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The Bank War was a long and bitter struggle waged by President Andrew Jackson in the 1830s against the Second Bank of the United States, a federal institution that Jackson sought to destroy. Jackson's stubborn skepticism about banks escalated into a highly personal battle between the president of the country and the president of the bank, Nicholas Biddle. The conflict over the bank became an issue in the presidential election of 1832, in which Jackson defeated Henry Clay.
Following his reelection, Jackson sought to destroy the bank and engaged in controversial tactics which included firing treasury secretaries opposed to his grudge against the bank. The Bank War created conflicts that resonated for years, and the heated controversy Jackson created came at a very bad time for the country. Economic problems which reverberated through the economy eventually led to major depression in the Panic of 1837 (which occurred during the term of Jackson's successor, Martin Van Buren). Jackson's campaign against the Second Bank ultimately crippled the institution.
The Second Bank of the U.S.
The Second Bank was chartered in April 1816, in part to manage debts the federal government had taken on during the War of 1812. The bank filled a void left when the Bank of the United States, created by Alexander Hamilton, did not have its 20-year charter renewed by Congress in 1811.
Various scandals and controversies plagued the Second Bank in the first years of its existence, and it was blamed for helping to cause the Panic of 1819, a major economic crisis. By the time Jackson became president in 1829, the problems of the bank had been rectified. The institution was headed by bank president Biddle, who exercised considerable influence over the financial affairs of the nation. Jackson and Biddle clashed repeatedly, and cartoons of the time depicted them in a boxing match, with Biddle cheered on by city dwellers, while frontiersmen rooted for Jackson.
Controversy Over Renewing the Charter
By most standards, the Second Bank was doing a good job of stabilizing the nation's banking system. But Jackson viewed it with resentment, considering it a tool of an economic elite in the East that took unfair advantage of farmers and working people. The charter for the Second Bank of the United States would expire, and thus be up for renewal, in 1836.
However, four years earlier, Clay, a prominent senator, pushed forward a bill that would renew the bank's charter. The 1832 charter renewal bill was a calculated political move. If Jackson signed it into law, it might alienate voters in the West and South, jeopardizing Jackson's bid for a second term. If he vetoed the bill, the controversy might alienate voters in the Northeast.
Jackson vetoed the renewal of the charter of the Second Bank of the U.S. in dramatic fashion. He issued a lengthy statement on July 10, 1832, providing the reasoning behind his veto. Along with his arguments claiming the bank was unconstitutional, Jackson unleashed some blistering attacks, including this comment near the end of his statement:
"Many of 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."
Clay ran against Jackson in the election of 1832. Although Jackson's veto of the bank's charter was an election issue, he was reelected by a wide margin.
Continued Attacks on the Bank
Jackson's war with the bank placed him in bitter conflict with the Biddle, who was as determined as Jackson. The two men sparred, sparking a series of economic problems for the country. At the beginning of his second term, believing he had a mandate from the American people, Jackson instructed his treasury secretary to remove assets from the Second Bank and transfer them to state banks, which became known as "pet banks."
In 1836, his last year in office, Jackson issued a presidential order known as the Specie Circular, which required that purchases of federal lands (such as lands being sold in the West) be paid for in cash (which was known as "species"). The Specie Circular was Jackson's last major move in the bank war, and it succeeded in virtually ruining the credit system of the Second Bank.
The clashes between Jackson and Biddle likely contributed to the Panic of 1837, a major economic crisis that impacted the U.S. and doomed the presidency of Jackson's successor, President Van Buren. Disruptions caused by the economic crisis resonated for years, so Jackson's suspicion of banks and banking had an effect that outlived his presidency.