In 1838, two years past the expiration of the charter for the Second Bank of the United States, President Van Buren was still facing attempts to charter a new central bank from his opponents in the Whig party. In his second State of the Union Address, Van Buren claimed that recent events had proven that a central bank was not needed even in times of emergencies.
In 1816, James Madison signed a 20-year charter to create the Second Bank of the United States. In 1832, when the charter was near expiration, Congress passed a bill to charter the third bank of the United States, but Jackson vetoed it setting up a bitter battle between Henry Clay and John C. Calhoun of the Whig party on one side and Andrew Jackson and Martin Van Buren of the Democrat party on the other. Jackson's veto became the main issue in the election and was framed as a choice between the Aristocratic bankers versus the people. After winning a second term, Jackson removed the deposits from the Bank and transferred it to state banks. The Second Bank of the United States was dead, but the fight over central banking in the United States was not. With Jackson's opponents still in Congress, Martin Van Buren now faced not only criticism but a financial crisis that many blamed on the actions that Andrew Jackson took. In what was called the Panic of 1837, banks in New York city ran out of gold and silver and immediately suspended specie payments resulting in a run on the bank leading to an economic collapse. President Van Buren had to act fast, and with the help of his friends in New York, he was able to convince the banks to resume accepting specie payments and the economy was in recovery, albeit brief. Van Buren saw it not only as a victory for the nation, but an opportunity to finally shut the door on any attempts to reopen the discussion to charter a third US Bank.
In 1837, species payments had only been interrupted for about 11 months. Compared to the previous shutdown in 1814, this was a start contrast. The differences were in Van Buren's words, "most striking". By forcing the state banks to return to the gold standard, the Van Buren administration was able to promptly restore the resumption of species payments proving once and for all that a central bank was not needed even in times of emergencies. Private capital and private enterprise were able to step up and resolve the crisis faster than the central bank could have. Van Buren was convinced now more than ever that a central bank is not needed. According to Van Buren, this was now the third time his opponents have tried to force a central bank onto the country and hopefully it will now be the last.
Van Buren argued that a central bank was not only unnecessary but was bad for the United States. The influence of a central bank could do nothing to avoid disorder and confusion in the exchange market. Nor did the bank have any power to compel the resumption of species payments. Rather, Van Buren argued that in the past, the bank of the United States had caused improper and excessive speculation over valued land in the western and northeastern forests "producing a spirit of wild speculation" as Andrew Jackson once called it. Furthermore, Van Buren argued the Bank of the United Sates caused panic and put obstacles to meet its own agenda, interfered with politics and was overall a far greater power for evil rather than good. The past experiences confirmed for Van Buren that neither for the sake of our commerce, our agriculture, our manufacturers, nor our finance was a central bank needed. The nation was better off without so much power centralized in the hands of a few bankers. It was a power over the government that should never be allowed. Van Buren still had enemies, but he now respectfully asked even those who supported a central bank in the past to reconsider his plan for an independent treasury system.
Here is the excerpt from President Martin Van Buren's 1838 State of the Union Address where he argues that a central bank was proven to not be needed.
"The contrast between the suspension of 1814 and that of 1837 is most striking. The short duration of the latter, the prompt restoration of business, the evident benefits resulting from an adherence by the Government to the constitutional standard of value instead of sanctioning the suspension by the receipt of irredeemable paper, and the advantages derived from the large amount of specie introduced into the country previous to 1837 afford a valuable illustration of the true policy of the Government in such a crisis. Nor can the comparison fail to remove the impression that a national bank is necessary in such emergencies. Not only were specie payments resumed without its aid, but exchanges have also been more rapidly restored than when it existed, thereby showing that private capital, enterprise, and prudence are fully adequate to these ends. On all these points experience seems to have confirmed the views heretofore submitted to Congress. We have been saved the mortification of seeing the distresses of the community for the third time seized on to fasten upon the country so dangerous an institution, and we may also hope that the business of individuals will hereafter be relieved from the injurious effects of a continued agitation of that disturbing subject. The limited influence of a national bank in averting derangement in the exchanges of the country or in compelling the resumption of specie payments is now not less apparent than its tendency to increase inordinate speculation by sudden expansions and contractions; its disposition to create panic and embarrassment for the promotion of its own designs; its interference with politics, and its far greater power for evil than for good, either in regard to the local institutions or the operations of Government itself. What was in these respects but apprehension or opinion when a national bank was first established now stands confirmed by humiliating experience. The scenes through which we have passed conclusively prove how little our commerce, agriculture, manufactures, or finances require such an institution, and what dangers are attendant on its power--a power, I trust, never to be conferred by the American people upon their Government, and still less upon individuals not responsible to them for its unavoidable abuses.
My conviction of the necessity of further legislative provisions for the safe-keeping and disbursement of the public moneys and my opinion in regard to the measures best adapted to the accomplishment of those objects have been already submitted to you. These have been strengthened by recent events, and in the full conviction that time and experience must still further demonstrate their propriety I feel it my duty, with respectful deference to the conflicting views of others, again to invite your attention to them.
With the exception of limited sums deposited in the few banks still employed under the act of 1836, the amounts received for duties, and, with very inconsiderable exceptions, those accruing from lands also, have since the general suspension of specie payments by the deposit banks been kept and disbursed by the Treasurer under his general legal powers, subject to the superintendence of the Secretary of the Treasury. The propriety of defining more specifically and of regulating by law the exercise of this wide scope of Executive discretion has been already submitted to Congress."
References
"Second Annual Message." Second Annual Message | The American Presidency Project, 3 Dec. 1838, https://www.presidency.ucsb.edu/documents/second-annual-message-4
"Eighth Annual Message | The American Presidency Project". Presidency.Ucsb.Edu, 2022, https://www.presidency.ucsb.edu/documents/eighth-annual-message-2.
https://www.stateoftheunionhistory.com/2019/10/1832-andrew-jackson-jackson-versus-bank.html
https://www.stateoftheunionhistory.com/2024/03/1837-martin-van-buren-stage-banks-and.html
https://founders.archives.gov/documents/Madison/03-11-02-0697
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