Uploaded on Sunday 16 February, 2014 to the money trust
Regarding the Bank of the United States; July 10, 1832
The Second Bank of the United States was established in 1816 by congressional charter for a duration of twenty years. This was the third American central bank in existence since the adoption of the Declaration of Independence after the Bank of North America [established in 1781] and the First Bank of the United States [established in 1791].
The U.S. government owned 20% in the bank along with private investors owning the remaining 80% of the stock. The names of the private investors were never publicized, nor was the extent of their expenditure in acquiring their shares. The federal cash injection was paid upfront into the bankâ€™s coffers. Then, through the process of fractional reserve lending, the bank loaned out funds to private investors thus enabling them to buy up shares with money which they had assimilated off the governmentâ€™s deposits. Approximately one third of the shares were sold to foreigners in Europe to, in high probability, very wealthy financiers with links to the Bank of England.
Twelve years into the bank's charter with just eight to go, General Andrew Jackson, a decorated military figure and the hero of the Battle of New Orleans, had won the presidential election of 1828 and was sworn into the White House in 1829. He was a staunch opponent of the Second Bank of the United States. Albeit for various reasons, Jackson understood that a quasi-public corporation with foreign influence operating as America's central bank was not in the best interests of the republic. The president of the bank, Nicholas Biddle, knew full well of Jacksonâ€™s disdain thereof.
And so it came to pass that four years later, near the end of Jacksonâ€™s first term in office during the election year of 1832, Biddle, together with Senator Henry Clay, plotted to have Congress pass a bill in the house for the renewal of the bankâ€™s charter, four years before its expiry in 1836. This bill was put on the table as a deliberate attempt to corner Jackson into signing it, thinking that he would not dare not to go along with their demands with an election looming so close. Never a man to be intimated with, Jackson stuck to his guns and vetoed it.
In carrying out his constitutional duties, Jackson underlined his reasons for his veto. His letter to Congress dated July 10, 1832 became one of Americaâ€™s iconic documents as it clearly lays out the governmentâ€™s responsibilities vis-Ă -vis its citizens, irrespective of their stratum, assets, or wealth. The directors and shareholders of the bank were furious and sought to unseat Jackson in the upcoming presidential election. The bank backed Senator Henry Clay of Kentucky and poured three million dollars into his campaign; a staggering amount of money in those days. Breaking with tradition, Jackson took them on and fought back, becoming the first sitting president in election history to campaign for reelection. The normal convention was for presidents to sit at home and look presidential. Jackson [together with Martin van Buren who later succeeded Jackson in 1837] founded the Democratic Party and ran on a campaign ticket of: "Jackson and no bank!" It worked out well. Jackson defeated Henry Clay by a landslide and started his second term of office in 1833.
During this time, Jackson strived to shut the bank down once and for all and assigned his trustees the task of removing federal funds out of the Second Bank of the United States and shifting these into safe banks which had no links to the former. That task ultimately fell to Roger Brooke Taney after which the previous two Secretaries of the Treasury, Louis McLane and William John Duane, refused to comply with Jacksonâ€™s demands. Taney began the process of withdrawing funds out of the bank on 1st October 1833. The bank was not ready to go down without a fight and its head, Nicholas Biddle, used his influence to get the Senate to reject Taneyâ€™s nomination as the appointed United States Secretary of the Treasury. Biddle further threatened to cause a deep economic depression if the bankâ€™s charter was not extended.
Biddle made good on his threats. The Second Bank of the United States swiftly contracted the money supply, calling in old loans and refusing to extend new ones. A financial panic ensued followed by a deep depression, causing a cross section of people to go in uproar. Biddle blamed Jackson, saying that this depression was sparked as a result of the government's withdrawal of federal funds from the bank. In contrast, Jackson told people who were desperate for money to speak to Biddle as he held the money in the vaults. Newspapers lambasted Jackson in editorials. To compound things, the bank threatened to withhold payments to politicians, making them pile on more pressure. But Jackson did not give in.
Within months into the depression, Congress assembled into what was known as the Panic Session and censured Jackson (the censure was expunged in 1837). The fate of the bank was left in the hands of Congress. The U.S. Constitution enables Congress to override a presidential veto if it can garner enough support from the house. But critically, in April 1834, the House of Representatives voted 134 â€“ 82 against rechartering the bank and the battle seemed all but over.
On 8th January 1835, Andrew Jackson paid off the national debt, the only U.S. president in history to do so. This feat was achieved, in large part, by selling off federal lands and bypassing the need to raise money. A few weeks later on 30th January 1835, a would-be assassin by the name of Richard Lawrence tried to murder Andrew Jackson. Lawrence fired his first pistol towards Jackson but it misfired. Then, he quickly got out a second pistol and it too misfired. On both occasions, the gunpowder failed to ignite the bullets, rendering them idle inside the barrels. During his trial, Lawrence was found not guilty by reason of insanity. After his release, word has it that he told his friends how powerful people in Europe had put him up to the task and promised to protect him if he were caught.
The following year in 1836, the Second Bank of the United States seized its functions as a central bank. It continued to operate as a fully run private corporation until it underwent liquidation in 1841. When Jackson was asked what his most important accomplishment had been, he said in reply: â€śI killed the bank!â€ť
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