Jackson's Anti Bank Views example essay topic

The validity of President Andrew Jackson's response to the Bank War issue has been contradicted by many, but his reasoning was supported by fact and inevitably beneficial to the country. Jackson's primary involvement with the Second Bank of the United States arose during the suggested governmental re-chartering of the institution. It was during this period that the necessity and value of the Bank's services were questioned. The United States government in 1816 chartered the Second Bank of the United States. It had a 20-year charter, which was to expire in 1836.

Despite this, the Bank was privately owned and during the age of Jackson, the president was Nicholas Biddle. The Bank was large in comparison to other banks, being responsible for 15-20% of bank loans in the United States and accounting for 40% of the bank notes in circulation. Also, the Bank held a specie reserve of 50% of the value of its notes, when normally other banks only had a specie reserve of 10-25% (Davis 1). In addition to the powerful coordination the Bank possessed, it influenced interest rates for loans to the working class and the rate of inflation in the nation. Because of the use of various bank notes, variegating from bank to bank due to the lack of national currency and mixture of specie, people trusted that each bank would be able to "cash in" their bank note for specie. This did not always hold true, but the Second Bank of the United States was the most trusted of the banks to supply specie in exchange for their bank notes.

Because of this most people, in order to protect themselves from losing money, would exchange state bank notes for notes issued by the Second Bank. However, this meant that the Second Bank could threaten the state banks by demanding more gold, which might cause for their bankruptcy. As a result, the state banks were pressured into not being able to over issue their bank notes, which inevitably decreased their importance and power in the nation by decreasing the circulation of their bank notes. This was the greatest argument posed by the leaders of the state banks against the Second Bank of the United States (Roughshod 2). Despite the oncoming bankruptcy of the state banks, prior to Jackson's administration the government did not show much support in their survival.

In fact, the government played a large role in the functioning of the Second Bank. Firstly, although it had been a privately owned institution, Congress and the President supervised its operations (Davis 1). Secondly, out of the twenty-five stockholders of the Bank, five of these were government owned. Thus showing support of the Bank by subscribing to one-fifth of its $35 million (Schlesinger 74). In addition, among the Bank's functions was to hold all government money, sell all government bonds, and make commercial loans.

However, no voters could dictate its policies or reign in its power, due to its privately owned status (Roughshod 2). Finally, the government also allowed bank notes to be used as payment for taxes. With the Jackson administration into office, the Second Bank of the United States became threatened. President Jackson had a private prejudice that wasn't party policy (Schlesinger 74).

He hated banks, all banks, but he especially hated the Second Bank of the United States. He viewed all bankers as "little more than parasites who preyed upon the poor and honest working people of America" (Roughshod 2). The reason for his hatred most likely stemmed from his near ruin as a businessman (land speculator, merchant, and slaver trader) when in the 1790's he accepted some bank notes that turned out to be worthless. From then on, he never trusted anything but hard money, or specie (Roughshod 2). Jackson was a supporter of the working class; he was viewed as a true liberal democratic. The Second Bank appeared to be monopolistic and aristocratic.

This did not coincide with Jackson's views on politics, economics, and society. Jackson did not support the government's prior involvement with the Bank. Firstly, because a monopoly is unconstitutional, any government support to such an institution is contradictory to the government's base, the constitution. Secondly, he also found it unconstitutional that the government was chartering such an institution, thus creating a bank, this right is also not given to the government in the constitution.

The Jacksonians were strict constructionists, believing in a strict interpretation of the constitution, which is why he and his ideological followers had such anguish towards the bank on constitutional terms. In addition, the government's acceptance of bank notes for taxes also did not coincide with the Jackson's anti- paper money views. Evidence of Jackson's anti- Bank views can be found in his veto message, which vetoed the re-charter of the Second Bank. "It (the Second Bank) enjoys an exclusive privilege of banking under the authority of the General Government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange" (Hofstadte 291). In his veto message, he also makes it a point to discuss how a limited portion of the nation's society is benefiting from the Bank. "Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent...

If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full value, and if gratuities must be made once in fifteen or twenty years let them not be bestowed on the subjects of a foreign government nor upon a designated and favored class of men in our country... to confine our favors to our fellow-citizens, and let each in his turn enjoy an opportunity to profit by our bounty" (Hofstadte 292). In one of the ending paragraphs of his veto message he also describes how each man should not be discriminated based on class because all men alike should be able to enjoy "the gifts of Heaven". In addition to his anti- monopolistic and pro- egalitarian views in his veto message, he also brings up the point that many of the stockholders were foreign and the potential danger this posed. .".. in the hands of a self-elected directory whose interests are identified with those of the foreign stockholders, will there not be cause to tremble for the purity of our elections in peace and for the independence of our country in war? ... Should the stock of the bank principally pass into the hands of a foreign country, and we should unfortunately become involved with that country, what would be our condition?" (Hofstadte 293). Some, however, believed "on the whole, the bank had been managed honestly and had performed useful service" (Adams 179).

For example, in Daniel Webster's speech on Jackson's veto bill from July 11, 1832 delivered to the Senate the day after the veto message was sent to Congress, he defends the effectiveness of the Second Bank. He was among the group of people who believed: "In his veto Jackson expressed views on the Constitution were not only absurd but dangerous" (Adams 179). His first attack is on Jackson's statements of mono poly. "It commences by an inflamed statement of what it calls the 'favor' bestowed upon the original bank by government, or, indeed, as it is phrased, the 'monopoly of its favor and support'; and through the whole message all possible changes are rung on the 'gratuity', the 'exclusive privileges', and 'monopoly', of the bank charter" (Hofstadte 296). His next notion defends the Bank in supporting aristocracy or not allowing the working class to profit by their institution. "What fair foundation is there for this mark?

The stockholders received there charter, not gratuitously, but for a valuable consideration in money, prescribed by Congress, and actually paid. At some times the stock has been above par, at other times below par, according to prudence in management, or according to commercial occurrences " (Hofstadte 297). Finally, his final argument opposes Jackson's notion of foreign dangers through the Bank. Webster describes that its not just the Second Bank which allows for foreign subscription, but also the state banks allow for this too, so why is only the Second Bank being charged and confronted about these engagements? He also makes the importance and power of a foreign stockholder clear in his speech. He says: "The foreign stockholder cannot be a director.

He has no voice even in the choice of directors. His money is placed entirely in the management of the directors appointed by the President and the Senate and the American stockholders" (Hofstadte 299). He then continues on to answer the question "What would be our condition?" from Jackson's veto message. He replies: "Why, Sir, it is plain that all the advantages would be on our side. The bank would still be our institution, subject to our own laws, and all its directors elected by ourselves; and our means would be enhanced, not by the confiscation and plunder, but by the proper use, of the foreign capitol in our hands" (Hofstadte 299).

It is in this statement, however, that if the Bank is to be believed as unconstitutional anyway, by the Jacksonians, who is to say that the institution will be "subject to our own law"? These are the threats that Jackson saw, an unconstitutional institution claiming its abidance by the law and constitutionality. The once lack of support by the government towards the state banks, was also altered once Jackson was reelected. He directed Secretary of the Treasury William Duane to take all government deposits from the Second Bank and deposit them in the favored state banks, or "pet" banks.

Duane refused to do so, so Jackson replaced him with Attorney General Roger Taney. Senators, like Clay, Webster, and Calhoun opposed this, and were furious at the damage done to the institution they so strongly supported, but the House approved the move regardless (Adams 181). Jackson not only expressed his opposition of the Second Bank and favoritism to the "pet" banks, but also established his presidential power and opinion by firing Duane (Roughshod 2). From these two different views, the pro- bank, led by Webster, Clay, and Calhoun and anti- bank views, led by the Jacksonians, other groups also were formed.

All of the supporters for the bank, were also supporters of aristocracy, the main group was the political party known as the Whigs, who were political enemies of Jackson. From the Jacksonian viewpoint came groups formed by the working class, mainly liberals, free bankers, and the hard money supporters. The liberals opposed the Bank strictly on moral grounds, that it was illegitimate for any government intervention in the economy or in society exceeding its limits. The liberals were also associated with the free bankers, who were in favor of a paper currency based on a fractional reserve system. Their argument stated that the banks regulatory function wasn't necessary or efficient, because in an unregulated financial free system competition would ensure that the public receives security against fraud.

They were also believers of the monopolistic privileges that the Second Bank possessed. The hard money supporters were anti- monopolistic, anti- regulatory banking, and anti- hard money. They mainly saw paper money and the bank's involvement with it as a way for employers and rich financiers to trick working men and farmers out of their earnings and money. Jackson was also hard money supporter and he states that the value of paper is liable to great and sudden fluctuations and cannot be relied upon to keep the medium of exchange uniform in amount (Davis 2-3). The Bank was destroyed; Jackson promptly made the decision to replace all bank notes with hard money. He did this by first prohibiting banks that received federal deposits to refrain from issuing bills less than 5$.

Then in the Specie Circular of 1836, Jackson prohibited payment for public lands in anything but gold and silver. And in that same year, to add to the anti- bank actions, Congress voted to deprive "pet" banks of federal deposits (Lehrman 1). But there were also new problems, which came into effect after the downfall of the Second Bank and the anti- bank actions taken. Many commend Jackson for the inflationary boom and than recession between 1834 to 1837. They believe by destroying the Second Bank, a restraint was taken off the fractional reserve and led, post-1834, to an increase in the supply of money, which led to a boom. However, many blame Jackson for the Panic of 1837 because there was no regulation in the fractional reserve during the new banking stage that was taken, hence came a low reserve ratio, since the banking system was unstable and so it experienced frequent collapses (Davis 4).

In retrospect, it is easy to understand why Jackson took the action he did in dismantling the Second Bank of the United States. However, there is more complication in analyzing its benefits, mainly because we have our own views on banking, and understanding why anyone wouldn't want a banking system becomes difficult to understand. In reference to the Panic of 1837, that too is also difficult to relate to Jackson's actions, since other factors occurring during the post- 1834 time period also affected the panic and not just the down fall of the Second Bank. Therefore, Jackson's anti- bank views were not simply based on personal prejudice, the Second Bank had many questionable principles that had to be terminated.

Bibliography

1) Adams, James Trus low. The March of Democracy: Vol. II A Half-Century of Expansion. New York: Charles Scribner's Sons, 1933.
2) Davis, Gareth. The Destruction of the Second Bank of the United States Rationale and Effects. web) The First Roughshod President: The Jackson Presidency: Domestic Affairs. web Domestic Affairs. htm 4) The Gilder Lehrman Institute of American History. The Bank War. 2001.
web display. cf m? HHI D = 594 5) Hofstadte, Richard. Vol. II Great Issues In American History. New York: Vintage Books, 1958.
6) Schlesinger, Arthur M. The Age of Jackson. Boston: Brown and Company, 1953.