THE WAR ON THE UNITED STATES BANK
"Nothing lacks now to complete the love-feast," wrote Isaac Hill
sardonically to Thomas H. Benton after the collapse of nullification,
"but for Jackson and Webster to solemnize the coalition [in support of
the Union] with a few mint-juleps! I think I could arrange it, if
assured of the coˆperation of yourself and Blair on our side, and Jerry
Mason and Nick Biddle on theirs. But never fear, my friend. This mixing
of oil and water is only the temporary shake-up of Nullification. Wait
till Jackson gets at the Bank again, and then the scalping-knives will
glisten once more."
The South Carolina controversy had indeed brought Jacksonians and
anti-Jacksonians together. But once the tension was relaxed, there
began the conflict of interests which the New Hampshire editor had
predicted. Men fell again into their customary political relationships;
issues that for the moment had been pushed into the
background--internal improvements, public land policy, distribution of
surplus revenue, and above all the Bank--were revived in full vigor.
Now, indeed, the President entered upon the greatest task to which he
had yet put his hand. To curb nullification was a worthy achievement.
But, after all, Congress and an essentially united nation had stood
firmly behind the Executive at every stage of that performance. To
destroy the United States Bank was a different matter, for this
institution had the full support of one of the two great parties in
which the people of the country were now grouped; Jackson's own party
was by no means a unit in opposing it; and the prestige and influence
of the Bank were such as to enable it to make a powerful fight against
any attempts to annihilate it.
The second Bank of the United States was chartered in 1816 for twenty
years, with a capital of thirty-five million dollars, one-fifth of
which had been subscribed by the Government. For some time it was not
notably successful, partly because of bad management but mainly because
of the disturbance of business which the panic of 1819 had produced.
Furthermore, its power over local banks and over the currency system
made it unpopular in the West and South, and certain States sought to
cripple it by taxing out of existence the several branches which the
board of directors voted to establish. In two notable
decisions--M'Culloch vs. Maryland in 1819 and Osborn vs. United States
Bank in 1824--the Supreme Court saved the institution by denying the
power of a State to impose taxation of the sort and by asserting
unequivocally the right of Congress to enact the legislation upon which
the Bank rested. And after Nicholas Biddle, a Philadelphia
lawyer-diplomat, succeeded Langdon Cheves as president of the Bank in
1823 an era of great prosperity set in.
The forces of opposition were never reconciled; indeed, every evidence
of the increasing strength of the Bank roused them to fresh hostility.
The verdict of the Supreme Court in support of the constitutionality of
the Act of 1816 carried conviction to few people who were not already
convinced. The restraints which the Bank imposed upon the dubious
operations of the southern and western banks were vigorously resented.
The Bank was regarded as a great financial monopoly, an "octopus," and
Biddle as an autocrat bent only on dominating the entire banking and
currency system of the country.
On Jackson's attitude toward the Bank before he became President we
have little direct information. But it is sufficiently clear that
eventually he came to share the hostile views of his Tennessee friends
and neighbors. In 1817 he refused to sign a memorial "got up by the
aristocracy of Nashville" for the establishment of a branch in that
town. When, ten years later, such a branch was installed, General
Thomas Cadwalader of Philadelphia, agent of the Bank, visited the town
to supervise the arrangements and became very friendly with the "lord
of the Hermitage." But correspondence of succeeding years, though
filled with insinuating cordiality, failed to bring out any expression
of goodwill toward the institution such as the agent manifestly
coveted.
Jackson seems to have carried to Washington in 1829 a deep distrust of
the Bank, and he was disposed to speak out boldly against it in his
inaugural address. But he was persuaded by his friends that this would
be ill-advised, and he therefore made no mention of the subject. Yet he
made no effort to conceal his attitude, for he wrote to Biddle a few
months after the inauguration that he did not believe that Congress had
power to charter a bank outside of the District of Columbia, that he
did not dislike the United States Bank more than other banks, but that
ever since he had read the history of the South Sea Bubble he had been
afraid of banks. After this confession the writer hardly needed to
confess that he was "no economist, no financier."
Most of the officers of the "mother bank" at Philadelphia and of the
branches were anti-Jackson men, and Jackson's friends put the idea into
his mind that the Bank had used its influence against him in the late
campaign. Specific charges of partizanship were brought against
Jeremiah Mason, president of the branch at Portsmouth, New Hampshire;
and although an investigation showed the accusation to be groundless,
Biddle's heated defense of the branch had no effect save to rouse the
Jacksonians to a firmer determination to compass the downfall of the
Bank.
Biddle labored manfully to stem the tide. He tried to improve his
personal relations with the President, and he even allowed Jackson men
to gain control of several of the western branches. The effort,
however, was in vain. When he thought the situation right, Biddle
brought forward a plan for a new charter which received the assent of
most of the members of the official Cabinet, as well as that of some of
the "Kitchen" group. But Jackson met the proposal with his unshakable
constitutional objections and, to Biddle's deep disappointment,
advanced in his first annual message to the formal, public assault. The
Bank's charter, he reminded Congress, would expire in 1836; request for
a new charter would probably soon be forthcoming; the matter could not
receive too early attention from the legislative branch. "Both the
constitutionality and the expediency of the law creating this bank,"
declared the President, "are well questioned by a large portion of our
fellow-citizens; and it must be admitted by all that it has failed in
the great end of establishing a uniform and sound currency." The first
part of the statement was true, but the second was distinctly unfair.
The Bank, to be sure, had not established "a uniform and sound"
currency. But it had accomplished much toward that end and was
practically the only agency that was wielding any influence in that
direction. The truth is that the more efficient the Bank proved in this
task the less popular it became among those elements of the people from
which Jackson mainly drew his strength.
Nothing came of the President's admonition except committee reports in
the two Houses, both favorable to the Bank; in fact, the Senate report
was copied almost verbatim from a statement supplied by Biddle. A year
later Jackson returned to the subject, this time with an alternative
plan for a national bank to be organized as a branch of the Treasury
and hence to have "no means to operate on the hopes, fears, or
interests of large masses of the community." In a set of autograph
notes from which the second message was prepared the existing Bank was
declared not only unconstitutional but dangerous to liberty, "because
through its officers, loans, and participation in politics it could
build up or pull down parties or men, because it created a monopoly of
the money power, because much of the stock was owned by foreigners,
because it would always support him who supported it, and because it
weakened the state and strengthened the general government." Congress
paid no attention to either criticisms or recommendations, and the
supporters of the Bank took fresh heart.
When Congress again met, in December, 1831, a presidential election was
impending and everybody was wondering what part the bank question would
play. Most Democrats were of the opinion that the subject should be
kept in the background. After all, the present bank charter had more
than four years to run, and there seemed to be no reason for injecting
so thorny an issue into the campaign. With a view to keeping the bank
authorities quiet, two members of the reconstructed Cabinet, Livingston
and McLane, entered into a modus vivendi with Biddle under which the
Administration agreed not to push the issue until after the election.
In his annual report as Secretary of the Treasury, McLane actually made
an argument for rechartering the Bank; and in his message of the 6th of
December the President said that, while he still held "the opinions
heretofore expressed in relation to the Bank as at present organized,"
he would "leave it for the present to the investigation of an
enlightened people and their representatives." He had been persuaded
that his own plan for a Bank, suggested a year earlier, was not
feasible.
Biddle now made a supreme mistake. Misled in some degree unquestionably
by the optimistic McLane, he got the idea that Jackson was weakening,
that the Democrats were afraid to take a stand on the subject until
after the election, and that now was the strategic time to strike for a
new charter. In this belief he was further encouraged by Clay, Webster,
and other leading anti-Administration men, as well as by McDuffie, a
Calhoun supporter and chairman of the Ways and Means Committee of the
House. There was small doubt that a bill for a new charter could be
carried in both branches of Congress. Jackson must either sign it,
argued Biddle's advisers, or run grave risk of losing Pennsylvania and
other commercial States whose support was necessary to his election. On
the other hand, Biddle was repeatedly warned that an act for a new
charter would be vetoed. He chose to press the issue and on January 9,
1832, the formal application of the Bank for a renewal of its charter
was presented to Congress, and within a few weeks bills to recharter
were reported in both Houses.
Realizing that defeat or even a slender victory in Congress would be
fatal, the Bank flooded Washington with lobbyists, and Biddle himself
appeared upon the scene to lead the fight. The measure was carried by
safe majorities--in the Senate, on the 11th of June, by a vote of 28 to
20, and in the House on the 3d of July, by a vote of 107 to 86. To the
dismay of the bank forces, although it ought not to have been to their
surprise, Jackson was as good as his word. On the 10th of July the bill
was vetoed. The veto message as transmitted to the Senate was probably
written by Taney, but the ideas were Jackson's--ideas which, so far as
they relate to finance and banking operations, have been properly
characterized as "in the main beneath contempt." The message, however,
was intended as a campaign document, and as such it showed great
ingenuity. It attacked the Bank as a monopoly, a "hydra of corruption,"
and an instrumentality of federal encroachment on the rights of the
States, and in a score of ways appealed to the popular distrust of
capitalistic institutions. The message acquired importance, too, from
the President's extraordinary claim to the right of judging both the
constitutionality and the expediency of proposed legislation,
independently of Congress and the Courts.
The veto plunged the Senate into days of acrid debate. Clay pronounced
Jackson's construction of the veto power "irreconcilable with the
genius of representative government." Webster declared that
responsibility for the ruin of the Bank and for the disasters that
might follow would have to be borne by the President alone. Benton and
other prominent members, however, painted Jackson as the savior of his
country; and the second vote of 22 to 19 yielded a narrower majority
for the bill than the first had done. Thus the measure perished.
The bank men received the veto with equanimity. They professed to
believe that the balderdash in which the message abounded would make
converts for their side; they even printed thirty thousand copies of
the document for circulation. Events, however, did not sustain their
optimism. In the ensuing campaign the Bank became, by its own choice,
the leading issue. The National Republicans, whose nominee was Clay,
defended the institution and attacked the veto; the Jacksonians
reiterated on the stump every charge and argument that their leader had
taught them. The verdict was decisive. Jackson received 219 and Clay 49
electoral votes.
The President was unquestionably right in interpreting his triumph as
an endorsement of the veto, and he naturally felt that the question was
settled. The officers and friends of the Bank still hoped, however, to
snatch victory from defeat. They had no expectation of converting
Jackson or of carrying a charter measure at an early date. But they
foresaw that to wind up the business of the Bank in 1836 it would be
necessary to call in loans and to withdraw a vast amount of currency
from circulation, with the result of a general disturbance, if not a
severe crippling, of business. This, they thought, would bring about an
eleventh-hour measure giving the Bank a new lease of life.
Jackson, too, realized that a sudden termination of the activities of
the Bank would derange business and produce distress, and that under
these circumstances a charter might be wrung from Congress in spite of
a veto. But he had no intention of allowing matters to come to such a
pass. His plan was rather to cut off by degrees the activities of the
Bank, until at last they could be suspended altogether without a shock.
The most obvious means of doing this was to withdraw the heavy deposits
made by the Government; and to this course the President fully
committed himself as soon as the results of the election were known. He
was impelled, further, by the conviction--notwithstanding unimpeachable
evidence to the contrary--that the Bank was insolvent, and by his
indignation at the refusal of Biddle and his associates to accept the
electoral verdict as final. "Biddle shan't have the public money to
break down the public administration with. It's settled. My mind's made
up." So the President declared to Blair early in 1833. And no one could
have any reasonable doubt that decisive action would follow threat.
It was not, however, all plain sailing. Under the terms of the charter
of 1816 public funds were to be deposited in the Bank and its branches
unless the Secretary of the Treasury should direct that they be placed
elsewhere; and such deposits elsewhere, together with actual
withdrawals, were to be reported to Congress, with reasons for such
action. McLane, the Secretary of the Treasury, was friendly toward the
Bank and could not be expected to give the necessary orders for
removal. This meant that the first step was to get a new head for the
Treasury. But McLane was too influential a man to be summarily
dismissed. Hence it was arranged that Livingston should become Minister
to France and that McLane should succeed him as Secretary of State.
The choice of the new Secretary of the Treasury would have been a
clever stroke if things had worked out as Jackson expected. The
appointee was William J. Duane, son of the editor of the Aurora, which
had long been the most popular and influential newspaper in
Pennsylvania. This State was the seat of the "mother bank" and,
although a Jackson stronghold, a cordial supporter of the proscribed
institution; so that it was well worth while to forestall criticism in
that quarter, so far as might be, by having the order for removal
issued by a Pennsylvanian. Duane, however, accepted the post rather
because he coveted office than because he supported the policy of
removal, and when the test came Jackson found to his chagrin that he
still had a Secretary who would not take the desired action. There was
nothing to do but procure another; and this time he made no mistake.
Duane, weakly protesting, was dismissed, and Roger B. Taney, the
Attorney-General, was appointed in his stead. "I am fully prepared to
go with you firmly through this business," Jackson was assured by the
new Secretary, "and to meet all its consequences."
The way was now clear, and an order was issued requiring all treasury
receipts after October 1, 1833, to be deposited in the Girard Bank of
Philadelphia and twenty-two other designated state banks. Deposits in
the United States Bank and its branches were not immediately "removed";
they were left, rather, to be withdrawn as the money was actually
needed. Nevertheless there was considerable disturbance of business,
and deputation after deputation came to the White House to ask that
Taney's order be rescinded. Jackson, however, was sure that most of the
trouble was caused by Biddle and his associates, and to all these
appeals he remained absolutely deaf. After a time he refused so much as
to see the petitioners. In his message of the 3d of December he assumed
full responsibility for the removals, defending his course mainly on
the ground that the Bank had been "actively engaged in attempting to
influence the elections of the public officers by means of its money."
From this point the question became entirely one of politics. The Bank
itself was doomed. On the one side, the National Republicans united in
the position that the Administration had been entirely in the wrong,
and that the welfare of the country demanded a great fiscal institution
of the character of the Bank. On the other side, the Democrats,
deriving, indeed, a new degree of unity from the controversy on this
issue, upheld the President's every word and act. "You may continue,"
said Benton to his fellow partizans in the Senate, "to be for a bank
and for Jackson, but you cannot be for this Bank and Jackson." Firmly
allied with the Bank interests, the National Republicans resolved to
bring all possible discomfiture upon the Administration.
The House of Representatives was controlled by the Democrats, and
little could be accomplished there. But the Senate contained not only
the three ablest anti-Jacksonians of the day--Clay, Webster,
Calhoun--but an absolute majority of anti-Administration men; and there
the attack was launched. On December 26, 1833, Clay introduced two
resolutions declaring that in the removal of the deposits the President
had "assumed upon himself authority and power not conferred by the
Constitution and laws but in derogation of both," and pronouncing
Taney's statement of reasons "unsatisfactory and insufficient." After a
stormy debate, both resolutions in slightly amended form were carried
by substantial majorities.
Jackson was not in the habit of meekly swallowing censure, and on the
15th of April he sent to the Senate a formal protest, characterizing
the action of the body as "unauthorized by the Constitution, contrary
to its spirit and to several of its express provisions," and
"subversive of that distribution of the powers of government which it
has ordained and established." Aside from a general defense of his
course, the chief point that the President made was that the
Constitution provided a procedure in cases of this kind, namely
impeachment, which alone could be properly resorted to if the
legislative branch desired to bring charges against the Executive. The
Senate was asked respectfully to spread the protest on its records.
This, however, it refused to do. On the contrary, it voted that the
right of protest could not be recognized; and it found additional
satisfaction in negativing an unusual number of the President's
nominations.
Throughout the remainder of his second Administration Jackson
maintained his hold upon the country and kept firm control in the lower
branch of Congress. Until very near the end, the Senate, however,
continued hostile. During the debate on the protest Benton served
notice that he would introduce, at each succeeding session, a motion to
expunge the resolution of censure. Such a motion was made in 1835, and
again in 1836, without result. But at last, in January, 1837, after a
debate lasting thirteen hours, the Senate adopted, by a vote of 24 to
19, a resolution meeting the Jacksonian demand.
The manuscript journal of the session of 1833-1834 was brought into the
Senate, and the secretary, in obedience to the resolution, drew black
lines around the resolution of censure, and wrote across the face
thereof, "in strong letters," the words: "Expunged by order of the
Senate, this sixteenth day of January, in the year of our Lord 1837."
Many members withdrew rather than witness the proceeding; but a crowded
gallery looked on, while Benton strengthened his supporters by
providing "an ample supply of cold hams, turkeys, rounds of beef,
pickles, wines, and cups of hot coffee" in a near-by committee-room.
Jackson gave a dinner to the "expungers" and their wives, and placed
Benton at the head of the table. That the action of the Senate was
unconstitutional interested no one save the lawyers, for the Bank was
dead. Jackson was vindicated, and the people were enthroned. π
π MacDonald, Jacksonian Democracy, p. 239.
The struggle thus brought to a triumphant close was one of the severest
in American political history. In 1836 the Bank obtained a charter from
Pennsylvania, under the name of the Bank of the United States of
Pennsylvania, and all connection between it and the Federal Government
ceased. The institution and the controversies centering about it left,
however, a deep impress upon the financial and political history of our
fifth and sixth decades. It was the bank issue, more than anything
else, that consolidated the new political parties of the period. It was
that issue that proved most conclusively the hold of Jackson upon
public opinion. And it was the destruction of the Bank that capped the
mid-century reaction against the rampant nationalism of the decade
succeeding the War of 1812. The Bank itself had been well managed,
sound, and of great service to the country. But it had also showed
strong monopolistic tendencies, and as a powerful capitalistic
organization it ran counter to the principles and prejudices which
formed the very warp and woof of Jacksonian democracy.
For more than a decade after the Bank was destroyed the United States
had a troubled financial history. The payment of the last dollar of the
national debt in 1834 gave point to a suggestion which Clay had
repeatedly offered that, as a means of avoiding an embarrassing
surplus, the proceeds of the sales of public lands should be
distributed according to population among the States. One bill on this
subject was killed by a veto in 1832, but another was finally approved
in 1836. Before distribution could be carried far, however, the country
was overtaken by the panic of 1837; and never again was there a surplus
to distribute. For seven years the funds of the Government continued to
be kept in state banks, until, in 1840, President Van Buren prevailed
upon Congress to pass a measure setting up an independent treasury
system, thereby realizing the ultimate purpose of the Jacksonians to
divorce the Government from banks of every sort. When the Whigs came
into power in 1841, they promptly abolished the independent Treasury
with a view to resurrecting the United States Bank. Tyler's vetoes,
however, frustrated their designs, and it remained for the Democrats in
1846 to revive the independent Treasury and to organize it
substantially as it operates today.