Andrew Jackson did not trust the Second Bank of the United States. He believed it gave too much power to a small group of wealthy people and did not answer to the voters. Jackson also disliked paper money and had bad personal experiences with debt earlier in his life. In 1832, when Congress passed a bill to renew the bank’s charter, Jackson vetoed it. He argued that the bank was dangerous to democracy. After he was reelected, he pulled government money out of the bank and placed it in state banks, which became known as “pet banks.”
Jackson’s decision affected many groups. Wealthy merchants, bankers, and manufacturers in the North worried that without a national bank, the economy would be unstable. Farmers and settlers in the West, however, celebrated the change. They wanted easier credit and thought the bank had favored the rich. The pet banks gained new power and influence since they now held federal funds. This made them important in their regions and tied them closely to Jackson and his allies.
The results were uneven. In the short term, money was easier to borrow, especially for buying land. Land sales rose quickly, and the federal government even had a surplus of money by 1836. But many state banks made risky loans and printed too much paper money. Because there was no central bank to keep control, the financial system became shaky. Prices for land and goods climbed and then suddenly dropped.
In 1837, the economy collapsed. Many banks could not exchange paper notes for gold and silver, and people lost trust in them. Businesses closed, workers lost jobs, and farmers could not pay their debts. This crisis became known as the Panic of 1837. It lasted for years and caused great hardship across the country. The Bank War showed that destroying the national bank helped some groups in the short run, but it also led to instability that hurt farmers, workers, and businesses when the economy fell apart.
