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1834 Andrew Jackson - Shutting Down the Second Bank of the United States


In 1816, the Second Bank of the United States was federally authorized for a 20 year charter. The main function of the bank was to regulate public credit issued by private banks and to establish a sound and stable national currency. The federal government owned 20% of the Bank's capital. The bank also held all U.S. deposits and provided all payments and receipts of government transactions including tax payments.

During Andrew Jackson's second term, he was determined to shut down the bank. Jackson and his party considered the Second Bank of the U.S. to be an illegitimate corporation whose charter violated state sovereignty and posed a threat to the agriculture-based economy. In 1832, when congress voted 
to re-authorize the bank, President Jackson quickly vetoed it. Then in 1833, Jackson moved quickly to remove all federal deposits from the institution. He distributed these funds to several private banks throughout the country. The Second Bank of the United States was dead.

Jackson's National Republican opponents (predecessor to the Whig party) in Congress were furious. In 1833, the National Republicans led by Henry Clay held an eight-vote majority over the Democrats. Clay challenged Jackson's shutdown of the bank by issuing a Senate resolution seeking the paper the president read to his cabinet regarding the Jackson's veto of the Second Bank. When Jackson refused to produce the document, Henry Clay and his party introduced a censure resolution. After debating the resolution for 10 weeks, the Senate voted 26 to 20 in favor of the resolution, and on March 28, 1834 President Andrew Jackson becomes the first president to be censured by Congress.
 
In Jackson's 1834 annual address to congress, Jackson fought back calling the bank "the scourge of the people", interfering with paying down the national debt and being used to make corrupt and partisan loans.  
"Circumstances make it my duty to call the attention of Congress to the Bank of the United States. Created for the convenience of the Government, that institution has become the scourge of the people. Its interference to postpone the payment of a portion of the national debt that it might retain the public money appropriated for that purpose to strengthen it in a political contest, the extraordinary extension and contraction of its accommodations to the community, its corrupt and partisan loans, its exclusion of the public directors from a knowledge of its most important proceedings, the unlimited authority conferred on the president to expend its funds in hiring writers and procuring the execution of printing, and the use made of that authority, the retention of the pension money and books after the selection of new agents, the groundless claim to heavy damages in consequence of the protest of the bill drawn on the French Government, have through various channels been laid before Congress."
   President Jackson then explained the actions he took to shut down the Second National Bank:
"It seems due to the safety of the people funds remaining in that bank and to the honor of the American people that measures be taken to separate the Government entirely from an institution so mischievous to the public prosperity and so regardless of the Constitution and laws. By transferring the public deposits, by appointing other pension agents as far as it had the power, by ordering the discontinuance of the receipt of bank checks in the payment of the public dues after 1834-01-01, the Executive has exerted all its lawful authority to sever the connection between the Government and this faithless corporation."
Jackson defended his actions, by arguing that the role of the bank was not constitutional, stating that "It is a constitutional provision 'that no money shall be drawn from the Treasury but in consequence of appropriations made by law'." He continued that "it is not within the constitutional authority of either of those departments to pay it away without law or to sanction its payment." Andrew Jackson's conclusion is that according to "plain constitutional provision, the claim of the bank can never be paid without an appropriation by act of Congress, but the bank has never asked for an appropriation.
It is a constitutional provision "that no money shall be drawn from the Treasury but in consequence of appropriations made by law" . The palpable object of this provision is to prevent the expenditure of the public money for any purpose what so ever which shall not have been 1st approved by the representatives of the people and the States in Congress assembled. It vests the power of declaring for what purposes the public money shall be expended in the legislative department of the Government, to the exclusion of the executive and judicial, and it is not within the constitutional authority of either of those departments to pay it away without law or to sanction its payment.
According to this plain constitutional provision, the claim of the bank can never be paid without an appropriation by act of Congress. But the bank has never asked for an appropriation. It attempts to defeat the provision of the Constitution and obtain payment without an act of Congress. Instead of awaiting an appropriation passed by both Houses and approved by the President, it makes an appropriation for itself and invites an appeal to the judiciary to sanction it. That the money had not technically been paid into the Treasury does not affect the principle intended to be established by the Constitution.
Jackson now explained his actions to remove all government funding from the bank. According to Jackson, in order to safeguard the public funds and the "honor of the American people", it was necessary to separate the government from the bank that was "so mischievous to the public prosperity and so regardless of the Constitution and laws".  Not only was Jackson pulling funds from the bank, but he planned to discontinue all business relations with the bank.
"It seems due to the safety of the public [see APP Note] funds remaining in that bank and to the honor of the American people that measures be taken to separate the Government entirely from an institution so mischievous to the public prosperity and so regardless of the Constitution and laws. By transferring the public deposits, by appointing other pension agents as far as it had the power, by ordering the discontinuance of the receipt of bank checks in the payment of the public dues after 1834-01-01, the Executive has exerted all its lawful authority to sever the connection between the Government and this faithless corporation.
The high-handed career of this institution imposes upon the constitutional functionaries of this Government duties of the gravest and most imperative character -- duties which they can not avoid and from which I trust there will be no inclination on the part of any of them to shrink. My own sense of them is most clear, as is also my readiness to discharge those which may rightfully fall on me. To continue any business relations with the Bank of the United States that may be avoided without a violation of the national faith after that institution has set at open defiance the conceded right of the Government to examine its affairs, after it has done all in its power to deride the public authority in other respects and to bring it into disrepute at home and abroad, after it has attempted to defeat the clearly expressed will of the people by turning against them the immense power intrusted to its hands and by involving a country otherwise peaceful, flourishing, and happy, in dissension, embarrassment, and distress, would make the nation itself a party to the degradation so sedulously prepared for itss public agents and do much to destroy the confidence of man-kind in popular governments and to bring into contempt their authority and efficiency."
Finally, Jackson wanted to sell all stock owned by the government to the public and suspend it's charter until the bank pays the Treasury the dividends withheld and any and all laws connecting the bank to the government or it's officers be repealed. Jackson wanted the bank to "be left hearfter to its own resources and means."
I"n guarding against an evil of such magnitude consideration of temprary convenience should be thrown out of the question, and we should be influenced by such motives only as look to the honor and preservation of the republican system. Deeply and solemnly impressed with the justice of these views, I feel it to be my duty to recommend to you that a law be passed authorizing the sale of the public stock; that the provision of the charter requiring the receipt of notes of the bank in payment of public dues shall, in accordance with the power reserved to Congress in the 14th section of the charter, be suspended until the bank pays to the Treasury the dividends withheld, and that all laws connecting the Government or its officers with the bank, directly or indirectly, be repealed, and that the institution be left hereafter to its own resources and means.

Events have satisfied my mind, and I think the minds of the American people, that the mischiefs and dangers which flow from a national bank far over-balance all its advantages. The bold effort the present bank has made to control the Government, the distresses it has wantonly produced, the violence of which it has been the occasion in one of our cities famed for its observance of law and order, are but premonitions of the fate which awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it. It is fervently hoped that thus admonished those who have heretofore favored the establishment of a substitute for the present bank will be induced to abandon it, as it is evidently better to incur any inconvenience that may be reasonably expected than to concentrate the whole moneyed power of the Republic in any form what so ever or under any restrictions."
Jackson was ready to say 'good riddance' to the US Bank. The state banks, in his mind had already proven themselves "fully adequate to the performance of all services which were required of the Bank of the United States, quite as promptly and with the same cheapness". Jackson urged Congress to pass a law that regulated the deposits in the State Banks, take over the power to direct where the government deposits are stored, and impose restrictions on the public officers of the bank.
"Happily it is already illustrated that the agency of such an institution is not necessary to the fiscal operations of the Government. The State banks are found fully adequate to the performance of all services which were required of the Bank of the United States, quite as promptly and with the same cheapness. They have maintained themselves and discharged all these duties while the Bank of the United States was still powerful and in the field as an open enemy, and it is not possible to conceive that they will find greater difficulties in their operations when that enemy shall cease to exist. 
The attention of Congress is earnestly invited to the regulation of the deposits in the State banks by law. Although the power now exercised by the executive department in this behalf is only such as was uniformly exerted through every Administration from the origin of the Government up to the establishment of the present bank, yet it is one which is susceptible of regulation by law, and therefore ought so to be regulated. The power of Congress to direct in what places the Treasurer shall keep the moneys in the Treasury and to impose restrictions upon the Executive authority in relation to their custody and removal is unlimited, and its exercise will rather be courted than discouraged by those public officers and agents on whom rests the responsibility for their safety. It is desirable that as little power as possible should be left to the President or the Secretary of the Treasury over those institutions, which, being thus freed from Executive influence, and without a common head to direct their operations, would have neither the temptation nor the ability to interfere in the political conflicts of the country. Not deriving their charters from the national authorities, they would never have those inducements to meddle in general elections which have led the Bank of the United States to agitate and convulse the country for upward of two years."

In March of 1836, the Bank of the United States shut it's doors, but its notes continued to be in circulation.  The state of Pennsylvania itself, renewed the charter of the bank and kept Nicholas Biddle on as President.  The bank continued to issue notes under then original name even though it was chartered by the state, not the federal government.  As of October, 1836 there were still $12 million notes in circulation.  In 1837, Jackson's successor, President Martin Van Buren pointed out this impropriety to Congress 

"It was my hope that nothing would occur to make necessary on this occasion any allusion to the late national bank. There are circumstances, however, connected with the present state of its affairs that bear so directly on the character of the Government and the welfare of the citizen that I should not feel myself excused in neglecting to notice them. The charter which terminated its banking privileges on the 4th of March, 1836, continued its corporate power two years more for the sole purpose of closing its affairs, with authority "to use the corporate name, style, and capacity for the purpose of suits for a final settlement and liquidation of the affairs and acts of the corporation, and for the sale and disposition of their estate--real, personal, and mixed--but for no other purpose or in any other manner whatsoever." Just before the banking privileges ceased, its effects were transferred by the bank to a new State institution, then recently incorporated, in trust, for the discharge of its debts and the settlement of its affairs. With this trustee, by authority of Congress, an adjustment was subsequently made of the large interest which the Government had in the stock of the institution. The manner in which a trust unexpectedly created upon the act granting the charter, and involving such great public interests, has been executed would under any circumstances be a fit subject of inquiry; but much more does it deserve your attention when it embraces the redemption of obligations to which the authority and credit of the United States have given value. The two years allowed are now nearly at an end. It is well understood that the trustee has not redeemed and canceled the outstanding notes of the bank, but has reissued and is actually reissuing, since the 3d of March, 1836, the notes which have been received by it to a vast amount. According to its own official statement, so late as the 1st of October last, nineteen months after- the banking privileges given by the charter had expired, it had under its control uncanceled notes of the late Bank of the United States to the amount of $27,561,866, of which $6,175,861 were in actual circulation, $ 1,468,627 at State bank agencies, and $3,002,390 in transitu, thus showing that upward of ten millions and a half of the notes of the old bank were then still kept outstanding.

The impropriety of this procedure is obvious, it being the duty of the trustee to cancel and not to put forth the notes of an institution whose concerns it had undertaken to wind up. If the trustee has a right to reissue these notes now, I can see no reason why it may not continue to do so after the expiration of the two years. As no one could have anticipated a course so extraordinary, the prohibitory clause of the charter above quoted was not accompanied by any penalty or other special provision for enforcing it, nor have we any general law for the prevention of similar acts in future.

But it is not in this view of the subject alone that your interposition is required. The United States in settling with the trustee for their stock have withdrawn their funds from their former direct liability to the creditors of the old bank, yet notes of the institution continue to be sent forth in its name, and apparently upon the authority of the United States. The transactions connected with the employment of the bills of the old bank are of vast extent, and should they result unfortunately the interests of individuals may be deeply compromised. Without undertaking to decide how far or in what form, if any, the trustee could be made liable for notes which contain no obligation on its part, or the old bank for such as are put in circulation after the expiration of its charter and without its authority, or the Government for indemnity in case of loss, the question still presses itself upon your consideration whether it is consistent with duty and good faith on the part of the Government to witness this proceeding without a single effort to arrest it."


References
https://teachinghistory.org/history-content/ask-a-historian/24101
https://upload.wikimedia.org/wikipedia/en/6/6f/Jackson_bank.jpg
https://www.presidency.ucsb.edu/documents/first-annual-message-4

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