CHAPTER IX. The War on the United States Bank

THE WAR ON THE UNITED STATES BANK

"Nothing lacks now to complete the love-feast," wrote Isaac Hill sardonically to Thomas H. Benton after the collapse of nullification, "but for Jackson and Webster to solemnize the coalition [in support of the Union] with a few mint-juleps! I think I could arrange it, if assured of the coˆperation of yourself and Blair on our side, and Jerry Mason and Nick Biddle on theirs. But never fear, my friend. This mixing of oil and water is only the temporary shake-up of Nullification. Wait till Jackson gets at the Bank again, and then the scalping-knives will glisten once more."

The South Carolina controversy had indeed brought Jacksonians and anti-Jacksonians together. But once the tension was relaxed, there began the conflict of interests which the New Hampshire editor had predicted. Men fell again into their customary political relationships; issues that for the moment had been pushed into the background--internal improvements, public land policy, distribution of surplus revenue, and above all the Bank--were revived in full vigor. Now, indeed, the President entered upon the greatest task to which he had yet put his hand. To curb nullification was a worthy achievement. But, after all, Congress and an essentially united nation had stood firmly behind the Executive at every stage of that performance. To destroy the United States Bank was a different matter, for this institution had the full support of one of the two great parties in which the people of the country were now grouped; Jackson's own party was by no means a unit in opposing it; and the prestige and influence of the Bank were such as to enable it to make a powerful fight against any attempts to annihilate it.

The second Bank of the United States was chartered in 1816 for twenty years, with a capital of thirty-five million dollars, one-fifth of which had been subscribed by the Government. For some time it was not notably successful, partly because of bad management but mainly because of the disturbance of business which the panic of 1819 had produced. Furthermore, its power over local banks and over the currency system made it unpopular in the West and South, and certain States sought to cripple it by taxing out of existence the several branches which the board of directors voted to establish. In two notable decisions--M'Culloch vs. Maryland in 1819 and Osborn vs. United States Bank in 1824--the Supreme Court saved the institution by denying the power of a State to impose taxation of the sort and by asserting unequivocally the right of Congress to enact the legislation upon which the Bank rested. And after Nicholas Biddle, a Philadelphia lawyer-diplomat, succeeded Langdon Cheves as president of the Bank in 1823 an era of great prosperity set in.

The forces of opposition were never reconciled; indeed, every evidence of the increasing strength of the Bank roused them to fresh hostility. The verdict of the Supreme Court in support of the constitutionality of the Act of 1816 carried conviction to few people who were not already convinced. The restraints which the Bank imposed upon the dubious operations of the southern and western banks were vigorously resented. The Bank was regarded as a great financial monopoly, an "octopus," and Biddle as an autocrat bent only on dominating the entire banking and currency system of the country.

On Jackson's attitude toward the Bank before he became President we have little direct information. But it is sufficiently clear that eventually he came to share the hostile views of his Tennessee friends and neighbors. In 1817 he refused to sign a memorial "got up by the aristocracy of Nashville" for the establishment of a branch in that town. When, ten years later, such a branch was installed, General Thomas Cadwalader of Philadelphia, agent of the Bank, visited the town to supervise the arrangements and became very friendly with the "lord of the Hermitage." But correspondence of succeeding years, though filled with insinuating cordiality, failed to bring out any expression of goodwill toward the institution such as the agent manifestly coveted.

Jackson seems to have carried to Washington in 1829 a deep distrust of the Bank, and he was disposed to speak out boldly against it in his inaugural address. But he was persuaded by his friends that this would be ill-advised, and he therefore made no mention of the subject. Yet he made no effort to conceal his attitude, for he wrote to Biddle a few months after the inauguration that he did not believe that Congress had power to charter a bank outside of the District of Columbia, that he did not dislike the United States Bank more than other banks, but that ever since he had read the history of the South Sea Bubble he had been afraid of banks. After this confession the writer hardly needed to confess that he was "no economist, no financier."

Most of the officers of the "mother bank" at Philadelphia and of the branches were anti-Jackson men, and Jackson's friends put the idea into his mind that the Bank had used its influence against him in the late campaign. Specific charges of partizanship were brought against Jeremiah Mason, president of the branch at Portsmouth, New Hampshire; and although an investigation showed the accusation to be groundless, Biddle's heated defense of the branch had no effect save to rouse the Jacksonians to a firmer determination to compass the downfall of the Bank.

Biddle labored manfully to stem the tide. He tried to improve his personal relations with the President, and he even allowed Jackson men to gain control of several of the western branches. The effort, however, was in vain. When he thought the situation right, Biddle brought forward a plan for a new charter which received the assent of most of the members of the official Cabinet, as well as that of some of the "Kitchen" group. But Jackson met the proposal with his unshakable constitutional objections and, to Biddle's deep disappointment, advanced in his first annual message to the formal, public assault. The Bank's charter, he reminded Congress, would expire in 1836; request for a new charter would probably soon be forthcoming; the matter could not receive too early attention from the legislative branch. "Both the constitutionality and the expediency of the law creating this bank," declared the President, "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." The first part of the statement was true, but the second was distinctly unfair. The Bank, to be sure, had not established "a uniform and sound" currency. But it had accomplished much toward that end and was practically the only agency that was wielding any influence in that direction. The truth is that the more efficient the Bank proved in this task the less popular it became among those elements of the people from which Jackson mainly drew his strength.

Nothing came of the President's admonition except committee reports in the two Houses, both favorable to the Bank; in fact, the Senate report was copied almost verbatim from a statement supplied by Biddle. A year later Jackson returned to the subject, this time with an alternative plan for a national bank to be organized as a branch of the Treasury and hence to have "no means to operate on the hopes, fears, or interests of large masses of the community." In a set of autograph notes from which the second message was prepared the existing Bank was declared not only unconstitutional but dangerous to liberty, "because through its officers, loans, and participation in politics it could build up or pull down parties or men, because it created a monopoly of the money power, because much of the stock was owned by foreigners, because it would always support him who supported it, and because it weakened the state and strengthened the general government." Congress paid no attention to either criticisms or recommendations, and the supporters of the Bank took fresh heart.

When Congress again met, in December, 1831, a presidential election was impending and everybody was wondering what part the bank question would play. Most Democrats were of the opinion that the subject should be kept in the background. After all, the present bank charter had more than four years to run, and there seemed to be no reason for injecting so thorny an issue into the campaign. With a view to keeping the bank authorities quiet, two members of the reconstructed Cabinet, Livingston and McLane, entered into a modus vivendi with Biddle under which the Administration agreed not to push the issue until after the election. In his annual report as Secretary of the Treasury, McLane actually made an argument for rechartering the Bank; and in his message of the 6th of December the President said that, while he still held "the opinions heretofore expressed in relation to the Bank as at present organized," he would "leave it for the present to the investigation of an enlightened people and their representatives." He had been persuaded that his own plan for a Bank, suggested a year earlier, was not feasible.

Biddle now made a supreme mistake. Misled in some degree unquestionably by the optimistic McLane, he got the idea that Jackson was weakening, that the Democrats were afraid to take a stand on the subject until after the election, and that now was the strategic time to strike for a new charter. In this belief he was further encouraged by Clay, Webster, and other leading anti-Administration men, as well as by McDuffie, a Calhoun supporter and chairman of the Ways and Means Committee of the House. There was small doubt that a bill for a new charter could be carried in both branches of Congress. Jackson must either sign it, argued Biddle's advisers, or run grave risk of losing Pennsylvania and other commercial States whose support was necessary to his election. On the other hand, Biddle was repeatedly warned that an act for a new charter would be vetoed. He chose to press the issue and on January 9, 1832, the formal application of the Bank for a renewal of its charter was presented to Congress, and within a few weeks bills to recharter were reported in both Houses.

Realizing that defeat or even a slender victory in Congress would be fatal, the Bank flooded Washington with lobbyists, and Biddle himself appeared upon the scene to lead the fight. The measure was carried by safe majorities--in the Senate, on the 11th of June, by a vote of 28 to 20, and in the House on the 3d of July, by a vote of 107 to 86. To the dismay of the bank forces, although it ought not to have been to their surprise, Jackson was as good as his word. On the 10th of July the bill was vetoed. The veto message as transmitted to the Senate was probably written by Taney, but the ideas were Jackson's--ideas which, so far as they relate to finance and banking operations, have been properly characterized as "in the main beneath contempt." The message, however, was intended as a campaign document, and as such it showed great ingenuity. It attacked the Bank as a monopoly, a "hydra of corruption," and an instrumentality of federal encroachment on the rights of the States, and in a score of ways appealed to the popular distrust of capitalistic institutions. The message acquired importance, too, from the President's extraordinary claim to the right of judging both the constitutionality and the expediency of proposed legislation, independently of Congress and the Courts.

The veto plunged the Senate into days of acrid debate. Clay pronounced Jackson's construction of the veto power "irreconcilable with the genius of representative government." Webster declared that responsibility for the ruin of the Bank and for the disasters that might follow would have to be borne by the President alone. Benton and other prominent members, however, painted Jackson as the savior of his country; and the second vote of 22 to 19 yielded a narrower majority for the bill than the first had done. Thus the measure perished.

The bank men received the veto with equanimity. They professed to believe that the balderdash in which the message abounded would make converts for their side; they even printed thirty thousand copies of the document for circulation. Events, however, did not sustain their optimism. In the ensuing campaign the Bank became, by its own choice, the leading issue. The National Republicans, whose nominee was Clay, defended the institution and attacked the veto; the Jacksonians reiterated on the stump every charge and argument that their leader had taught them. The verdict was decisive. Jackson received 219 and Clay 49 electoral votes.

The President was unquestionably right in interpreting his triumph as an endorsement of the veto, and he naturally felt that the question was settled. The officers and friends of the Bank still hoped, however, to snatch victory from defeat. They had no expectation of converting Jackson or of carrying a charter measure at an early date. But they foresaw that to wind up the business of the Bank in 1836 it would be necessary to call in loans and to withdraw a vast amount of currency from circulation, with the result of a general disturbance, if not a severe crippling, of business. This, they thought, would bring about an eleventh-hour measure giving the Bank a new lease of life.

Jackson, too, realized that a sudden termination of the activities of the Bank would derange business and produce distress, and that under these circumstances a charter might be wrung from Congress in spite of a veto. But he had no intention of allowing matters to come to such a pass. His plan was rather to cut off by degrees the activities of the Bank, until at last they could be suspended altogether without a shock. The most obvious means of doing this was to withdraw the heavy deposits made by the Government; and to this course the President fully committed himself as soon as the results of the election were known. He was impelled, further, by the conviction--notwithstanding unimpeachable evidence to the contrary--that the Bank was insolvent, and by his indignation at the refusal of Biddle and his associates to accept the electoral verdict as final. "Biddle shan't have the public money to break down the public administration with. It's settled. My mind's made up." So the President declared to Blair early in 1833. And no one could have any reasonable doubt that decisive action would follow threat.

It was not, however, all plain sailing. Under the terms of the charter of 1816 public funds were to be deposited in the Bank and its branches unless the Secretary of the Treasury should direct that they be placed elsewhere; and such deposits elsewhere, together with actual withdrawals, were to be reported to Congress, with reasons for such action. McLane, the Secretary of the Treasury, was friendly toward the Bank and could not be expected to give the necessary orders for removal. This meant that the first step was to get a new head for the Treasury. But McLane was too influential a man to be summarily dismissed. Hence it was arranged that Livingston should become Minister to France and that McLane should succeed him as Secretary of State.

The choice of the new Secretary of the Treasury would have been a clever stroke if things had worked out as Jackson expected. The appointee was William J. Duane, son of the editor of the Aurora, which had long been the most popular and influential newspaper in Pennsylvania. This State was the seat of the "mother bank" and, although a Jackson stronghold, a cordial supporter of the proscribed institution; so that it was well worth while to forestall criticism in that quarter, so far as might be, by having the order for removal issued by a Pennsylvanian. Duane, however, accepted the post rather because he coveted office than because he supported the policy of removal, and when the test came Jackson found to his chagrin that he still had a Secretary who would not take the desired action. There was nothing to do but procure another; and this time he made no mistake. Duane, weakly protesting, was dismissed, and Roger B. Taney, the Attorney-General, was appointed in his stead. "I am fully prepared to go with you firmly through this business," Jackson was assured by the new Secretary, "and to meet all its consequences."

The way was now clear, and an order was issued requiring all treasury receipts after October 1, 1833, to be deposited in the Girard Bank of Philadelphia and twenty-two other designated state banks. Deposits in the United States Bank and its branches were not immediately "removed"; they were left, rather, to be withdrawn as the money was actually needed. Nevertheless there was considerable disturbance of business, and deputation after deputation came to the White House to ask that Taney's order be rescinded. Jackson, however, was sure that most of the trouble was caused by Biddle and his associates, and to all these appeals he remained absolutely deaf. After a time he refused so much as to see the petitioners. In his message of the 3d of December he assumed full responsibility for the removals, defending his course mainly on the ground that the Bank had been "actively engaged in attempting to influence the elections of the public officers by means of its money."

From this point the question became entirely one of politics. The Bank itself was doomed. On the one side, the National Republicans united in the position that the Administration had been entirely in the wrong, and that the welfare of the country demanded a great fiscal institution of the character of the Bank. On the other side, the Democrats, deriving, indeed, a new degree of unity from the controversy on this issue, upheld the President's every word and act. "You may continue," said Benton to his fellow partizans in the Senate, "to be for a bank and for Jackson, but you cannot be for this Bank and Jackson." Firmly allied with the Bank interests, the National Republicans resolved to bring all possible discomfiture upon the Administration.

The House of Representatives was controlled by the Democrats, and little could be accomplished there. But the Senate contained not only the three ablest anti-Jacksonians of the day--Clay, Webster, Calhoun--but an absolute majority of anti-Administration men; and there the attack was launched. On December 26, 1833, Clay introduced two resolutions declaring that in the removal of the deposits the President had "assumed upon himself authority and power not conferred by the Constitution and laws but in derogation of both," and pronouncing Taney's statement of reasons "unsatisfactory and insufficient." After a stormy debate, both resolutions in slightly amended form were carried by substantial majorities.

Jackson was not in the habit of meekly swallowing censure, and on the 15th of April he sent to the Senate a formal protest, characterizing the action of the body as "unauthorized by the Constitution, contrary to its spirit and to several of its express provisions," and "subversive of that distribution of the powers of government which it has ordained and established." Aside from a general defense of his course, the chief point that the President made was that the Constitution provided a procedure in cases of this kind, namely impeachment, which alone could be properly resorted to if the legislative branch desired to bring charges against the Executive. The Senate was asked respectfully to spread the protest on its records. This, however, it refused to do. On the contrary, it voted that the right of protest could not be recognized; and it found additional satisfaction in negativing an unusual number of the President's nominations.

Throughout the remainder of his second Administration Jackson maintained his hold upon the country and kept firm control in the lower branch of Congress. Until very near the end, the Senate, however, continued hostile. During the debate on the protest Benton served notice that he would introduce, at each succeeding session, a motion to expunge the resolution of censure. Such a motion was made in 1835, and again in 1836, without result. But at last, in January, 1837, after a debate lasting thirteen hours, the Senate adopted, by a vote of 24 to 19, a resolution meeting the Jacksonian demand.

The manuscript journal of the session of 1833-1834 was brought into the Senate, and the secretary, in obedience to the resolution, drew black lines around the resolution of censure, and wrote across the face thereof, "in strong letters," the words: "Expunged by order of the Senate, this sixteenth day of January, in the year of our Lord 1837." Many members withdrew rather than witness the proceeding; but a crowded gallery looked on, while Benton strengthened his supporters by providing "an ample supply of cold hams, turkeys, rounds of beef, pickles, wines, and cups of hot coffee" in a near-by committee-room. Jackson gave a dinner to the "expungers" and their wives, and placed Benton at the head of the table. That the action of the Senate was unconstitutional interested no one save the lawyers, for the Bank was dead. Jackson was vindicated, and the people were enthroned. π

π MacDonald, Jacksonian Democracy, p. 239.

The struggle thus brought to a triumphant close was one of the severest in American political history. In 1836 the Bank obtained a charter from Pennsylvania, under the name of the Bank of the United States of Pennsylvania, and all connection between it and the Federal Government ceased. The institution and the controversies centering about it left, however, a deep impress upon the financial and political history of our fifth and sixth decades. It was the bank issue, more than anything else, that consolidated the new political parties of the period. It was that issue that proved most conclusively the hold of Jackson upon public opinion. And it was the destruction of the Bank that capped the mid-century reaction against the rampant nationalism of the decade succeeding the War of 1812. The Bank itself had been well managed, sound, and of great service to the country. But it had also showed strong monopolistic tendencies, and as a powerful capitalistic organization it ran counter to the principles and prejudices which formed the very warp and woof of Jacksonian democracy.

For more than a decade after the Bank was destroyed the United States had a troubled financial history. The payment of the last dollar of the national debt in 1834 gave point to a suggestion which Clay had repeatedly offered that, as a means of avoiding an embarrassing surplus, the proceeds of the sales of public lands should be distributed according to population among the States. One bill on this subject was killed by a veto in 1832, but another was finally approved in 1836. Before distribution could be carried far, however, the country was overtaken by the panic of 1837; and never again was there a surplus to distribute. For seven years the funds of the Government continued to be kept in state banks, until, in 1840, President Van Buren prevailed upon Congress to pass a measure setting up an independent treasury system, thereby realizing the ultimate purpose of the Jacksonians to divorce the Government from banks of every sort. When the Whigs came into power in 1841, they promptly abolished the independent Treasury with a view to resurrecting the United States Bank. Tyler's vetoes, however, frustrated their designs, and it remained for the Democrats in 1846 to revive the independent Treasury and to organize it substantially as it operates today.