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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
This was personal misfortune, undeserved and severe. The more important victim was the American people. For with destruction of the United States Bank there was removed from an overexcitable economy the influence most effective in moderating its booms and depressions.
Andrew Jackson had vetoed recharter in 1832 and transferred the federal accounts to the pet banks in 1833 and 1834. The Bank’s federal charter expired in 1836, though Nicholas Biddle obtained a charter from Pennsylvania and continued the organization as a state bank. The period was one of boom. Then in 1837 there was panic, all the banks in the country suspended, prices fell, and business collapsed. It was all Andrew Jackson’s fault, his opponents declared, for killing the federal Bank. This was too generous. Jackson was not to blame for everything. The crisis was world-wide and induced by many forces. It would have happened anyway. Yet certainly Jackson’s destruction of the Bank did not help. Instead it worsened the collapse. Had the Bank been allowed to continue the salutary performance of the years immediately preceding the attack upon it, and had it been supported rather than undermined by the Administration, the wild inflation which culminated in the collapse would have been curbed and the disaster diminished. Such a course would have been consistent with Jackson’s convictions and professions. Instead he smote the Bank fatally at the moment of its best performance and in the course of trends against which it was needed most. Thereby he gave unhindered play to the speculation and inflation that he was always denouncing.
To a susceptible people the prospect was intoxicating. A continent abounding in varied resources and favorable to the maintenance of an immense population in the utmost comfort spread before the gaze of an energetic, ambitious, and clever race of men, who to exploit its wealth had two new instruments of miraculous potency: steam and credit. They rushed forward into the bright prospect, trampling, suffering, succeeding, failing. There was nothing to restrain them. For about a century the big rush lasted. Now it is over. And in a more critical mood we note that a number of things are missing or have gone wrong. To be sure, we are on top of the world still, but it is not very good bookkeeping to omit one’s losses and count only one’s gains.
That critical mood was known to others than Jackson. Emerson, Hawthorne, and Thoreau felt it. So did an older and more experienced contemporary of theirs, Albert Gallatin, friend and aide in the past to Thomas Jefferson, and now president of a New York bank but loyal to Jeffersonian ideals.
“The energy of this nation,” he wrote to an old friend toward the end of Andrew Jackson’s Administration, “is not to be controlled; it is at present exclusively applied to the acquisition of wealth and to improvements of stupendous magnitude. Whatever has that tendency, and of course an immoderate expansion of credit, receives favor. The apparent prosperity and the progress of cultivation, population, commerce, and improvement are beyond expectation. But it seems to me as if general demoralization was the consequence; I doubt whether general happiness is increased; and I would have preferred a gradual, slower, and more secure progress. I am, however, an old man, and the young generation has a right to govern itself…”
In these last words, Mr. Gallatin was echoing the remark of Thomas Jefferson that “the world belongs to the living.” Neither Gallatin nor Jefferson, however, thought it should be stripped by the living. Yet nothing but the inadequacy of their powers seems to have kept those Nineteenth-Century generations from stripping it. And perhaps nothing else could.
But to the extent that credit multiplies man’s economic powers, curbs upon credit extension are a means of conservation, and an important means. The Bank of the United States was such a means. Its career was short and it had imperfections. Nevertheless it worked. The evidence is in the protest of the bankers and entrepreneurs, the lenders and the borrowers, against its restraints. Their outcry against the oppressor was heard, and Andrew Jackson hurried to their rescue. Had he not, some other way of stopping its conservative and steadying influence could doubtless have been found. The appetite for credit is avid, as Andrew Jackson knew in his day and might have foretold for ours. But because he never meant to serve it, the credit for what happened goes rather to the clever advisers who led the old hero to the monster’s lair and dutifully held his hat while he stamped on its head and crushed it in the dust.
Meanwhile, the new money power had curled up securely in Wall Street, where it has been at home ever since.