Now and again when reading biographies or histories of the early 19th century in the U.S., I’ve run across the controversy over the Bank of the United States, along with how Jackson opposed it, others favoured it, major political issue, etc.
However, lacking any knowledge of economic history, I’ve never understood why the Bank was such a big deal. Was it like a central bank? why did it arouse such passions?
The Second Bank of the United States held the deposits of the federal government, handled interstate transfers of federal funds, and handled federal payments. It also could issue bank notes and had power to oversee and support state banks, by redeeming state banknotes. It also served as a lender of last resort.
Its supporters said that it provided stability to the currency and encouraged state banks to keep enough of a currency reserve to support their depositors.
Its opponents said that it was an unneccesary and unconstitutional regulation on the banking industry. They said it was monopolistic hurt competition. Other opponents said that it promoted paper money, and that it, and banks in general led to currency instability.
Captain Amazing has the right of it. But on a macroscope is was simply state rights versus federal rights. Almost any major controversy until the end of the Civil War had this at the core.
There were two Banks of the United States?
Yep. The first was set up in 1793, I think, and lasted till its charter exprired in 1803. The second bank had a 20 year charter, and was set up in the 1810’s. That was the bank Jackson didn’t like, and whose charter expired after Jackson vetoed the bill that would have extended it.
Jackson’s veto of the rechartering of the 2nd BofUS led to the only time the Senate has formally censured the president. Henry Clay was so pissed off at Jackson’s veto that he got the Senate to pass a censure resolution.
A few years later, once Jackson’s supporters had a majority, the censure was reversed, even to the extent that the Senate’s secretary went back to the old Senate journal and crossed out the entry for it.
The first Bank of the United States was Alexander Hamilton’s creation. It was widely opposed by many for pretty much the same reasons the second bank faced.
The SBUS sounds a lot like the Federal Reserve (founded 1913); what’s the difference, and how did the US economy work in the meantime?
Nitpick on dates. The first (" Hamilton’s") Bank was chartered for 20 years by Congress in 1791. It expired in 1811, and its non-existence was a hindrance to paying for the War of 1812.
Then, in 1816, the Second Bank was established by Congress, partly so as to avoid the financing problems of the previous five years. It was crucial in the nation’s westward, cross-Appalachian expansion.
The BUS then came up for re-charter in 1836, during Jackson’s term, but as early as 1832 Clay wanted to use re-chartering as a campaign point in his run against Jackson for the presidency (If Jackson vetoed it, he would alienate big east moneymen; if he signed it, he would lose hsi popular unwashed constituency). But it all backfired on Clay, as the sentiment against the big money institutions of the “East” turned out to be widespread (forerunner of America’s nativism) and Jackson’s opposition to the Bank helped him sweep in to a second term. Jackson vetoed the re-charter, but still had to deal with a resentful Biddle at the Bank until 1836, the expiration date, as well as with related economic problems like the Panic of 1837.
Maybe someone else can fill us in on what happened after that.
After Jackson effectively killed the 2nd BUS, the Panic of 1837 ensued. However, all of the heat ended up falling on Jackson’s successor, Martin Van Buren.
Van Buren was sort of like Hoover, he came into an office at the beginning of a down cycle that was caused by his more popular predecessor’s policies.
When Van Buren ran for re-election in 1840, he was spanked by William Henry Harrison in what marked the first presidential campaign that somewhat resembled today’s, like advertising.
And as we know, Harrison died after a month in office and he was succeeded by John Tyler, who was a Whig (Harrison’s party) in name only. He was really a dissatisfied Democrat. Once Tyler became president, Clay thought he would be easy to manipulate. He was wrong.
Clay pushed for the reinstantment of the BUS. Tyler vetoed it and Clay formally read Tyler out of the Whig Party and everyone, except Daniel Webster, resigned from Tyler’s Cabinet. Webster resigned later as he was involved in some negotiations at the time.
In those days bank notes were issued by state chartered banks and their value declined the further you were from the state of issue. Since this was a serious problem for interstate commerce, it was pretty easy to justify a national bank, at least constitutionally. Of course, as already mentioned, states-rightists didn’t like it. When the US finally did get to issue a national currency, they destroyed state chartered banknotes by the simple method of putting a tax on every transaction that used state banknotes. I assume this enraged states-rightists.
Both the First Bank of the United States as well as the Second Bank of the United States are in Philadelphia, as part of Independence National Historical Park. The First Bank is generally closed to the public except for special occasions.
However, the Second Bank houses the Park’s Portrait Gallery and worth a look. If I remember correctly, the main gallery to the left as you enter the building has a magnificent Waterford Crystal chandelier, while the main banking room has the largest brick barrel-valuted ceiling in the [USA?, world?] The brain fades.
Oh, yes. The Second Bank is haunted. There is a particular gallery there where no onw wants to be in at any time. If you go there, find a ranger who’s been in the park for a while (years). The story is fascinating.