Pet banks
Encyclopedia
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. bank when President
Andrew Jackson
vetoed the recharter for the Second Bank of the United States
, proposed by Daniel Webster and Henry Clay four years before the recharter was due. Clay intended to use the rechartering of the bank as a topic in the upcoming election of 1832. The charter for the Second Bank of the United States, which was headed by Nicholas Biddle, was for a period of twenty years beginning January 1816, but Jackson's distrust of the national banking system (which he claimed to be unconstitutional) led to Biddle's proposal to recharter early, and the beginning of the Bank War
. Jackson cited four reasons for vetoing the recharter, each degrading the Second Bank of the United States in falsified claims of it holding an exorbitant amount of power.
The term implied that the state banks were controlled by Jackson. By 1833 there were 23 "pet banks" or state banks with US Treasury funds . The term gained currency because most of the banks were chosen not because of monetary fitness but on the basis of the spoils system
, which rewarded political allies of Andrew Jackson
.
Most pet banks eventually lost money and failed. The Pet Banks and smaller "wildcat" banks flooded the country with paper currency. Because this money became so unreliable, Jackson issued the Specie Circular
, which required all public lands to be purchased with gold and/or silver. This contributed to the Panic of 1837
where there was a major dip in the economy due to the increased debt created by this banking system .
Pejorative
Pejoratives , including name slurs, are words or grammatical forms that connote negativity and express contempt or distaste. A term can be regarded as pejorative in some social groups but not in others, e.g., hacker is a term used for computer criminals as well as quick and clever computer experts...
term for state banks selected by the U.S. Department of Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
to receive surplus government funds in 1833. They were also named "Wildcat Banks". They were made among the big U.S. bank when 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...
vetoed the recharter for the Second Bank of the United States
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...
, proposed by Daniel Webster and Henry Clay four years before the recharter was due. Clay intended to use the rechartering of the bank as a topic in the upcoming election of 1832. The charter for the Second Bank of the United States, which was headed by Nicholas Biddle, was for a period of twenty years beginning January 1816, but Jackson's distrust of the national banking system (which he claimed to be unconstitutional) led to Biddle's proposal to recharter early, and the beginning of the Bank War
Bank War
The 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...
. Jackson cited four reasons for vetoing the recharter, each degrading the Second Bank of the United States in falsified claims of it holding an exorbitant amount of power.
The term implied that the state banks were controlled by Jackson. By 1833 there were 23 "pet banks" or state banks with US Treasury funds . The term gained currency because most of the banks were chosen not because of monetary fitness but on the basis of the spoils system
Spoils system
In the politics of the United States, a spoil system is a practice where a political party, after winning an election, gives government jobs to its voters as a reward for working toward victory, and as an incentive to keep working for the party—as opposed to a system of awarding offices on the...
, which rewarded political allies of 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...
.
Most pet banks eventually lost money and failed. The Pet Banks and smaller "wildcat" banks flooded the country with paper currency. Because this money became so unreliable, Jackson issued the Specie Circular
Specie Circular
The 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:...
, which required all public lands to be purchased with gold and/or silver. This contributed to the Panic of 1837
Panic of 1837
The 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 ,...
where there was a major dip in the economy due to the increased debt created by this banking system .