the bank veto & "Killing" the National Bank
Another major issue of Jackson’s presidency concerned the re-chartering of the Bank of the United States. This bank and its branches, although privately owned, received federal deposits and attempted to serve a public purpose by cushioning the ups and downs of the national economy. The bank’s president, Nicholas Biddle, managed it effectively. Biddle’s arrogance, however, contributed to the suspicion that the bank abused its powers and only served the interests of the wealthy. Jackson shared this suspicion. Furthermore, he believed that the Bank of the United States was unconstitutional.
Henry Clay, Jackson’s chief political opponent, favored the bank. In 1832, an election year, Clay decided to challenge Jackson on the bank issue by persuading a majority in Congress to pass a bank re-charter bill. Jackson promptly vetoed this bill, denouncing it as a private monopoly that enriched the wealthy and foreigners at the expense of the common people. The issue backfired for Clay in the 1832 election. An overwhelming majority of voters approved Jackson’s attack on “bank corruption.” Jackson won reelection with more than three-fourths of the electoral vote and the National Bank died.
Henry Clay, Jackson’s chief political opponent, favored the bank. In 1832, an election year, Clay decided to challenge Jackson on the bank issue by persuading a majority in Congress to pass a bank re-charter bill. Jackson promptly vetoed this bill, denouncing it as a private monopoly that enriched the wealthy and foreigners at the expense of the common people. The issue backfired for Clay in the 1832 election. An overwhelming majority of voters approved Jackson’s attack on “bank corruption.” Jackson won reelection with more than three-fourths of the electoral vote and the National Bank died.
pet banks
After winning reelection of 1832, Jackson had to deal with the economic consequences of his decision to oppose the Bank of the United States. Jackson “killed” the national bank not only by vetoing its re-charter but also by withdrawing all federal funds. Aided by Secretary of the Treasury Roger Taney, he transferred the funds to various state banks, which Jackson’s critics called “pet banks.” The immediate effect of Andrew Jackson’s attack on the Second National Bank of the United States in 1834 was an expansion of credit and speculation. Many started to view President Andrew Jackson as King Andrew I.
panic of 1837
As a result of both Jackson’s financial policies and feverish speculation in western lands, prices for land and various goods became badly inflated. Jackson hoped to check the inflationary trend by issuing a presidential order known as the specie circular. It required that all future purchases of federal lands be made in gold and silver rather than in paper banknotes. Soon afterward, as banknotes lost their value and land sales plummeted, a financial crisis – the Panic of 1837, plunged the nation’s economy into a depression. And because there was no National Bank, there was no financial institution to regulate the economy.