2
The Bank War
The fight over the Bank of the United States marked the beginning of the end of the fondest dream of the Founders: that the country they created might be spared the rancor of partisan politics. Parties, they believed, were artifacts of monarchy, where competing interests vied for the king’s favor. In a republic, based on civic virtue, parties need never emerge, for all good citizens would seek the common weal. What the Founders failed to appreciate was that good citizens might have distinctly different visions of the common weal. In time Americans would accept this conclusion, but enough of the Revolutionary idealism remained during the 1790s to cause opposing camps of idealists to condemn their opponents as base, malicious, and corrupt.
Heading the camp of capitalism was Hamilton; of democracy, Jefferson. Hamilton’s Federalists favored a strong central government attuned to commerce and finance; their geographic base was New England and the cities. Jefferson’s party, which called itself the Republicans, strove to limit federal power and tilted toward farmers, including the planters of the South, where the Republican center of gravity lay. The fault line between the parties assumed an international angle when the French Revolution led to war in Europe. The Federalists followed Hamilton in perceiving a natural affinity between the moneyed classes of America and those of Britain; from this perception flowed a preference for Britain in this latest installment of that country’s historic struggle with France. The Republicans favored France, on grounds of gratitude for French help in the American Revolutionary War, of continuing hostility toward past master Britain, and especially of revolutionary France’s endorsement of the principles of popular government on which the American republic had been founded. When the British and the French both began preying on American shipping, with each trying to deny American trade to the other, the foreign-policy debate became passionately vitriolic. The Federalists alleged Republican complicity in the French Reign of Terror; the Republicans imagined Federalist plots to reattach America to the British empire.
The fierceness of partisan politics in America dismayed the oldest Founders. George Washington shook his head and retired to Mount Vernon. “Me thought I heard him think, ‘Ay! I am fairly out and you are fairly in!’” John Adams recorded upon succeeding Washington in the presidency. “‘See which of us will be the happiest!’” Adams soon envied Washington. After he and the Federalist majority in Congress took the French seizures of American ships as cause to launch an undeclared naval war against France, the Republicans cried sellout to Britain. The Federalists responded by ramming through Congress the Alien and Sedition Acts, outlawing most dissent. Jefferson, Adams’s vice president—under the original system for choosing presidents, whereby the runner-up became vice president—secretly penned a protest asserting the right of states to nullify laws they deemed unconstitutional. Jefferson then challenged Adams’s reelection, initiating one of the nastiest campaigns in American political history.
Hamilton took part in the campaign but not, surprisingly, on Adams’s side. After his twin triumphs on the debt and the Bank of the United States, Hamilton’s star had fallen somewhat. A proposal by him for the encouragement of manufacturing in America, by federal subsidies to capitalists and protective tariffs against imports, struck even some of his Federalist friends as excessive and fell dead in Congress. An adulterous affair led to blackmail by the husband of Hamilton’s paramour, quietly curbing Hamilton’s ambitions; when the affair and the blackmail payments surfaced, his enemies were delighted and his supporters embarrassed. During the hostilities with France, Adams recalled Washington to service as commander of the army; Washington consented on condition that Hamilton be his inspector general. In this post Hamilton proposed to employ the troops against those who challenged federal authority on the Alien and Sedition Acts. The mere idea outraged the Republicans and unnerved more than a few of the Federalists; when Washington resigned the army command, Adams conspicuously snubbed Hamilton by leaving the position vacant. Hamilton struck back during the campaign of 1800, circulating a pamphlet slashing Adams unmercifully. “There are great and intrinsic defects in his character which make him unfit for the office of Chief Magistrate,” Hamilton wrote. “By his ill humours and jealousies he has already divided and distracted the supporters of the Government…. He has furnished deadly weapons to its enemies by unfounded accusations, and has weakened the force of its friends by decrying some of the most influential of them to the utmost of his power.”
Hamilton’s pamphlet guaranteed Adams’s defeat. Jefferson triumphed over Adams in the 1800 balloting, but to the confusion of the Republicans, the pleasure of the Federalists, and the puzzlement of most Americans, Jefferson finished in an electoral tie with Aaron Burr. The Constitution specified that each elector should have two votes. Jefferson was the clear favorite of the Republican electors, who also favored New Yorker Burr for vice president. One of the electors was supposed to toss away his second vote, to ensure that Jefferson finish first and Burr second. But communications snarled, and Burr received as many votes as Jefferson. This threw the contest to the House of Representatives, where lame-duck and now mischief-bent Federalists still ruled. Only the intervention of Hamilton, who considered Jefferson foolish but Burr dangerous, broke the deadlock, in Jefferson’s favor.
Hamilton subsequently learned just how dangerous Burr was. Burr nursed his injury for three years, during which he fell out with Jefferson, who grew almost as alarmed at Burr’s ambition as Hamilton already was. Aware he wouldn’t receive a second term for vice president, Burr ran for governor of New York. Hamilton continued to oppose him, in language that cast aspersions on Burr’s character. Burr lost and thereupon challenged Hamilton to a duel. Hamilton’s eldest son had died in a duel, and Hamilton agonized at possibly subjecting his wife to another such tragedy. But his honor wouldn’t let him refuse. On the morning of July 11, 1804, Burr and Hamilton met at Weehawken, New Jersey (dueling being illegal in New York). Burr’s bullet ruptured Hamilton’s liver and lodged in his spine. He lingered in pain before dying the next day.
THE DUEL ENDED Burr’s political career almost as quickly as it ended Hamilton’s life. A New York grand jury indicted him, and he fled for his freedom to the West. He stopped in Philadelphia, where he took refuge in the home of Charles Biddle, a descendant of Quakers and an old friend. By happenstance the Biddle household at just that moment included Nicholas Biddle, Charles Biddle’s eighteen-year-old-son, who had been living away at college and was about to sail for France. Young Nick was seeking a path in life and had been contemplating politics. But the extremist turn of party affairs, embodied in the Biddle house by the bloodstained vice president, prompted a somber reconsideration. “The violence of party…disgraces our country,” he wrote. He wanted nothing to do with it.
He proceeded to Paris, to become the personal secretary of the American minister to France. The United States had recently arranged to purchase Louisiana from France, and Nick was assigned to help sort out the financial details. He dealt with merchants, particularly those who had claims subsumed in the $15 million purchase price, and bankers, including representatives of Barings, the London house that underwrote the transaction. Eventually he worked himself out of a job and, after a grand tour of the Continent, returned to Philadelphia.
He again felt the urge to public service. “Every good citizen owes himself to his country,” he wrote. But he still shuddered at the violence of party politics, and so he chose the world of literature instead. The Port Folio, a genteel journal of arts and lofty criticism, offered him its editorship. He accepted. Between issues he studied law.
Yet public service wouldn’t let him escape so easily, and after friends and professional associates pleaded with him to accept nomination to the lower house of the Pennsylvania legislature, he entered politics. He was elected in time to observe the demise of one of Philadelphia’s landmark institutions. The national capital had moved on schedule in 1800 to Washington City (as it was called while the memory of Washington the man lingered), but the Bank of the United States remained in Philadelphia. Its stranding was more than physical, for the Republicans who had controlled the federal government since Jefferson’s election made clear they wouldn’t renew the Bank’s charter when it expired in 1811.
Biddle’s politics and economics were Hamiltonian (notwith-standing his father’s kindness to Hamilton’s killer), and as a Pennsylvania lawmaker he lamented the decision to let the Bank die. A recent exacerbation of the troubles between the United States and Britain had led some Americans to call for war; Biddle didn’t agree, but he thought the possibility of war made dissolution of the Bank especially inopportune. “Is this a time to disorder the finances?” he inquired rhetorically. “When the nerves of the whole nation should be braced and strong, are we to prepare for combat by cutting the main artery of all its resources?”
James Madison, who had succeeded Jefferson as president, and the other Republicans ignored Biddle, and the Bank concluded its operations. Yet hardly had the doors been bolted and the windows shuttered than the administration began having second thoughts. The war clouds burst in 1812, and the ensuing conflict severely strained the finances of the federal government. At first the government benefited from Hamilton’s earlier efforts on behalf of the public credit, but as the fighting persisted Madison succumbed to the temptation Hamilton had warned of and began printing unsupported paper money. Interest rates soared, investor confidence plunged, and the national accounts spun into confusion. That the war went badly for American military forces compounded the financial chaos, and about the time the British burned the Capitol and the White House, Madison concluded that Hamilton had been right regarding the need for a national bank, at least in time of crisis. Conveniently forgotten were the earlier Republican assertions, most notably by Madison himself, that a national bank contravened the Constitution.
Ironically, however, Hamilton’s heirs in the Federalist party now opposed a national bank. Some complained that the Republicans, ignorant of the first principles of banking, failed to afford the institution adequate funds. “This Bank is to begin with insolvency,” Daniel Webster declared. “It is to commence its existence in dishonor. It is to draw its first breath in disgrace.” At least as much of the opposition, though, reflected the growth of state banks since the closing of the first Bank of the United States, and the Federalists’ political and often financial attachment to those local institutions.
But the opposition failed, and in 1816 the second Bank of the United States was chartered. Its terms were similar to those of the first, but not identical. The Bank’s capital was $35 million, rather than $10 million, reflecting the growth in the nation’s economy since 1791. The federal government would still own twenty percent of the stock, and the Bank would still have twenty-five directors. But only twenty of the directors would be elected; the other five would be appointed by the president.
ONE OF THOSE appointed directors, starting in 1819, was Nicholas Biddle. He took the job reluctantly. He had never lost his distaste for the roughhouse of politics, and the first two years of operation had made the new Bank the target of heated criticism. State banks claimed that the national bank stole their business. Debtors denounced the Bank’s efforts to strengthen the currency. When convincing evidence emerged that some of the directors of the Bank had engaged in speculation in the Bank’s stock and even outright fraud, Republican skeptics of banks and bankers recycled their complaints from Hamilton’s day that the national bank was a plot against the American people.
Biddle appreciated the need to fix the Bank. “That it has been perverted to selfish purposes cannot be doubted,” he wrote President James Monroe upon learning that Monroe wanted to nominate him for director. “That it may, and must, be renovated is equally certain.” But the renovations wouldn’t come easily. “They who undertake to reform abuses…must encounter much hostility.” Biddle wasn’t sure he could handle the criticism. Yet when Monroe appealed to his patriotism, Biddle decided he couldn’t resist. “I am unwilling to avoid any duty by which you think I can be of service,” he told the president.
The timing of Biddle’s appointment could hardly have been less auspicious. In 1819 the United States suffered its first full-blown financial panic. The American economy had grown by fits and starts since the end of the Revolutionary War, with farming continuing to employ the great majority of Americans, commerce supporting a smaller but substantial number, and various kinds of manufacturing beginning to play a role. The farm economy expanded by virtue of the rapid increase of both the population and the land area of the United States. The former had roughly doubled since the Revolution, as a result of natural increase and immigration; the latter had doubled, too, upon the acquisition of Louisiana from France. Commerce increased apace, although the chronic wars between Britain and France put a crimp on overseas trade. Manufacturing emerged with the introduction of new technology—the cotton gin, for example, and mechanical looms—and the disappearance, upon American independence, of the restrictions Britain had placed on colonial manufactures.
The War of 1812 put a damper on the economic growth. Commodities clogged American warehouses as exporters refused to run the British blockade. The inflation induced by the war—or, rather, by the Madison administration’s wartime monetary policies—dislocated nearly every sector of the economy, deranging prices and making rational business planning impossible.
The derangement took a new form after the war. Though the conflict against Britain ended in a standoff, the accompanying struggle against the Indians of the West culminated in the destruction of nearly all aboriginal resistance to white settlement east of the Mississippi. The sudden availability of vast new reaches of territory, combined with the loose money left over from the war, fueled wild speculation in land. Prices rose and rose, becoming unsustainable about the time Biddle joined the board of the second Bank of the United States. Nervous lenders, including the Bank, insisted on stronger collateral; this reminder of reality ruined the fun and threw the speculation into reverse. Land prices plummeted, causing everything erected upon them to collapse as well. Banks called in their loans and savers hoarded, driving prices still further down. Solid figures on the overall shrinkage of the money supply are impossible to reconstruct, but the contraction of the liabilities of the Bank of the United States—from $22 million in the autumn of 1818 to $10 million at the beginning of 1820—is indicative.
The depression that followed the panic prostrated large parts of the country. Banks folded; merchants liquidated; sailing ships sat idle; commercial buildings stood empty; farmers lost their land and homes. Tens of thousands of Americans took to the roads in vague hope of finding something better than the disaster they fled. An Ohioan described “distress…beyond comprehension. Marshal and sheriff sales are almost daily.” An observer in western New York lamented the sight of “families naked…children freezing in the winter’s storm…fathers without coats or shoes.”
The one bright spot of the season, for the Bank of the United States if not for the destitute, was a decision by the Supreme Court regarding the Bank’s constitutionality. The change of Republican heart in Washington that had allowed the resurrection of the Bank didn’t extend to all the states, several of which passed laws to inhibit its operation. Maryland taxed banks not chartered by Maryland’s legislature, of which the Bank of the United States was the prime example. James McCulloch, the cashier of the Baltimore branch of the Bank, refused to pay the tax. Maryland sued, McCulloch countersued, and the case went to the Supreme Court.
Chief Justice John Marshall had been appointed by John Adams just before that last Federalist president left office in 1801. For nearly two decades Marshall had defended and elaborated the Federalist vision of a strong central government. As his Federalist colleagues on the Supreme Court retired and died, he grew lonelier but more adamant that the nation took precedence over the states and that the Constitution allowed what it didn’t explicitly forbid. This was the line he adopted in leading the court to rule for McCulloch and the Bank. “Let the end be legitimate,” Marshall wrote (in words that echoed Hamilton’s justification of the first Bank), “let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the Constitution, are constitutional.” The Bank fit Marshall’s description and therefore was constitutional. As for the Maryland law taxing the Bank, it was not. “The power to tax involves the power to destroy,” Marshall wrote. If a state could tax the operations of the federal government, it could prevent those operations. “This was not intended by the American people. They did not intend to make their government dependent on the states.”
A more forthright declaration of the Hamiltonian view, not only on the Bank but on the powers of the federal government at large, was difficult to imagine. Many Republicans disputed Marshall’s interpretation, and decades would pass before the Supreme Court was generally accepted as the final arbiter of the Constitution. But in the meantime Marshall’s opinion gave the Bank a continued lease on life.
NICHOLAS BIDDLE MADE the most of Marshall’s ruling. In 1822 the Bank board required a new president, and Biddle, as a voting member, reflected on the requisites for the job. Chief among these, he decided, were “talent for business, standing with the government, and residence in Philadelphia.” The need for business talent in the Bank president was obvious, although Biddle noted that this wasn’t confined to “men of business,” who seemed to him often to lack vision. As for the Bank president’s relation to government: “He should be known to and stand well with the Government—not an active partisan, not even a party man—but a man in whom the Government would confide. I am far from thinking that the government should have any direct or indirect influence over the Bank. On the contrary, the less of it which exists, the better for both. But the government is a great stockholder and a great customer.” Regarding Philadelphia residence: the Bank was headquartered there, and a Philadelphian would foster good relations with the community.
Having characterized the ideal Bank president, Biddle decided he fit the bill as well as anyone, and at the encouragement of some of the directors he let his name be put forward. In January 1823, two days before his thirty-seventh birthday, he became president of the Bank of the United States.
His promotion elicited skepticism in some moneyed quarters. John Jacob Astor, the New York merchant and real-estate developer who was on his way to becoming America’s richest man, thought Biddle too literary to run the nation’s leading bank. Biddle responded in good-humored verse, elevating living financiers over dead authors.
I prefer my last letters from Barings or Hope
To the finest epistles of Pliny or Pope.
Biddle added that he had abandoned illusions of art’s transcendence and found peace and happiness in “that simplest, sublimest of truths—six per cent.”
As his first order of business, Biddle oversaw completion of the Bank’s new headquarters, a marble-columned structure on Philadelphia’s Chestnut Street. And amid a belated but general revival of business after the post-1819 depression, he directed the consolidation of the Bank’s resources and the reestablishment of its role as the balance wheel of the American economy. One measure of his success was the reduction and eventual elimination of the monetary exchange rate between the different regions of the country. Eastern merchants and bankers had long discounted western bank notes, both because of the trouble involved in redeeming them and because western banks were perceived to be riskier than their eastern counterparts. Biddle’s Bank, by transferring funds efficiently and by enforcing uniform standards among its various branches, brought the regions into alignment.
This accomplishment pleased many but alienated others. The brokers who had profited from the differential took offense, as did the friends of state banks whose business was stolen by Biddle’s Bank. Unreconstructed Jeffersonians, distrusting all banks, interpreted this exercise of Biddle’s power as a threat to democracy.
The hero of this last group was Andrew Jackson, who knew next to nothing about banks, a little more about money, and a great deal about democracy. By the 1820s nearly all the old property qualifications for voting had disappeared, as new states entered the Union with constitutions based on the egalitarian rhetoric of the Declaration of Independence, and shamed the existing states into changing their rules. At the same time and for similarly democratic reasons, state legislatures conferred the selection of presidential electors upon the people. The result was that presidential campaigns in the 1820s became popularity contests, with the victor the candidate most appealing to the largest number of adult white males.
Occasionally the system stumbled. Though Jackson garnered the most popular votes in 1824, he split the electoral vote with three other candidates, and the race went to the House of Representatives, from which John Quincy Adams emerged victorious. Adams wasn’t as hostile to democracy as his Federalist father, John Adams, had been, but he was certainly less populist than Jackson. And when he appointed Henry Clay, the fourth-place finisher, who had thrown his support to Adams in the House, to be secretary of state and thereby—in the practice of those days—heir apparent to the presidency, the Jacksonians cried “corrupt bargain.” They lashed the Adams-Clay cabal for perverting democracy and commenced the campaign of 1828 at once.
IN THAT CAMPAIGN Biddle supported Adams, but silently. “There is no one principle better understood by every officer in the Bank than that he must abstain from politics,” Biddle told an associate.
The course of the Bank is very clear and straight on that point. We believe that the prosperity of the Bank and its usefulness to the country depend on its being entirely free from the control of the officers of the Government, a control fatal to every bank which it ever influenced. In order to preserve that independence it must never connect itself with any administration, and never become a partisan of any set of politicians…. We have no concern in politics. Dean Swift said, you know, that money is neither Whig nor Tory, and we say with equal truth that the Bank is neither Jackson man nor Adams man. It is only a bank.
Yet the Bank wasn’t only a bank. It was the arbiter of the nation’s money supply, the bestower or withholder of prosperity. Biddle wouldn’t have had it otherwise.
But Andrew Jackson would. Jackson hadn’t said much about the Bank during the campaign; in fact he hadn’t said much about any issues. Jackson adopted the position pioneered by that other general-turned-politician, George Washington, that a candidate’s actions and character should speak for themselves. Jackson recognized, moreover, that his value to voters as a symbol of the triumph of democracy would only diminish once he descended into the realm of policy. As a result, when he assumed the presidency in 1829 after an easy defeat of Adams, he did so unburdened by promises or commitments to anything more specific than the national welfare, however he chose to define it.
On the money question, the defining began with Jackson’s first annual message (the written equivalent of what would come to be called the State of the Union address). The president reminded the country that the charter of the Bank of the United States would expire in 1836, and he supposed that the stockholders would apply for a renewal of the charter. He warned them to expect a presidential veto. A strict constructionist, Jackson believed that Congress legitimately might charter a bank for the federal District of Columbia, but not for the rest of the country. That John Marshall had ruled otherwise didn’t impress him.
Biddle read Jackson’s remarks yet didn’t take them seriously. “They should be treated as the honest though erroneous notions of one who intends well,” Biddle told a friend. He assumed that when the sager heads in the administration and the president’s party asserted themselves, they would side with the Bank. “The expressions in the message were the President’s own, not dictated nor suggested by any body else, and asserted in opposition to the wishes, if not the advice, of all his habitual counselors. It is not therefore a cabinet measure, nor a party measure, but a personal measure. As such it is far less dangerous.” Once people understood this, all would be well. “The question will be decided on its own merits.”
Here Biddle was the naïve one. Few questions in American politics are decided on their merits alone, and the Bank question was not one of those. Henry Clay still wanted to be president, and he befriended the Bank to that end. Clay’s embrace of what he called the “American system” of federal support for business via protective tariffs and funding for roads, bridges, and canals made him Kentucky’s answer to Alexander Hamilton—only taller, handsomer, and more eloquent—and extended easily to the Bank. As the leader of the anti-Jackson party in Congress, Clay nominated himself as Biddle’s chief legislative adviser. He told Biddle to move slowly on renewal of the charter. Though Biddle had the votes in Congress, Clay said, Jackson’s warning of a veto had to be taken seriously. Presidential vetoes were rare in those early days but not unheard of; in fact Jackson had just vetoed a roads bill, on the ground that internal improvements were constitutionally reserved to the states. He might well veto Bank renewal. The question then would be “referred to the people,” Clay said, “and would inevitably mix itself with all our elections. It would probably become…the controlling question in American politics. The friends of the Bank would have to argue the question before the public against the official act of the President, and against the weight of his popularity.” The Bank couldn’t win such a contest. Better to wait, therefore, till after the election of 1832. “Then everything will be fresh; the succeeding Presidential election will be too remote to be a shaping measure in reference to it; and there will be a disposition to afford the new administration the facilities in our fiscal affairs which the Bank of the United States perhaps alone can render.” Clay was already running to replace Jackson; his assurance on the Bank was to let Biddle know that a President Clay would be cooperative. But even if Jackson were returned to office, the Bank would be better off for having waited. “He will have probably less disposition than he has now to avail himself of any prejudices against the Bank. He will then also have less influence, for it may be loosely asserted, at least as a general rule, that the President will have less popularity in his second than in his first term.”
Clay may have been giving Biddle honest advice in this letter. Everything he said was plausible enough. But Clay was also pursuing his own self-interest. With the election two years away, he didn’t want to have to run as the defender of the Bank and capital against Jackson as the champion of democracy and the people. Clay concurred with Biddle that the Bank served the national interest, but he didn’t expect the masses to agree. And those masses were the ones who, for better or worse, now controlled America’s destiny.
Perhaps surprisingly, Biddle had greater confidence in the masses than Clay did. After Jackson repeated his warning about terminating the Bank, Biddle wrote defiantly, “In respect to General Jackson and Mr. Van Buren”—Secretary of State Martin Van Buren, whom Jackson was grooming for the succession—“I have not the slightest fear of either of them…. Our countrymen are not naturally disposed to cut their own throats to please any body, and I have so perfect a reliance on the spirit and sense of the nation that I think we can defend the institution from much stronger enemies than they are.” All that was necessary was education. “We must endeavour to reach the understandings of our fellow citizens by the diffusion of correct views of a subject which is much misunderstood.”
Biddle didn’t have quite the faith in his countrymen to conduct his educational campaign overtly. He utilized Bank funds to pay for the drafting of pro-Bank articles conveying, as he put it, “real and positive information regarding the working of the institution and its beneficial influence on the prosperity of the nation.” He offered editors up to a thousand dollars to insert such articles in their papers. He asked only that his role in the campaign be concealed, “as it might be misconstrued.”
Biddle’s campaign also involved payments to politicians. Daniel Webster, who had represented the Bank in the McCulloch Supreme Court case, now represented Massachusetts in the Senate. Biddle placed him on the payroll—as Webster reminded him rather brusquely when an installment was delayed. “I believe my retainer has not been renewed, or refreshed, as usual,” Webster wrote. “If it be wished that my relation to the Bank should be continued, it may be well to send me the usual retainers.”
Finally, by way of a warning to the enemies of the Bank to keep hands off, Biddle arranged a contraction of credit in the West. It was there that antipathy for the Bank ran broadest and support for Jackson deepest. Biddle concealed his intentions in the matter, citing financial uncertainty as cause for calling in the loans. The effect wasn’t dramatic but it was unmistakable, as was Biddle’s point: that the Bank would defend itself, by harming its enemies if necessary.
AS THE ELECTION of 1832 approached, Jackson remained as popular as ever, to Henry Clay’s discouragement. Clay had hoped for a slip, an opening for attack. But nothing significant developed, and he gradually realized that the only way to prevent Jackson’s reelection was to start a political brushfire, in hopes Jackson would stumble trying to put it out. He reversed his earlier advice to Biddle about delaying renewal of the Bank’s charter. Biddle could still anticipate cooperation in Congress, Clay said. As to Jackson: “My own belief is that, if now called upon, he would not negative the bill, but that if he should be re-elected the event might and probably would be different.” Clay adduced no evidence in support of this belief. And in fact he had none. But he did have the recent nomination of the National Republicans—as the anti-Jacksonians currently styled themselves—on a platform calling the Bank a “great and beneficent institution,” and he hoped to make the Bank the central issue in his campaign for president.
Biddle bit. “We have determined on applying to the present Congress for a renewal of the Charter of the Bank,” he informed an ally in early 1832. “To this course I have made up my mind after great reflection and with the clearest conviction of its propriety.” As before, Biddle professed disinterest in the politics of the matter. “Neither I nor any of my associates have anything whatever to do with the President or his election. I know nothing about it and care nothing about it. The Bank has never had any concern in elections; it will not have any now.” Jackson might stand or fall. “The Bank cares not…. It takes it own time and its own way.” Yet having said this, Biddle judged that Jackson would be “ten times more disposed” to veto renewal after reelection than before. And if he did veto before the election, he must surely incur the wrath of the people. “Even I, who do not feel the slightest interest in him, would be sorry to ascribe to a President of the United States a course much fitter for a humble demagogue than the Chief Magistrate of a great country.”
Biddle commenced the case for renewal himself. In a letter to Congress he described the Bank as being “connected intimately with the local business of every section of the United States, with the commercial interchanges between the several States, and the intercourse of them all with foreign nations.” In each of these areas the Bank had contributed substantially to the general welfare, and wisdom consisted in renewing its charter, that the good work continue. Biddle acknowledged that the existing charter had four years to run; his reason for applying early was to give the Bank and the myriad enterprises and individuals it served time to plan their futures.
Daniel Webster took up the Bank’s case where Biddle left off. Any Senate speech by Webster was an occasion, guaranteed to pack the galleries. That this one involved a direct challenge to the Jackson administration made it all the more appealing. The “God-like Daniel,” as he was often called, drew himself up and launched forth. He praised the Bank for preserving America from unsound money. “A disordered currency is one of the greatest of political evils,” he declared. “It undermines the virtues necessary for the support of the social system, and encourages propensities destructive of its happiness. It wars against industry, frugality, and economy; and it fosters the evil spirits of extravagance and speculation.” Webster was known as an advocate of business, but he also had a reputation for oratorical surprise. His surprise this day was to contend that the lower classes—not the wealthy—would be the ones most damaged by the destruction of the Bank. Such an eventuality would throw the people upon the flimsy notes of unreliable state banks. “Ordinary tyranny, oppression, excessive taxation: these bear lightly upon the happiness of the mass of the community, compared with fraudulent currencies and the robberies committed by depreciated paper.” The rich found ways to protect themselves against inflation; the poor simply suffered. Webster predicted that reliance on the state banks would cause gold and silver to vanish, as the state banks flooded the country with their small-denomination notes. He cited English history to make his point. “When Mr. Pitt, in the year 1797, proposed in Parliament to authorize the Bank of England to issue one pound notes, Mr. Burke lay sick at Bath of an illness from which he never recovered. And he is said to have written to the late Mr. Canning, ‘Tell Mr. Pitt that if he consents to the issuing of one pound notes, he must never expect to see a guinea again.’”
As Webster finished, Thomas Hart Benton rose to rebut. Benton’s alliance with Jackson couldn’t have been predicted a decade earlier, when he and Jackson took opposite sides in a shooting brawl in Nashville. Jackson’s shoulder caught a bullet that spent years in his flesh before finally popping out, by which time, however, he and Benton had discovered a common devotion to the emerging democracy and a shared distrust of banks. In 1832 Benton was a senator from Missouri, and his belief that gold and silver constituted the only honest money was earning him the nickname “Old Bullion.” He rejected Webster’s assertion that the Bank of the United States was good for the common people of America. Conceivably the Bank’s policies benefited some workers in the Northeast, he said, but the benefit of such policies came at the expense of the population of the rest of the country. “They lead to the abduction of its gold and silver. If notes are issued, they are payable at the branch bank”—in a given state—“and an adequate supply of gold and silver must be kept on hand to redeem them; but these orders being drawn on Philadelphia, the gold and silver of the state must be sent there to meet them.” By stealing its specie, the capitalists of the northern seaboard sucked the life out of the South and West. “They gorge to repletion, then vomit their load into the vast receptacles of the Northeast, and gorge again.” The honest people of the heartland staggered under the burden of debt as the money supply contracted; the capitalists scooped up their foreclosed farms and bankrupted shops at auctions rigged by the policies of the Bank and its minions. The consequence was as appalling as it was inevitable. “In these mock sales of towns and cities may be laid the foundation for the titles and estates of our future nobility—Duke of Cincinnati! Earl of Lexington! Marquis of Nashville! Count of St. Louis! Prince of New Orleans! Such may be the titles of the bank nobility…. Yes, sir! When the renewed charter is brought in for us to vote upon, I shall consider myself as voting upon a bill for the establishment of lords and commons in this America, and for the eventual establishment of a King!”
Neither the approximate accuracy of Benton’s account of the Bank’s operations nor his blatant demagoguery regarding their portent stopped the Senate from approving renewal by a narrow margin, or the House from backing it more enthusiastically. Jackson was certain Biddle had bought some of the favorable votes, though he couldn’t prove it. Roger Taney, Jackson’s attorney general, allowed more room for nuance. Taney recounted how one congressman had switched to Biddle’s side after receiving a generous loan from the Bank. “I do not mean to say that he was directly bribed to give this vote,” Taney wrote. “From the character he sustained and from what I knew of him, I think he would have resented any thing that he regarded as an attempt to corrupt him. But he wanted the money, and felt grateful for the favor. And perhaps he thought that an institution which was so useful to him, and had behaved with so much kindness, could not be injurious or dangerous to the public, and that it would be as well to continue it.”
CONGRESSIONAL APPROVAL PUT the fate of the Bank in Jackson’s hands. He hadn’t expected such a gift, doubting that his opponents would be so foolish as to provide him an issue on which his philosophical inclination and his political interest so clearly coincided. That Biddle could blunder this badly didn’t surprise him, but he thought Clay should have realized opposition to the Bank would be an easy winner for the president. Obviously the man was desperate.
“A bank of the United States is in many respects convenient for the Government and useful to the people,” Jackson acknowledged in receiving the renewal bill. This convenience, and his respect for his predecessors, had inclined him to let the Bank live out its charter, despite his stated reservations about its legitimacy. But the Bank’s advocates, by seeking renewal, aimed to extend the Bank’s existence. To this he could not agree. Jackson appreciated that the Supreme Court had ruled the Bank constitutional in the McCulloch case. John Marshall and the other justices were entitled to their views, he said, but these didn’t bind the president. “Each public officer who takes an oath to support the Constitution swears that he will support it as he understands it, and not as it is understood by others. It is as much the duty of the House of Representatives, of the Senate, and of the President to decide upon the constitutionality of any bill or resolution which may be presented to them for passage or approval as it is of the supreme judges.” This principle was sufficiently important that Jackson felt obliged to reiterate it: “The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both.” Jackson read the “necessary and proper” clause of the Constitution more literally than Marshall did or Hamilton had; the Founders, he inferred, meant “necessary and proper,” not “necessary or proper.” As useful as a national bank might be, it was by no means necessary. It was, therefore, unconstitutional.
Jackson’s view of the Constitution and its interpretation was hardly unique at the time; the doctrine of judicial supremacy remained a conceit of John Marshall and a minority in America. Yet much more was involved in the Bank question than constitutionality. Like Benton, Jackson believed the Bank undermined democracy by creating a monopoly of money. Of the Bank’s twenty-five directors, only five were answerable to the people. The rest served the interests of capital. “It is easy to conceive that great evils to our country and its institutions might flow from such a concentration of power in the hands of a few men irresponsible to the people.” Nor were the monopolists all Americans; almost a third of the stock of the Bank was owned by foreigners. “Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?” Most to the point, the Bank eroded the equality on which democracy rested.
Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions…. But when the laws undertake to add to these natural and just advantages artificial distinctions, to grant title, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.
Because the Bank conferred its favors preferentially, it defeated the purposes of democratic government. The renewal bill required a veto and accordingly received it.
THE REACTION TO Jackson’s Bank veto was instantaneous and sharp. “A more deranging, radical, law-upsetting document was never promulgated by the wildest Roman fanatic,” a New England editor declared. “Let it be remembered that every military chieftain—Sylla, Caesar, Cromwell—all have obtained unlimited and despotic power by pretending to be the sole friends of the People and often by denouncing the rich, and by cajoling the poor with prospects which they never intended to be realized, or only realized with chains and slavery and dungeons, or enrollment in the legions assembled to add to the power of the tyrant.” The share price of Bank stock plummeted, as did the price of commodities. Construction projects were suspended; steamboats stayed at the wharf. Protesters took to the streets in several cities and towns. Those in Philadelphia, the home of the Bank, declared their “astonishment, indignation, and alarm” that the president would so upset the economy and trifle with the national interest. The Philadelphia protesters went on to demand the defeat of Jackson in the election now but months away.
This last demand revealed the reason for the intensity of the reaction. Jackson’s veto was neither unexpected (he had long been saying he opposed renewal) nor immediately significant (the existing charter had four years left to run). But the protesters aimed to marshal the anger at the veto and use it remove Jackson from office in favor of the capital-friendly Clay.
Biddle thought the veto guaranteed Jackson’s defeat. “I am delighted with it,” he wrote Clay regarding the veto message. “It has all the fury of a chained panther biting the bars of his cage. It is really a manifesto of anarchy…. My hope is that it will contribute to relieve the country from the dominion of these miserable people.” Biddle now dropped his cloak of nonpartisanship, telling Clay, “You are destined to be the instrument of that deliverance.” He paid to distribute Clay’s speeches and provided other financial and logistical support. “At no period of your life has the country ever had a deeper stake in you,” he wrote Clay. “I wish you success most cordially, because I believe the institutions of the Union are involved in it.”
Jackson couldn’t have been happier at the uproar or at Biddle’s opposition. The capitalists were powerful, but the democrats (many of whom now called themselves Democrats) were more numerous. “The veto works well everywhere,” he wrote with satisfaction as election day neared. “It has put down the Bank instead of prostrating me.”
Jackson’s assessment proved the more accurate. In the election he increased his popular majority from 1828 and routed Clay in the electoral college by 219 to 49. The lesson seemed clear, at least to the Jacksonians: when democracy and capitalism collided at the ballot box, democracy won.
BIDDLE HAD KNOWN he was taking a risk in hitching the Bank to Clay. But he considered himself and the Bank impregnable. For all Jackson’s opposition, the Bank still held the government’s deposits, which gave the Bank its great leverage. Jackson and the democrats would never touch these, for in doing so they would bring the temple down upon their own heads. “They will not dare to remove them,” Biddle told Webster. “If the deposits are withdrawn, it will be a declaration of war which cannot be recalled.”
Biddle fatally underestimated Jackson. The president learned of Biddle’s defiance; he also heard that Biddle and the Bank were plotting another contraction of credit. “This operation will be performed under the avowed idea that it is necessary and preliminary to winding up its concerns,” Jackson’s informant told him. The contraction would cause a run on state banks, which would be forced to suspend specie payments. “The immense injury to the whole nation resulting from that event, it is believed, and not without foundation, will induce a strong public feeling in favor of recharter of the Bank as the only means of restoring a sound currency.”
Jackson determined to preempt Biddle by going straight for the deposits. He enlisted Attorney General Taney to prepare the legal brief for removal, and he dispatched confidant Amos Kendall to sound out state banks across the country to see if they were willing to accept the deposits and provide the services currently furnished by Biddle’s Bank. This was no idle question, for though the state banks could use the business, many feared to cross Biddle. Kendall discovered that the closer to Philadelphia the banks were, the greater their fear. “Most of the banks here will answer precisely as the Bank of the United States desires,” he wrote Jackson from Baltimore. Boston’s bankers were bolder, to the point of offering their personal pledges for the security of the government’s deposits. Yet even the bold ones declared that if Jackson were to act, he must do so decisively and at once. Biddle would surely retaliate against any bank that went along with the administration, and if the cooperating bank were caught short of cash, it would be ruined. Kendall summarized the feeling: “Immediate removal or no removal.”
Biddle’s spies in the banking world apprised him of Jackson’s planning, and he plotted his response. “The real sin of the Bank in the eyes of the Executive,” he told a colleague, “is that it is refractory and unmanageable. When these people first came into power…they considered the Bank a part of the spoil.” Biddle had refused to yield to the Jacksonian efforts to sweep the Bank into democratic politics. “We saw all that would follow from the slightest concession, and determined, since there must be war, to begin it in the frontiers by letting them know they were to have nothing to do with the Bank.” Biddle was referring to the earlier credit contraction in the West, which he now admitted had backfired against the Bank. “From that time they resolved that as they could not bend it they would break it.” Biddle prepared a new approach. “In half an hour, I can remove all the constitutional scruples in the District of Columbia. Half a dozen Presidencies”—of Bank branches—“a dozen cashierships, fifty clerkships, a hundred directorships to worthy friends who have no character and no money.” While deciding which public officials to bribe, Biddle braced himself for whatever Jackson might do. “We must go on to the end of the chapter,” he said.
In September 1833 Jackson struck the blow. He convened a special Cabinet session and told the secretaries he was going to withdraw the deposits at once. He hurried through the constitutional arguments against the Bank, preferring to take his stand on the morality of the contest. The fight against the Bank was part of the historic struggle for liberty, he declared. Kings and tyrants had fallen, yet the battle continued. “The mass of the people have more to fear from combinations of the wealthy and professional classes—from an aristocracy which through the influence of riches and talents, insidiously employed, sometimes succeeds in preventing political institutions, however well adjusted, from securing the freedom of the citizen.” Biddle’s Bank had gained “almost entire dominion over the circulating medium, and with it, power to increase or diminish the price of property and to levy taxes on the people in the shape of premiums and interest.” The Founders had fought to free Americans from such arbitrary rule. To continue the fight was the current generation’s “sacred duty.”
BIDDLE’S SPIES INFORMED him of Jackson’s decision even before the president announced it. Biddle counterattacked instantly. He called in more loans, additionally tightened credit, and generally made money scarce. In response to questions he said he was simply steadying the Bank against the uncertainty the president’s rash move had precipitated. But he took few pains to hide the larger goal: to demonstrate the need for a national bank beyond the reach of politics. Meanwhile he went ahead with his bribery plan, conferring directorships and other plums on Jackson allies who agreed to defect.
Biddle’s assault on the money supply produced the pain he desired. Samuel Swartout, Jackson’s director of the New York customhouse, resisted a Biddle bribe but wrote the Bank chief of the terrible injury the current money pressure was inflicting on the financial markets. “It is dreadful here,” Swartout declared, “and no hope of relief except through your institution. You must be liberal…. The old friends and dependents of the Bank are perishing for want of aid. Surely the institution cannot mean this?” Biddle had proved his point, Swartout said. “Now that the effect of the late measure”—the withdrawal of the deposits—“has been made manifest, you can relieve the whole community…. Rely upon it, you would receive due credit and consideration for it. I speak to you, my dear sir, with the freedom of a friend. Would to God the Bank would take a noble, liberal course and thus justify itself to the world…. Its power has been shown; now let its mercy be manifested.”
Biddle was in no mood for mercy. He tightened the screws still more. The panic spread from New York to Boston and Philadelphia. Banks collapsed under the strain, leaving depositors empty-handed. “My view is simply this,” Biddle wrote the director of the Bank branch at Boston. “The ties of party allegiance can only be broken by the actual conviction of existing distress in the community. Nothing but the evidence of suffering abroad will produce any effect in Congress. If the Bank remains strong and quiet, the course of events will save the Bank and save all the institutions which are now in great peril.” The Bank must not relent. “If from too great a sensitiveness, from the fear of offending or the desire of conciliating, the Bank permits itself to be frightened or coaxed into any relaxation of its present measures, the relief will itself be cited as evidence that the measures of the Government are not injurious or oppressive, and the Bank will inevitably be prostrated. Our only safety is in pursuing a steady course of firm restriction.” Courage would bring victory, though not at once. “I have no doubt that such a course will ultimately lead to restoration of the currency and the recharter of the Bank. How soon this will take place, it is of course difficult to conjecture.”
It grew more difficult in subsequent weeks. “The future is full of gloom and confusion,” Biddle wrote in February 1834. Yet the uncertainty made him more determined. “My own course is decided. All the other banks and all the merchants may break, but the Bank of the United States shall not break.” A Biddle uncle had been an officer in the Continental Navy. “I have asked Commodore Biddle what is the least sail under which a man of war can lie to in a gale of wind, and he says a close-reefed main top sail. So our squadron will be put under close-reefed main top sails and ride out the gale for the next two years. As to those who have no sea room and breakers under their lee, they must rely on Providence.” Jackson didn’t know whom he was tangling with. “The worthy President thinks that because he has scalped Indians…he is to have his way with the Bank. He is mistaken…. He may as well send at once and engage lodgings in Arabia.”
BIDDLE’S WILLINGNESS AND ability to ravage the economy confirmed Jackson’s judgment of the malignant irresponsibility of the moneyed class. It was precisely this power of the Bank that had determined Jackson to destroy it. And he remained determined to do so, regardless of the pain the destruction produced. “Were all the worshipers of the golden calf to memorialise me and request a restoration of the deposits,” he said to Martin Van Buren, “I would cut my right hand from my body before I would do such an act. The golden calf may be worshiped by others, but as for myself I will serve the Lord.” Jackson was certain he was serving the Lord—and democracy—in holding out against Biddle. “My conscience told me it was right to stop the career of this destroying monster. I took the step fearlessly, believing it a duty I owed to my God and my country.”
Jackson told himself the pain was localized in the groups that most deserved it. “There is no real general distress,” he wrote confidentially. “It is only with those who live by borrowing, trade on loans, and the gamblers in stocks…. It would be a godsend to society if all such were put down.”
The distress in fact was more general than Jackson allowed, as he might have inferred upon receiving a petition from six thousand bankers, brokers, and merchants requesting relief. But the president refused to reconsider. “Relief, sir!” he thundered to a quaking spokesman for the petitioners. “Come not to me, sir! Go to the monster!…Go to Nicholas Biddle. We have no money here…. Biddle has all the money. He has millions of specie in his vaults at this moment, lying idle, and yet you come to me to save you from breaking…. It is folly, sir, to talk to Andrew Jackson. The government will not bow to the monster.”
For Jackson, as for Biddle, the contest had become supremely personal. “The Bank, Mr. Van Buren, is trying to kill me,” he told the vice president. “But I will kill it!”
AND HE DID. Biddle’s friends in Congress deserted him one by one as it became apparent that the public was blaming him, not Jackson, for the panic. Henry Clay convinced the Senate that Jackson required censure, but the House, whose members all faced the voters imminently, fled Biddle and the Bank. Biddle relented under the political duress, easing the panic, but the action did him no good, as it demonstrated that he could have eased things earlier.
The congressional campaign of 1834 was the stormiest in memory. In Philadelphia mobs rioted against the Bank and against Biddle, forcing the Bank chief to barricade himself in his home, surrounded by armed guards. He and his family survived, but the Whigs—as the party of capital now called itself—almost did not. So severe was the Whig defeat that even the formerly most Bank-friendly Whigs turned their backs on Biddle. “There is one cause of congratulation connected with the result of the recent election, in which even we can participate,” Thurlow Weed, the leader of the New York Whigs, said. “It has terminated the United States Bank war…. After staggering along from year to year with a doomed bank upon our shoulders, both the bank and our party are overwhelmed. The burden, however, is now removed.”
Biddle continued to plot desultorily with the Bank’s few remaining friends against Jackson and his heir apparent, Van Buren. Daniel Webster urged Biddle to employ his money and influence against the Democrats in critical districts. Yet Webster too insisted on keeping a public distance from Biddle. “You will of course burn this, and let no eye but your own see it,” he concluded one letter to the Bank president. The next letter ended simply, “Burn.”
Nothing came of Biddle’s plots. He muttered against the “gang of banditti” in the executive branch but was forced to watch their new chief march to victory in the 1836 election. Meanwhile, as the Bank’s federal charter ran out, Biddle sought a new legal home for the institution, which Pennsylvania obligingly provided. The Bank of the United States slipped into history, but the Bank of the United States of Pennsylvania, shorn of the earlier bank’s interstate branches and deprived of the federal patronage, yet housed in the same marble temple on Chestnut Street, carried on.
This was a minor victory for Biddle; a somewhat larger one, albeit merely moral, came months later. Jackson’s defeat of Biddle and the Bank restored what the Jacksonians hoped would be democratic control of the money supply, but in fact it left the money supply even more at the mercy of the capitalists than before. The hundreds of state banks, now freed of the oversight of the Bank of the United States, issued bank notes profligately, producing speculative bubbles in all manner of commodities and property. Jackson could do nothing about most of the speculation, but he could curb that in land, and he did so by issuing a “specie circular” in July 1836 directing federal officers to accept only gold and silver in exchange for public lands.
The measure dampened the speculation in land, but it simultaneously disordered the money system. Specie flowed to the West, the locale of the land sales, and away from the East, the hub of the country’s economic activity. An eastern banker exaggerated, but only a little, when he said of the specie directive, “It transferred specie from the place where it was most wanted, in order to sustain the general currency of the country, to places where it was not wanted at all.” Another observer remarked, “The monetary affairs of the whole country were convulsed—millions upon millions of coin were in transitu in every direction and consequently withdrawn from useful employment. Specie was going up and down the same river to and from the South and North and East and West at the same time.”
Amid the domestic financial disturbance arrived a shock from abroad. The speculation in America had been part of a transatlantic boom, and at almost the same time that Jackson was issuing his specie circular, the Bank of England raised interest rates and broadly tightened credit. Cotton prices fell on British markets, and because the American South was Britain’s principal supplier, the falling prices punished American planters and their brokers. Several firms collapsed in New Orleans, and then in New York, at which point the growing anxiety became a wholesale panic.
Nicholas Biddle blamed Jackson and democracy for the country’s financial woes, and he thought the masses were getting what they deserved. “The crusade against banks and the discrimination at the Land Offices between specie and bank paper has not been without its effect on the less intelligent part of our population,” Biddle declared. He couldn’t help gloating at the Democrats’ discomfiture, even though it devastated the economy and threatened to swamp his own bank.
Andrew Jackson holding aloft the order for the removal of the federal deposits from the second Bank of the United States. As the Bank collapses, the directors flee for their lives. Nicholas Biddle is the one with horns.
Biddle retired in 1839, claiming ill health but secretly planning a candidacy for president. He must have been sicker than he knew, for though 1840 proved a good year for the party of capital, Biddle was delusional in thinking Americans would elect a man best known as a bank president to be their own president. Instead they elected William Henry Harrison, like Jackson a former general but unlike him a Whig. No one paid the least attention to Biddle.
He suffered another blow when his old bank collapsed amid scandal in 1841. Charles Dickens visited Philadelphia a short while later, reaching the city at night. “Looking out of my chamber window before going to bed,” he wrote, “I saw, on the opposite side of the way, a handsome building of white marble, which had a mournful ghost-like aspect, dreary to behold. I attributed this to the sombre influence of the night, and on rising in the morning looked out again, expecting to see its steps and portico thronged with groups of people passing in and out. The door was still tight shut, however; the same cold, cheerless air prevailed…. I hastened to inquire its name and purpose…. It was the Tomb of many fortunes, the Great Catacomb of investment, the memorable United States Bank.”