In 1832, President Andrew Jackson vetoed the recharter of the Second Bank of the United States. The original charter was due to expire in 1836, but Henry Clay proposed the recharter several years before it was due in part to make it a topic in the upcoming election of 1832. It was only 1830, years before the official start of the Bank War, and the animosity between the western frontier states and Nicholas Biddle the president of the Bank of the United States was already heating up. In late 1829, Preston Blair, an adviser to Jackson and editor of the Globe newspaper published a large-scale attack against the bank, making claims that the Eastern banks were taking over control of the government, sending fear through Kentucky and the other frontier states.
In President Jackson's second Annual Address he delved into Clay's proposal to recharter the Bank. It had been almost a year since Blair published his attack and nothing had changed to "lessen in any degree the dangers which many of our citizens apprehend from that institution". At this point though, Jackson asked Congress whether some compromise could be found to modify the charter to alleviate the fears without breaking the bank. Jackson suggested modifying the structure of the banks by doing two things. One creating a new bank that would run as a branch of the Treasury department, and two, strengthening state banks. In the 1830s, one-fifth of Biddle's bank's reserve was held by the U.S. Government, the federal government was its number one stockholder. The new bank would be organized as a branch of the Treasury Department to manage the funds of the government and pay its expenses. Such a bank would not be a corporate body, nor have any stock holders. Rather, it would be run by a few officers of the Treasury Department and thus would not be much as much of a threat to our constitutional form of government as the current Bank of the United States was. Also, because it would not "operate on the hopes, fears, or interests of large masses of the community", it would not be subject those special interest groups feared so much by the people.
Jackson wanted state banks to be strengthened with the power to distribute local currency. Jackson suggested that the Bank of the United States should no longer issue any paper, but instead would check the issues of the State banks by accept their notes in exchange for specie. Jackson made it clear to Congress, that without these modifications he could not support the recharter of the Second Bank of the United States. For without these changes, the Bank could not avoid the "occasional collisions with the local authorities and perpetual apprehensions and discontent on the part of the States and the people." In 1830, it was already clear that the recharter of the Bank was going to be a major election issue, and Jackson demonstrated that would side with the people.
"The importance of the principles involved in the inquiry whether it will be proper to recharter the Bank of the United States requires that I should again call the attention of Congress to the subject. Nothing has occurred to lessen in any degree the dangers which many of our citizens apprehend from that institution as at present organized. In the spirit of improvement and compromise which distinguishes our country and its institutions it becomes us to inquire whether it be not possible to secure the advantages afforded by the present bank through the agency of a Bank of the United States so modified in its principles and structures as to obviate constitutional and other objections.
It is thought practicable to organize such a bank with the necessary officers as a branch of the Treasury Department, based on the public and individual deposits, without power to make loans or purchase property, which shall remit the funds of the Government, and the expense of which may be paid, if thought advisable, by allowing its officers to sell bills of exchange to private individuals at a moderate premium. Not being a corporate body, having no stock holders, debtors, or property, and but few officers, it would not be obnoxious to the constitutional objections which are urged against the present bank; and having no means to operate on the hopes, fears, or interests of large masses of the community, it would be shorn of the influence which makes that bank formidable. The States would be strengthened by having in their hands the means of furnishing the local paper currency through their own banks, while the Bank of the United States, though issuing no paper, would check the issues of the State banks by taking their notes in deposit and for exchange only so long as they continue to be redeemed with specie. In times of public emergency the capacities of such an institution might be enlarged by legislative provisions.
These suggestions are made not so much as a recommendation as with a view of calling the attention of Congress to the possible modifications of a system which can not continue to exist in its present form without occasional collisions with the local authorities and perpetual apprehensions and discontent on the part of the States and the people."Ultimately these state banks would become known as 'Pet Banks' by Jackson's opponents. In 1833, the Second Bank of the United States had about $9 million in government funds. Jackson directed that all future deposits of government funds was to go to certain stated banks. Because these banks were controlled by Jackson's political allies, they were referred to as 'Pet Banks'.
References
Presidency.ucsb.edu. (2019). Second Annual Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/second-annual-message-3 [Accessed 18 Apr. 2019].Wagner, D. (2019). 1829 Andrew Jackson - Beginnings of the Bank War. [online] Stateoftheunionhistory.com. Available at: http://www.stateoftheunionhistory.com/2018/12/1829-andrew-jackson-beginnings-of-bank.html [Accessed 8 May 2019].
Schlesinger, A. (1989). The age of Jackson. New York: Book-of-the-Month Club, pp.74-79.
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