By Nancy Spannaus
May 12, 2018—On April 23, 1834, a meeting of the “People of Mifflin County, Pa.” adopted the following resolution, which it sent on to the Congress of the United States:
Resolved. . . . That the unwise and unlawful removal of the public deposits from the Bank of the United States, and the war of extermination which the President has declared against that institution, and the mutual distrust and alarm necessarily attending those acts, are in the opinion of this meeting, the sole and only causes of the present pecuniary distress in the country. “ … That the present disorganized state of the currency, the unparalleled scarcity of money, the loss of public credit and private confidence, has the inevitable tendency to oppress the poor, and to foster the rich. “… That we view, with no ordinary feelings of disapprobation, the doctrine of the President of the United States, that ‘all who trade on borrowed capital ought to break,’ as anti-republican and unchristian in its sentiment, and in its effect calculated to paralyze native industry and enterprise, and to place the poor but industrious and enterprising trader and merchant at the mercy of their more wealthy competitors.
The Mifflin County resolution was by no means unique. It was echoed from 1832 on by tens of thousands of citizens who gathered in town meetings around the nation, notably, but not only in New Jersey, New York, Vermont, North Carolina, Ohio, and Pennsylvania. They gathered not only to protest the state of the economy, but to demand the restoration of the system of credit that had been established by the Second Bank of the United States, and was being obliterated by President Andrew Jackson. Those citizens understood that the lifeblood of the nation’s economy and prosperity lay in a properly functioning national banking system, and they demanded that national banking be restored.
Many Americans today (and even Congressmen and Senators), rightly appalled by the Wall Street domination of U.S. economic policy, believe it’s “too complicated” to rally the nation around the need for a new National Bank. They instead set their sights on correcting particular abuses, demanding less income inequality, or a higher minimum wage, or universal health care. Yet none of these noble aims are reachable without taking back the U.S. economy from the financial predators, and restoring the American System we had under George Washington, John Quincy Adams, Abraham Lincoln, and Franklin Delano Roosevelt.
The purpose of this article is to bust through this myth, by reviving some history of the fight to save the Second National Bank in the early 1830s. That fight failed, but not because the population failed to rally behind the bank. What was lacking was a national political leadership unified around the crucial objective of restoring the bank—a point we will return to at the end of this article.
The Second National Bank
To understand the fight, you must first recall the political and economic scene.
The Presidency of John Quincy Adams, contrary to myth, represented the take-off point for the United States economy. During the four short years of his term (1825-1829), the nation underwent a virtual explosion of productivity, spurred by the building of canals and railroads (infrastructure), and the opening of new industries with higher technological capacity. Cities and towns were springing up in the western territories, commerce was booming, and the prospect for dealing with the festering slavery problem was within grasp, through the expansion of industry and transportation corridors into the South. The President may not have been personally popular, but his collaboration with the Second National Bank definitely was.
One of the key aspects of this prosperity was the national credit system which had been created by Nicholas Biddle, who became president of the Second National Bank in 1822. Biddle moved to correct the policies which had led to the mismanagement of the bank in the years before. Biddle was committed to establishing a uniform currency of banknotes, which would allow commerce and investment to function smoothly throughout the nation. This also involved supporting the legitimate purposes of state and local banks, and controlling their excesses. His aim followed that of the founder of the American System, Alexander Hamilton himself, who put it this way in his Report on Public Credit of 1795:
Public Credit … is among the principal engines of useful enterprise and internal improvement. As a substitute for capital, it is little less useful than gold or silver, in agriculture, in commerce, in the manufacturing and mechanic arts.… It is a matter of daily experience in the most familiar pursuits. One man wishes to take up and cultivate a piece of land; he purchases upon credit, and, in time, pays the purchase money out of the produce of the soil improved by his labor. Another sets up in trade; in the credit founded upon a fair character, he seeks, and often finds, the means of becoming, at length, a wealthy merchant. A third commences business as manufacturer or mechanic, with skill, but without money. It is by credit that he is enabled to procure the tools, the materials, and even the subsistence of which he stands in need, until his industry has supplied him with capital; and, even then, he derives, from an established and increased credit, the means of extending his undertakings.
Biddle’s management of the Bank worked well because he wielded it as a means by which the “farms, the commerce, and factories, and the internal improvements of the country” would be aided in functioning due to their access to credit. People who wanted to build, expand their farms, and sell their goods could get credit. Confidence in the currency grew, and long-term investments became possible because they were undertaken on credit, not cash on the barrel-head. Credit presupposed that current investment would create increased wealth in the future through an increase in productivity, and that’s what occurred during Biddle’s tenure.
The 1830s Turning Point
Not everyone was happy with Biddle’s system, however. Discontent stemmed primarily from those financial interests in New York City, but especially London, who saw that the growth of American economic strength threatened to break the financial power of the British Empire, as it was exercised through their control of specie (hard money) and credit. Some reports say that Biddle had been so successful that he had the United States turning a surplus against the City of London by the late 1820s. These London bankers also were out to protect their profits in the Southern slave system, which received full backing from Wall Street as well.
Their most effective political weapon was populism, an appeal to sectionalism, localism, racism, and hatred of banks in general. And there was no better spokesman for this outlook than the “war hero” and slave-owner Andrew Jackson.
When Jackson ran for President in the 1828 elections, he did not come out against the Second Bank. But by the end of 1829, he had been convinced by his cabinet/controllers to begin a propaganda campaign against the Bank, claiming it had failed to create “a uniform and sound currency.” His attack was followed up by others in the New York-banker-controlled Democratic Party, who charged that the Bank of the United States was a “monopoly” that oppressed the people. This, despite the fact that the Bank had a capital of $28 million, against state bank capital of $128 million, and its branch banks competed with the circulation of 500 other state banks. Also, at the time, seven million shares of its stock were held by the U.S. government, eight million by widows and orphans’ charities, eight million by company owners and businessman, with seven million held by foreigners (who had no voting power). Only three million shares were held by the very rich.
In 1832, when Biddle decided to seek re-charter of the Bank four years before the charter’s expiration in 1836, the President vetoed the Congressional approval. After his re-election that fall, he launched a full broadside against the Bank, which was followed in October 1833 with a removal of the government’s deposits from the Bank. (This was only done after Jackson had to fire two Secretaries of the Treasury who refused to do his arguably unconstitutional bidding.)
Jackson’s action was not taken lying down. Constituents barraged Congress and the President, but the President remained intransigent. One Pennsylvania delegation reported that Jackson told them that “all who do business on borrowed capital should break,” whether they be speculators or hard-working business or tradesmen. Report of this attitude spurred even more memorials to Congress, a few of which I quote below.
Credit: “The Very Lifeblood of Enterprise”
Young Men’s Meeting, Troy, N.Y., April 14, 1834.
Resolved, that in the opinion of this meeting it is a policy too venturesome and dangerous in the President of the U.S. … to depart from the landmarks of a safe experience set by the sages of the revolution, and to attempt to uproot institutions established and sanctioned by them. The first charter of the U.S. Bank received the signature of George Washington; the second of James Madison; and we have yet to learn that Andrew Jackson is a wiser patriot, or a safer expounder of the constitution, than they.
… That we regard the hostility manifested by the present Chief Magistrate against the U.S. Bank, and those who goad him on and sustain him, as wanton and ruinous, waged to gratify political aspirants, and which, if finally successful in prostrating that institution, the currency, set afloat on a sea of experiment, without any regulating and controlling power, must be wrecked amid the contentions and unrestrained issues of rival institutions and interests.
Meeting of the Citizens of Cumberland County, Pa., May 12, 1834.
We now see the people borne down by a peculiar pressure upon their business; the voice of discontent and disaffection is everywhere heard; the great scheme of public improvements by the General government is abandoned; the tariff is repealed or neutralized; manufactories are prostrated; public credit is destroyed; the people themselves have become restive; our public elections in a neighboring state were disgraced by the presence of brutal force, and the necessity occurred of calling out the military power of the country to suppress a furious mob. … The Chief magistrate is striving to concentrate in himself most dangerous powers. … He claims the right to appoint and to dismiss cabinet and other officers at his pleasure, without the “advice and consent of the Senate,” and to reappoint after the nominee has been rejected; And of the doleful catalog, perhaps the most afflictive and portentous, is the sad truth, that the discipline of party, and devotion to one frail man, have justified these measures in the eyes of thousands and tens of thousands, honest, respectable, and intelligent citizens.
Citizens of Detroit, Michigan Territory, May 12, 1834.
The means of obtaining the usual and necessary bank accommodations are crippled; and credit, the very life blood of western enterprise, the vital principle which impart vigor and activity to the settlement and improvement of every part of the West, has received a shock, from which, as we fear many years will not be sufficient to recover it.
By the existing law it is impossible for them to purchase the public lands on a credit, and without the means of making ready payment at the land office when they arrive, few will be likely to undertake the enterprise.
… They think they perceive in the measures of the Executive a disposition to usurpation and oppression: of usurpation, in assuming of himself a responsibility which the existing law, the whole course of legislation from the foundation of the government, and indeed, the very spirit of the English and American constitutions, have confided to other hands; of oppression, in his open disregard of the distresses of the people, and his avowed contempt of their petitions for relief.
Citizens of Athens County, Ohio, May 14, 1834.
Almost the whole of our surplus products of last year, far exceeding in quantity that of any preceding year, is now afloat, hopelessly seeking a market on the Ohio and Mississippi, or has already been sacrificed at prices absolutely ruinous: prices which blast the hopes of the future, and spread universal discouragement and despondency.
. . .Your memorialists do feel bound to complain and protest against the course of the Executive in regard to that portion of the suffering community who have appealed to his interposition for relief, and more especially the indifference and insensibility so often and emphatically avowed to the distress and utter ruin of those . . . whom he please to denominate as those who are doing business on borrowed capital (a class comprising, as we believe, more than one half of those actively engaged in every great department of business,) as highly disrespectful to the whole American people, and unbecoming to the elective head of a nation of freemen.
And we believe that the moral and political effect of the credit system presents a trait of far greater value; that this system has been found eminently to contribute to the elevation of individual character; practically to realize the true republican equality which must otherwise be a mere phantom of imagination, by affording facilities to men possessing talents, industry, skill, enterprise, sterling merit, wherever found to acquire that rank and distinction, and to exert that salutary and auspicious influence on society for which God and nature have qualified them.
Mobilizing for the Future
Does this depth of passion to save the Bank of the United States shock you? What did these citizens understand that most Americans don’t understand today?
Faced with the shock of the collapse of public credit which Jackson removal of government support for, and collaboration with, the National Bank caused, they looked for the cause. They turned, for example, to leading spokesmen of the Whig Party, such as Henry Clay, who were able to explain the role of the National Bank in putting capital and labor to work building the nation. They were able to see that government-backed national debt, when contracted for the purpose of building a more productive society in the future, could indeed be a blessing, because the future productivity created by wise investments would provide a means of paying back what was borrowed.
They could see that without credit, the engines of industry and agriculture were grinding to a halt, even as the big money interests continued to profit off people’s misery.
Unfortunately, the forces in Congress who could have forged an alliance to defeat Jackson’s veto, ended up fighting each other over petty issues. Daniel Webster, Henry Clay, and John Calhoun, although nominally united behind a Whig program, couldn’t coordinate on a strategy, and were at each others’ throats. Jackson stayed in office, and returned to a nominally decentralized, “hard money” regime, where government funds were distributed to favorite state banks around the nation (eliminating the pool of credit once lodged in the National Bank), and government land could only be purchased with gold or silver. By the time Jackson’s New York backer and successor Martin van Buren took the presidency in 1837, a full-fledged depression had broken out across the land.
The Whig Party did not totally give up the fight, but it had begun to split apart under centripetal pressures, as various interests vied to save themselves against the interests of others. Under Henry Clay’s leadership, the Whigs tried to re-establish the Bank of the United States in 1842, but their so-called Whig president, John Tyler, turned against them, and vetoed the bill.
Indeed, it was not until the crisis of the Civil War that a leader was in place who could once again create a national banking system geared to building the nation—Abraham Lincoln.
It was John Quincy Adams, then a Congressman, who forecast the dire consequences of the failure of the Whig Party to mobilize for the National Bank, as well as its concomitant American System policies of protecting industry and building internal improvements. His warning, issued in February 1833 in response to Jackson’s inaugural address, is worthy of being heeded today:
The planter of the south, the new settler of the west, the husbandman of the north and center, the merchant of the Atlantic shore, the navigator of the ocean, and the artisan of the workshop and the loom, have each, in his several spheres of action, a separate and distinct interest, but a common right, a common stake, a common pledge in that great social compact, the constitution of the United States. All are equally entitled to its protection, and to that of its laws. To bind, to interweave, to rivet them in adhesion inseparably together, is the duty of the American patriot and statesman: to bring one of those great interests in hostile collision with all or any of the others, is to loosen the bonds of the union, and to kindle the fires of strife.
A sound, uniform and accredited currency; an inexhaustible and invaluable fund of common property in the public lands; an organized and effective application of the national energies and resources, to great undertakings of internal improvement; and a firm, efficient protection of commerce and navigation against the arm of foreign violence, and of manufactures and agriculture against the indirect aggressions of foreign Legislation and competition:—these … are the cements, which can alone render this union prosperous and lasting. To decompose and unsettle the currency, to cast away the treasure of the public lands, to abandon all enterprises of internal improvement, and systematically to deny all protection to the domestic manufactures, is to separate the great interests of the country, and to set them in opposition to each other. It is to untie the ligaments of the union.
… However in one portion of the union, the independent farmers or planters, cultivating the soil by their slaves, may be considered, by one of themselves, as the basis of society, and the best part of the population, the assumption of such a principle, as a foundation of a system of national policy for the future government of these United States, is an occurrence of the most dangerous and alarming tendency; as threatening, at no remote period, not only the prosperity, but the peace of the country, and as directly leading to the most fatal of catastrophes—the dissolution of the union by a complicated, civil and servile war (emphasis added).
We need a full mobilization for a new National Bank today.