The Second Bank of the United States and the two term presidency of Andrew Jackson present one of the first major battles between populist interests and the elites within American society. The Second Bank was chartered by the federal government in 1816 to act as the only financial institution to function in all of the American states. Its charter members were elected from a larger group of public figures and a smaller group of banking and political elites in private, “back room” meetings. While the idea of the Bank was sophisticated and along the lines of Hamiltonian fiscal policy, it was also controversial in the west and the south because banks were seen as evil and consolidation of political power was seen as antithetical to the American experience.
Nicholas Biddle was president of the Bank during the Jacksonian era and understood not only the role of the Bank in national politics but what its purpose should be in national fiscal policy. This made Biddle appear arrogant and egotistical but what truly concerned the common person about the Bank was its increasing politicization. Biddle retained prominent lawyer and politician Daniel Webster as legal counsel and the Bank supporters were largely in favor of John Quincy Adams for president in 1824 and 1828. This frustrated private bankers at the state and local level who resented the monopolistic control over major financial deals by the federal government and the Second Bank of the United States. The Bank also provided fuel to the fire for the rise of the Democratic Party and their first standard bearer, General Andrew Jackson.
Jackson, maligned by the “corrupt bargain” and Adams’ election in 1824, was a Westerner who was burnt by bankers who mishandled loans and nearly bankrupt the war hero upon his return to Tennessee. His anger at the Bank and his populist message were enough to defeat Adams in 1828 and Jackson used the Bank issue to rally support for his 1832 re-election bid. In particular, he used the actions of his presidential foe, Henry Clay, to sink the efforts of the Bank to expand the institution’s influence. Clay, as Speaker of the House, tried to get the Bank’s charter renewed for another four years and secure the Bank’s role in American finances for years to come. However, Jackson was infuriated by Clay’s actions and vowed to veto the “Hydra” Bank bill before it could sink its teeth into small communities around the country. The rational was that the Bank was unconstitutional in its breadth of influence and that it amounted to a government sponsored monopoly. Jackson went through three Treasury secretaries before getting the policy he wanted and received government censure for his actions against the Bank, but this was later expunged. There was plenty of support for the veto in Congress and the public and he easily won re-election in 1832.
The Bank of the United States died a slow death after Jackson’s veto. The economic viability of the Bank was made marginal after Jackson’s re-election proved that his populist message was far more prevalent than concern over a sound, federal banking system. Nicholas Biddle called for repayment of loans to the bank from throughout the country but the loans were not reconciled and the Bank slowly dwindled to a state bank for Pennsylvania. Jackson won this particular battle but the connection between the Bank’s death and the Panic of 1837 is fairly direct, as many of the smaller banks favored by Jackson went belly up when the economy turned.