The Bank War
America into the 1820s was certainly not a little island, and was starting to look like this:
And down the line, Andrew Jackson was coming to kill the bank.
We’re really not going to pretend any depth of knowledge or understanding of the history of this period and the different factors at play, and obviously there’s a lot to understand in this swirl of historical currents. There are those who claim the Second Bank of the United States stabilised and was of benefit to America. But what is certain is that President Andrew Jackson didn’t see it that way. There is no doubt whatsoever over President Jackson’s view of banksters (though this term wouldn't be used for another century.)
Andrew Jackson, Old Hickory, who as a US general bested the British in the Battle of New Orleans, came to the presidency in 1829 determined to Kill the Bank. But, like Jefferson, he could do nothing until the Bank’s charter came up for renewal in 1836, which would be the last year of second term if he lasted that long. Jackson busied himself in the meantime with a clear-out of bank officials from government offices.
In 1832, as the presidential election approached, The Second Bank of the United States moved to have Congress renew their charter four years early. Congress obliged, but President Jackson vetoed this renewal, declaring:
If government would confine itself to equal protection and, as Heaven does its rains, show its favour alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the Act before me, there seems to be a wide and unnecessary departure from these just principles.
That would indeed be an unqualified blessing, then and now.
Jackson felt certain enough about the popular appeal of this issue to campaign for re-election at the end of the tumultuous year of 1832 with the slogan of Jackson and No Bank, representing the Bank as the instrument of unfair privilege, an unaccountable elite, destructive of the common wealth of the United States.
Serious money poured into the campaign against Jackson’s re-election, but he won with a landslide victory. Jackson knew that a battle had been won, not a war. He said:
The hydra of corruption is only scotched, not dead.
This chapter of American history is referred to as the Bank War. Amidst kicking and screaming, state funds were withdrawn from the Second Bank. Jackson was resolute, reportedly saying (attribution not found but it sounds like him):
I have a chain. I’m ready with screws to draw every tooth and then the stumps.
The Bank War went on, familiar financial panic set in. As wages collapsed and unemployment soared, Jackson was blamed for it by his actions in removing funds from the central bank, and newspaper editorials were scathing of him. This all led to the Panic Session in Congress. Jackson was official censured by Senate. The public were outraged at this censure and it was later expunged.
Jackson kept on battling. There is such clarity and consistency in what he says that it seems safe to include this quote, as it is certainly consistent with what he is known to have said, in an 1834 address in Philadelphia where he was addressing the banking community:
Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!
Jackson saw that their policies were to cause inflation in various asset classes, and then cause deflation and wipe out everybody who was in debt, picking up their assets cheaply; all of which was starting to look to us like a tedious rhythm through history, whatever else anyone says.
In April of 1834, everything hung in the balance. With enough votes, Congress could override Jackson’s veto and grant the Bank another 20 year monopoly over America’s money. Eventually, the result was conclusive, the House of Representatives voted 134-82 against re-chartering the Bank, and, voted 175-42 in favour of forming a committee to investigate the affairs of the bank and to determine the causes of the panic of 1833. Jackson’s veto had been confirmed. The Bank refused to cooperate with the investigation, so, apparently that was that.
Jackson concluded this stormy year by warning the country:
The bold effort the present bank had made to control the government, the distress it had wantonly produced, are but premonitions of the fate that awaits the American people should they be deluded into a perpetuation of this institution or the establishment or another like it.
Jacksonian Democracy, as the movement of the time became known, was about instituting greater democracy for common people and bringing to an end the monopoly of government by elites.
In a letter to his Vice-President, Jackson had said:
The bank, Mr. Van Buren, is trying to kill me, but I will kill it.
The Autobiography of Martin Van Buren, published in Annual Report of the American Historical Association for the Year 1918, vol. II (1920), ed. John Clement Fitzpatrick, ch. XLIII (p. 625)
1835 began for Andrew Jackson with an attempt on his life, two pistols in his stomach, both of which failed to go off. This was the first of a series of acts of assassination against an American president, and perhaps the most incompetent.
Later that year, Jackson’s great moment came and he paid off the national debt, the only time in America’s history this has happened.
From 1836, when the charter of the Second Bank ran out, there's a much used quote of Nicolas Biddle's, head of the Bank, that we haven't been able to find any refutation of (nor the primary source, though.) It's one of the many quotes that go around attributed to bankers' mouths that seem to provide insight into the central banking mind and soul. Reportedly, Biddle is known to have boasted aloud about his power and, again, there's certainly acts of quiet corruption that can be pinned to Biddle. He is quoted as saying:
Nothing but widespread suffering will produce any effect on Congress. Our only safety is in pursuing a steady course of firm monetary restriction. And I have no doubt that such a course will ultimately lead to restoration of the currency and the re-charter of the Bank.
Vile Acts of Evil - Volume 1 - Banking in America, Michael A Kirchubel
Widespread suffering is exactly what would follow in 1837 and beyond, and there’s lots of debate about the causes of that. There are some differing views about what happened around these times. All we’re really noting is that these questions about money are definitely good questions, and are never discussed anymore in the political arenas, and haven’t been for a long time.
In the midst of difficult economic times, Henry George was born in 1839. Whatever else might be said about Jackson – and there is plenty else to say – he put paid to the central bank idea in America for 77 years. Andrew Jackson killed the bank.
But he didn’t kill fractional reserve banking, used by numerous state-chartered banks in the new wildcat era of free banking. The wildcat banking practises are blamed for much economic instability in the years before the Civil War. Instability was also caused by the monetary policies of the Bank of England. Britain was the hegemon of this day, as the USA became, and in these days, when Britain raised interest rates, major banks in the USA must also do so. When Britain sneezed, America caught a cold.