Bank War

The Bank War refers to the political struggle that develops over the issue of rechartering the Second Bank of the United States (BUS) during the presidency of Andrew Jackson (1829–1837).

The affair results in the destruction of the bank and its replacement by various state banks.

Anti-Bank Jacksonian Democrats are mobilized in opposition to the national bank’s re-authorization on the grounds that the institution confers economic privileges on a small group of financial elites, violating Constitutional principles of social equality, that it interferes in the political process, and has been given a charter that violates state sovereignty, posing an implicit threat to Southern agrarian society dependent upon slavery.

With the Bank charter due to expire in 1836, the President of the Bank of the United States, Nicholas Biddle, in alliance with the National Republicans under senators Henry Clay (KY) and Daniel Webster (MA), decides to make rechartering a referendum on the legitimacy of the institution in the elections of 1832.

When Congress votes to reauthorize the Bank, Jackson, as incumbent and candidate in the race, vetoes the bill.

His veto message justifying his action is a polemical declaration of the social philosophy of the Jacksonian movement pitting "the planters, the farmers, the mechanic and the laborer" against the "monied interest" and arguing against the Bank’s constitutionality.

Pro-Bank National Republicans warn the public that Jackson will abolish the Bank altogether if granted a second term.

In the presidential election of 1832, the B.U.S. serves as the central issue in mobilizing the opposing Jacksonian Democrats and National Republicans.

Jacksonians successfully conceal the incompatibility of their "hard money" and "paper money" factions in the anti-Bank campaign, allowing Jackson to score an overwhelming victory against Henry Clay, despite the Bank providing major financial assistance to Clay.

Fearing economic reprisals from Biddle and the Bank, Jackson moves swiftly to remove federal deposits from the institution.

In 1833, he succeeds in distributing the funds to several dozen private banks throughout the country.

The new Whig Party emergea in opposition to his perceived abuse of executive power, officially censuring Jackson in the Senate.

In an effort to promote sympathy for the institution’s survival, Biddle retaliatea by contracting Bank credit, inducing a serious and protracted financial downturn.

A reaction sets in throughout America’s financial and business centers against Biddle’s economic warfare, compelling the Bank to reverse its tight money policies.

By the close of 1834, recharter is no longer a winnable objective.

Rather than permitting the Bank to go out of existence, Biddle arranges its conversion to a state chartered corporation in Pennsylvania just weeks before its federal charter expires in March 1836.

This episode in the Bank’s decline and fall ends in 1841 with liquidation of the institution.

Jackson’s campaign against the Bank has triumphed.

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