The Bank War
Andrew Jackson’s first term was full of controversy. For all of his reputation as a military and political warrior, however, the most characteristic struggle of his presidency was financial. As president, he waged a “war” against the Bank of the United States.
The charter of the controversial national bank that Congress had established as part of Alexander Hamilton’s financial plan expired in 1811. But five years later, Congress had given a new charter to the Second Bank of the United States. Headquartered in Philadelphia, the bank was designed to stabilize the growing American economy. By requiring other banks to pay their debts promptly in gold, it was supposed to prevent them from issuing too many paper banknotes that could drop suddenly in value. Of course, the Bank of the United States was also supposed to reap a healthy profit for its private stockholders, like the Philadelphia banker Stephen Girard and the New York merchant John Jacob Astor.
Though many Republicans had supported the new bank, some never gave up their Jeffersonian suspicion that such a powerful institution was dangerous to the republic. Andrew Jackson was one of the skeptics. He and many of his supporters blamed the bank for the Panic of 1819, which had become a severe economic depression. The national bank had made that crisis worse, first by lending irresponsibly and then, when the panic hit, by hoarding gold currency to save itself at the expense of smaller banks and their customers. Jackson’s supporters also believed the bank had corrupted many politicians by giving them financial favors.
In 1829, after a few months in office, Jackson set his sights on the bank and its director, Nicholas Biddle (Figure 29). Jackson became more and more insistent over the next three years as Biddle and the bank’s supporters fought to save it. A visiting Frenchman observed that Jackson had “declared a war to the death against the Bank,” attacking it “in the same cut-and-thrust style” that he had once fought the Indians and the British. For Jackson, the struggle was a personal crisis. “The Bank is trying to kill me,” he told Martin Van Buren, “but I will kill it!”
The bank’s charter was not due for renewal for several years, but in 1832, while Jackson was running for re-election, Congress held an early vote to reauthorize the Bank of the United States. The president vetoed the bill.
In his veto message, Jackson called the bank unconstitutional and “dangerous to the liberties of the people.” The charter, he explained, didn’t do enough to protect the bank from its British stockholders, who might not have Americans’ interests at heart. In addition, Jackson wrote, the Bank of the United States was virtually a federal agency, but it had powers that were not granted anywhere in the Constitution. Worst of all, the bank was a way for well-connected people to get richer at everyone else’s expense. “The rich and powerful,” the president declared, “too often bend the acts of Government to their selfish purposes.” Only a strictly limited government, Jackson believed, would treat people equally.
Although its charter would not be renewed, the Bank of the United States could still operate for several more years. So in 1833, to diminish its power, Jackson also directed his cabinet to stop depositing federal funds in it. From now on, the government would do business with selected state banks instead. Critics called them Jackson’s “pet banks.”
Jackson’s bank veto set off fierce controversy. Opponents in Philadelphia held a meeting and declared that the president’s ideas were dangerous to private property. Jackson, they said, intended to “place the honest earnings of the industrious citizen at the disposal of the idle” — in other words, redistribute wealth to lazy people—and become a “dictator.” A newspaper editor in Maine said that Jackson was trying to set “the poor against the rich,” perhaps in order to take over as a military tyrant. But Jackson’s supporters praised him. Pro-Jackson newspaper editors wrote that he had kept a “monied aristocracy” from conquering the people.
By giving President Jackson a vivid way to defy the rich and powerful, or at least appear to do so, the Bank War gave his supporters a specific “democratic” idea to rally around. More than any other issue, opposition to the national bank came to define their beliefs. And by leading Jackson to exert executive power so dramatically against Congress, the Bank War also helped his political enemies organize.
Increasingly, supporters of Andrew Jackson referred to themselves as Democrats. Under the strategic leadership of Martin Van Buren, they built a highly organized national political party, the first modern party in the United States. Much more than earlier political parties, this Democratic Party had a centralized leadership structure and a consistent ideological program for all levels of government. Meanwhile, Jackson’s enemies, mocking him as “King Andrew the First,” named themselves after the patriots of the American Revolution, the Whigs. (3)
The Panic of 1837
Unfortunately for Jackson’s Democrats (and most other Americans), their victory over the Bank of the United States worsened rather than solved the country’s economic problems.
For a while, to be sure, the signs were good. Between 1834 and 1836, a combination of high cotton prices, freely available foreign and domestic credit, and an infusion of specie (“hard” currency in the form of gold and silver) from Europe spurred a sustained boom in the American economy. At the same time, sales of western land by the federal government promoted speculation and poorly regulated lending practices, creating a vast real estate bubble.
Meanwhile, the number of state-chartered banks grew from 329 in 1830 to 713 just six years later. As a result, the volume of paper banknotes per capita in circulation in the United States increased by forty percent between 1834 and 1836. Low interest rates in Great Britain also encouraged British capitalists to make risky investments in America. British lending across the Atlantic surged, raising American foreign indebtedness from $110 to $220 million over the same two years.
As the boom accelerated, banks became more careless about the amount of hard currency they kept on hand to redeem their banknotes. And although Jackson had hoped that his bank veto would reduce bankers’ and speculators’ power over the economy, it actually made the problems worse.
Two further federal actions late in the Jackson administration also worsened the situation. In June 1836, Congress decided to increase the number of banks receiving federal deposits. This plan undermined the banks that were already receiving federal money, since they saw their funds distributed to other banks. Next, seeking to reduce speculation on credit, the Treasury Department issued an order called the Specie Circular in July 1836, requiring payment in hard currency for all federal land purchases. As a result, land buyers drained eastern banks of even more gold and silver.
By late fall in 1836, America’s economic bubbles began to burst. Federal land sales plummeted. The New York Herald reported that “lands in Illinois and Indiana that were cracked up to $10 an acre last year, are now to be got at $3, and even less.” The newspaper warned darkly, “The reaction has begun, and nothing can stop it.”
Runs on banks began in New York on May 4, 1837, as panicked customers scrambled to exchange their banknotes for hard currency. By May 10, the New York banks, running out of gold and silver, stopped redeeming their notes. As news spread, banks around the nation did the same. By May 15, the largest crowd in Pennsylvania history had amassed outside of Independence Hall in Philadelphia, denouncing banking as a “system of fraud and oppression.”
The Panic of 1837 led to a general economic depression. Between 1839 and 1843, the total capital held by American banks dropped by forty percent as prices fell and economic activity around the nation slowed to a crawl. The price of cotton in New Orleans, for instance, dropped fifty percent.
Travelling through New Orleans in January 1842, a British diplomat reported that the country “presents a lamentable appearance of exhaustion and demoralization.” Over the previous decade, the American economy had soared to fantastic new heights and plunged to dramatic new depths.
Normal banking activity did not resume around the nation until late 1842. Meanwhile, two hundred banks closed, cash and credit became scarce, prices declined, and trade slowed. During this downturn, seven states and a territorial government defaulted on loans made by British banks to finance internal improvements. (3)
Rise of the Whigs
The Whig Party, which had been created to oppose Andrew Jackson and the Democratic Party, benefitted from the disaster of the Panic of 1837.
The Whig Party had grown partly out of the political coalition of John Quincy Adams and Henry Clay. The National Republicans, a loose alliance concentrated in the Northeast, had become the core of a new anti-Jackson movement. But Jackson’s enemies were a varied group; they included proslavery southerners angry about Jackson’s behavior during the Nullification Crisis as well as antislavery Yankees.
After they failed to prevent Andrew Jackson’s reelection, this fragile coalition formally organized as a new party in 1834 “to rescue the Government and public liberty.” Henry Clay, who had run against Jackson for president and was now serving again as a senator from Kentucky, held private meetings to persuade anti-Jackson leaders from different backgrounds to unite. He also gave the new Whig Party its anti-monarchical name.
At first, the Whigs focused mainly on winning seats in Congress, opposing “King Andrew” from outside the presidency. They remained divided by regional and ideological differences. The Democratic presidential candidate, Vice President Martin Van Buren (Figure 33), easily won election as Jackson’s successor in 1836. But the Whigs gained significant public support after the Panic of 1837, and they became increasingly well-organized. In late 1839, they held their first national convention in Harrisburg, Pennsylvania.
To Henry Clay’s disappointment, the convention voted to nominate not him but General William Henry Harrison (Figure 34) of Ohio as the Whig candidate for president in 1840. Harrison was known primarily for defeating Shawnee warriors in the Northwest before and during the War of 1812, most famously at the Battle of Tippecanoe in present-day Indiana. Whig leaders viewed him as a candidate with broad patriotic appeal. They portrayed him as the “log cabin and hard cider” candidate, a plain man of the country, unlike the easterner Martin Van Buren. To balance the ticket with a southerner, the Whigs nominated a slave owning Virginia senator, John Tyler, as vice president. Tyler had been a Jackson supporter but had broken with him over states’ rights during the Nullification Crisis.
Although “Tippecanoe and Tyler, too” (Figure 35) easily won the presidential election of 1840, this choice of ticket turned out to be disastrous for the Whigs. Harrison became ill (for unclear reasons, though tradition claims he contracted pneumonia after delivering a nearly two-hour inaugural address without an overcoat or hat) and died after just thirty-one days in office (Figure 36). Harrison thus holds the ironic honor of having the longest inaugural address and the shortest term in office of any American president. Vice President Tyler became president (Figure 37) and soon adopted policies that looked far more like Andrew Jackson’s than like a Whig’s. After Tyler twice vetoed charters for another Bank of the United States, nearly his entire cabinet resigned, and the Whigs in Congress expelled “His Accidency” from the party.
The crisis of Tyler’s administration was just one sign of the Whig Party’s difficulty uniting around issues besides opposition to Democrats. The Whig Party would succeed in electing two more presidents, but it would remain deeply divided. Its problems would grow as the issue of slavery strained the Union in the 1850s. Unable to agree upon a consistent national position on slavery, and unable to find another national issue to rally around, the Whigs would break apart by 1856. (3)
Anti-Masons, Anti-Immigrants, and the Whig Coalition
The Whig coalition drew strength from several earlier parties, including two that harnessed American political paranoia. The Anti-Masonic Party formed in the 1820s for the purpose of destroying the Freemasons. Later, anti-immigrant sentiment formed the American Party, also called the “Know-Nothings.” The American Party sought and won offices across the country in the 1850s, but nativism had already been an influential force, particularly in the Whig Party, whose members could not fail to notice that urban Irish Catholics strongly tended to support Democrats.
Freemasonry (Figure 38), an international network of social clubs with arcane traditions and rituals, seems to have originated in medieval Europe as a trade organization for stonemasons. By the eighteenth century, however, it had outgrown its relationship with the masons’ craft and had become a general secular fraternal order that proclaimed adherence to the ideals of the Enlightenment.
Freemasonry was an important part of the social life of men in the new republic’s elite. George Washington, Benjamin Franklin, Andrew Jackson, and Henry Clay all claimed membership. Prince Hall, a free leather worker in Boston, founded a separate branch of the order for African American men. However, the Masonic brotherhood’s secrecy, elitism, rituals, and secular ideals generated a deep suspicion of the organization among many Americans.
In 1820s upstate New York, which was fertile soil for new religious and social reform movements, anti-Masonic suspicion would emerge for the first time as an organized political force. The trigger for this was the strange disappearance and probable murder of William Morgan. Morgan announced plans to publish an exposé called Illustrations of Masonry, by One of the Fraternity Who Has Devoted Thirty Years to the Subject. This book purported to reveal the order’s secret rites, and it outraged other local Freemasons. They launched a series of attempts to prevent the book from being published, including an attempt to burn the press and a conspiracy to have Morgan jailed for alleged debts. In September, Morgan disappeared. He was last seen being forced into a carriage by four men later identified as Masons. When a corpse washed up on the shore of Lake Ontario, Morgan’s wife and friends claimed at first that it was his.
The Morgan story convinced many people that Masonry was a dangerous influence in the republic. The publicity surrounding the trials transformed local outrage into a political movement that, though small, had significant power in New York and parts of New England. This movement addressed Americans’ widespread dissatisfaction about economic and political change by giving them a handy explanation: the republic was controlled by a secret society.
In 1827, local anti-Masonic committees began meeting across the state of New York, committing not to vote for any political candidate who belonged to the Freemasons. This boycott grew, and in 1828, a convention in the town of LeRoy produced an “Anti-Masonic Declaration of Independence,” the basis for an Anti-Masonic Party. In 1828, Anti-Masonic politicians ran for state offices in New York, winning twelve percent of the vote for governor.
In 1830, the Anti-Masons held a national convention in Philadelphia. After a dismal showing in the 1832 presidential elections, the leaders of the Anti-Masonic Party folded their movement into the new Whig Party. The Anti-Masonic Party’s absorption into the Whig coalition demonstrated the importance of conspiracy theories in American politics. Just as Andrew Jackson’s followers detected a vast foreign plot in the form of the Bank of the United States, some of his enemies could detect it in the form of the Freemasons. Others, called nativists, blamed immigrants.
Nativists detected many foreign threats, but Catholicism may have been the most important. Nativists watched with horror as more and more Catholic immigrants (especially from Ireland and Germany) arrived in American cities. The immigrants professed different beliefs, often spoke unfamiliar languages, and participated in alien cultural traditions. Just as importantly, nativists remembered Europe’s history of warfare between Catholics and Protestants. They feared that Catholics would bring religious violence with them to the United States.
In the summer of 1834, a mob of Protestants attacked a Catholic convent near Boston. The rioters had read newspaper rumors that a woman was being held against her will by the nuns. Angry men broke into the convent and burned it to the ground. Later, a young woman named Rebecca Reed, who had spent time in the convent, published a memoir describing abuses she claimed the nuns had directed toward novices and students. The convent attack was among many eruptions of “nativism,” especially in New England and other parts of the Northeast, during the early nineteenth century.
Many Protestants saw the Catholic faith as a superstition that deprived individuals of the right to think for themselves and enslaved them to a dictator, the pope, in Rome. They accused Catholic priests of controlling their parishioners and preying sexually on young women. They feared that Catholicism had the potential to overrun and conquer the American political system, just as their ancestors had feared it would conquer England.
The painter and inventor Samuel F. B. Morse, for example, warned in 1834 that European tyrants were conspiring together to “carry Popery through all our borders” by sending Catholic immigrants to the United States. If they succeeded, he predicted, Catholic dominance in America would mean “the certain destruction of our free institutions.” Around the same time, the Protestant minister Lyman Beecher lectured in various cities, delivering a similar warning. “If the potentates of Europe have no design upon our liberties,” Beecher demanded, then why were they sending over “such floods of pauper emigrants — the contents of the poorhouse and the sweepings of the streets—multiplying tumults and violence, filling our prisons, and crowding our poorhouses, and quadrupling our taxation” — not to mention voting in American elections?i (3)