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Jackson’s Fight With The ‘Money Power’
The third in a series on TIMES OF TRIAL IN AMERICAN STATECRAFT Old Hickory's attack on Biddle's bank had some unexpected consequences
June 1956 | Volume 7, Issue 4
Actually the situation was not so bad as my simplified account makes it appear. For one thing, the goods imported at New York were sold elsewhere in the country, and more money came to New York in payment for them than went out of the city in duties paid the government. But I have described it in the bald, one-sided terms that appealed to the local politicians and to the businessmen prone to grumbling because money was not so easy as they would like. There was truth in what they said, but it amounted to less than they made out.
New York’s grievance was special because her customs receipts were so large and went to a vanquished rival. Otherwise the federal Bank’s pressure on the local banks—all of which were state banks—was felt in some degree through the country at large. Wherever money was paid to a federal agency—for postage, for fines, for lands, for excise, for import duties—money was drawn from the local banks into the federal Bank. The flow of funds did not drain the local banks empty and leave them nothing to do, though they and the states’ rights politicians talked as if that were the case. The federal Bank was simply their principal single creditor.
And though private business brought more money to New York and other commercial centers than it took away, the federal government took more away than it brought. For its largest payments were made elsewhere—to naval stations, army posts, Indian agents, owners of the public debt, largely foreign, and civilians in the government service throughout the country. In the normal flow of money payments from hand to hand in the economy, those to the federal government and consequently to the federal Bank were so large and conspicuous that the state banks involved in making them were disagreeably conscious of their size and frequency.
These banks, of course, were mostly eastern and urban rather than western and rural, because it was in eastern cities that the federal government received most of its income. Accordingly, it was in the eastern business centers, Boston, New York, Baltimore, and Charleston, that resentment against Philadelphia and the federal Bank was strongest. This resentment was intensified by the fact that the federal Bank’s branch offices were also competitors for private business in these and other cities, which the present Federal Reserve Banks, very wisely, are not.
General Jackson’s accession to the presidency afforded an opportunity to put an end to the federal Bank. Its charter would expire in seven years. The question of renewal was to be settled in that interval. Jackson was popular and politically powerful. His background and principles were agrarian. An attack on the Bank by him would be an attack “by the democracy on the money power.” It would have, therefore, every political advantage.
The realities behind these words, however, were not what the words implied. The democracy till very recently had been agrarian because most of the population was agricultural. But the promoters of the assault on the Bank were neither agrarian in their current interests nor representative of what democracy implied.
In the western and rural regions, which were the most democratic in a traditional sense, dislike of the federal Bank persisted, though by 1829 it had less to feed on than formerly. Years before, under incompetent managers, the Bank had lent unwisely in the West, had been forced to harsh measures of self-preservation, and had made itself hated, with the help, as usual, of the state banks and states’ rights politicians. But the West needed money, and though the Bank never provided enough it did provide some, and in the absence of new offenses disfavor had palpably subsided by the time Jackson became President.
There were also, in the same regions, vestiges or more of the traditional agrarian conviction that all banks were evil. This principle was still staunchly held by Andrew Jackson. He hated all banks, did so through a long life, and said so time after time. He thought they all violated the Constitution. But he was led by the men around him to focus his aversion on the federal Bank, which being the biggest must be the worst and whose regulatory pressure on the state banks must obviously be the oppression to be expected from a great, soulless corporation.
However, not all agrarian leaders went along with him. For many years the more intelligent had discriminated in favor of the federal Bank, recognizing that its operations reduced the tendency to inflation which, as a hard-money party, the agrarians deplored. Altogether, it was no longer to be expected that the agrarian democracy would initiate a vigorous attack on the federal Bank, though it was certainly to be expected that such an attack would receive very general agrarian support.
It was in the cities and within the business world that both the attack on the Bank and its defense would be principally conducted. For there the Bank had its strongest enemies and its strongest friends. Its friends were the more conservative houses that had dominated the old business world but had only a minor part in the new. It was a distinguished part, however, and influential. This influence, which arose from prestige and substantial wealth, combined with the strength which the federal Bank derived from the federal accounts to constitute what may tritely be called a “money power.” But it was a disciplined, conservative money power and just what the economy needed.
But it was no longer the money power. It was rivaled, as Philadelphia was by New York, by the newer, more vigorous, more aggressive, and more democratic part of the business world.