The Bank War

The Bank War was a fight over the continued existence of the Second Bank of the United States (BUS), waged between banking opponents led by Andrew Jackson and his allies, and banking supporters, led by BUS president Nicholas Biddle and key congressional figures, most notably Henry Clay and Daniel Webster. Ostensibly a struggle over the future of the nation’s economy, the most significant impacts of the Bank War were actually political, producing the most impactful political debate of the antebellum period outside of the slavery issue. The war spanned most of Jackson’s presidency (1829-1837) with the most intense moments occurring between 1831-1835.

While the economic impact of the Bank War is open to debate, its political impact is undeniable. The conflict ushered in the second party system which formed the country’s political structure for next two decades. Additionally, the manner in which Jackson waged the Bank War forever changed the presidency, creating a more intimate connection between the office and the people while also giving it a greater level of power.

Prelude to the Bank War

The Second BUS was granted a twenty-year charter in 1816 and replaced Alexander Hamilton’s First BUS which was allowed to expire upon the termination of its charter in 1811. Fallout from the War of 1812 made clear that the country needed a central banking authority to manage the nation’s finances. The BUS served as the government’s fiscal agent, responsible for collecting payments due to the government and dispersing government funds to cover expenses, such as pension payments to veterans. Therefore, the BUS became the depository for government funds. Additionally, the BUS was responsible for establishing a uniform currency while simultaneously reigning in the behavior of state banks that over-issued their bank notes and engaged in questionable lending policies.

The BUS was not solely a government enterprise; it was also a private commercial venture with the goal, like all commercial ventures, to generate profit for its investors. This mixing of public responsibility with private gain, however, did not sit well with Americans who already distrusted banks in general. These Americans were especially anxious during the Bank’s early years, when it engaged in the wildcat banking practices it was created to regulate. The last straw for many, was when the country plunged into a depression in 1819. Although the BUS didn’t cause the crisis, many people viewed its presence as a contributing factor.

In the years after, the Bank took on a different image under the leadership of Nicholas Biddle, who took over as BUS president in 1823. Under Biddle, the BUS was able to fulfill its mission of providing a safe and uniform national currency while driving most state bank currencies out of circulation. Biddle also restored the regulatory function of the BUS, effectively keeping state bank lending under control. By the time Andrew Jackson assumed the presidency in 1829, the Second BUS was popular among a large segment of the population including business-oriented northerners and western land speculators who benefited from ready access to credit. The BUS had also become the regulator of the nation’s currency, becoming a fixture, and some would argue, a necessity for the country. However, the Bank’s critics still lingered. The most prominent among those who opposed the BUS was soon-to-be-president, Andrew Jackson.

The Opposing Sides

Although Jackson disliked the BUS, it was not clear upon taking office that he aimed to destroy it. Jackson’s disdain for the Bank can be attributed to several factors. For one, Jackson sustained financial losses more than once due to paper money depreciation, leading to a general distrust of paper money and the banks that promoted its use. Second, Jackson grew fearful of the preponderance of British investors in BUS stock, worrying that British influence over the Bank, and by extension the nation’s economic system, would restore the crown’s authority over its former colonies. Lastly, and most importantly, Jackson envisioned an egalitarian society in which all (white men) had the opportunity to succeed on the sweat of their own brow; the BUS bestowed special privileges on a small, and in the president’s estimation, undeserving group who contributed nothing of material benefit to society. The BUS wielded far too much power and was therefore a threat to the peoples’ liberties and Jackson’s own authority. When Jackson heard rumors that the Bank had employed its vast resources in an attempt to defeat him and his supporters in the 1828 elections, Jackson focused on destroying the BUS and its president, Nicholas Biddle.

Waging war against an institution as powerful as the BUS would not be easy. Jackson needed a band of loyal soldiers to take the monster Bank head on. Because Jackson’s cabinet members were generally friendly to the Bank, he had to look beyond his official cabinet.. Jackson found only one avowed BUS opponent — his attorney general Roger B. Taney — among his cabinet members. To fight the BUS, Jackson mostly relied on the informal group of advisors and allies who helped him shape public policy known as the Kitchen Cabinet. These men, most conspicuously newspaper editors Francis P. Blair and Amos Kendall, worked closely with Jackson and Taney to craft anti-Bank messages for public consumption.

Indeed, Jackson’s official news organ, the Washington Globe — established in large part because of the Bank War — was critical in disseminating the administration’s anti-Bank stance to garner public support. Jackson also needed congressional backing to effectively fight the BUS, counting on men such as James K. Polk, C.C. Cambreleng, and Andrew Stevenson in the House and Thomas Hart Benton and Isaac Hill in the Senate to push the anti-Bank platform on the national stage. Jackson also received aid from those not necessarily connected with his administration, most notably William M. Gouge, whose anti-bank manifesto published in 1833 made perhaps the most convincing argument for abolishing the central banking system.

The Commencement of Hostilities

Trouble for Biddle and the BUS began almost immediately after Jackson took office. High level members of Jackson’s administration pressed Biddle to investigate charges of electioneering by various BUS branches, notably Louisville, Portsmouth and New Orleans, but the sensitive Biddle was far from cooperative. Unwilling to accept his bank was guilty of wrongdoing, Biddle conducted sham investigations to placate the administration. For Jackson, Biddle’s evasiveness only confirmed his preconception that the BUS was a corrupt monster meddling in politics where it did not belong and controlled by its equally corrupt president.

What would later be remembered as the Bank War began with Jackson’s first annual message to Congress, delivered in December 1829. The Bank’s charter was set to expire in 1836 but by the time Jackson gave his first annual address, the question of recharter had crept into the public mind. Aware of this, Jackson stressed the importance of considering if the BUS should be rechartered along with the observation that, “[b]oth the constitutionality and the expediency of the law creating this Bank 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.”

This inaccurate assessment must have disappointed BUS supporters, while Biddle took action to rectify the false perception. Biddle enlisted the help of Samuel Smith, the pro-Bank Jacksonian chair of the Senate Finance Committee, to launch an investigation into the president’s claims. The resulting report (ghost written by Biddle himself) maintained that the BUS was both constitutional and that it successfully established a sound and uniform currency. The House, through its Ways and Means Committee chaired by George McDuffie, submitted a similar report confirming the Bank’s utility. Biddle had both laudatory reports printed and circulated widely on the Bank’s dime, demonstrating that he would not allow Jackson to disparage his Bank without firing back himself.

As a further safeguard, Biddle sought to ingratiate himself to the president by building relationships with the pro-Bank members of Jackson’s inner circle. This effort seemed effective, as Biddle received positive assurances from William Lewis and Josiah Nichol, two Jackson confidantes, that the Bank would be rechartered if Biddle made the concessions the president sought. Optimism for peace was tempered however, when Jackson’s expressed the same misgivings about the BUS in his second annual address. In response, Biddle continued his public relations campaign in the newspapers, paying editors to print pro-Bank and in some cases, anti-administration articles. Biddle also secured loans from the BUS for influential editors and Congressmen, which essentially confirmed Jackson’s charges that the Bank was interfering in politics.

Biddle received good news in the spring of 1831, when the shakeup to Jackson’s cabinet led BUS supporter, Louis McLane,  to become the new Treasury secretary. As the presidential election was looming, Biddle and the new secretary met to discuss matters. McLane made clear that Jackson did not want the Bank to be an election issue as it could cut into his margin of victory. An understanding appeared to have been reached — Jackson would allow the BUS to be rechartered with the proper modifications if Biddle waited to request the recharter until after the election. When Jackson gave his third annual address, he echoed the same complaints from the previous two messages but added that the Bank’s fate ultimately lied in the hands of Congress.

For Biddle though, this was not enough. He was led to believe that Jackson would come out in support of the BUS, a fairly foolish assumption given the president’s long held position regarding the Bank. He now worried that the dissident voices among Jackson’s intimates, such as Taney and Kendall, would thwart any perceived deal with McLane. Consequently, with the support of prominent National Republicans, notably presidential candidate Henry Clay, as well as members of the Bank’s board of directors, Biddle submitted to a bank-friendly Congress an application for recharter on January 6, 1832. If Jackson signed the recharter bill (when it inevitably passed), then Biddle and the National Republicans would have their Bank. If he vetoed it, the BUS would become the issue of the election and maybe its popularity, Biddle hoped, would be enough to topple the wildly popular president.

The Pitched Battle – Veto and the Election of 1832

The recharter bill passed in the House on July 3, almost a month after the Senate. Seven days later, on July 10, 1832, Andrew Jackson issued perhaps the most consequential presidential veto in American history. In his Veto Message, Jackson made some incredibly provocative claims. For one, past presidents had only used the veto power to strike down bills they deemed constitutionally questionable. The Bank veto was different. Jackson attacked the BUS for exerting its financial resources to “bend the acts of government to their selfish purposes.” Such language was included for the purpose of stirring up class division — by justifying the veto as standing up against the moneyed aristocracy on behalf of the “humble members of society” who could not access the artificial privileges granted by the BUS, Jackson established the president as the mouthpiece and protector of the people. The days that followed in Congress were consumed by raucous debate over the audacious message.

The presidential election that followed Jackson’s veto was a disaster for the Bank and its supporters. Biddle tried to influence the election by spending considerable amounts money to print pro-Bank articles in hopes of swaying public opinion in its favor. Indeed, one estimate puts the Bank’s spending on printing between 1831-1832 at $48,287 (compared to $9,982 over the previous two years before election season got underway), not to mention the tens of thousands spent in what was labeled, “miscellaneous expenses.” These spending figures brought forth harsh charges by the Jacksonians that the BUS had engaged in electioneering thus confirming what Jackson had been saying about the Bank for years. Anti-Jacksonians argued that these expenses were purely for self-defense and that any institution under such heavy attack had every right to defend itself. In fact, what Biddle had conducted in trying to secure recharter was perhaps the first national lobby effort in the country’s history. Regardless, Jackson won the election, defeating Clay by an electoral margin of 219 to 49 with Anti-Mason candidate William Wirt picking up seven votes and John Floyd of Virginia capturing South Carolina’s 11 protest votes. Jackson’s popular margin of victory did shrink from 1828, however, leading to speculation that the Bank issue had siphoned away some of his support.

Dirty Fighting – The Removal of the Deposits

To Jackson, his sweeping electoral victory was a clear mandate for him to eliminate the BUS. However, merely letting its charter expire was no longer enough for the vindictive president. Instead, he would end the Bank immediately. To do this, Jackson decided to remove the government deposits from its vaults, which was some $9 million.

According to section sixteen of the BUS charter, government deposits could be removed only by the order of the Secretary of the Treasury. Louis McLane proved unwilling to issue the order, believing the BUS was the safest place for the government funds. In June, 1833, Jackson promptly reassigned McLane to head the State Department and replaced him with William J. Duane, a known anti-Bank man from Philadelphia. But to Jackson’s surprise, his new appointee was no more willing to remove the deposits, calling the move “arbitrary and needless.” Undeterred, on September 18, 1833, Jackson presented his cabinet with a paper enumerating his reasons for removing the deposits from the BUS and, perhaps to assuage Duane, assumed all responsibility for the decision. Two days later, the paper appeared in the Globe, thus cluing in the public to the president’s designs.

When Duane again refused to issue the removal, Jackson replaced him with Attorney General Roger Taney, whose animosity toward the BUS exceeded that of Jackson himself. Three days after the appointment (which required no Senate confirmation).as the new Secretary of Treasury, Taney issued the order that government funds would no longer be deposited in BUS vaults and would instead be deposited in state banks chosen by the administration. After the Bank was stripped of its capital and divested from its role as the government’s fiscal agent, the Bank was close to collapsing.

Two Front Bank War – The Panic Session

The threat of and actual removal of the deposits thrust the Bank War into a two front engagement, one political and one economic. The political front was fought largely in Congress, where the members of the 23^rd Congress were greeted within days of convening with Taney’s reasons for removing the deposits. This kicked off what became known as the Panic Session in the House and Senate. The most dramatic conflicts occurred in the Senate, where anti-Jackson policymakers held a slight majority. Still stinging from his embarrassing electoral defeat, Henry Clay submitted two resolutions for debate, one censuring Jackson for taking an unconstitutional hold over the Treasury and one denouncing Taney’s reasoning for removing the deposits as “unsatisfactory and insufficient.”

The three-month debate that followed became more than just an alternating defense and attack of the Bank; it became the most important debate over the reach of executive authority and separation of power to occur since the early days of the Republic. Anti-Jacksonians flooded the session with speeches arguing that Jackson abused both his veto power and power to remove executive officers. Additionally, they argued that the Treasury department was beholden to Congress, not the president, and therefore any attempt by Jackson to meddle in the nation’s finances was a usurpation of legislative authority. Jacksonians argued that Clay’s resolutions were a de facto impeachment and that Jackson had not seized any power not clearly granted to him by the Constitution and the law. Three months into the session, the Senate voted in favor of both of Clay’s resolutions—the president had been censured.¹. Jackson promptly responded to the censure with a lengthy protest message in which he shockingly declared himself “the direct representative of the American people.” Establishing such a role for the president became one of the most lasting impacts of the Bank War.

While anti-Jacksonians in the Senate earned largely symbolic wins, the president’s allies in the pro-Jackson House scored their own victories. The president enjoyed a friendly majority in the lower house bolstered by the presence of one his strongest supporters, James K. Polk, as chair of the Ways and Means Committee. After an initial blunder in which Polk unwittingly allowed Taney’s report to be debated in front of the whole chamber rather than within the confines of the Jackson-friendly committee, the future president regained his footing by steering through Congress four anti-BUS resolutions including an overwhelmingly bipartisan measure to investigate the Bank’s illicit behavior.

Meanwhile, Biddle opened the economic front by manufacturing a financial crisis to force a recharter bill and the two-thirds congressional support needed to override a veto. Even before Taney issued his order, Biddle, through contracting credit and calling in loans, took roughly $6 million out of circulation. Shortly after the removal order, Biddle squeezed harder, cutting back loans by an additional $5.5 million before the end of the year. Initially, the contraction worked. Petitions flooded both the House and Senate, imploring that the deposits be restored. Additionally, businessmen hit hard by the contraction went to Jackson with hat in hand begging for relief.

The wily president skillfully flipped the script, telling the frustrated callers to “[g]o to Nicholas Biddle…Biddle has all the money.” The tactic worked. As Biddle continued the monetary squeeze, reducing business by over $18 million in five months (roughly double the figure lost by the removal order), the public blame shifted to Chestnut Street. The worst for Biddle came when the pro-Bank governors from Pennsylvania and New York, George Wolf and William L. Marcy broke from the BUS over the excessive curtailment. By May, Biddle perhaps realized he had gone too far and reversed course. But it was too late, public support for BUS had waned and with it, any chance for recharter. Biddle’s gamble had failed.

War’s End – The Impact of the Bank War

Without government funds and hope for recovering them lost, the BUS lived out its remaining days quietly. When the Bank’s charter expired in March 1836, Biddle tried to keep it alive by successfully incorporating in the state of Pennsylvania but had to pay a hefty sum to do so. Biddle invested heavily in cotton but when the market went south in 1837, the Bank all but collapsed. Biddle stepped down as president in 1839 and the Bank closed in 1841.Biddle died just three years later, in 1844.

Historians continue to debate the economic impact of the Bank War. By dissolving the BUS, the Jacksonians were forced to find a replacement which they did in deposit banking. Rather than deposit government funds in the BUS and its branches, the administration would choose various state banks, derisively referred to as “pet banks” due to the political considerations that went into choosing them. The deposit banking experiment did not go smoothly and by 1837, the country once again found itself in the grips of a depression. Recent scholarship has downplayed the Bank War’s impact on the nation’s economy, arguing that a multitude of external forces acting on the United States’ finances were the real factors that crashed the economy in the late 1830s. Hindsight notwithstanding, much blame at the time for the economic woes were heaped upon Jackson and although his policies did not directly cause the panic, the perception that they did haunted his successor, Martin Van Buren, contributing to his crushing defeat in 1840.

The clearest impact of the Bank War was on the nation’s politics. The war finally gave Jackson’s opponents — former National Republicans, southern States’ Righters, wayward Democrats, strict constructionists, and Anti-Masons — an issue around which they could coalesce and served as the foundation for the creation of the anti-Jackson, Whig party. At the same time, the Bank War weeded out reluctant members of the president’s camp, leaving behind a devoted collection of Jackson followers that only the slavery question could rip asunder. These two parties would vie for power over the next two decades and formed the political backdrop that would plunge the country headlong into civil war.

Furthermore, the manner in which Jackson waged his war against the BUS forever bolstered the power of the president. The veto of the bank bill meant that Congress would now have to consider presidential will when crafting laws. Also, by viewing his reelection as a mandate to kill the Bank, Jackson formed a link between the peoples’ votes and presidential action that did not exist previously. The vast power presidents wield today is in part due to the political battles of the 1830s and those who have and will assume the office and enjoy all the power that comes with it have Jackson and his Bank War to thank.

About the Author: Michael Trapani has been teaching American History in central New Jersey for over fifteen years. His book, Panic in the Senate: The Fight Over the Second Bank of the United States and the American Presidency, will be available in spring 2021.

Suggested Reading on the Bank War:

Campbell, Stephen W. The Bank War and the Partisan Press: Newspapers, Financial Institutions, and the Post Office in Jacksonian America. Lawrence, KS: University of Kansas Press, 2019.

Campbell, Steven W. “Funding the Bank War: Nicholas Biddle and the Public Relations Campaign to Recharter the Second Bank of the U.S., 1828-1832.” American Nineteenth Century History, 17:3, (2016), 273-299.

Catterall, Ralph C. “The Charges Against the Bank,” in Jackson Versus Biddle: The Struggle Over the Second Bank of the United States, ed. by George Rogers Taylor. Boston: DC Heath and Company, 1949, 36-53.

Catterall, Ralph C. The Second Bank of the United States. Chicago: University of Chicago Press, 1902.

Hammond, Bray. Banks and Politics in America: From the Revolution to the Civil War. Princeton, NJ: Princeton University Press, 1957.

Howe, Daniel Walker. What Hath God Wrought: The Transformation of America, 1815-1848. New York: Oxford University Press, 2007.

Kahan, Paul. The Bank War: Andrew Jackson, Nicholas Biddle, and the Fight for American Finance. Yardley, PA: Westholme Publishing, 2016.

Knodell, Jane. “Profit and duty in the Second Bank of the United States’ exchange operations.” Financial History Review, 10, (2003), 5-30.

Knodell, Jane. “Rethinking the Jacksonian Economy: The Impact of the 1832 Bank Veto on Commercial Banking.” Journal of Economic History 66, no. 3 (September 2006): 541-574.

Redlich, Fritz. Molding of American Banking: Men and Ideas. New York: Hafner Publishing Company, 1951.

Remini, Robert V. Andrew Jackson and the Bank War: A Study in the Growth of Presidential Power. New York: W.W Norton & Company Inc., 1967.

Schlesinger, Jr., Arthur. The Age of Jackson. Boston: Little, Brown and Company, 1945.

Temin, Peter. The Jacksonian Economy. New York: W.W. Norton & Company, 1969.

Trapani, Michael J. Panic in the Senate: The Fight Over the Second Bank of the United States and the American Presidency. New York: Algora Publishing, 2021.

Watson, Harry L. Liberty and Power: The Politics of Jacksonian America. New York: Hill and Wang, 2006.

Wilentz, Sean. The Rise of American Democracy: Jefferson to Lincoln. New York: W.W. Norton & Company, 2005.

1. The censure though would be expunged from the record in 1837 due to the efforts of Thomas Hart Benton