Andrew Jackson's Veto of the National Bank
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Bill of Rights Institute
Written by: Frank W. Garmon Jr., Christopher Newport University

The fate of the U.S. economy weighed heavily on President Andrew Jackson’s mind in 1832 as he debated signing the renewal of the charter of the Second Bank of the United States. Congress had granted the national bank a new charter for twenty years starting in 1816, but bank advocates tried to renew the charter early to force its passage through Congress during an election year. The stage was set for a showdown between Jackson and Second National Bank president Nicholas Biddle.

Jackson had to weigh whether to kill the national bank because of his constitutional opposition to it and his fear that the bank was an engine of aristocracy. He also had to decide how he was going to challenge the precedent of its constitutionality as decided by previous congresses and presidents, and the Supreme Court.

Biddle had to decide how to react to Jackson’s opposition to the national bank. He believed the constitutional questions were settled and that the bank had great utility for the expansion of the American economy. Biddle had to work with allies in Congress to devise the best strategy to strengthen their own hand countering Jackson’s opposition. The resulting clash was one of the most significant battlegrounds of the mid-nineteenth-century politics.

Consistency and continuity keep financial markets stable and predictable for everyone involved. Uncertainty and instability are always bad for business. Safeguarding the future of the bank was thus a high priority for merchants and bankers who relied on the country’s financial markets. But farmers worried that the bank worked in opposition to the nation’s democratic principles. Its opponents described it as a “many headed monster” and argued that the bank was actively creating an aristocracy that undermined the interests of ordinary people..

The national bank had been one of the cornerstones of Alexander Hamilton’s economic reforms when he was secretary of the Treasury during the Washington administration. The Bank of the United States could loan money to the federal government in times of war and encourage economic development by providing American businesses with access to capital they could invest in their firms. The first Bank’s charter expired shortly before the War of 1812; however, the war demonstrated the need to maintain a central bank that could finance a conflict by making loans and bond issues rather than by raising taxes. In 1816, President James Madison overcame his earlier constitutional qualms and signed the bank bill into law. The Second Bank of the United States was even larger than the first and became one of the largest corporations in the world. But whereas Hamilton had designed a bank on Federalist principles, proponents of the Second Bank sought to give the institution a republican character. The new bank was centered in Philadelphia, had branches in every major city, and issued new stock at a lower price to allow everyday Americans to invest.

Early banks were not as sophisticated as their modern successors. To set them up, wealthy individuals banded together to provide credit and loan money to start-up businesses and merchants. Bankers preferred to loan money to merchants rather than farmers, because merchants could repay short-term loans quickly after selling their goods at market. Because there were no credit reports, personal connections were most important in determining an individual’s creditworthiness, and early bankers loaned money to family members and friends. The close-knit relationships these establishments fostered led many Americans to view banks as elite institutions. Farmers in the nineteenth century were especially critical of them. Although they did not reject capitalism or oppose banks on principle, they worried that concentrated financial power would lead to concentrated political power, and many believed the banking sector did little to benefit farmers.

Rival banks did not appreciate competition from the operating branches of the Second Bank of the United States. Several state legislatures responded by imposing taxes on the federal bank’s operations. In 1819, the Supreme Court ultimately struck down a tax in Maryland as unconstitutional in McCulloch v. Maryland. Chief Justice John Marshall emphasized in his opinion that “the power to tax involves the power to destroy.” The case cemented the supremacy of the federal government by ensuring that states could not tax federal institutions. More importantly, the court’s ruling established the doctrine of implied powers by declaring the national bank to be constitutional. When the Supreme Court issued its ruling, state bankers complained that the federal government had encroached unfairly on their industry by granting tax exemption to their competitor. Although the outcry over the Court’s decision quickly subsided, a financial panic that developed later that year intensified farmers’ opposition to the banking system and resulted in bank and business failures.

The financial panic of 1819 hurt many farmers, artisans, and other small businesses, which fueled resentment against the bank and its paper currency when a Congressional inquiry revealed that the institution, in fact, had acted irresponsibly during the crisis. The Panic provided a critical turning point for Andrew Jackson and other “hard money” advocates, who insisted that paper currency could never replace money backed by gold and silver.

The Bank of the United States soon recovered its sound financial footing under the leadership of Nicholas Biddle. Over the course of his fourteen-year tenure, Biddle managed the bank expertly. He worked to provide some permanence to the institution, given that its charter was set to expire in 1836, by communicating with Andrew Jackson and members of his administration beginning almost immediately after Jackson’s election as president in 1828. Biddle had carefully surveyed the political situation in Congress and realized that enough votes existed for recharter but not enough to override a veto if the president opposed the measure. Unfortunately for Biddle, however, Jackson indicated that “both the constitutionality and the expediency of the law creating this Bank are well questioned.” Biddle felt he had little choice but to press for the bank’s recharter during an election year because it was a relatively popular institution that Jackson would not dare kill with a veto or he would face voters’ wrath.

During the election campaign of 1832, Jackson’s opponents organized a new political party, the National Republicans, under Henry Clay. Clay believed that forcing Jackson to take a stand on the national bank would threaten to embarrass the president and guarantee his own election. The Bank of the United States was a central component of the American System Clay supported, which proposed using a strong central bank and high tariffs to fund a comprehensive system of internal improvement projects such as railroads and canals. Biddle travelled to Washington, DC, to lobby members of Congress to support the bank’s recharter. Despite the best efforts of the Jacksonian opponents of the bank, Congress passed the recharter bill with a solid majority in both houses.

Jackson quickly vetoed the bill and defended his decision on constitutional principles, saying the Constitution does not specifically grant Congress the power to create a national bank. The president also questioned the Supreme Court’s decision in McCulloch v. Maryland, arguing that the Court should not serve as the exclusive authority or final arbiter of the Constitution. Instead, Jackson insisted that each branch had the ability to decide for itself whether a proposed measure was constitutional. Jackson also attacked the undemocratic character of the bank. Congress had provided it with exclusive privileges, he pointed out, and granted it a monopoly that insulated it from competition with state banks. Furthermore, foreign nationals owned more than one-fifth of the bank’s stock. In closing, Jackson emphasized that the “rich and powerful too often bend the acts of government to their selfish purposes.” The wealthy Americans stood to benefit from the bank’s recharter, he argued, not farmers, mechanics, and laborers.

With no chance of overriding the president’s veto in Congress, Biddle maneuvered the bank’s resources against Jackson. He called in loans, making it more difficult for banks and businesses to borrow money. If Americans felt the loss of the Bank of the United States directly, he reasoned, they would turn against Jackson and support recharter. Unfortunately for Biddle, however, he had overplayed his hand, and the bank’s efforts alienated those who might have been most inclined to defend it. Business leaders and Congress turned against him.

As the so-called Bank War escalated, Jackson recommended moving the federal government’s deposits out of the Bank of the United States, and Treasury Secretary Roger Taney began transferring them to pro-administration state banks.

Jackson’s opponents ridiculed these “pet banks” as a source of corruption, but to no avail. The removal of the government’s deposits crippled the federal bank, and it dissolved in 1836. The next year, another financial panic, the Panic of 1837, swept the country. Guided in his veto decision by his constitutional convictions and political exigencies, Jackson’s victory over the bank doomed central banking in the United States until the creation of the Federal Reserve in the early twentieth century.

Review Questions

1. Andrew Jackson justified vetoing the bill to recharter the Bank of the United States for all the following reasons except

the Jacksonians believed the bank contributed to U.S. intervention in the War of 1812 and other wars

Jackson believed the bank was unconstitutional and that the Supreme Court had erred in McCulloch v. Maryland

the Jacksonians believed the bank acted as a monopoly and received exclusive privileges from Congress

foreigners controlled more than 20 percent of the bank’s stock

2. Which of the following presents the events of the “Bank Wars” in the correct chronological order from earliest to most recent?

McCulloch v. Maryland, Jackson vetoes the bill rechartering the Second Bank, Biddle calls in loans, Jackson recommends moving government funds to pet banks

McCulloch v. Maryland, Biddle calls in loans, Jackson recommends moving government funds to pet banks, Jackson vetoes the bill rechartering the Second Bank

Biddle calls in loans, McCulloch v. Maryland, Jackson recommends moving government funds to pet banks, Jackson vetoes the bill rechartering the Second Bank

McCulloch v. Maryland, Jackson recommends moving government funds to pet banks, Biddle calls in loans, Jackson vetoes the bill rechartering the Second Bank

3. During the Bank War, Nicholas Biddle was

a prominent member of Congress who wanted to expose Andrew Jackson’s antagonism towards the Bank of the United States

a political ally of Andrew Jackson’s who wanted to close the Bank of the United States

the president of the Bank of the United States, who wanted its charter renewed

Andrew Jackson’s secretary of the Treasury who transferred money from the Bank of the United States to Jackson’s pet banks

4. The Panic of 1819 was a turning point in U.S. economic history because

it guaranteed the election of Andrew Jackson as president

it resulted in the decision in McCulloch v. Maryland, stating the Bank of the United States was constitutional

it demonstrated to “hard currency” supporters that only gold- and silver-backed currency would maintain a viable economy, giving credence to Jackson’s beliefs about the national bank in the 1830s

it led to the nomination of Henry Clay, who, as president, would have guaranteed the continuation of the Bank of the United States

5. Despite being a member of the Republican Party, which of the following presidents signed the renewal charter of the Bank of the United States in 1816?

Thomas Jefferson

James Madison

James Monroe

John Quincy Adams

6. Opponents of the Bank of the United States argued against it for all the following reasons except

the Bank favored eastern business interests

the Bank catered to the elite

the Bank had been granted a monopoly over state banks

farmers were guaranteed necessary loans from the Bank

7. The destruction of the Bank of the United States led to

the election of Martin Van Buren as president

the creation of the National Republicans as a new political party

the end of central banking in the United States until the creation of the Federal Reserve

the immediate rechartering of the Bank of the United States

Free Response Questions

Explain Andrew Jackson’s decision to veto the Second Bank of the United States.

Explain why the Jacksonians opposed the Second Bank of the United States despite congressional efforts to make the institution more democratic.

AP Practice Questions

EXCERPT 1 “The present corporate body, denominated the president, directors, and company of the Bank of the United States, will have existed at the time this act is intended to take effect twenty years. It enjoys an exclusive privilege of banking under the authority of the General Government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of many millions to the stockholders. . . . It is not our own citizens only who are to receive the bounty of our Government. More than eight millions of the stock of this bank are held by foreigners. By this act the American Republic proposes virtually to make them a present of some millions of dollars.”

Andrew Jackson, Bank Veto Message, July 10, 1832

EXCERPT 2 “The veto is an extraordinary power, which, though tolerated by the Constitution, was not expected, by the convention, to be used in ordinary cases. It was designed for instances of precipitate legislation, in unguarded moments. Thus restricted, and it has been thus restricted by all former presidents, it might not be mischievous. During Mr. Madison’s administration of eight years, there occurred but two or three cases of its exercise. During the last administration, I do not now recollect that it was once. In a period little upward of three years, the present chief magistrate has employed the veto four times. We now hear quite frequently, in the progress of measures through Congress, the statement that the president will veto them, urged as an objection to their passage.”

Henry Clay, Speech to the U.S. Senate on President Jackson’s veto of the rechartering of the Bank of the United States, July 10, 1832

Refer to the excerpts provided.

1. A major difference between Andrew Jackson and Henry Clay in their arguments regarding the Bank of the United States concerned

the fact that the bank dealt only with the elite

the constitutionality of the bank

Clay’s belief that the veto should be used liberally

the extent of the president’s power over the bank

2. In vetoing the recharter of the Bank of the United States, Andrew Jackson expressed his disapproval of which Supreme Court decision?

Marbury v. Madison

Dartmouth v. Woodward

McCulloch v. Maryland

Ogden v. Gibbons

3. Which of the following best describes the motivation for the event described in the excerpts?

A disagreement over the proper interpretation and use of the president’s veto power

The failure of the agricultural industry, due to the lack of available funding

Clay’s desire for a political victory to match Jackson’s winning of the Nullification Crisis

Lingering animosity between Clay and Jackson over the “Corrupt Bargain” in the election of 1824

Primary Sources

Jackson, Andrew. “Veto Message” in Jackson vs. Biddle’s Bank: The Struggle Over the Second Bank of the United States. Second ed. Edited by George Rogers Taylor, 27. Lexington, MA: D.C. Heath and Company, 1972.

Suggested Resources

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

Jackson, Andrew. “Veto Message” in Jackson vs. Biddle’s Bank: The Struggle Over the Second Bank of the United States. Second ed. Edited by George Rogers Taylor, 10–29. Lexington, MA: D.C. Heath and Company, 1972.

Lamoreaux, Naomi. Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England. Cambridge, UK: Cambridge University Press, 1996.

Remini, Robert V. Andrew Jackson and the Bank War. New York: Norton, 1967.

Remini, Robert V. The Life of Andrew Jackson. New York: Harper & Row, 1988.

Taylor, George Rogers ed. Jackson vs. Biddle’s Bank: The Struggle Over the Second Bank of the United States. Second ed. Lexington, MA: D.C. Heath and Company, 1972.

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