Did Nicholas Biddle try to buy the presidential election in 1832? Did Andrew Jackson Shut down the bank to stop him? On September 10, 1833, President Jackson pulled the government deposits out of the Bank of the United States (BUS) and put it into the state banks. Jackson told Congress that he did this, not only because he had evidence that Nicholas Biddle had used the money for "electioneering purposes", but because that Mr. Biddle had plans to do it in the future as well. Jackson now believed he had "unquestionable proof" that the BUS had become a permanent political machine controlled by the great corporations and had enough evidence to shut down it down.
These actions and Jackson’s words kicked off the infamous Bank wars between Andrew Jackson and Nicholas Biddle, the Bank's president. It was not an easy fight; popular opinion was turning towards the Bank. Under the rein of Biddle, the bank contributed greatly to the strength and stability of the US economy, and by 1832, public opinion of the BUS that had waned during the prior economic downturns was now improving. Nevertheless, Jackson, a strong supporter of states’ rights, considered the quasi-public corporate charter of the Bank of the United States to be unconstitutional and vetoed its charter renewal, enraging his then presidential opponent Henry Clay and the National Republicans.
The battle first heated up during the summer months of 1832, an election year, Jackson appointed his trusted friend Amos Kendall to scout the state banks to determine if they were both fiscally sound and loyal to the Democratic party. On August 25th, 1833 Kendall reported back that the situation with the US Br. Bank was very dire because they possessed a monopoly and were able to hold the state banks hostage to their demands. Kendall reported that he found banks in both Boston and Maine that were willing to give the "personal responsibility of the directors and all they possess for the security of the government" and advised that the decision to move the funds to these state banks "be speedily settled". Furthermore, Kendall reported that "the deposits are any longer safe in the U.S. Bank” because the Board of Directors had authorized “Mr. Biddle to spend the money of the Bank as he pleases”. Kendall concluded that if true, such actions would put the security of the government's money at great risk.
On September 10th, just two weeks after receiving this report from Mr. Kendall, President Jackson instructed his Secretary of Treasury to remove all federal funds from the Second Bank of the U.S. and redistribute them to various state banks, popularly known as “pet banks.” On December 3rd, Jackson officially reported to Congress in his State of the Union Address that "the Secretary of the Treasury has directed the money of the United States to be deposited in certain State banks designated by him". A full report would be delivered soon, but Jackson assured Congress that such actions were done for the good of public interest, because of the "conduct of the bank" and only after ample evidence was acquired. According to Jackson, there was no doubt that the money was being used for "electioneering purposes". Despite being "disguised by cautious language", Jackson believed there was proof that this was done in the past and sufficient evidence that plans to influence future elections were also in the works. Jackson made no mention of his own reelection campaign, but it seems likely that he was concerned that if action was not taken immediately the money would have been used to perhaps influence the upcoming 1834 Congressional election just as it Jackson believed it was used in 1832 to help Henry Clay, the favorite of Nicholas Biddle and the Bank. It has been widely reported that Nicholas Biddle and the bank contributed to Henry Clay’s campaign.
"Since the last adjournment of Congress, the Secretary of the Treasury has directed the money of the United States to be deposited in certain State banks designated by him, and he will immediately lay before you his reasons for this direction. I concur with him entirely in the view he has taken on the subject, and some months before the removal I urged upon the Department the propriety of taking that step. The near approach of the day on which the charter [see APP Note] will expire, as well as the conduct of the bank, appeared to me to call for this measure upon the high considerations of public interest and public duty. The extent of its misconduct, however, although known to be great, was not at that time fully developed by proof. It was not until late in the month of August that I received from the Government directors an official report establishing beyond question that this great and powerful institution had been actively engaged in attempting to influence the elections of the public officers by means of its money, and that, in violation of the express provisions of its charter, it had by a formal resolution placed its funds at the disposition of its president to be employed in sustaining the political power of the bank. A copy of this resolution is contained in the report of the Government directors before referred to, and how ever the object may be disguised by cautious language, no one can doubt that this money was in truth intended for electioneering purposes, and the particular uses to which it was proved to have been applied abundantly show that it was so understood. Not only was the evidence complete as to the past application of the money and power of the bank to electioneering purposes, but that the resolution of the board of directors authorized the same course to be pursued in future."
Jackson had no doubt that the action he took was warranted. He wrote that there "unquestionable proof that the Bank of the United States was converted into a permanent electioneering engine". Jackson had no choice, but to request that the Secretary of the Treasury use its unique power to remove deposits from the Bank so that its funds could longer be used to exert extraordinary power to influence the judgement of the voters and "control their decisions". Jackson argued that the Bank was using their power to control public opinion by spreading fear throughout the country. By withholding loans to merchants in one area and using the Bank owned newspapers to sound unfounded alarms in other areas, they were creating panic in all. In the Kendall’s report to Jackson, he explained how Bank was able to manipulate the markets. The BUS like state banks, was able to lend money and issue paper currency backed by reserves of specie, but on their own terms and without any discount. Merchants, who collectively owed millions of dollars to the BUS were now being forced to turn to the State banks to borrow species to pay the dues owed. To maintain viability, the state banks were forced to refuse these loans and merchants were defaulting on their loans. Using the government's own money, the Bank was creating a monopoly and were able to "rule the mercantile community here with a rod of iron". According to Kendall, if the money was moved to the state banks it would open up new options and change the balance of power and the merchants would be freed.
"It being thus established by unquestionable proof that the Bank of the United States was converted into a permanent electioneering engine, it appeared to me that the path of duty which the executive department of the Government ought to pursue was not doubtful. As by the terms of the bank charter no officer but the Secretary of the Treasury could remove the deposits, it seemed to me that this authority ought to be at once exerted to deprive that great corporation of the support and countenance of the Government in such an use of its funds [see APP Note] and such an exertion of its power. In this point of the case the question is distinctly presented whether the people of the United States are to govern through representatives chosen by their unbiased suffrages or whether the money and power of a great corporation are to be secretly exerted to influence their judgment and control their decisions. It must now be determined whether the bank is to have its candidates for all offices in the country, from the highest to the lowest, or whether candidates on both sides of political questions shall be brought forward as heretofore and supported by the usual means.
At this time the efforts of the bank to control public opinion, through the distresses of some and the fears of others, are equally apparent, and, if possible, more objectionable. By a curtailment of its accommodations more rapid than any emergency requires, and even while it retains specie to an almost unprecedented amount in its vaults, it is attempting to produce great embarrassment in one portion of the community, while through presses known to have been sustained by its money it attempts by unfounded alarms to create a panic in all."
As the 1833 session of Congress wore on, the pressures in the money market increased and failures became more numerous. The panic became more intense and the Congress became flooded with petitions both for and against the restoration of deposits. The number of petitions to restore the deposits, like support in Congress outnumbered those to remove by 2 to 1. Congress led by Henry Clay expressed outrage at the removal of the deposits claiming that the country was in agony and suffering. He cited, one city where there more than sixty bankruptcies and a loss of $15 million. Clay was pandering to the tears of helpless widows and the unfed orphans to pressure the president to restore the funds, but Jackson remained committed to never restoring the deposits. When a delegation from the mechanics and artisans of New York met in a conference with Jackson to pressure him for help, Jackson told them, 'Well what do you want? what would you have me do? what do you come here for? why don't you go to the United States Bank? Go to Nicholas Biddle!". When they pushed back, Jackson replied, "I told them, and I now tell you, I never will restore the deposits; I never will re-charter the United States Bank, or sign a charter for any bank, so long as my name is Andrew Jackson". Jackson called the Bank a "corrupt and abominable institution, buying up presses and interfering with elections throughout the country. When Jackson, continued to argue that the bank had violated its charter, they asked why the President had not pursued all lawful measures, for there was one measure not yet pursued. The delegation pointed out that the bank's charter included a clause that authorized the bank to issue a 'scire facias' or an annulment of the charter. "It may be, however, before the affairs of the bank are wound up", Jackson replied. Jackson was getting furious explained to the delegation that despite threatening letters, he would destroy the Bank. "I've got my foot upon it, and I'll crush it", Jackson said and then he repeated his suggestion to go to Nicholas Biddle for the money. "Is Andrew Jackson to bow the knee to the golden calf, as did the Israelites of old? I tell you, if you want relief, go to Nicholas Biddle'.
Jackson was now ready to "order a scire facias against the bank". Andrew Jackson was going to put an end to the bank once and for all. Despite the exhortations of Congress, he still believed people were on his side. According to Jackson, the attempt to create a panic was nothing more than a scheme to force the restoration of deposits and renewal of their charter and it failed because of the good sense of the people who refused to get caught in the panic and the ability for the state banks to make accommodations.
"These are the means by which it seems to expect that it can force a restoration of the deposits, and as a necessary consequence extort from Congress a renewal of its charter. I am happy to know that through the good sense of our people the effort to get up a panic has hitherto failed, and that through the increased accommodations which the State banks have been enabled to afford, no public distress has followed the exertions of the bank, and it can not be doubted that the exercise of its power and the expenditure of its money, as well as its efforts to spread groundless alarm, will be met and rebuked as they deserve. In my own sphere of duty I should feel myself called on by the facts disclosed to order a scire facias against the bank, with a view to put an end to the chartered rights it has so palpably violated, were it not that the charter itself will expire as soon as a decision would probably be obtained from the court of last resort."
President Jackson was just one year into his second term and the war on the Bank was just beginning. Jackson made his move to remove the deposits from the bank and now Congress was going to make their move to censure the President, but I will leave that as a topic for another post.
References
Presidency.ucsb.edu. (2020). Fifth Annual Message | The American Presidency Project. [online] Available at: https://www.presidency.ucsb.edu/documents/fifth-annual-message-2 [Accessed 24 Feb. 2020].
Belohlavek, J. (2016). Andrew Jackson. New York: Routledge, p.87.
Hill, A. (2020). The Second Bank of the United States | Federal Reserve History. [online] Federalreservehistory.org. Available at: https://www.federalreservehistory.org/essays/second_bank_of_the_us [Accessed 24 Feb. 2020].
Parton, J. (1860). Life of Andrew Jackson. New York: Mason Brothers, pp.537 - 552.
The Library of Congress. (2020). Amos Kendall to Andrew Jackson, August 25, 1833. [online] Available at: https://www.loc.gov/resource/maj.01084_0362_0365/?st=text [Accessed 24 Feb. 2020].
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