Lesson 4: Jackson's War on the Bank

Lesson Focus

While Congress compromised on other issues, the battle over the Second Bank of the United States was different. This conflict divided the nation by class, leading not to a solution but to widespread financial panic and depression.

People to Know

Andrew Jackson, Nicholas Biddle

Learning Objectives

• Understand the key arguments for and against the Second Bank of the United States, a powerful but controversial financial institution.
• Explain how the battle over the Bank's charter became the central, decisive issue in the presidential election of 1832.

Many Americans grew to distrust the Second Bank of the United States (B.U.S.), calling it a “Monster.” Farmers preferred hard money (gold and silver) and resented paper currency, while state banks and small businesses opposed what they saw as unfair monopolies that benefited the wealthy.

This widespread opposition created a hostile political environment for the Bank, uniting different groups who felt its power was a threat to the common person and free competition.

President Jackson, a westerner who favored hard money, personally distrusted all banks and believed the B.U.S. had too much power and unfairly favored the rich.

He was also angry that the Bank had opposed his 1828 election. The Bank’s president, Nicholas Biddle, challenged Jackson by siding with his political opponents.

This set the stage for a dramatic political battle, as Jackson's personal convictions aligned with popular anger against the Bank.

Henry Clay and other opponents of Jackson decided to make the Bank the main issue of the election of 1832. They pushed a Recharter Bill through Congress, four years before the old charter was set to expire.

They hoped to force Jackson into a politically damaging veto, but Jackson turned it into a powerful message against privilege, claiming the Bank made “the rich richer.”

This move backfired on Clay; Jackson won a landslide victory.

Following his reelection, Jackson moved to destroy the B.U.S. before its charter expired in 1836. He ordered all federal funds to be withdrawn from the B.U.S. and deposited into loyal state banks, which critics called “pet banks.”

Nicholas Biddle retaliated by tightening credit, causing a brief economic downturn. Pay special attention to how this backfired, as the public blamed Biddle, not Jackson, proving the Bank had too much power over the economy.

After Jackson dismantled the B.U.S., easy credit from “pet banks” fueled wild speculation in public lands and high inflation. To stop this, Jackson issued the Specie Circular in 1836, demanding that all land payments be made in gold or silver.

This drastic policy reversal caused credit to vanish and land sales to collapse.

This action directly triggered a major financial crisis, leading to the nationwide economic depression known as the Panic of 1837.