Bank War

Bank War

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

Anti-BUS Jacksonian Democrats were mobilized in opposition to the national bank’s re-authorization on the grounds that the institution conferred economic privileges on financial elites, violating republican principles of social equality. With the Bank charter due to expire in 1836, the pro-BUS President of the Bank of the United States, Nicholas Biddle, in alliance with the National Republicans under Senator Henry Clay (KY) and Senator Daniel Webster (MA), decided to make rechartering a referendum on the legitimacy of the institution in the general election of 1832.

When Congress voted to reauthorize the Bank, Jackson, as incumbent and candidate in the race, promptly vetoed the bill. His veto message justifying his action was a polemical declaration of the social philosophy of the Jacksonian movement pitting “farmers, mechanics and laborers” against the “rich and powerful” and arguing against the Bank’s constitutionality. Pro-Bank interests warned the public that Jackson would abolish the Bank altogether if granted a second term.

In the presidential campaigns of 1832, the BUS served as the central issue in mobilizing the opposing Jacksonian Democrats and National Republicans. Jackson and Biddle personified the positions on each side. Jacksonians successfully concealed 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.

Fearing economic reprisals from Biddle and the Bank, Jackson moved swiftly to remove federal deposits from the institution. In 1833 he succeeded in distributing the funds to several dozen private banks throughout the country. The new Whig Party emerged 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 retaliated by contracting Bank credit, inducing a serious and protracted financial downturn. A reaction set 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 was a “lost cause.”

Instead of allowing the Bank to go out of existence, Biddle arranged its conversion to a state chartered corporation in Pennsylvania just weeks before its federal charter expired in March 1836. This episode in the Bank’s decline and fall ended in 1841 with liquidation of the institution. Jackson’s campaign against the Bank had triumphed.