The Bank War
The Second National Bank
 Nicholas Biddle is the Bank President
 4/5 privately owned
 Issued bank notes and regulated state banks
 Charter set to expire in 1836
 The Bank is flawed but is working (highly
profitable)
Hard v. Soft Money Debate
 Hard Money- all currency should be soundly backed by
gold or silver
 Soft Money- currency does not have to be backed by
specie, wanted more currency in circulation
 Jackson supported the hard money position
 The national bank is criticized by both sides
Jackson is Mad at Bank
 He thinks it is corrupt, issues too much soft
money, and caters to the elite
 Also has personal issues with Henry Clay
Corruption in the Bank
 The National Bank is highly profitable and caters
to powerful people
 Daniel Webster and other powerful Congressman
support the bank but also heavily borrow and
invest in the bank
Henry Clay- The Great
Instigator?
 Henry Clay and Daniel Webster lead a bill in
Congress to Re-charter the bank early
 Jackson Vetoes the Bank- take that Congress
 Henry Clay makes the Bank the Central Issue in
the election of 1832 (Clay v. Jackson)
Election of 1832
Jackson Dominates and Clay
is Sad
 Jackson takes this election as a mandate to kill
the bank
Jackson Kills the Bank!!
 He doesn’t want to wait for it to expire
 He fires 2 Secretaries of the Treasury before he
gets Roger Taney to remove the funds from the
the bank
 The funds are deposited in state banks (“pet
banks”)
Biddle Fights Back
 Nicholas Biddle calls in loans and raises interest rates to
hurt the economy and put pressure on Jackson
 Jackson tells investors to “Go to Biddle” who eventually
gives in.
 Basically this is a childish fight that destroys the
economy
National Bank Cartoon
Impact of Bank’s Death
 The Nation loses and effective, yet flawed,
economic institution
 No Regulation- easy credit, inflation, major
boom in land sales
 Government has a surplus from 1835-1837
 What do we do with this surplus? Is this a
dangerous situation?
The Distribution Act (1836)
 Congress returns money to the states
 The withdrawal of funds hurts the “pet
banks” and they have to call in their loans
The Specie Circular
 Jackson issues an executive order stating that
all federal land had to be paid for in specie or
with currency securely backed by specie
 Everyone wants specie and this sparks a run
on the banks
The Panic of 1837
 Massive economic downturn
 People lose land, banks close, heavy inflation
 Martin Van Buren is blamed