemed a naval hero.  Yet another uncle was a member of the first Continental Congress.  Nicholas Biddle lived a privileged and charmed existence during his youth.  He engaged in the practice of law before being elected to serve in the Pennsylvania House of Representatives and the State Senate.  While in the Pennsylvania State Senate, Biddle pressed for a Second Bank of the United States.  The first Bank of the United States had been formed under President George Washington and its charter had expired in 1811 and had not been renewed.  The War of 1812 brought about financial chaos and economic hardship for much of the country.  When the second Bank of the United States was chartered in 1816, President James Monroe appointed Nicholas Biddle to become a director of the bank.  When the president of the Bank of the United States resigned in 1822, Biddle assumed the presidency.

A panic had erupted in America in 1818 as a $4 million payment was due on bonds that had been floated to buy Louisiana and the territory owned by France on the American continent.  The payment was due to be paid in either gold or silver.  The government of the United States needed gold and silver and the Bank of the United States was responsible for making the payment to those who had invested in the bonds.  American banks who had borrowed money from the Bank of the United States in “paper” money now had to repay the debt in either gold or silver.

This particular fiscal policy caused hardship for one businessman in Tennessee: Andrew Jackson.  General Jackson found himself in financial difficulty in repaying his own debts.  Jackson never much liked banks in the first place, but he became quite hostile to those banks whose deposits were not entirely backed by gold or silver.  At the top of General Jackson’s list of suspicious entities was the Bank of the United States.  Andrew Jackson did not think paper money a sound currency for a country.  He questioned the constitutionality of the Bank of the United States, yet Nicholas Biddle woefully underestimated both the power and determination of a riled Andrew Jackson.

Despite Jackson’s demand for gold and silver, which was known as “hard money,” the president was highly sensitive to many westerners in the country who favored “soft money” because they wanted to get their hands on easy credit.

The Bank of the United States had a host of supporters in Congress, but perhaps the two most prominent were also two of the most powerful: Daniel Webster of Massachusetts and Henry Clay of Kentucky.  “Harry of the West” was an especially talented politician; Clay become Speaker of the House on his first day as a member of Congress in 1811.  Henry Clay was a genuine presidential possibility and his own ambitions collided with those of General Andrew Jackson.  Both were enormously popular in the western part of the country and just so readers know, the United States extended only as far as Louisiana, Missouri, and Illinois in 1824.

Andrew Jackson carried all of the South save for Georgia, the home state of another presidential contender, William Crawford.  Clay only carried carried his native Kentucky, Missouri and Ohio.  Secretary of State John Quincy Adams carried his own Massachusetts, New York and New England.  Jackson won the hotly contested states of Pennsylvania, Illinois, Indiana, New Jersey, and Maryland.  Crawford won Virginia and Delaware in addition to Georgia.  While Andrew Jackson won the popular vote, the election was thrown into the House of Representatives where congressmen had to decide between Jackson and John Quincy Adams.  Speaker Clay threw his considerable influence behind Adams who was elected.  Adams made Henry Clay Secretary of State, then the most prominent position in government outside the presidency.  Most American presidents up until that time followed the route of having served as Secretary of State before being elected president, which is precisely what Henry Clay proposed to do.

General Jackson immediately thundered he was the victim of a “corrupt bargain” between Clay and Adams.  He would ring that bell endlessly for the next four years when he ran again and easily defeated President John Quincy Adams.

The hostility between Andrew Jackson and Henry Clay could hardly have been deeper or greater.

In 1832, Daniel Webster and Henry Clay introduced legislation to recharter the Bank of the United States, despite the fact the bank’s current charter had four more years left to run.  It was a presidential election year, which was part of Clay and Webster’s legislative strategy.  They believed opposing the bill would be next to impossible for Jackson, as it would alienate many voters, especially in Pennsylvania.

They did not reckon with Andrew Jackson’s nature.

President Jackson snarled to his vice presidential running mate, Martin Van Buren, “The Bank is trying to kill me, sir, but I shall kill it!”

Clay and Webster were able to push their bank recharter bill through Congress and were shocked when it was promptly vetoed by President Andrew Jackson.  Worse still for the Bank of the United States, Jackson ordered that all federal deposits be removed.  The wily President Jackson had federal deposits moved to state banks.

That decision not only shocked members of Jackson’s own Cabinet, but horrified some, not the least of which was Secretary of the Treasury Louis McLane.  McLane flatly refused to withdraw federal deposits from the Bank of the United States.  Secretary McLane would not resign his post, but Andrew Jackson was not to be denied.  The president promptly nominated McLane to serve as Secretary of State.  Jackson was dismayed when his choice to succeed McLane, William J. Duane, also stubbornly refused to remove federal deposits from the Bank of the United States.  An angry President Jackson simmered for four months then fired Duane and replaced him with Attorney General Roger B. Taney.  Taney’s appointment was a “recess appointment,” meaning it did not have to be immediately approved by the United States Senate.  Taney followed Jackson’s orders and removed all federal deposits from the Bank of the United States.

Jackson was overwhelmingly reelected, handing Henry Clay the worst and most humiliating defeat of his long political career.

It was Nicholas Biddle’s turn to be outraged and he sought to retaliate by raising interest rates, full well knowing the effect it would have on the American economy.  Biddle’s actions caused a recession and a financial panic ensued in 1833 and 1834.

Supporters of the Bank of the United States kept introducing bills to recharter the bank, but President Jackson vetoed them all.  Finally, in April of 1836, President Andrew Jackson watched as the Bank of the United States’ charter expired.

Nicholas Biddle remained as president of the bank, which lived on as a state bank, but he resigned in in 1841.  A greater financial panic took down what was left of the Bank of the United States and Nicholas Biddle found himself under arrest and charged with bank fraud.  Biddle had to endure a bitter trial, although he was acquitted in the end.  Yet the ordeal broke his health and he died on February 27, 1844.

Andrew Jackson went home to Tennessee where he remained a revered elder statesman for Democrats and the object of hatred and scorn by his political opponents.  Jackson influenced the election of his last vice president, Martin Van Buren, as president.  Van Buren was toppled when he ran for reelection in 1840, largely because of the financial chaos and suffering in the country.  Jackson was still powerful enough to engineer the nomination of an unknown and the first real “dark horse” candidacy in the history of American presidential politics: an obscure former governor from Tennessee, James K. Polk.

The ornery Andrew Jackson still lived, but he kept his promise to kill the Bank of the United States.

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