Jackson and His Pet Banks

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    President Andrew Jackson is an interesting figure to those who fight again centralized banking because of his success in bringing an end to the Second Bank of the United States. However, what were Jackson’s primary motivations for “killing” the bank? Were they based in sound economic principles or merely a timely political fight? If it is the former, why did Jackson end the BUS only to establish a corrupt system of pet banks? Did he not know that such a system would lead to economic trouble? Should Jackson be lauded or scorned for these actions?


    The first thing to note about this is that the law chartering the Second Bank of the United States required the secretary of the treasury to deposit federal tax revenue in the B.U.S. Jackson’s removal was thus in one sense illegal.

    On the other hand, as Jackson made clear in his Bank Bill Veto Message (1832), he did not grant the validity of the Supreme Court’s decision in _McCulloch v. Maryland_ (1819) beyond the case at hand. In other words, although McCulloch won, Jackson denied that the Court’s decision bound him. Since he held that the B.U.S.’s charter was unconstitutional, he did not think he had to follow the law granting that charter.

    In general, Jackson was prone to do what personal animus drove him to do. Thus, for example, he came down hard on South Carolina in the Nullification Crisis even though neighboring Georgia was simultaneously nullifying the Supreme Court’s pronouncements concerning the rights of Indians in Georgia. Why? Because Martin Van Buren had just disclosed to him that Vice President John C. Calhoun of South Carolina had as secretary of war in 1817 called for then-General Jackson to be relieved of his command. At least, that’s how I read it.

    Essentially, Jackson turned to the pet banks because he had to do something with the federal tax revenue, and he hadn’t thought out the problem before he removed the deposits. For a fuller account of this imbroglio, see:

    Kevin R. C. Gutzman, “Andrew Jackson’s War Against the Second Bank of the United States,” in _Conflicts in American History, Volume II: The Early Republic Era, 1783-1860_, ed. C. Brid Nicholson (Bruccoli Clark Layman, 2010), 212-36.


    And, don’t forget that Nicolas Biddle’s–the president of the B.U.S.–chief ally was Henry Clay. Clay, of course, spread the rumors during the 1828 campaign that Jackson’s wife Rachel was a bigamist because she was still technically married to her first husband when she married Old Hickory. She died of a heart attack before Jackson took office and Jackson never forgave Clay for starting those rumors. Clay also censured Jackson in the Congress for his actions in Florida after the War of 1812. So, in short, Jackson’s move was not ideological. It was personal.

    David Crockett brought up the fact that Jackson was at one time inclined to support the Whig economic program and then did an about face when Jackson was running for Senate. In terms of politics, Jackson always did what was best for Jackson and his personal vendettas.

    Jackson did the right thing in declaring the Bank unconstitutional, but his policies after the fact were a disaster.


    Scott Trask has a paper on this: http://mises.org/journals/scholar/trask1.pdf

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