Banking in the Jacksonian Era
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The
Second Bank of the United States The Second Bank of the United States was the second federally authorized Hamiltonian national bank in the United States. Located in Philadelphia, Pennsylvania, the bank was chartered from February 1816 to January 1836.. The Bank's formal name, ac ...
opened in January 1817, six years after the
First Bank of the United States First or 1st is the ordinal form of the number one (#1). First or 1st may also refer to: *World record, specifically the first instance of a particular achievement Arts and media Music * 1$T, American rapper, singer-songwriter, DJ, and rec ...
lost its charter. The Second Bank of the United States was headquartered in
Carpenter's Hall Carpenters' Hall is the official birthplace of the Commonwealth of Pennsylvania and a key meeting place in the early history of the United States. Carpenters' Hall is located in Independence National Historical Park in Philadelphia, Pennsylvania. ...
,
Philadelphia Philadelphia, often called Philly, is the largest city in the Commonwealth of Pennsylvania, the sixth-largest city in the U.S., the second-largest city in both the Northeast megalopolis and Mid-Atlantic regions after New York City. Sinc ...
, the same as the First Bank, and had branches throughout the nation. The Second Bank was chartered by many of the same congressmen who in 1811 had refused to renew the charter of the original Bank of the United States. The predominant reason that the Second Bank of the United States was chartered was that in the
War of 1812 The War of 1812 (18 June 1812 – 17 February 1815) was fought by the United States of America and its indigenous allies against the United Kingdom and its allies in British North America, with limited participation by Spain in Florida. It bega ...
, the U.S. experienced severe
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
and had difficulty in financing military operations. Subsequently, the
credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt), ...
and borrowing status of the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
was at its lowest level since its founding. The charter of the Second Bank of the United States (B.U.S.) was for 20 years and therefore up for renewal in 1836. Its role as the depository of the federal government's revenues made it a political target of banks chartered by the individual states who objected/envied the B.U.S.'s relationship with the central government. Partisan politics came heavily into play in the debate over the renewal of the charter. "The classic statement by Arthur Schlesinger was that the partisan politics during the Jacksonian period was grounded in
class conflict Class conflict, also referred to as class struggle and class warfare, is the political tension and economic antagonism that exists in society because of socio-economic competition among the social classes or between rich and poor. The forms ...
. Viewed through the lens of party elite discourse, Schlesinger saw inter-party conflict as a clash between wealthy Whigs and working class Democrats." (Grynaviski)
President President most commonly refers to: *President (corporate title) *President (education), a leader of a college or university *President (government title) President may also refer to: Automobiles * Nissan President, a 1966–2010 Japanese ful ...
Andrew Jackson Andrew Jackson (March 15, 1767 – June 8, 1845) was an American lawyer, planter, general, and statesman who served as the seventh president of the United States from 1829 to 1837. Before being elected to the presidency, he gained fame as ...
strongly opposed the renewal of its charter, and built his platform for the election of 1832 around doing away with the Second Bank of the United States. Jackson's political target was
Nicholas Biddle Nicholas Biddle (January 8, 1786February 27, 1844) was an American financier who served as the third and last president of the Second Bank of the United States (chartered 1816–1836). Throughout his life Biddle worked as an editor, diplomat, au ...
,
financier An investor is a person who allocates financial capital with the expectation of a future return (profit) or to gain an advantage (interest). Through this allocated capital most of the time the investor purchases some species of property. Type ...
, politician, and president of the Bank of the United States. Apart from a general hostility to banking and the belief that
specie Specie may refer to: * Coins or other metal money in mass circulation * Bullion coins * Hard money (policy) * Commodity money * Specie Circular, 1836 executive order by US President Andrew Jackson regarding hard money * Specie Payment Resumption Ac ...
(gold and/or silver) were the only true monies, Jackson's reasons for opposing the renewal of the charter revolved around his belief that bestowing power and responsibility upon a single bank was the cause of inflation and other perceived evils. During September 1833, President Jackson issued an
executive order In the United States, an executive order is a directive by the president of the United States that manages operations of the federal government. The legal or constitutional basis for executive orders has multiple sources. Article Two of th ...
that ended the deposit of government funds into the Bank of the United States. After September 1833, these deposits were placed in the state chartered banks, commonly referred to as Jackson's "
pet banks Pet banks is a derogatory term for state banks selected by the United States Department of the Treasury, U.S. Department of Treasury to receive surplus Treasury funds in 1833. Pet banks are sometimes confused with wildcat banking, wildcat banks. ...
". While it is true that 6 out of the 7 initial depositories were controlled by
Jacksonian Democrats Jacksonian democracy was a 19th-century political philosophy in the United States that expanded suffrage to most white men over the age of 21, and restructured a number of federal institutions. Originating with the seventh U.S. president, And ...
, the later depositories, such as the ones in
North Carolina North Carolina () is a state in the Southeastern region of the United States. The state is the 28th largest and 9th-most populous of the United States. It is bordered by Virginia to the north, the Atlantic Ocean to the east, Georgia and So ...
,
South Carolina )''Animis opibusque parati'' ( for, , Latin, Prepared in mind and resources, links=no) , anthem = " Carolina";" South Carolina On My Mind" , Former = Province of South Carolina , seat = Columbia , LargestCity = Charleston , LargestMetro = ...
, and
Michigan Michigan () is a state in the Great Lakes region of the upper Midwestern United States. With a population of nearly 10.12 million and an area of nearly , Michigan is the 10th-largest state by population, the 11th-largest by area, and the ...
, were run by managers who opposed Jacksonian politics. It is probably a
misnomer A misnomer is a name that is incorrectly or unsuitably applied. Misnomers often arise because something was named long before its correct nature was known, or because an earlier form of something has been replaced by a later form to which the name ...
to label all the state chartered repositories “pet banks”.


See also

*
Bank War The Bank War was a political struggle that developed over the issue of rechartering the Second Bank of the United States (B.U.S.) during the Presidency of Andrew Jackson, presidency of Andrew Jackson (1829–1837). The affair resulted in the shu ...
* Hard times token *
History of central banking in the United States This history of central banking in the United States encompasses various bank regulations, from early wildcat banking practices through the present Federal Reserve System. 1781–1836: Bank of North America and First and Second Bank of the Uni ...
*
Panic of 1837 The Panic of 1837 was a financial crisis in the United States that touched off a major depression, which lasted until the mid-1840s. Profits, prices, and wages went down, westward expansion was stalled, unemployment went up, and pessimism abound ...
*
Specie Circular The Specie Circular is a United States presidential executive order issued by President Andrew Jackson in 1836 pursuant to the Coinage Act. It required payment for government land to be in gold and silver. History The Specie Circular was a reac ...


References

* Grynaviski, Jeffery D. Rethinking Jackson's Bank War: Party Politics and American Monetary. University of Chicago. 25 Nov. 2006 (http://harrisschool.uchicago.edu/Academic/workshops/pol_econ_papers/Grynaviski.pdf). * Hammond, Bray. "Jackson, Biddle, and the Bank of the United States." ''The Journal of Economic History'' 7 (1947): 1-23. 6 Dec. 2006. * Rockoff, Hugh T. "Money, Prices and Banks in the Jacksonian Era." Chapter 33 in ''The Reinterpretation of American Economic History'', eds. R.W. Fogel and Stanley Engerman. New York: Harper & Row, 1971. * Scheiber, Harry N. "The Pet Banks in Jacksonian Politics and Finance, 1833-1841." ''Journal of Economic History'' 33 (1963): 196-214 * Sylla, Richard, "Review of Peter Temin The Jacksonian Economy" Economic History Services, Aug 17, 2001 (http://eh.net/bookreviews/library/sylla.shtml) * Taylor, George R., and D C. Heath. "Jackson Versus Biddle: the Struggle Over the Second Bank of the United States." (1949). 24 Nov. 200

* Temin, Peter. ''The Jacksonian Economy''. New York: W.W. Norton & Company, 1969. * Walton, Gary M. and Hugh Rockoff. ''History of the American Economy'' 10th edition. Thomson South-Western, 2005. {{Andrew Jackson, state=collapsed Economic history of the United States
Jacksonian Era Jacksonian democracy was a 19th-century political philosophy in the United States that expanded suffrage to most white men over the age of 21, and restructured a number of federal institutions. Originating with the seventh U.S. president, Andr ...
Presidency of Andrew Jackson