The Bank War
Another political battle President Jackson waged during his first term as President was one against the Second Bank of the United States. Like many westerners, he thought that the Bank was too powerful and needed to be eliminated. Jackson's Democratic Party opposed the Bank. The Whig Party, however, supported the Bank. Whigs believed that the Bank was needed to regulate state banks' lending to prevent a buildup of debts that could not be repaid.
A Controversial Bank The Bank of the United States had been a subject of dispute since its early days. The Bank had great power over the nation's banking system because it controlled loans made by state banks. When the Bank's directors thought that state banks were making too many loans, they limited the amount these banks could lend. The cutbacks angered farmers and merchants who borrowed money to buy land or finance new businesses.
President Jackson and other leading Democrats saw the Bank as undemocratic. Although Congress created the Bank, it was run by private bankers. Jackson condemned these men as agents of “special privilege” who grew rich with public funds. He especially disliked Nicholas Biddle, president of the Bank since 1823.
Biddle came from a wealthy Philadelphia family. He was well qualified to run the bank. Under Biddle, the U.S. economy had experienced stability and prosperity. However, Biddle was arrogant and vain. Jackson felt that Biddle used the Bank to benefit the rich. He also resented Biddle's influence over certain members of Congress.The Bank Applies for Renewal Biddle and other Whigs worried that the President might try to destroy the Bank. Two Whig senators, Henry Clay and Daniel Webster, thought of a way to save the Bank and defeat Jackson in the upcoming election at the same time.
The Bank's charter was not due for renewal by Congress until 1836. However, Clay and Webster wanted to make the Bank an issue in the 1832 election. They persuaded Biddle to apply for renewal early.
However, Clay and Webster wanted to make the Bank an issue in the 1832 election. They persuaded Biddle to apply for renewal early.
The Whigs believed that most Americans appreciated the role of the Bank in the nation's prosperity. If Jackson vetoed the bill to renew the charter, they felt sure that he would anger voters and lose the election. Clay pushed the charter renewal bill through Congress in 1832. Jackson was sick in bed when he heard that Congress had renewed the Bank's charter. “The Bank … is trying to kill me,” Jackson fumed, “but I will kill it!”Jackson Cuts Off the Bank In an angry message to Congress, Jackson vetoed the Bank bill. He gave two reasons for his veto. First, he said that the Bank was unconstitutional, even though in McCulloch v. Maryland the Supreme Court had ruled in the Bank's favor. Like other Democrats, Jackson believed that the federal government could not charter a bank, because the Constitution did not explicitly give it the power to do so. However, the Supreme Court had ruled that the Constitution implicitly gave the federal government this right in the “necessary and proper clause.”
This clause states that the federal government has the power “To make all Laws which shall be necessary and proper for carrying into Execution the … Powers [already described], and all other Powers vested by this Constitution.” The Supreme Court had decided that the “necessary and proper” clause gave the government the power to charter a national bank. Jackson believed that only states had the right to charter banks.
Jackson also felt that the Bank helped aristocrats at the expense of the common people. He warned:
When the laws undertake … to make the rich richer and the potent more powerful, the humble members of the society—the farmers, mechanics, and laborers—who have neither the time nor the means of [getting] like favors for themselves … have a right to complain of the injustices of their government.
—Andrew Jackson, Veto Message, July 10, 1832
As planned, the Whigs made the Bank a major issue in the election of 1832. They chose Henry Clay as their candidate to run against Andrew Jackson.
When the votes were counted, however, they showed that Jackson had won a stunning election victory. The common people had surprised the Whigs by supporting Jackson and rejecting the Bank of the United States.
The Bank Loses Its National Role Without a new charter, the Bank would have to close in 1836. Jackson refused to wait. He ordered Secretary of the Treasury Roger Taney to stop putting government money in the Bank. Instead, Taney deposited federal money in state banks. They became known as pet banks because Taney and his friends controlled many of them. The loss of federal money crippled the Bank of the United States. Its elimination as a national bank was another effect of Jackson's presidency. The end of the Bank's role in regulating lending contributed to an economic crisis that would have to be faced by the next President of the United States.
Without a national bank to regulate the country's financial system, responsibility for regulating banks fell to individual states. The period from the late 1830s until the 1860s is known as the state banking era. During this time, each state set its own rules for banks.
Many banks issued loans in the form of paper money, and promised to redeem it with silver or gold. Because federal law defined the value of dollars in terms of silver and gold, state banks sometimes failed when they did not have enough silver or gold on hand to redeem the paper money they had issued.
by reading the text answer the question Summarize arguments regarding the banking system
The arguments regarding the banking system can be summarized as follows:
1. President Jackson and his Democratic Party believed that the Second Bank of the United States was too powerful and undemocratic. They saw the Bank as benefiting the wealthy and not serving the interests of the common people.
2. The Whig Party, on the other hand, supported the Bank and believed that it was necessary to regulate state banks' lending in order to prevent excessive debts that could not be repaid.
3. Jackson argued that the Bank's charter was unconstitutional, despite the Supreme Court ruling in favor of the Bank in McCulloch v. Maryland. He believed that only states had the right to charter banks.
4. The Whigs, led by Henry Clay and Daniel Webster, pushed for the early renewal of the Bank's charter in order to make it an election issue. They believed that most Americans appreciated the Bank's role in the nation's prosperity.
5. Jackson vetoed the Bank bill, citing its unconstitutionality and its favoritism towards the wealthy. He argued that the government should not prioritize the interests of the rich over the common people.
6. In the 1832 election, Jackson won a decisive victory over the Whigs, showing that the common people supported his opposition to the Bank.
7. Jackson ordered the removal of government funds from the Bank and deposited them in state banks controlled by his friend Roger Taney. This led to the Bank losing its national role and contributed to an economic crisis in the years that followed.
8. Without a national bank, states were responsible for regulating banks, leading to the state banking era where each state set its own rules. This resulted in some banks failing when they did not have enough silver or gold to back the paper money they had issued.
did you get your answer from the reading
Yes, my answer was derived from the provided text.
then i only need 4 arguments regarding the banking system
Certainly! Here are four key arguments regarding the banking system:
1. President Jackson and his Democratic Party believed that the Second Bank of the United States was too powerful and undemocratic, and that it favored the wealthy over the common people.
2. The Whig Party, however, supported the Bank and argued that it was necessary to regulate state banks' lending in order to prevent a buildup of debts that could not be repaid.
3. Jackson contended that the Bank's charter was unconstitutional, asserting that only states had the right to charter banks and that the federal government lacked the explicit power to do so.
4. The elimination of the Bank as a national institution and the subsequent state banking era led to each state setting its own rules for banks, resulting in issues such as banks issuing paper money without enough silver or gold to back it, which could lead to failures and financial instability.