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Only One Problem

November 8, 2018

The 2nd Bank of the United States (B.U.S.) was chartered by the U.S. Congress in 1816.  It controlled inflation by preventing the state banks from issuing currency that was not redeemable in specie.  Theoretically, the B.U.S. had the same restrictions, but it found a way around them.  It also found a way to use its resources to support politicians who favored the B.U.S.  Chief among these politicians was Senator Henry Clay who had lost his bid to replace Andrew Jackson as President.

Although Jackson had killed the rechartering legislation in 1832, he feared the B.U.S. would use the people’s money to support candidates in 1834 who would then form a veto-proof, pro-bank majority in Congress.  Since the B.U.S. charter did not expire until 1836, Jackson felt the need to do something right away.  He determined to remove Federal deposits from the bank and transfer them to carefully selected state banks.  In anticipation of this, the House voted 109 to 46 in favor of leaving the deposits in the B.U.S.

June 26, 1833 was a great day for President Jackson.  He was on a tour of New England and had been well received everywhere.  On that day he received an honorary degree from Harvard.  Later that same day he visited Bunker Hill in commemoration of the American Revolution.  By the end of the day he completed work on a lengthy communication, complete with cover letter, to his new Treasury Secretary.  Regarding the removal of deposits from the B.U.S., Jackson wrote: “Upon a careful review of the subject in all its bearings, I have come to the conclusion that it ought to be done as soon as we can get ready.”

There was only one problem.  The Treasury Secretary was not sold on Jackson’s idea.

 

 

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