In the interest of full disclosure, the next few paragraphs probably won’t contain a great deal of insight into the
evolving perception of corporations in the early United States. The fact of the
matter is that between the Panic of 1819 and the presidency of Andrew Jackson
(1829-1837) the 2nd BUS slowly but surely recovered some of the
confidence it had lost during the financial crisis, the American economy
continued to expand, and the Republican mainstream continued its support of the
American System and its accompanying nationalist economic policies. It was, in
short, a period of gradual transition, if not dramatic change. That being said,
I do feel it’s important to provide at least an overview of some of the processes
that unfolded, the social and political fissures that gradually formed, and the
rise of certain political figures who would come to define America’s nineteenth
century. If this doesn’t interest you then by all means skip ahead to the sixth
paragraph of this post where I assure you the really juicy stuff begins.
Still
with me? Right then…
Though
the Second Bank of the United States managed to weather the Panic of 1819 with
reasonable success, thanks to the stern oversight of its president, Langdon
Cheves, the effects of the recession were widely felt by a great number of
Americans into the 1820s. Unemployment was widespread, property values
plummeted, and confidence in paper currency was shaky at best. Seeking to
remedy the nation’s economic woes and restore faith in the concept of a central
bank, Cheves’ replacement Nicholas Biddle began a program of gradual credit
expansion, coupled with increased commercial loans and consistent monetary
oversight (aimed at the historically paper-money-mad state banks). Biddle was a
Pennsylvania prodigy, the scion of a long-establish Quaker family who had
graduated from Princeton at age 15 and demonstrated a remarkably broad array of
talents in matters of law, economics, diplomacy, classical philosophy and art.
In 1816 he’d been appointed by President Madison as one of the Second Bank’s
government directors; upon becoming president of the institution in 1822 he
oversaw a period of steady, well-regulated growth that did much to restore its
reputation and firmly establish its role as the solid anchor of the American
economy. No less august personage than Albert Gallatin, Treasury Secretary
under Jefferson and Madison and one of the nation’s foremost financial
authorities, agreed upon reviewing Biddle’s performance that the 2nd
BUS was more than adequately fulfilling its intended role. Though critics of
the institution remained scattered throughout the states and Congress, it
appeared that public opinion was generally in favor of the Bank’s continued
existence, or at least indifferent enough to leave it to its own devices.
Unfortunately this was not to be the case for long.
In
the annals of American presidential elections 1824 stands among the more
remarkable years. Not only were its immediate circumstances fraught with
tension – four candidates from the same party running against each other, the
vote being thrown to the House of Representatives when no clear winner emerged
– but it represented, in the long term, the end of the so-called “Era of Good
Feelings” and its outward political consensus and marked the beginning of a
much more factious, populist, ruggedly egalitarian era in the history of the
United States. The previous election in 1820 saw James Monroe run completely
unopposed, a fact representative of how few major political disagreements
remained following the virtual collapse of Federalism after 1814/15. By 1824,
however, serious fractures had formed among the ruling Republicans, and that
year’s elections saw four members of the same political faction square off. Two
were members of the Monroe cabinet, Secretary of State John Quincy Adams (son
of Founding Father and President John Adams) and Treasury Secretary and former
Georgia Senator William Crawford. The third candidate was Speaker of the House
Henry Clay, a Kentucky Congressmen who had helped negotiate an end to the War
of 1812 and was one of the principle architects of the American System. The fourth
and perhaps most significant office-seeker in 1824 was a low-born Tennessee
cotton trader, gambler, duelist and military officer named Andrew Jackson.
Having secured a spectacular
victory at New Orleans in 1815 (thanks in no small part to the city’s
population of free African-Americans) and precipitated an unauthorized invasion
of Spanish Florida in 1818, Jackson had become a nationally popular figure in
spite of his limited record of public service. His strength was partially drawn
from his status as a largely self-made man whose life was dominated by military
service and years spent as a country lawyer and planter on the Tennessee
frontier. Unlike his opponents, who were generally well-educated, well-born or
both, Jackson claimed to speak for the “common man” who distrusted privilege,
was suspicious of the Eastern elite, and had suffered greatly at the hands of
the Second Bank of the United States and its at-times schizophrenic attitude
towards credit. This proclivity for populist rhetoric was actually rather
ironic considering Jackson’s well-documented authoritarian streak and the
frequent instances during his subsequent terms as president of a casual
disregard for public opinion. At the time of his nomination many of his fellow
Republicans, including Clay, Adams, Albert Gallatin and Thomas Jefferson,
considered him fundamentally unfit for the office of President due to his
irascible temper and military habits. For millions of Americans, however, he
was the embodiment of the raucous, unpretentious, unforgiving lifestyle they
faced every day, and the leader who spoke most forcefully to their interests
and experiences than any that had come before.
Unfortunately for Jackson, and
indeed for all his fellow presidential candidates, no one man enjoyed
sufficient support across the entire United States to secure an outright
victory in 1824. Jackson and Adams finished in first and second place,
respectively, but with only 99 of the required 131 electoral votes (to Adams’
84) the victor of New Orleans came up tragically short. In accordance with the
provisions of the 12th Amendment the top three vote-getters had
their names submitted to the House of Representatives to be voted on a second
time. Just as in 1800 the congressmen presented their ballots as states rather
than individuals, and so regional politics were once more permitted to spill
into the national arena. Clay, who had come in fourth and was thus out of the
running, was able to use his position as Speaker of the House to arrange a tidy
victory for Adams on the first ballot. In return Adams agreed to appoint Clay
as Secretary of State while Jackson, who had won a plurality of the popular
vote (41.4%), raged at what he declared was a “Corrupt Bargain.” Over the
course of the next four years President Adams attempted to preserve his
predecessor’s nonpartisan administrative style by maintaining a neutral
attitude toward the emerging factionalism among his fellow Republicans. This
tack proved unsuccessful due in part to Adams’ refusal to make use of political
appointments in order to recruit potential allies (as was common practice at
the time), as well as the steadfast opposition he faced in Congress to the
great majority of his agenda. The stymied Jackson, meanwhile, made use of the
narrative surrounding his defeat – hero of the common man robbed of victory by
the bastion of the Eastern elite – combined with the organizational savvy of
New York political organizer Martin Van Buren to craft an extremely effective
political machine that propelled him to an easy victory over Adams in 1828 (178
electoral votes to Adams’ 83).
Here’s where it gets good.
While Jackson’s opposition to
banking and commerce weren’t exactly a secret, the status of the 2nd
BUS hadn’t been an issue that received a great deal of attention during the
1828 presidential campaign. Key to Jackson success, however, had been his
ability to harness the discontent that still lingered among state banking
interests over what they perceived as the intrusive oversight of the Second
Bank of the United States. Combined with the mistrust felt by millions of
mainly-rural Americans who remembered all too clearly the damage the Second
Bank had wrought with its credit policies and subsequent response to the Panic
of 1819, Jackson and his so-called “Democratic Party” had managed to resurrect
the alliance between the agrarian South and entrepreneurial North that had been
the core of Jeffersonian Republicanism. Due to the competing hard-money (gold
and silver) and paper money factions within this nascent organization, Jackson
had refrained from taking a strong position on banking in the immediate and
maintained cordial relations with Biddle and the other directors of the Second
Bank. Biddle himself had reportedly voted for Jackson, and though he was
unwilling to allow the institution over which he resided to become part of the
Democratic Party patronage machine he seemed amenable to much of the reform
agenda that Jackson’s platform entailed. For his part Jackson seemed open to
maintaining cordial relations with the 2nd BUS, met Biddle’s
proposals for paying down the national debt with enthusiasm, and appeared to
have come around to the idea that a central bank was not without purpose after
all.
The first cracks in the
relationship between the Jackson Administration and the Second Bank emerged in
1829 with the delivery of the president’s First Annual Address to Congress. Displaying
once more the democratic bona fides that had garnered him such widespread
support in 1824 and 1828, Jackson stated that though the re-charter of the
Second Bank was not due until 1836, “I feel that I can not, in justice to the
parties interested, too soon present it to the deliberate consideration of the
Legislature and the people.” Though the 2nd BUS was a private
corporation whose legitimacy was well-established (as the rulings of Chief
Justice Marshall attested), Jackson purported that, “Both the constitutionality
and the expediency of the law creating this bank are well questioned by a large
portion of our fellow citizens.” By placing the task of reviewing the
performance and necessity of a central bank in the hands of “the people,” his
“fellow citizens,” and their representatives in Congress, Jackson was able to
maintain his professed attachment to democratic ideals while once more calling
attention to the Second Bank’s public
functions and accompanying public
accountability. Indeed this opening shot in what would come to be known as the
Bank War was, by the standards of the abuse Jackson was to later heap on the
Second Bank and its president, both restrained and focused on questions of
civic utility. To that end he concluded the relatively brief section of his
Address to Congress focused on the 2nd BUS by asking,
If such an institution is deemed
essential to the fiscal operations of the Government, I submit to the wisdom of
the Legislature whether a national one, founded upon the credit of the
Government and its revenues, might not be devised which would avoid all
constitutional difficulties and at the same time secure all the advantages to
the Government and country that were expected to result from the present bank.
Though he obviously disagreed, or at
least found suspect, Marshall’s opinion of the legitimacy of a
nationally-chartered central bank, Jackson made use of very similar language to
the Chief Justice in describing said institution’s theoretical role. The
measure of a national bank’s utility was determined by whether or not it was
“essential to the fiscal operations of the Government.” Its purpose, or at
least the only one worth mentioning, was to, “secure all the advantages to the
Government and country,” that the people and their representatives required.
Marshall may have been willing to argue that the charter incorporating the Second
Bank of the United States was the property of its shareholders; an assertion
Jackson doubtless would had expressed little sympathy for. That being said,
neither man seemed willing to discuss the Bank in terms of the rights and
privileges of those shareholders, but rather in regards to the services their
corporation could provide to the general population.
In spite of the generally
indirect approach Jackson applied in calling into doubt the worth of the 2nd
BUS in 1829 he did make at least one substantive attack on its performance.
When he acknowledged the reservations many of his fellow citizens held regarding
the Second Bank, Jackson admitted, as if in sympathy, “that [the bank] has
failed in the great end of establishing an uniform and sound currency.” This
was perhaps the most important function the central bank was supposed to
provide. After the end of the Revolution no government in the United States, be
they state or federal, issued paper currency on their own authority. Banks were
thus the only source of bills of credit, for most people the only form of
circulating currency they had access to. The further a paper currency travelled
from its point of origin, however, the less likely it could be redeemed for its
full value. A Bank of Pennsylvania dollar, for instance, might be worth its
face value in Philadelphia or Pittsburgh, but in Atlanta or Knoxville would
likely fetch only a fraction of its stated worth. Few state banks could
consequently provide bills of credit whose value was stable across the whole of
the United States, creating difficulties for trade and commerce and
necessitating the frequent, cumbersome and at-times risky transportation of
large quantities of specie. A central bank, however, with branches in every
state whose capital was anchored by government deposits, and was also the sole
purveyor of Treasury bonds and collector of tax revenues, could issue bills of
credit whose value was consistent across every state in the Union. As far back
as Alexander Hamilton’s 1791 proposal for the 1st BUS this had been
viewed one of the chief benefits a central bank could supply to the fledgling
United States. If Jackson’s claim had been apt, if the 2nd BUS had
indeed failed to established a “uniform and sound currency,” it would indeed
had called into question the need to perpetuate the institution and continue to
reward such a fundamental failure.
Unfortunately, for Jackson I
suppose, his claim had little basis in fact. Biddle had proven to be an
exceedingly capable administrator, and in short order following his appointment
as its president in 1822 had placed the 2nd BUS on sound financial
footing. This he accomplished by carefully but steadily extending the Second
Bank’s credit and allowing branch offices a certain amount of discretion in
making loans to the most viable business elements in their respective regions.
By 1829 the Second Bank of the United States had managed to shed most of the
opprobrium it had earned during the Panic of 1819, and the bills of credit it
emitted enjoyed wide circulation and widespread public confidence. The purpose
of Jackson’s assertion to the contrary was thus likely intended as a signal of
intention. Baseless as it was, and adamant as the rejections of it were from
both houses of Congress, Jackson’s calling into doubt the viability of the
Second Bank doubtless shook Biddle’s belief that his relationship with the new
administration was going to be a smooth one. At the same time Jackson likely
intended to signal both hard money agriculturalists (like himself, who
distrusted paper currency altogether) and the state banking interests (who
resented the control the 2nd BUS exerted over their lending
policies) that he was sympathetic to their respective positions. In the
immediate, however, little about the public relationship between the Jackson
Administration and the 2nd BUS changed; no formal policy concerning
the Second Bank emerged, and its accustomed relationship with the Treasury
Department continued.
As per usual,
Andrew Jackson’s First State of
the Union: http://en.wikisource.org/wiki/Andrew_Jackson%27s_First_State_of_the_Union_Address
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