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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
Editor's Note: Bray Hammond wrote this essay for American Heritage in 1956 and developed it into Banks and Politics in America from the Revolution to the Civil War, for which he won the Pulitzer Prize for history in 1958.
“Relief, sir!” interrupted the President. “Come not to me, sir! Go to the monster. It is folly, sir, to talk to Andrew Jackson. The government will not bow to the monster. … Andrew Jackson yet lives to put his foot upon the head of the monster and crush him to the dust.”
The monster, “a hydra of corruption,” was known also as the Second Bank of the United States, chartered by Congress in 1816 as depository of the federal government, which was its principal stockholder and customer. The words were reported by a committee which called on President Jackson in the spring of 1834 to complain because he and Secretary of the Treasury Roger Taney had removed the federal deposits from the federal depository into what the Jacksonians called “selected banks” and others called “pet banks.” The President was disgusted with the committee.
“Andrew Jackson,” he exclaimed in the third person as before, “would never recharter that monster of corruption. Sooner than live in a country where such a power prevailed, he would seek an asylum in the wilds of Arabia.”
In effect, he had already put his foot on the monster and crushed him in the dust. He had done so by vetoing a new charter for the Bank and removing the federal accounts from its books. So long as the federal Bank had the federal accounts, it had been regulator of the currency and of credit in general. Its power to regulate had derived from the fact that the federal Treasury was the largest single transactor in the economy and the largest bank depositor. Receiving the checks and notes of local banks deposited with it by government collectors of revenue, it had had constantly to come back on the local banks for settlements of the amounts which the checks and notes called for. It had had to do so because it made those amounts immediately available to the Treasury, wherever desired. Since settlement by the local banks was in specie, i.e. silver and gold coin, the pressure for settlement automatically regulated local bank lending; for the more the local banks lent, the larger the amount of their notes and checks in use and the larger the sums they had to settle in specie. This loss of specie reduced their power to lend.
All this had made the federal Bank the regulator not alone of the currency but of bank lending in general, the restraint it had exerted being fully as effective as that of the twelve Federal Reserve Banks at present, though by a different process. With its life now limited to two more years and the government accounts removed from its books, it was already crushed but still writhing.
The Jacksonian attack on the Bank is an affair respecting which posterity seems to have come to an opinion that is half hero worship and half discernment. In the words of Professor William G. Sumner, the affair was a struggle “between the democracy and the money power.” Viewed in that light, Jackson’s victory was a grand thing. But Sumner also observed—this was three-quarters of a century ago—that since Jackson’s victory the currency, which previously had owned no superior in the world, had never again been so good. More recently Professor Lester V. Chandler, granting the Bank’s imperfections, has said that its abolition without replacement by something to take over its functions was a “major blunder” which “ushered in a generation of banking anarchy and monetary disorder.” So the affair stands, a triumph and a blunder.
During Andrew Jackson’s lifetime three things had begun to alter prodigiously the economic life of Americans. These were steam, credit, and natural resources.
Steam had been lifting the lids of pots for thousands of years, and for a century or so it had been lifting water from coal mines. But only in recent years had it been turning spindles, propelling ships, drawing trains of cars, and multiplying incredibly the productive powers of man. For thousands of years money had been lent, but in most people’s minds debt had signified distress—as it still did in Andrew Jackson’s. Only now was its productive power, long known to merchants as a means of making one sum of money do the work of several, becoming popularly recognized by enterprising men for projects which required larger sums than could be assembled in coin. For three centuries or more America’s resources had been crudely surmised, but only now were their variety, abundance, and accessibility becoming practical realities. And it was the union of these three, steam, credit, and natural resources, that was now turning Anglo-Saxon America from the modest agrarian interests that had preoccupied her for two centuries of European settlement to the dazzling possibilities of industrial exploitation.
In the presence of these possibilities, the democracy was becoming transformed from one that was Jeffersonian and agrarian to one that was financial and industrial. But it was still a democracy: its recruits were still men born and reared on farms, its vocabulary was still Jeffersonian, and its basic conceptions changed insensibly from the libertarianism of agrarians to that of laissez faire. When Andrew Jackson became President in 1829, boys born in log cabins were already becoming businessmen but with no notion of surrendering as bankers and manufacturers the freedom they might have enjoyed as farmers.