Banking in the Jacksonian Era
Encyclopedia
The Second Bank of the United States
opened in January 1817, six years after the First Bank of the United States
lost its charter. The Second Bank of the United States was headquartered in Carpenter's Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation. The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812
, the U.S. experienced severe inflation
and had difficulty in financing military operations. Subsequently, the credit
and borrowing status of the United States
was at its lowest level since its founding.
The charter of the Second Bank of the United States (B.U.S.) was for 20 years and therefore up for renewal in 1836. Its role as the depository
of the federal government's revenues made it a political target of banks chartered by the individual states who objected/envied the B.U.S.'s relationship with the central government. Partisan politics came heavily into play in the debate over the renewal of the charter. "The classic statement by Arthur Schlesinger
was that the partisan politics during the Jacksonian
period was grounded in class conflict. Viewed through the lens of party elite discourse, Schlesinger saw inter-party conflict as a clash between wealthy Whigs
and working class Democrats
." (Grynaviski) President
Andrew Jackson
strongly opposed the renewal of its charter, and built his platform for the election of 1832 around doing away with the Second Bank of the United States. Jackson's political target was Nicholas Biddle
, financier
, politician, and president of the Bank of the United States.
Apart from a general hostility to banking and the belief that specie
(gold and/or silver) were the only true monies, Jackson's reasons for opposing the renewal of the charter revolved around his belief that bestowing power and responsibility upon a single bank was the cause of inflation and other perceived evils.
During September 1833, President Jackson issued an executive order that ended the deposit of government funds into the Bank of the United States. After September 1833, these deposits were placed in the state chartered banks, commonly referred to as Jackson’s “pet banks”
. While it is true that 6 out of the 7 initial depositories were controlled by Jacksonian Democrats, the later depositories, such as the ones in North Carolina
, South Carolina
, and Michigan
, were run by managers who opposed Jacksonian politics. It is probably a misnomer
to label all the state chartered repositories “pet banks”.
Second Bank of the United States
The Second Bank of the United States was chartered in 1816, five years after the First Bank of the United States lost its own charter. The Second Bank of the United States was initially headquartered in Carpenters' Hall, Philadelphia, the same as the First Bank, and had branches throughout the...
opened in January 1817, six years after the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...
lost its charter. The Second Bank of the United States was headquartered in Carpenter's Hall, Philadelphia, the same as the First Bank, and had branches throughout the nation. The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the War of 1812
War of 1812
The War of 1812 was a military conflict fought between the forces of the United States of America and those of the British Empire. The Americans declared war in 1812 for several reasons, including trade restrictions because of Britain's ongoing war with France, impressment of American merchant...
, the U.S. experienced severe inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and had difficulty in financing military operations. Subsequently, the credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
and borrowing status of the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
was at its lowest level since its founding.
The charter of the Second Bank of the United States (B.U.S.) was for 20 years and therefore up for renewal in 1836. Its role as the depository
Depository institution
A depository institution is a financial institution in the United States that is legally allowed to accept monetary deposits from consumers...
of the federal government's revenues made it a political target of banks chartered by the individual states who objected/envied the B.U.S.'s relationship with the central government. Partisan politics came heavily into play in the debate over the renewal of the charter. "The classic statement by Arthur Schlesinger
Arthur Schlesinger
Arthur Schlesinger may refer to:*Arthur M. Schlesinger, Sr. , American historian and professor at Harvard University*Arthur M. Schlesinger, Jr. , his son, American historian, social critic and former John F. Kennedy associate...
was that the partisan politics during the Jacksonian
Jacksonian democracy
Jacksonian democracy is the political movement toward greater democracy for the common man typified by American politician Andrew Jackson and his supporters. Jackson's policies followed the era of Jeffersonian democracy which dominated the previous political era. The Democratic-Republican Party of...
period was grounded in class conflict. Viewed through the lens of party elite discourse, Schlesinger saw inter-party conflict as a clash between wealthy Whigs
Whig Party (United States)
The Whig Party was a political party of the United States during the era of Jacksonian democracy. Considered integral to the Second Party System and operating from the early 1830s to the mid-1850s, the party was formed in opposition to the policies of President Andrew Jackson and his Democratic...
and working class Democrats
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
." (Grynaviski) President
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
Andrew Jackson
Andrew Jackson
Andrew Jackson was the seventh President of the United States . Based in frontier Tennessee, Jackson was a politician and army general who defeated the Creek Indians at the Battle of Horseshoe Bend , and the British at the Battle of New Orleans...
strongly opposed the renewal of its charter, and built his platform for the election of 1832 around doing away with the Second Bank of the United States. Jackson's political target was Nicholas Biddle
Nicholas Biddle (banker)
Nicholas Biddle was an American financier who served as the president of the Second Bank of the United States.-Ancestry and early life:...
, financier
Financier
Financier is a term for a person who handles typically large sums of money, usually involving money lending, financing projects, large-scale investing, or large-scale money management. The term is French, and derives from finance or payment...
, politician, and president of the Bank of the United States.
Apart from a general hostility to banking and the belief that specie
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....
(gold and/or silver) were the only true monies, Jackson's reasons for opposing the renewal of the charter revolved around his belief that bestowing power and responsibility upon a single bank was the cause of inflation and other perceived evils.
During September 1833, President Jackson issued an executive order that ended the deposit of government funds into the Bank of the United States. After September 1833, these deposits were placed in the state chartered banks, commonly referred to as Jackson’s “pet banks”
Pet banks
Pet banks is a pejorative term for state banks selected by the U.S. Department of Treasury to receive surplus government funds in 1833. They were also named "Wildcat Banks". They were made among the big U.S...
. While it is true that 6 out of the 7 initial depositories were controlled by Jacksonian Democrats, the later depositories, such as the ones in North Carolina
North Carolina
North Carolina is a state located in the southeastern United States. The state borders South Carolina and Georgia to the south, Tennessee to the west and Virginia to the north. North Carolina contains 100 counties. Its capital is Raleigh, and its largest city is Charlotte...
, South Carolina
South Carolina
South Carolina is a state in the Deep South of the United States that borders Georgia to the south, North Carolina to the north, and the Atlantic Ocean to the east. Originally part of the Province of Carolina, the Province of South Carolina was one of the 13 colonies that declared independence...
, and Michigan
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....
, were run by managers who opposed Jacksonian politics. It is probably a misnomer
Misnomer
A misnomer is a term which suggests an interpretation that is known to be untrue. Such incorrect terms sometimes derive their names because of the form, action, or origin of the subject becoming named popularly or widely referenced—long before their true natures were known.- Sources of misnomers...
to label all the state chartered repositories “pet banks”.
See also
- Bank WarBank WarThe Bank War is the name given to the controversy over the Second Bank of the United States and the attempts to destroy it by President Andrew Jackson. At that time, it was the only nationwide bank and, along with its president Nicholas Biddle, exerted tremendous influence over the nation's...
- Hard times tokenHard times tokenHard-times tokens are large-cent-sized copper tokens, struck from about 1833 through 1843, serving as unofficial currency. These privately made pieces, comprising merchant, political and satirical pieces, were used during a time of political and financial crisis in the United States.Today,...
- History of central banking in the United StatesHistory of central banking in the United StatesThis article is about the history of central banking in the United States, from the 1790s to the present.-Bank of North America:Some Founding Fathers were strongly opposed to the formation of a central banking system; the fact that England tried to place the colonies under the monetary control of...
- Panic of 1837Panic of 1837The Panic of 1837 was a financial crisis or market correction in the United States built on a speculative fever. The end of the Second Bank of the United States had produced a period of runaway inflation, but on May 10, 1837 in New York City, every bank began to accept payment only in specie ,...
- Specie CircularSpecie CircularThe Specie Circular was an executive order issued by U.S. President Andrew Jackson in 1836 and carried out by President Martin Van Buren. It required payment for government land to be in gold and silver.-History:...