“Had they suspended twenty-four hours sooner, Mr. Kane, the locofoco candidate, would have been mayor of the city.” — Morning Herald, October 10, 1839.
On October 9, 1839, the morning after the mayoral election, Philadelphians woke up to a financial crisis. The city’s banks suspended specie payments. Those holding their paper money could no longer count on exchanging it for gold or silver. The timing immediately raised a political question. Had the banks waited until the votes were cast to protect their allies in the Whig party from defeat? A Philadelphia correspondent writing to New York’s Morning Herald certainly thought so. Locofoco was a name used for Democrats, and the candidate was John Kintzing Kane. In the following weeks, the story continued to spread across the nation.
“The Banks of Philadelphia would have suspended sooner than they did, but for the election of the 8th October.” — Richmond Enquirer, November 12, 1839.
“the ‘St. Helena’ of suspension, on which barren spot an effort is making to induce us to sit contentedly.” — Pennsylvanian, reprinted in the Charleston Mercury, October 16, 1839.
These were accusations and editorial judgments, but they reveal how closely banking and politics had become connected. In his December 2 State of the Union address, President Martin Van Buren questioned the justification for the suspension itself. He accused the banks of having “other motives than a want of public confidence” and pointed to the renewed suspension as further evidence that the government should separate its finances from the banks. Behind the Philadelphia controversy stood the institution Andrew Jackson had fought so hard to defeat: the Bank of the United States. Its federal charter was gone, but the bank had found a new life in Pennsylvania.
The story goes back to 1832. In July of that year, President Andrew Jackson vetoed the renewal of the Second Bank of the United States’ charter. Bank President Nicholas Biddle and Jackson’s presidential opponent, Henry Clay, had hoped to make renewal an election issue, but Jackson won another term. The following year, his administration directed federal deposits into selected state banks. Then President Jackson accused Biddle of using the bank’s money to influence elections, support friendly newspapers, and exert pressure upon the business community. In Jackson’s eyes, the bank had become a political machine, and the government’s money helped sustain its power. Biddle, however, was not ready to surrender. Before the federal charter expired in 1836, Pennsylvania granted the institution a state charter. It would continue operating under the familiar name of the United States Bank, but now its authority came from Harrisburg rather than Washington. Jackson had blocked the renewal of a national bank; he had not prevented Pennsylvania from chartering one of its own.
The new charter became an achievement of the Whig–Anti-Masonic coalition backing Pennsylvania Governor Joseph Ritner. In exchange for its privileges, the bank would provide payments, loans, and investments intended to support public improvements and tax relief. Whig newspapers celebrated the bargain while Democrats saw an opportunity to renew their attack on Biddle’s bank and the politicians who had rescued it. At a Kingston meeting in 1836, Democrats endorsed constitutional-convention candidates who would “sustain popular rights and annul the charter of the United States Bank.” The coalition’s combined strength in the state House fell from 68 seats in 1835 to only 28 in 1836. Historian Michael Holt identifies the bank controversy as a major reason for this reversal.
An 1836 cartoon titled On the Way to Araby! captured Biddle’s apparent victory. As displayed above, Biddle is standing outside the bank with its new Pennsylvania charter introducing “an old friend with a new face.” Jackson flees toward Araby, an old name for Arabia, carrying a broken cane marked “Veto,” while Van Buren gathers his predecessor’s discarded mantle. The cartoon mocked Jackson’s failure to destroy the bank but also injects Van Buren into the story suggesting he would inherit the banking controversy along with Jackson’s political mantle. Jackon had defeated the Bank of the United States, but not the confluence of power. The suspension of specie payments in 1837 served as a demonstration of the danger when public funds are dependent on corporate decisions. Banks holding public money could not meet their obligations in coin, leaving the government dependent upon institutions it did not control. Van Buren saw this danger and proposed an Independent Treasury to keep federal funds in the custody of public officers. His proposal reached beyond Biddle’s bank and challenged the use of state banks as well. It provoked opposition from Whigs and even divided some within the Democratic party.
In Pennsylvania, the broader struggle between Democrats and the Whig–Anti-Masonic coalition continued in the 1838 gubernatorial election between Democrat David R. Porter and incumbent Governor Ritner, an Anti-Mason supported by the Whigs. Porter defeated Ritner in the 1838 gubernatorial election, while disputed Philadelphia legislative returns produced competing claims to control of the state House. In December, crowds confronted legislators in Harrisburg, and Ritner called out the militia. The buckshot ammunition supplied to the troops gave the confrontation its name: the Buckshot War. According to the American Philosophical Society’s account of his papers, John Kintzing Kane helped lead the campaign to unseat two disputed Whig state senators. The confrontation was about more than just the bank’s charter, yet it brought the same rival political forces into another bitter contest. Less than a year later, Kane would challenge the Whigs in Philadelphia itself.
On October 8, 1839, Kane faced incumbent Whig mayor John Swift and another Whig candidate. Swift finished only 49 votes ahead of Kane but did not receive a majority of all votes cast. The morning after the popular election, the banks suspended specie payments. The mayoral decision passed to the Whig-controlled council, which subsequently retained Swift. The Morning Herald correspondent joined the two events and accused the banks of waiting for the election and believed that an earlier suspension would have made Kane mayor. The accusation is revealing. The writer alleged the banks’ conduct would have cost the Whigs the city’s highest office.
Van Buren's Response
For Van Buren, the suspension raised a larger question. In his state of the union address, he reminded Congress that the banks’ failure to pay specie in 1837 had already demonstrated the government’s dependence upon them. The renewed suspension supplied further reasons to dissolve that connection. He distinguished the earlier loss of public confidence from the justification now offered: banks argued that maintaining coin payments would require an inconvenient reduction in their loans.
“The plea has ceased to be one of necessity. Convenience and policy are now deemed sufficient to warrant these institutions in disregarding their solemn obligations.”
Van Buren explained how credit extended abroad could bring trouble home. Banks and merchants borrowed in Europe, but their American paper money could not settle those foreign debts. Gold and silver flowed out, banks demanded repayment from their borrowers, and credit contracted just when businesses most needed it. Property could be forced onto the market when buyers had the least money available. Suspension then left the community using paper whose value was uncertain. He acknowledged that many banks had continued honoring their obligations but argued that neither a large capital nor a national charter could remove the underlying danger.
Van Buren raised the concern that the dangers would spread across the country. The banking monster that Pennsylvania had revived could not deliver the security its supporters promised. Nor would its difficulties remain in Philadelphia. Through trade and exchange, the actions of banks in a few great commercial cities affected institutions and communities far inland.
“That recently at Philadelphia immediately affected the banks of the South and West in a similar manner.”
Conclusion
Whether the Philadelphia banks deliberately waited until after the election remained a matter of accusation. Their suspension, however, was a fact, and Van Buren believed the government had already seen enough. Public funds should not depend upon the decisions of banking corporations, whether those decisions arose from financial pressure, convenience, or political conflict. Once again, he asked Congress to establish an independent National Treasury.
Here is the full excerpt from Van Buren’s 1839 State of the union address.
“In the modes of business and official restraints on disbursing officers no legal change was produced by the suspension of specie payments. The report last referred to will be found to contain also much useful information in relation to this subject. I have heretofore assigned to Congress my reasons for believing that the establishment of an independent National Treasury, as contemplated by the Constitution, is necessary to the safe action of the Federal Government. The suspension of specie payments in 1837 by the banks having the custody of the public money showed in so alarming a degree our dependence on those institutions for the performance of duties required by law that I then recommended the entire dissolution of that connection. This recommendation has been subjected, as I desired it should be, to severe scrutiny and animated discussion, and I allow myself to believe that notwithstanding the natural diversities of opinion which may be anticipated on all subjects involving such important considerations, it has secured in its favor as general a concurrence of public sentiment as could be expected on one of such magnitude. Recent events have also continued to develop new objections to such a connection. Seldom is any bank, under the existing system and practice, able to meet on demand all its liabilities for deposits and notes in circulation. It maintains specie payments and transacts a profitable business only by the confidence of the public in its solvency, and whenever this is destroyed the demands of its depositors and note holders, pressed more rapidly than it can make collections from its debtors, force it to stop payment. This loss of confidence, with its consequences, occurred in 1837, and afforded the apology of the banks for their suspension. The public then acquiesced in the validity of the excuse, and while the State legislatures did not exact from them their forfeited charters, Congress, in accordance with the recommendation of the Executive, allowed them time to pay over the public money they held, although compelled to issue Treasury notes to supply the deficiency thus created. It now appears that there are other motives than a want of public confidence under which the banks seek to justify themselves in a refusal to meet their obligations. Scarcely were the country and Government relieved in a degree from the difficulties occasioned by the general suspension of 1837 when a partial one, occurring within thirty months of the former, produced new and serious embarrassments, though it had no palliation in such circumstances as were alleged in justification of that which had previously taken place. There was nothing in the condition of the country to endanger a well-managed banking institution; commerce was deranged by no foreign war; every branch of manufacturing industry was crowned with rich rewards, and the more than usual abundance of our harvests, after supplying our domestic wants, had left our granaries and storehouses filled with a surplus for exportation. It is in the midst of this that an irredeemable and depreciated paper currency is entailed upon the people by a large portion of the banks. They are not driven to it by the exhibition of a loss of public confidence or of a sudden pressure from their depositors or note holders, but they excuse themselves by alleging that the current of business and exchange with foreign countries, which draws the precious metals from their vaults, would require in order to meet it a larger curtailment of their loans to a comparatively small portion of the community than it will be convenient for them to bear or perhaps safe for the banks to exact. The plea has ceased to be one of necessity. Convenience and policy are now deemed sufficient to warrant these institutions in disregarding their solemn obligations. Such conduct is not merely an injury to individual creditors, but it is a wrong to the whole community, from whose liberality they hold most valuable privileges, whose rights they violate, whose business they derange, and the value of whose property they render unstable and insecure. It must be evident that this new ground for bank suspensions, in reference to which their action is not only disconnected with, but wholly independent of, that of the public, gives a character to their suspensions more alarming than any which they exhibited before, and greatly increases the impropriety of relying on the banks in the transactions of the Government. A large and highly respectable portion of our banking institutions are, it affords me unfeigned pleasure to state, exempted from all blame on account of this second delinquency. They have, to their great credit, not only continued to meet their engagements, but have even repudiated the grounds of suspension now resorted to. It is only by such a course that the confidence and good will of the community can be preserved, and in the sequel the best interests of the institutions themselves promoted New dangers to the banks are also daily disclosed from the extension of that system of extravagant credit of which they are the pillars. Formerly our foreign commerce was principally rounded on an exchange of commodities, including the precious metals, and leaving in its transactions but little foreign debt. Such is not now the case. Aided by the facilities afforded by the banks, mere credit has become too commonly the basis of trade. Many of the banks themselves, not content with largely stimulating this system among others, have usurped the business, while they impair the stability, of the mercantile community; they have become borrowers instead of lenders; they establish their agencies abroad; they deal largely in stocks and merchandise; they encourage the issue of State securities until the foreign market is glutted with them; and, unsatisfied with the legitimate use of their own capital and the exercise of their lawful privileges, they raise by large loans additional means for every variety of speculation. The disasters attendant on this deviation from the former course of business in this country are now shared alike by banks and individuals to an extent of which there is perhaps no previous example in the annals of our country. So long as a willingness of the foreign lender and a sufficient export of our productions to meet any necessary partial payments leave the flow of credit undisturbed all appears to be prosperous, but as soon as it is checked by any hesitation abroad or by an inability to make payment there in our productions the evils of the system are disclosed. The paper currency, which might serve for domestic purposes, is useless to pay the debt due in Europe. Gold and silver are therefore drawn in exchange for their notes from the banks. To keep up their supply of coin these institutions are obliged to call upon their own debtors, who pay them principally in their own notes, which are as unavailable to them as they are to the merchants to meet the foreign demand. The calls of the banks, therefore, in such emergencies of necessity exceed that demand, and produce a corresponding curtailment of their accommodations and of the currency at the very moment when the state of trade renders it most inconvenient to be borne. The intensity of this pressure on the community is in proportion to the previous liberality of credit and consequent expansion of the currency. Forced sales of property are made at the time when the means of purchasing are most reduced, and the worst calamities to individuals are only at last arrested by an open violation of their obligations by the banks--a refusal to pay specie for their notes and an imposition upon the community of a fluctuating and depreciated currency. These consequences are inherent in the present system. They are not influenced by the banks being large or small, created by National or State Governments. They are the results of the irresistible laws of trade or credit. In the recent events, which have so strikingly illustrated the certain effects of these laws, we have seen the bank of the largest capital in the Union, established under a national charter, and lately strengthened, as we were authoritatively informed, by exchanging that for a State charter with new and unusual privileges--in a condition, too, as it was said, of entire soundness and great prosperity--not merely unable to resist these effects, but the first to yield to them. Nor is it to be overlooked that there exists a chain of necessary dependence among these institutions which obliges them to a great extent to follow the course of others, notwithstanding its injustice to their own immediate creditors or injury to the particular community in which they are placed. This dependence of a bank, which is in proportion to the extent of its debts for circulation and deposits, is not merely on others in its own vicinity, but on all those which connect it with the center of trade. Distant banks may fail without seriously affecting those in our principal commercial cities, but the failure of the latter is felt at the extremities of the Union. The suspension at New York in 1837 was everywhere, with very few exceptions, followed as soon as it was known. That recently at Philadelphia immediately affected the banks of the South and West in a similar manner. This dependence of our whole banking system on the institutions in a few large cities is not found in the laws of their organization, but in those of trade and exchange. The banks at that center, to which currency flows and where it is required in payments for merchandise, hold the power of controlling those in regions whence it comes, while the latter possess no means of restraining them; so that the value of individual property and the prosperity of trade through the whole interior of the country are made to depend on the good or bad management of the banking institutions in the great seats of trade on the seaboard.”
References
Van Buren, Martin. “Third Annual Message.” 2 Dec. 1839. The American Presidency Project, University of California, Santa Barbara, www.presidency.ucsb.edu. Accessed 20 Sept. 2026.
“‘Principles, Not Men’—Dr. Andrew Bedford’s ‘Inflexible Democracy.’” Pennsylvania in the Civil War, 17 Aug. 2019, https://www.penncivilwar.com/post/principles-not-men.
Clay, Edward Williams. On the Way to Araby! Mar. 1836. Published by H. R. Robinson. Library of Congress, https://www.loc.gov/pictures/item/2008661280/.
Holt, Michael F. The Rise and Fall of the American Whig Party: Jacksonian Politics and the Onset of the Civil War. Oxford UP, 1999, pp. 54–55.
“Important from Philadelphia—Suspension of Specie Payments—Results of the Election.” Morning Herald [New York], 10 Oct. 1839. Transcribed in “Schuylkill Bank—Philadelphia, PA,” Historical Bank Runs, https://www.finhist.com/bank-runs/episodes/2487869590478.html.
“Series I. John Kintzing Kane, 1800–1892.” American Philosophical Society Manuscript Collections Search, https://as.amphilsoc.org/repositories/2/archival_objects/962503.
Saylor, Richard. “Pennsylvania’s Buckshot War of 1838.” Pennsylvania Heritage, Spring 2022, https://paheritage.wpengine.com/article/pennsylvanias-buckshot-war-of-1838/.
“‘To Meet One’s Waterloo’: Meaning and Origin.” Word Histories, 19 Mar. 2024, https://wordhistories.net/2024/03/19/meet-ones-waterloo/. Includes an excerpt from the Pennsylvanian, reprinted in the Charleston Mercury, 16 Oct. 1839, p. 2, col. 3.
“Views on the Bank Suspension.” Richmond Enquirer, 12 Nov. 1839. Transcribed in “Schuylkill Bank—Philadelphia, PA,” Historical Bank Runs, https://www.finhist.com/bank-runs/episodes/2487869590478.html.
Wagner, Dennis. “1832 Andrew Jackson—Did Nicholas Biddle Try to Buy a Presidential Election?” State of the Union History, 24 Feb. 2020, https://www.stateoftheunionhistory.com/2020/02/1832-andrew-jackson-did-nicholas-biddle.html.
No comments:
Post a Comment