RESEARCH QUESTION: Why was president Andrew Jackson opposed to the national bank, and why did he destroy it?
The legitimacy of President Jackson’s reaction 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. Jackson’s destruction of the bank was necessary because it was unconstitutional. Congress didn’t have the right to create such a bank. The Bank favored Northeastern states over southern and western states. I will go in depth to his core beliefs of why he hated banks in general. Part B: Summary of evidence 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 banknotes 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 US. Because of the use of various banknotes, changing 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 coins in return. 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 banknotes. 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 eventually 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 banknotes 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 came from his near ruin as a businessman (land speculator,