The War Against the Bank

The Second Bank of the United States was chartered in 1816 for a term of 20 years. It was to be a depository for federal funds and to pay national debts. However, it was answerable only to its directors and the stockholders and not the electorate. The central bank was supported by those involved in industrial and commercial ventures; they wanted a strong currency and control of the economy. Opponents were distrustful of the federal government. The critical question — with whom would President Jackson side?

Nicholas Biddle was running the Bank of the United States when Jackson became president in 1828. Jackson was troubled by the Bank’s constitutionality and the use of paper money in place of gold and silver, but sympathetic to supporters from the west who needed access to credit.

In 1832, Biddle’s supporters in Congress, Daniel Webster and Henry Clay, introduced Bank recharter legislation, even though the charter wasn’t due to expire for four more years. They thought Jackson could not risk losing the votes in Pennsylvania and other commercial states. Jackson reacted by saying, “The Bank is trying to kill me, Sir, but I shall kill it!” to his vice president Martin Van Buren.

Jackson vetoed the Bank Recharter Bill and was elected to a second term. Jackson also ordered the federal government's deposits removed from the Bank of the United States and placed in state or "PET" banks. Jackson was overwhelmingly elected to a second term.

There was an economic contraction at the end of 1833 and into 1834 as result of Biddle’s action to make it difficult for businesses and others to get the money they needed. The bank charter eventually expired in 1836.

Source: The War Against the Bank
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