1832 Andrew Jackson - Jackson versus The Bank of the United States

Andrew Jackson is quite often remembered as a populist, a man of the people.   There is no better example of this than when he took on the Bank of the United States and corporate charters  that were feeding the engine of industrialization.   Led by Senator Henry Clay, Congress was partnering with corporations to build major roads like the Cumberland road by purchasing stock in companies like the Maysville, Washington, Paris, and Lexington Turnpike Company.  Jackson fought back vetoing the arrangements claiming that these corporate charters were unconstitutional.   Chief among these was the quasi-public corporate charter of the Bank of the United States created by Congress to manage the finances of the government.   The Bank of the United States (BUS) enjoyed a monopoly with the federal government owning one-fifth of the stock.   Like the state banks, it lent for profit and issued paper currency that was backed by local reserves of specie, but it also served as the federal government’s banker for all financial transactions including storing and distributing funds.  Because of its national reach and ties to the federal government, the BUS enjoyed a significant competitive advantage over the state banks, as well as over the federal money supply.  In 1832, Jackson  was determined to take down the Bank of the United states and all government funding of corporate charters with it.

The first Bank of the United States was formed in 1816 and had a charter to do business for 20 years.  In 1832, the BUS had $35 million in capital, some of which came from the government, but much most from investors.  Outside of the government’s 20% stake in the Bank, ownership resided in a small group of powerful investors.   Every year of Jackson’s presidency, he criticized the bank and the enormous power that had been granted to it by Congress.  With the current charter of the bank ending, Senator Clay a fierce opponent of Jackson, strongly urged the Senate to renew the Bank’s charter.   He argued that the Bank was needed to offset the balance of power being centered into the hands of one man, meaning President Jackson.   Clay suggested that if Congress did not act to renew the Charter, the government would fail.  Clay even went so far as to push a resolution through the Senate to condemn Jackson for violating the Constitution and the nation’s laws.   In the end, the Senate voted to approve the renewal of the Bank’s charter, 107 to 85.   The renewal was sent to President Jackson’s desk on the fourth of July 1832, and six days later Andrew Jackson vetoed the bill.  President Jackson sent the bill back to the Senate and set out on a course to divest the United States government, not only from the Bank of the United States, but from all corporate charters.

In Jackson’s 1832 State of the Union address, several months after he vetoed the Bank bill, Jackson address Congress with a recommendation to “dispose of all stocks now held by it in corporations, whether created by the General or State Governments, and placing the proceeds in the Treasury”.  Jackson said the profits from these stocks were “of little or no value” and the influence among the states were averse to our way of governing.   Despite, the veto, an arrangement made by the Bank of the United States to hold back a portion of the stock longer than anticipated depriving the government of the use of public funds until at least October of 1833.  Nevertheless, Jackson reassured the nation that the Bank’s assets were “entirely safe” all the while urging Congress to begin a “serious investigation” into the “transactions of the institution”.

"In conformity with principles heretofore explained, and with the hope of reducing the General Government to that simple machine which the Constitution created and of withdrawing from the States all other influence than that of its universal beneficence in preserving peace, affording an uniform currency, maintaining the inviolability of contracts, diffusing intelligence, and discharging unfelt its other super-intending functions, I recommend that provision be made to dispose of all stocks now held by it in corporations, whether created by the General or State Governments, and placing the proceeds in the Treasury. As a source of profit these stocks are of little or no value; as a means of influence among the States they are adverse to the purity of our institutions. The whole principle on which they are based is deemed by many unconstitutional, and to persist in the policy which they indicate is considered wholly inexpedient. 

It is my duty to acquaint you with an arrangement made by the Bank of the United States with a portion of the holders of the 3% stock, by which the Government will be deprived of the use of the public funds longer than was anticipated. By this arrangement, which will be particularly explained by the Secretary of the Treasury, a surrender of the certificates of this stock may be postponed until [1833 October], and thus may be continued by the failure of the bank to perform its duties. 

Such measures as are within the reach of the Secretary of the Treasury have been taken to enable him to judge whether the public deposits in that institution may be regarded as entirely safe; but as his limited power may prove inadequate to this object, I recommend the subject to the attention of Congress, under the firm belief that it is worthy of their serious investigation. An inquiry into the transactions of the institution, embracing the branches as well as the principal bank, seems called for by the credit which is given throughout the country to many serious charges impeaching its character, and which if true may justly excite the apprehension that it is no longer a safe depository of the money of the people."

On September 10, 1833, Jackson removed all federal funds from the Second Bank of the U.S., redistributing them to various state banks, which were popularly known as “pet banks.” In addition, he announced that deposits to the bank would not be accepted after October 1. Finally, Jackson had succeeded in destroying the bank; its charter officially expired in 1836.  In his Annual Address that year, Jackson requested that Congress clearly define the duties of the officer charged with the duties of closing out the bank.

"It is also incumbent on Congress in guarding the pecuniary interests of the country to discontinue by such a law as was passed in 1812 the receipt of the bills of the Bank of the United States in payment of the public revenue, and to provide for the designation of an agent whose duty it shall be to take charge of the books and stock of the United States in that institution, and to close all connection with it after the 3d of March, 1836, when its charter expires. In making provision in regard to the disposition of this stock it will be essential to define clearly and strictly the duties and powers of the officer charged with that branch of the public service.

It will be seen from the correspondence which the Secretary of the Treasury will lay before you that notwithstanding the large amount of the stock which the United States hold in that institution no information has yet been communicated which will enable the Government to anticipate when it can receive any dividends or derive any benefit from it."

Jackson's Bank Veto Message

Six months prior to his annual address, Jackson vetoed the recharter of the Bank.  Supporters of the bank argued, that a recent ruling by the supreme court ruled that the Bank of the United States was constitutional.  The ruling stated that the BUS was constitutional as an appropriate means for carrying into effect the enumerated powers of the General government.  Jackson agreed with them that in principle a national bank is constitutional, but he argued that was up to the legislative authority of Congress to determine what powers, privileges or exemptions were "necessary and Proper" for the Bank to have.     In Jackson’s veto address of 1832, he explained to Congress why be believed that the Bank’s charter gave it powers that were neither constitutional nor “necessary and proper”.   In a lengthy letter, Jackson laid out his objections to the Bank of the United States and why it was "subversive of the rights of the States, and dangerous to the liberties of the people".

Jackson argued that the bill "takes away powers expressly granted to Congress and rights scrupulously reserved to the States".  Jackson considered this to be very dangerous precedent to set and was therefore sending the bill back to Congress.   Aside from any concerns that the bank is unconstitutional Jackson wrote that his duty of signing the bill "would have been cheerfully performed", but his list of objections was long.

1. The bill would extend the exclusive powers, privileges and favors enjoyed by the Bank of the United States.
2. The bill would increase the market stock of the bank by 20 or 30 percent, lining the pockets of the wealthy and foreign investors.
3. The bill did not allow for competitive bidding, and stock is being sold below market value. Based on Jackson's calculations, the present value of the bank was $17 million, but the act proposed to sell it for $3 million.  Congress should set the value at $28 million and put the excess in the U.S. Treasury.   
4. The bill did not remove the most "odious features" of the bank that make it inconsistent with the rights of the states and liberties of the people.  The bill did remove the rights to hold real estate, limited its power to establish branches, and restricted the circulation of small notes, but it also allowed the Bank of the United States to require the state banks to sell there notes at a discount in exchange for notes issued by the BUS.
5. The bill would impose a tax on stock held by U.S. Citizens, but not on foreigners, making the stock worth more to a foreigner than to the citizens of the United States. This would drive most of the stock out of the country and make the American people debtors to other nations. 
6.  As the amount of stock owned by U.S. citizens diminishes, so too would the number of stockholders and the power of the bank would end up in the hands of a few wealthy citizens who would be responsible for choosing 20 out of 25 directors.  Soon the directors of the bank would be elected by a few very wealthy stock owners who would be able to elect themselves from year to year without any accountability.    Such a situation would be dangerous to both our liberty and our independence.   In times of peace, the purity of our elections could be jeopardized and in times of war our very independence would be endangered.  No nation could defend itself from a foreign power if the bank fell into their hands, giving them power over our currency and public monies.   
7. The bill prohibits Congress from creating banks in the District of Columbia which goes against the declaration that Congress shall have exclusive legislation of the district "in all cases whatsoever".  
8. The only time that Congress can grant exclusive privileges or monopolies is to promote the progress of science and "useful arts" through copyright and patent laws.  Every other attempt to grant a monopoly whether for even a limited time is "palpably unconstitutional".   
9. The act would give the bank and its stockholders including Congress the right to acquire real estates without the right of states to object.   The federal government is restricted in its power to purchase land (except for forts, arsenals etc), but through the bank they could purchase the lands, giving them a power not delegated to them in the constitution.
10. The increase in capital possessed by the new bank is not serving public needs, but rather private needs.
11. The bill delegates the power to establish branch locations based on private speculation and gain.
12. The Congressional approved power of the bank to pay out a portion of its surplus as a bonus to stockholders, grants the bank a power that is certainly not necessary, and if it were necessary, then it would not be proper. 
13. It is neither necessary nor proper for Congress to transfer the power to "coin money and regulate the value thereof" to the Bank and is therefore unconstitutional.
14. If state banks can be taxed by individual states, then it is wrong for the bill to exempt the national bank or its branches from taxation.  Currently state banks or even private agencies are exempt from paying taxes on any Government money that is deposited in them, but it does not make sense that all bank operations are tax exempt just because they hold government money.  This bill sweeps away and annihilates the taxing power delegated to them by Congress.

 Jackson concluded his veto message  by summarizing his major concerns over the constitutionality of the bank.

"If our power over means is so absolute that the Supreme Court will not call in question the constitutionality of an act of Congress the subject of which "is not prohibited, and is really calculated to effect any of the objects intrusted to the Government," although, as in the case before me, it takes away powers expressly granted to Congress and rights scrupulously reserved to the States, it becomes us to proceed in our legislation with the utmost caution. Though not directly, our own powers and the rights of the States may be indirectly legislated away in the use of means to execute substantive powers. We may not enact that Congress shall not have the power of exclusive legislation over the District of Columbia, but we may pledge the faith of the United States that as a means of executing other powers it shall not be exercised for twenty years or forever. We may not pass an act prohibiting the States to tax the banking business carried on within their limits, but we may, as a means of executing our powers over other objects, place that business in the hands of our agents and then declare it exempt from State taxation in their hands. Thus may our own powers and the rights of the States, which we can not directly curtail or invade, be frittered away and extinguished in the use of means employed by us to execute other powers. That a bank of the United States, competent to all the duties which may be required by the Government, might be so organized as not to infringe on our own delegated powers or the reserved rights of the States I do not entertain a doubt. Had the Executive been called upon to furnish the project of such an institution, the duty would have been cheerfully performed."

References

Presidency.ucsb.edu. (2019). Fourth Annual Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/fourth-annual-message-3 [Accessed 1 Nov. 2019].

Presidency.ucsb.edu. (2019). Seventh Annual Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/seventh-annual-message-2 [Accessed 20 Oct. 2020].

Miller Center. (2019). Andrew Jackson: Domestic Affairs | Miller Center. [online] Available at: https://millercenter.org/president/jackson/domestic-affairs [Accessed 1 Nov. 2019].

Miller Center. (2019). July 10, 1832: Bank Veto | Miller Center. [online] Available at: https://millercenter.org/the-presidency/presidential-speeches/july-10-1832-bank-veto [Accessed 1 Nov. 2019].

Smithsonian. (2019). Andrew Jackson, America’s Original Anti-Establishment Candidate. [online] Available at: https://www.smithsonianmag.com/history/andrew-jackson-americas-original-anti-establishment-candidate-180958621 [Accessed 1 Nov. 2019].

VOA. (2019). Andrew Jackson Takes on the Bank of the US. [online] Available at: https://learningenglish.voanews.com/a/andrew-jackson-nicholas-biddle-henry-clay-bank-united-states/1749399.html [Accessed 1 Nov. 2019].