The War Against the Bank

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In 1816, the Second Bank of the United States was chartered with a twenty year term. This time limitation was but one consequence of the controversiality of the bank.

The new bank was the successor of the first national bank of the US. This first bank was dissolved in 1811 when Congress refused to renew its charter. It being a source of controversiality, Congress decided that it did not need the bank. After the war of 1812, however, Congress realized that a national bank could be used as a source of repairing an economy wounded by the war. Additionally, they felt that the bank could be used as funding in the event of another war.

On January 1, 1817, the bank opened its doors for business. It ran for 16 controversial years before applying early for recharter. However, as the bank attempted to push its recharter through congress, it was vetoed by President Andrew Jackson- a strong opponent of the bank. Jackson believed that the bank was "unauthorized by the Constitution, subversive to the rights of States, and dangerous to the liberties of the people."

Upon reelection, Jackson took further steps to take power away from the National Bank. He announced that the federal government would no longer deposit its money in the bank, but instead deposit money in state banks. Jackson, being a popularly supported president, managed to convince many Americans that the bank was bad for the country.

In 1836, the bank closed its doors for good, leading to an economic recession.

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(please click to enlarge.)

Why was President Andrew Jackson so vehemently against the bank?

President Jackson was against the National Bank for several reasons.

external image 220px-Andrew_Jackson_Daguerrotype-crop.jpgFirst, Jackson had run into many financial problems in his past as a result of the National Bank. Jackson often got involved with speculation. In 1795, he sold sixty-eight thousand acres of land to a man named David Allison. He accepted promissory notes (documents containing a promise to pay a certain amount of money to a specific person at a given date or on demand) from Allison as payment. Jackson then used these promissory notes to secure purchase of supplies for his trading post. However, Allison went bankrupt, and could not pay the sums he promised to pay in his promissory notes. It took Jackson over a decade to become financially secure again. According to John Steele Gordon, this event left Jackson with “a lifelong horror of debt and debt’s various instrumentalities.” Jackson’s hatred for the National Bank can be explained, in part, by this history.

Another reason for Andrew Jackson’s hatred of the bank was his position on states’ rights. Jackson believed that states could be trusted with a lot more power than the federal government. Additionally, he believed that the National Bank centralized financial might, leading to a monopoly on fiscal policy. This would jeopardize economic stability. Furthermore, the bank was not governed by any government official.

Due to personal history and politics, Jackson and the National Bank were like oil and water.

Bank Wars: A Recurring Theme in American History

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The Bank War over the Second National Bank is but one battle in the annuls of history. Throughout American history, there
have been a multitude of battles over the economic system and the role of the American banks. The banking system has been fought over throughout history, and is a major component of the theme of Labor, Industry, and Economy. The banking system continues to be a major source of sectionalism to this day, as factions of the nation argue over how the banks and the economy should be handled.

The following series of videos provides an excellent background and puts the fight over the Second National Bank in context. It also explains the significance of a central bank, and the impact of the banks on the public.

The Truth About Banks, pt 1

The Truth About Banks, pt 2

The Truth About Banks, pt 3

Obviously, this video makes some very disillusioning claims. Feel free to leave comments and discussion below.

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