Jackson vs. National Bank Prosperity and Panic

The National Bank  Most powerful bank in the U.S. It held government funds and issued money. The President Nicholas Biddle set policies that controlled the nation’s money supply.

Jackson’s issues with the bank…  Jackson lost money in financial deals early in his career.  He thought the bank had too much power – they made loans to members of Congress. Biddle openly boasted that he could influence Congress.  He felt their lending policies favored wealthy clients and hurt the average person.

Renew the bank?  Biddle asks Congress to renew the bank’s charter in 1832 (due in 1836). He thought Jackson would support it in an election year.  Congress voted to renew the bank’s charter, but Jackson vetoed it. He claimed the bank was unconstitutional. He said the bank was a monopoly that favored the few at the expense of the many.  The Supreme Court has already ruled earlier that the bank was constitutional. But Jackson claimed elected officials had to judge the constitutionality of a law for themselves, they did not need to rely on the Supreme Court.

A voice from the past…  “It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes…Distinction in society will always exist under every just government… (B)ut when the laws undertake to…make the rich richer and the potent more powerful, the humble members of society…have a right to complain of the injustice of their Government.” Andrew Jackson, veto message, July 10, 1832.

Presidential Election 1832  Henry Clay and the National Republican Party called Jackson a tyrant. They said he wanted too much power as president.  The Democrats portrayed Jackson as defender of the people.  Jackson won the election, he took that as a sign of approval about his war on the bank.

Jackson’s war on the bank  He had govt. funds deposited in state banks, which opponents called “pet banks.”  Biddle fought back by making it harder for people to borrow money. He hoped the resulting economic troubles would force Jackson to return govt. deposits to the bank.  Instead people rallied Jackson’s position.  The bank eventually went out of business, but the economy would suffer.

Prosperity turns to Panic  During Jackson’s time in office the country prospered. People could get loans to buy public lands and the economy boomed. However “the pet banks” began issuing too much paper money. The rise in the money supply made each dollar worth less. Prices rose – Inflation (increase in prices and decrease in the value of money).  To fight inflation Jackson issued an order that required people to pay in gold or silver for public lands.

Panic of 1837  Martin Van Buren – Jackson’s vice-president was elected in 1836 because of Jackson’s popularity.  Within a few months of his election, panic spread throughout the economy.  People took their paper money to the banks to demand gold or silver. The banks ran out. The government was unable to get their money from the state banks. The banks went out of business. A depression followed.  90 Percent of factories in the East closed in Jobless workers had no way of buying food or paying rent. People went hungry. Farmers were hurt less because they could grow their own food.

Rise of the Whig Party  Senators Clay and Webster argued that the government need to help the economy. Van Buren disagreed. He believed it would improve if left alone.  Van Buren was blamed for the Panic even though he had only been in office a few weeks before it started.  Clay, Webster and other Jackson opponents formed the Whig Party, named after a British party that opposed royal power.  The Whigs chose William Henry Harrison to run for President and John Tyler as his vice. He had a strong military record and a lack of strong political views.  The election of 1840 became a campaign of personalities. They portrayed Harrison as a westerner and of the common man and Van Buren as wealthy. Harrison won.  Harrison spoke for 2 hours in the rain at his inauguration. He developed a cold, then pneumonia. He died a month after being inaugurated. Vice-President Tyler became President.