Summary
- Nicholas Biddle was a prominent banker, author, and politician who served as the president of the Second Bank of the United States (BUS) from 1823 to 1839, known for his opposition to President Andrew Jackson during the “Bank War.”
- Biddle worked to overcome public animosity toward the BUS in the 1820s and implemented a nationwide corporate lobbying campaign to preserve the Bank’s charter, which was ultimately vetoed by Jackson in 1832.
- After the expiration of the BUS charter in 1836, Biddle continued his banking career as the head of the United States Bank of Pennsylvania (BUSP), where he became involved in the southern slave economy through investments in cotton, slave mortgages, and plantation banks.
- A series of unwise investments and unscrupulous activities during the Panic of 1837 led to Biddle’s downfall, with the BUSP permanently shutting its doors in 1841, and Biddle facing lawsuits and charges of conspiracy and fraud until his death in 1844.
Nicholas Biddle (1786—1844) was a banker, author, financial theorist, editor, diplomat, and politician most famous for opposing President Andrew Jackson during the “Bank War.” He served as president of the Second Bank of the United States (BUS) from 1823 to 1839.
Early Life
Born on January 8, 1786 to an illustrious Philadelphia family with Quaker ancestry, Nicholas Biddle was surrounded by family members who valued public service and military valor. He was a child prodigy who graduated from what later became known as Princeton University at age fifteen. In 1811, he married Jane Craig and raised three children with her at the Andalusia Estate outside Philadelphia. Even before becoming the nation’s most famous banker, Biddle’s list of accomplishments was impressive. He edited the journals of the Lewis and Clark Expedition; participated in the diplomatic teams that negotiated the Louisiana Purchase, Adams-Onis Treaty, and Missouri Compromise; and served briefly in the Pennsylvania General Assembly. In 1819, President James Monroe appointed Biddle as a government director of the BUS. With the departure of South Carolinian Langdon Cheves in 1823, Biddle became the Bank’s third president.
Nicholas Biddle at the Bank of the United States
Nicholas Biddle worked diligently in the 1820s to overcome public animosity toward the Bank stemming from the Panic of 1819. He oversaw a steady reduction in the country’s public debt and implemented a swift response to a budding financial crisis in 1825. It was partly because of Biddle’s skilled management that British investors began to pour more money into the stocks and bonds that capitalized American transportation companies, banks, and municipal governments. During this time Biddle mostly rejected overt efforts to engage in partisan politics, preferring to assess loan applicants solely on their creditworthiness.
All of this changed with the election of Andrew Jackson. Although the Bank had not been a major campaign issue in the 1828 presidential election, Jackson argued in his first annual message to Congress in December 1829 that the Bank was unconstitutional and that it had failed to provide the nation with a sound currency. Biddle resolved that to preserve the life of the Bank, a proactive media campaign was in order. What he established over the next few years was one of the earliest corporate lobbies conducted on a nationwide scale.
An impressive array of branch officers, state bankers, lawmakers, intellectuals, vote counters, lawyers, and confidential agents were enlisted by Biddle to transmit pro-BUS ideas through articles, essays, pamphlets, philosophical treatises, stockholders’ reports, congressional debates, and petitions, all in a standardized campaign message that reached disparate geographical locations separated by hundreds of miles of distance. In early 1831, Biddle sent confidential agents into the state legislatures in Pennsylvania and New York, in some cases equipped with bribe money, to persuade undecided lawmakers and secure pro-BUS resolutions. After strategizing with the Bank’s stockholders, Biddle instructed his branch officers to draw up pro-BUS petitions and citizens’ memorials for presentation in Congress. Branch officers, in turn, networked with state banks to provide Biddle with local assessments of public opinion.
According to recent estimates, the BUS spent between $50,000 to $100,000 of its own money in printing orders for circulating pro-BUS media and lent about $100,000 to editors and perhaps $150,000 to $200,000 to congressmen from the start of Biddle’s campaign in early 1830 to Jackson’s veto in July 1832. Some of these loans and expenditures were issued unilaterally and secretively by Biddle. Large newspaper enterprises with nationwide subscription lists, including James Watson Webb’s New York Courier and Enquirer, Duff Green’s United States Telegraph, and Gales’s and Seaton’s National Intelligencer, were some of the most noteworthy recipients of these loans. $100,000 in 1832 would be equivalent to several million dollars today.
Defenders of the bank insisted that as long as editors and congressmen offered ample security for a loan and were not delinquent in their payments, they had as much right as any loan applicant to borrow from the bank. After all, one of the bank’s chief purposes was to operate a profitable business that could return consistent dividends to stockholders. Biddle and his allies added that the Bank’s business model also relied on cultivating a positive reputation for sound credit; a reputation that Jacksonians were deliberately trying to damage through demagogic rhetoric and carefully planned bank runs. For their part, Biddle’s opponents did not lack for well-organized political campaigns financed by public and private money. The Jacksonians had already erected a vast, nationwide patronage network of party loyalists through the Post Office, which could shape public opinion with the assistance of state banks and hard-line Jacksonian newspapers like the Globe.
On September 1, 1831, the Bank’s board gave Biddle permission to submit an application to Congress for a new 20-year charter. Accordingly, Congress passed a bill to re-charter the Bank, which Jackson famously vetoed in July 1832. The fall elections affirmed Jackson’s position with an electoral college victory of 219 to 49.
Destruction of the Second Bank of the United States
Interpreting his impressive electoral victory as a mandate destroy the “Monster Bank” once and for all, Jackson ordered the Treasury Department to remove the bank’s public (or “federal”) deposits, worth $10 million, in the fall of 1833. Biddle responded in ways that were both understandable given the Bank’s numerous public and private responsibilities—including paying off the nation’s public debt and maintaining a sound currency—and yet also vindictive. The main course he pursued was to minimize the Bank’s risks and accumulate reserves by raising interest rates. Borrowers would have to repay the Bank promptly. Individuals and financial institutions that relied directly or indirectly on the BUS for credit, especially state banks and merchants, had to adjust by tightening their own credit. In turn, the manufacturers and farmers who relied on them would have to pay up their debts immediately, scale back production, or both.
A brief but noticeable economic contraction ensued. “Biddle’s Panic,” as some historians have called it, was the BUS-induced slump that lasted from the fall of 1833 to the summer of 1834. Some evidence suggests that Biddle deliberately wished to inflict harm on the community in order to convince Americans that a national bank was indispensable to a thriving, well-regulated economy. His letters took on a more defiant tone. Jackson’s opponents were coalescing into a new political party, the Whigs, and Clay corralled the Senate into censuring Jackson for removing the public deposits—the only example of such a reprimand in U.S. history. But overall, the 1833-34 panic was just one of many examples demonstrating a talented if rash man who possessed poor political instincts. The manufactured economic crisis cost him crucial public support among merchants, farmers, conservative Jacksonians, Whigs, members of the Bank’s board, and pro-BUS governors. In April 1834 the Jacksonian House voted that the Bank “ought not to be rechartered” and that the “public deposits ought not to be restored.” Since Congress adjourned in the summer of 1834 without having passed a new charter, the bank’s board moved to resume its normal lending practices. The Bank’s 20-year charter expired without renewal in March 1836.
Cotton and Slavery
The Pennsylvania state legislature breathed new life into Biddle’s career in February 1836 when it granted a state charter to replace the expiring federal charter. The newly-minted United States Bank of Pennsylvania (BUSP) shared much in common with its predecessor, including a $35 million capital stock and much of the same personnel, but tended to take on riskier purchases as an investment bank would.
Soon, Biddle turned southward for business opportunities. Aided by a new provision in the BUSP charter he helped secure, Biddle purchased a controlling interest in the Merchants Bank of New Orleans. Census records show that many of the agents he placed in charge of this southern bank were slave owners, including Thomas Urquhart, John Minturn, and James Erwin. In 1837, Biddle ordered one of his agents to buy up large quantities of slave-grown cotton. The plan was to be inconspicuous: Biddle’s southern agents would use notes from southern state banks, not the BUSP, hold on to the cotton, and then sell it at the right time to reap the greatest profits. Discretion was necessary because the BUSP’s charter prohibited the purchase of commodities.
Several motivations figured into these uncompetitive trade practices. In addition to benefitting himself and his family, Biddle’s priority was to keep specie in the United States, which he had done on at least two occasions in the 1820s and which he equated with the national interest. Since 1836 British creditors had refused to accept foreign bills of exchange in payment for American imports. Only American specie exports would settle imbalances with Britain. Biddle knew that specie exports would lead American banks to curtail credit even further and contribute to crippling deflation. At the same time the British needed cotton to fuel their Industrial Revolution. At least initially Biddle’s efforts were successful. English buyers paid higher prices for American cotton, bringing the balance of payments between the two countries back into line.
It was, thus, after Jackson’s presidency when Biddle became a major player and investor in a region whose economy was characterized by complex networks of credit founded on the mutually reinforcing commodification of land, cotton, and slaves. Looking closely at the Bank’s financial transactions shows how Biddle functioned within—and extracted profits from — the South’s slave economy, both because slave labor gave value to the cotton in which Biddle speculated and because slave mortgages were an important component of the southern banking system that Biddle propped up. He bailed out several state banks in the South through an injection of Bank funds. He purchased large quantities of shares in plantation banks that were capitalized by slave mortgages, European investors, and lands previously occupied by Native Americans. The Union Bank of Mississippi, the Planters’ Bank of Natchez, and the Union Bank of Florida were examples.
Further evidence of the implicit desire to extend the political economy of slavery can be found in Biddle’s views on the Texas Republic. Biddle favored the immediate annexation of Texas to the United States and criticized abolitionists for their opposition. Unlike many northerners he opposed the acquisition of the Oregon Territory. In 1838, Biddle developed plans for issuing a $5 million loan to Texas in 1838, both to prop up a fledgling republic and to prevent Great Britain from gaining influence in the region. Apparently Biddle issued the loan and even purchased some of the republic’s sovereign debt. The preservation of slavery, of course, was a central contributor to whites Texans’ drive for independence from Mexico, and indeed, secession from the United States in 1861.
A series of unwise investments and unscrupulous activities during the Panic of 1837 proved to be the source of Biddle’s downfall. Millions of dollars of the Bank’s funds were tied up in real estate and internal improvement projects that had yet to profit, and heavy borrowing in Europe compounded matters. In February 1841, the BUSP permanently shut its doors. Amid the heightened economic uncertainty, debtors rushed to pay creditors, who had obligations of their own. Slaves, as highly liquid assets, were bought and sold quickly to obtain cash. The BUSP, which had lent to several of the South’s plantation banks, became one of the largest owners of plantations, slaves, and slave-grown products in Mississippi as it sought to wind up its affairs. Biddle and his colleagues, moreover, borrowed from the BUSP on their own account without operating through official channels. For the remainder of his life Biddle was plagued with lawsuits brought forth by the bank’s stockholders. He was even arrested and charged with conspiracy and fraud, though the charges were later dropped. On February 27, 1844, Biddle died at the age of fifty-eight from complications related to bronchitis and edema.
Further Reading on Nicholas Biddle
Campbell, Stephen. “Profit, Nationalism, and ‘Virgin Land.’: Nicholas Biddle and the Expansion of Cotton and Slavery, 1823—1841,” Pennsylvania Magazine of History and Biography (forthcoming 2021).
Govan, Thomas Payne. Nicholas Biddle, Nationalist and Public Banker, 1786–1844. University of Chicago Press, 1959.
Kilbourne, Richard. Slave Agriculture and Financial Markets in Antebellum America: The Bank of the United States in Mississippi, 1831—1852. Pickering & Chatto, 2006.
Lepler, Jessica M. The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis. Cambridge University Press, 2013.
Smith, Walter Buckingham. Economic Aspects of the Second Bank of the United States. Harvard University Press, 1953.