Its that time again, time to read that Historical Viewpoints book and decipher the useful information from the hodgepodge. Don’t forget that we have a reading quiz so be sure to read the stuff and only use my notes as a summary.
Author Background: Mr. Hammond was knowledgeable in the finance and banking industry. He wrote the article in order to counter a pro-Jackson position taken by a young historian, Arther M. Schlesinger Jr. who also published a book called The Age of Jackson
Bray Hammond’s Thesis
Jackson was not wise to dismantle the Second Bank of the United States.
Key Points
- Congress complained about the removal of federal funds from the Bank of U.S and the depositing of the funds in "pet banks". The legislative branch disagreed with what the executive had to say.
- The BUS was a federal regulator of credit and currency if it had federal funds. It took the checks and notes from the local bank and came back to the local banks for the gold and silver coin to back those notes and checks up. This regulated the credit markets. Without the BUS, there would be no regulation and lending would go out of control, possibly deflating the worth of all paper currency and checks.
- Jackson’s victory was a triumph that brought along some hardship. There was complete disarray with money and local banks. In a way his victory was a blunder.
- Three things had changed the the American way of productivity. Steam which was a steam engine probably purchased by an entrepreneur on credit. The steam engine then contributed to the increase in the obtaining of and the usage of natural resources. America was industrializing basically.
- Idea of market economy was popular and Andrew Jackson grew up with the idea that boys were to grow up to be businessmen. They obviously didn’t want the bank taking money or controlling them. After all, they weren’t controlled as farmers and did not want to be controlled as businessmen.
- Yet Jackson contradicted himself. He hated the abuse of credit and hated paper money. However, he destroyed the bank which created the abuse of credit as there was no regulatory structure. This led to overspeculation because there was credit pumped into the market out of control. We all know that overspeculation leads to economic crises. He created a bunch of worthless paper money by creating his pet banks that printed something that was worth less than toilet paper probably.
- Of course it’s not all on Jackson’s shoulders. It was his cabinet too. First of all, his cabinet was full of people experienced with business so he basically relied on them heavily to make business decisions. The two exceptions were William B Lewis and James A Polk who were farmers. Following were the businessmen that exercised their influence on Jackson:
- Martin van Buren was a lawyer who got rich from investments.
- Amos Kendall was the business and administrative guy. he was the one that said the "world is governed too much" and "our countrymen are beginning to demand" and government should just "protect the people and their property" and leave people alone when they make decisions on what to invest in, what kind of labor they want to do, and moral law. People should be their own oppressors. But the economy was overall in trouble so this wasn’t exactly something that would fit the situation. People panic and lose their heads when they see the riots and when they see their money diminish into nothing. Again, like today in 2008, the economy is slowing down and people are in deep panic. They throw around the “r” word (recession). It may not even be as bad but people do panic and it’s hard to calm people down when they start seeing their savings and retirements shrink.
- Roger Taney (chief justice) seemed to be a person that supported the banks but probably not the BUS. Taney believed banks should be subject to free competition just like other businesses.
- David Henshaw was the Jacksonian boss of Massachusetts. He was a banker and an industrialist who had the power to influence Washington. He wanted a Jacksonian bank to replace the current BUS but he wanted a larger bank. Jackson did like this idea as he wrote a blip about it in his veto message.
- Samuel Ingham was Jackson’s secretary of treasury that was a paper manufacturer turned banker.
- Churchill C. Cambreleng was leader of the pack in Congress that attacked the BUS.
- Why were the men listed above so against the BUS? They thought the bank made it harder to get money because it did regulate credit. This could keep businessmen from taking out loans.
- New York was the center of commerce and it paid the most tariffs too because it was a large port. New York was disadvantaged because the businessmen their paid money which ended up in the bank in NY and then was transferred into the BUS which was headed by mostly Philly businessmen. Would Philly businessmen really care about what happens in NY? Probably not. NY being the center was supposed to be at an advantage but they weren’t because the BUS “stole” money from them.
- Here’s the process broken down
- The BUS received checks from New York Businessmen
- The funds from the checks were directly available to the treasury department.
- The BUS had to tell the NY banks to back up the checks using money.
- The NY banks had to draw money from reserves in order to serve it up to the BUS.
- NY Banks had less money to lend.
- The money was now in Philly and not NY so the businessmen in NY would have a harder time to get a loan
- The businessmen in Jackson’s cabinet failed to look at the flip side. New York was selling their goods to the rest of the country so money did come back to NY. They talked about it as if money wasn’t flowing back into NY.
- Not just NY felt this though. All local banks lost money when a government tax, tariff, excise, fines, postage, etc. because the local bank had to serve up money to back up the paper given to the BUS. But the banks weren’t drained, money would always flow back into them. It’s not like the country just stopped interstate trade.
- It seemed that the federal government was hogging all the money and the states were not happy about that. Most of the money came from the East where more of the money was.
- So Jackson wanted to kill the monopolizing of money by the BUS by using democracy.
- However, the people that wanted to kill the bank besides Jackson were people that had no farming experience. Their motive was not to help the farmers, it was to help themselves.
- The west were angry at the bank because of foreclosures but the BUS did provide money to the West although it was not enough. Even so, the west wasn’t as angry.
- Jackson’s hatred for banks (because they were “unconstitutional”) ended up blinding him from the reality. If there was no bank, inflation would skyrocket and a few farming people realized this.
- The main attack actually came from the business world, not the farming world. New businessmen were the ones that especially angry at the bank, they wanted to get richer. The more established businessmen would be less likely to hate the bank. The newer businessmen were less trusted and the banks were less likely to lend to them because they had no credit history.
- The bank was necessary as it created order, it created conservative money power, it was just the necessity to keep the economy from falling further.
- One of the reasons Jackson’s attack succeeded was because Nicholas Biddle. Biddle, the pres of the BUS, was an aristocrat. He was quite successful and efficiently managed the bank. But he didn’t even know that Jackson was attacking the Bank. He thought the public would support the bank because they saw it was “necessary”. This was the Bank’s downfall right here. Biddle wasn’t keeping up with the times. He died a broken man.
- However, the United States suffered even more. The economy was in a roller coaster.
- So the bank charter ended, the economy boomed, Biddle got a job at a Philly state bank, the federal funds were now in the “pet banks”.
- Then came a crash in 1837 and the fingers were pointed at Jackson. It wasn’t all his fault, it was the land speculators and his fault. So inflation went out of control (like oil prices in mid-July 08’) and then CRASH. Oh…my bad…
- Something went wrong, after a century of people coming, rushing forward, making a good living, getting rich, investing out of control, then BAM.
- Albert Gallatin, friend of Tom Jefferson, commented that the progress was better than expected but was way too fast and this lead to demoralization. People were overspeculating because they had the funds to do so and this caused the crash. Some investors couldn’t figure out how to use their money wisely.
- Jackson wanted to increase credit because the common people cried out for it. But he was advised by businessmen that cared about themselves. Therefore, he got rid of the bank thinking it would benefit the common people, the farmers…but it benefited the businessmen and sent the economy into turmoil. Guess where the money power was and still is? WALL STREET…look where that got us right now.
Restating the Thesis
Jackson’s decision was unwise but it was not solely his decision, it was the influence of his cabinet and the common people that believed the bank was hurting them. He made a rash decision to kill the bank, followed through, and this ended up worsening a situation that could have been lightened up by the BUS.
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