The message that accompanied Jackson’s
veto of the Bank of the United States re-charter bill has since become regarded
as one of the most significant expressions of the at-times complex and
contradictory Jacksonian ideology. A virtual political manifesto, the message
outlined Old Hickory’s belief in a strong executive as a guard against
legislative overreach, the triumph of the “common people” over the moneyed
elite, and the primacy of “democratic” institutions. As yet another – in not
the the most definitive – expression of Jackson’s perspective on banking and
corporations, his 1832 veto message is similarly worthy of study and
reflection. Aside from the sections that concern themselves with the
constitutionality of the 2nd BUS, an issue which Jackson argued had
yet to be fully settled, it contains numerous passages that lend valuable
insight into how the 7th President viewed the Second Bank in
ideological, practical and moral terms.
More than any of his previous
writings on the subject of the 2nd BUS, the veto message makes clear
Jackson’s dislike for corporate banking, or indeed corporations generally.
Whereas in his 2nd State of the Union Address Old Hickory had
expressed tacit approval of state banking as a legitimate extension of state
sovereignty, by 1832 he seemed to have become far less charitable. From the
beginning of his message to Congress Jackson expressed his disdain for the
level of privilege that was being extended to the directors and shareholders of
the 2nd BUS by the terms of the re-charter bill. “The powers,
privileges, and favors bestowed upon [the Bank] in the original charter,”
Jackson wrote, “by increasing the value of the stock far above its par value,
operated as a gratuity of many millions to the stockholders.” For this and the
additional increase in stock value to result from the passage of the re-charter
bill, which Jackson calculated as, “at least seven millions more,” the American
people at large received little in the way of compensation. Indeed, these
dividends, to be chiefly collected by, as Jackson described, “foreigners and […]
some of our more opulent citizens,” came directly or indirectly, “out of the
earnings of the American people.” There was truth enough in this claim; it was
the economic activity, the borrowing, buying and selling, of American
merchants, manufacturers and farmers that generated the wealth meant to
incentivize the purchase of shares in the 2nd BUS and thereby expand
its capital. While there is an argument to be made that the compensation the
general public received in return for the perpetuation of an admittedly narrow
monopoly was a stable economy and solid currency, it cannot be denied that the
shareholders of the Second Bank were the most significant and most immediate beneficiaries
of its existence.
Aside from the relative cost to
the American people of perpetuating the privileges of the directors and
stockholders of the 2nd BUS, Jackson seized on the distinctly
un-republican partiality inherent in granting government sanction to private
enterprise and the resultant stifling of competition as further negatives on
the institution’s existence. Why, he asked, were the stockholders of the Bank
entitled to continue to receive the preferential treatment they had already
enjoyed for almost twenty years? What so significantly set them apart from any
other group of Americans with the money and aptitude to form a corporation? If
there was to be a national bank at all, “why should not Congress create and
sell twenty-eight millions of stock, incorporating the purchasers with all the
powers and privileges secured in this act and putting the premium upon sales
into the Treasury?” As I remarked in weeks past, opinions in the early-19th-century
United States as to the ideological underpinnings of corporations changed
perhaps most significantly in the Jacksonian era. By 1832 it seemed Jackson had
come to regard the 2nd BUS as detrimental to the nation’s social
order because, to his thinking, it symbolized the government creation of a
social and economic class that enjoyed privileges and was entitled to financial
rewards that were beyond the reach of the majority of Americans. The fostering
of competition was a potential remedy. Just as the states began to issue
charters to more than one corporation in a given field, so Jackson argued that
the federal government ought to have opened the process of creating a national
bank to any and all that had the means to purchase stock. This would have
potentially distributed ownership more widely than a simple renewal of the
existing Bank at the same time it netted the government revenues far in excess
of the fees the existing stockholders were to pay upon re-charter. Thus Jackson
conceived of breaking up the monopoly enjoyed by the Bank as ideologically and
morally, as well as financially, sound.
To the palpable disdain for the
notion of government privilege Jackson conveyed in his 1832 veto message there
was added a liberal serving of good-old-fashioned American nationalism.
Sprinkled amidst his arguments against the constitutionality of the 2nd
BUS and those in favor of protecting the traditional prerogatives of the
states, Old Hickory time and again lamented the fact that such a large portion
of the Second Bank’s shares were held by foreign nationals (“more than a forth”
by his estimation). These non-citizen stockholders, Jackson believed, enjoyed a
number of advantages over their domestic compatriots that made it appear as
though the so-called Bank of the United States was in reality little more than
a depository for the wealthy of Europe. Citizen shareholders, because they were
also residents of various states, were capable of having their stock in the
Second Bank taxed by the governments of those states. Because foreign
shareholders and their property did not fall within the sovereignty of any such
state their shares would thus remain untaxed and ultimately be of greater
value. This would doubtless encourage foreign ownership of stock in the Second
Bank, which would in turn perpetuate an even more significant dilemma.
As aforementioned, the largest portions
of the Second Bank’s shareholders were either foreigners, or else residents of
Eastern states (New England, the Mid-Atlantic, the Upper South, etc…). Though
residents of both Massachusetts and Alabama could theoretically avail
themselves of the services the 2nd BUS offered without
discrimination, the wealth that their financial activities generated for the
Bank would come to rest to a greater degree in the former because it contained
the greater number of shareholders. A Westerner who had little patience for the
machinations of what he perceived as the “Eastern elite,” this would doubtless
had been cause enough for Jackson to regard the 2nd BUS with distaste.
Worse yet, however, European shareholders could collect dividends commensurate
with their percentage of ownership on the same terms as their domestic
compatriots. The more profit the Bank generated the more dividends were paid
out. In this way, Jackson argued, the Second Bank actively facilitated the
removal of wealth from the South and West to the East, and from thence to
Europe. Because this wealth was in the form of hard currency its removal would
result in a contraction of capital and the resultant economic shockwaves. This
eventuality was of little utility to the American people and of great utility
to foreign shareholders. Though I don’t suppose that Jackson was particularly
in love with state banks either, being yet another form of government favoritism,
they at least avoided this cash drain phenomenon by usually restricting
ownership of shares to resident citizens only.
Another consequence of foreign
ownership of 2nd BUS stock that Jackson complained of had to do with
the election of Bank officers. The fact that the Second Bank’s foreign
shareholders were not permitted to help elect the institution’s various
officers, devised by Alexander Hamilton and usually considered a prudent
measure to limit foreign influence, in fact constituted a serious fault.
Because the percentage of foreign shareholders was fairly high, this regulation
served to concentrate voting power in the hands of the domestic shareholders
that remained. As shares could, at any time, be sold from a domestic
shareholder to a foreign national, as indeed Jackson claimed many of the
regulations governing the Bank encouraged, this group of privileged electors
could be made to shrink over time. Conceivably, a relatively small number of
particularly wealthy citizens, perhaps including some of the Bank directors
themselves, could come into possession of enough shares though entirely legal
means to constitute an effective oligarchy over the financial well-being of the
United States. With this argument Jackson turned a regulation intended to
preserve the Bank’s American character into a fundamental flaw. State banks
could avoid this eventuality by again restricting the ownership of shares, and
therefore voting power, to resident citizens. This would presumably help
maintain a relatively large franchise and prevent the monopolization of control
in the hands of an interested few.
These objections, rooted in
nationalism and a fear of foreign influence and intrusion, also orbited around
a central aversion on Jackson’s part to the way corporations like the 2nd
BUS functioned. This aversion was no doubt particularly strong on Jackson’s
part because the responsibilities with which the Bank had been vested allowed
it both a high degree of autonomy from government control as well as
significant power over aspects of the public sphere. Unlike Congress, the
Treasury Department or the Navy, the Second Bank of the United States was, in
its fundamental make-up, a private concern. Its shareholders were chiefly
motivated by profit, ownership of stock was open to whoever could afford the
cost, and decisions were made by an unelected (by the general public) president
and board of directors. Where Hamilton, two generations earlier, had seen these
aspects of the 1st BUS as necessary evils in the face of the federal
government’s inability to fund many of its desired initiatives, Jackson argued
in his veto message that, “there are no necessary evils in government. Its
evils exist only in its abuses.” It would seem that to his thinking utility,
while not unimportant, came second to ideological and moral integrity. Whatever
advantages the 2nd BUS afforded the American government and people –
Jackson was willing to admit it wasn't without its uses – its very nature
violated too many basic republican principles and concentrated wealth in the
hands of too few to be permitted to continue.
The last aspect of Jackson’s veto
message that I’ll remark upon here is the way that attempted to reframe
corporate banking as a chiefly private, rather than public, affair. As I recall
I've attempted to explain, much of the discussion about corporations during the
early decades of the United States of America’s existence treated them as a
form of public utility. Banks or ferry companies or groups tasked with building
and maintaining roads tended to be viewed by the state as providers of public
services first and profit-seeking businesses second. The First Bank of the
United States as Alexander Hamilton conceived it was a tool by which the
newly-minted federal government could borrow money in order to fund certain of
its initiatives at the same time that it stimulated economic growth. That its
capital was backed by the wealth of stockholders whose chief personal aim was
collecting healthy dividends was incidental; the wealth and privilege they enjoyed
was a form of incentive meant to encourage their participation in a scheme
whose long-term beneficiaries would be all Americans. This was not a
perspective adopted by everyone in a position to observe how the Bank actually
functioned. Republicans like Jefferson and Madison were highly critical of the
government-granted privilege that was the basis of how corporations functioned
and repeatedly questioned its constitutional legitimacy. Indeed, most of the
debates that took place in the late-18th and early-19th
centuries concerning the desirability or necessity of corporations in the
United States related to issues or concepts like constitutionalism and strict
constructionism, egalitarianism, and republicanism. Profits, dividends and the
rights of corporate stockholders never seemed to be at the centre of these
discussions, except inasmuch as they provided incentive for the private
subsidization of public initiatives.
In a break with the presiding
narrative, Jackson’s veto message brought to the forefront the private nature
of corporations like the Second Bank of the United States and attempted to
expose just how much of their existence was devoted to profit over public
utility. To this end he argued that the circumstances of the 2nd BUS
were calculated to provide maximum advantage to its stockholders at the same
time it performed its various public duties. The 1st BUS, he wrote,
had possessed a Congressionally-mandated capital of $11 million. With that
capital it had managed to perform the various duties required of it as national
bank, including paying down the national debt, with relative safety and
efficiency. Considering that the national debt shrank from $75 million when the
1st BUS was chartered in 1791 to approximately $50 million when it
became defunct in 1811, this would seem a fair claim. The 2nd BUS,
by comparison, had a mandated capital of $35 million. What, asked Jackson,
could be the purpose of increasing the value of the shares sold by the national
bank by $24 million (particularly when $11 million had proven entirely
sufficient) other than increasing the opportunities for speculation and
bolstering the private gain of the shareholders themselves? Similarly, the
charter of the 2nd BUS granted it the privilege of establishing
branch offices in whatever locations it deemed useful. Because the Bank was
governed by directors and a president who were shareholders themselves, they
were doubtless motivated in exercising this permission to choose locations for
said offices most conducive to increasing their profits. As the existence of
the 2nd BUS was based in part on the widely-accepted (though not by
Jackson) notion that said institution was “necessary and proper” to the
exercise of the federal government’s various economic responsibilities, Jackson
questioned the legitimacy of the Second Bank in turn exercising a privilege
that was necessary and proper only to its own private financial designs. In
either instance, Old Hickory seemed keen to assert, personal gain was masked by
veiled admissions to public utility.
In what I considered perhaps the
most interesting argument Jackson deployed in his critique of the Second Bank
of the United States, particularly in light of how corporations have come to be
regarded in the modern United States, the 7th President also claimed
that seeking profit was a right possessed by all Americans. I’ll grant that
this was not a point he felt the need to belabour – it occupied a single
paragraph sandwiched between two much larger sections – but its significance
should not be discounted. In fact, because it’s not a long passage I’ll excerpt
it here in full:
Banking, like farming,
manufacturing, or any other occupation or profession, is a business, the right
to follow which is not originally derived from the laws. Every citizen and
every company of citizens in all our States possessed the right until the State
legislatures deemed it good policy to prohibit private banking by law. If the
prohibitory State laws were now repealed, every citizen would again possess the
right. The State banks are a qualified restoration of the right which had been
taken away by the laws against banking, guarded by such provisions and
limitations as in the opinion of the State legislatures the public interest
requires.
This conception of the relationship
between the people, corporations and government would appear to consist of
nothing short of an inversion of almost all of the preceding discussion on that
topic.
Banking, Jackson apparently
believed, was not just a means to an end – a tool by which government exercised
its sovereignty – but a means in itself. Every American had an innate right to
undertake banking as a profession, profit being the ultimate goal, either as
individuals or as a legally recognized group (such as a corporation). The
relationship between government and corporate banks was thus not one of
privilege but of regulation; government did not create banks that required
private ambition and private wealth in order to perform public functions, but
rather limited the ability of private wealth to be put to use in the form of a
bank in accordance with considerations of public utility and safety. This
arrangement placed greater focus on the various negative aspects of banking
(and corporations in general) and greater responsibility on the part of
government for protecting the public from those aspects. In keeping with the
admittedly schizophrenic Jacksonian ideal of small government, this placed
Congress or the state legislations in the role of mediator rather than leader and
the American people as the prime engine of corporate growth. It was their
money, their ambition, and the expression of their rights that created
corporations, whose regulation was the responsibility of government.
I'm sorry if it seems like I'm overemphasizing
my point, here. So often the study of history with a capital “H” is an attempt
to understand people and places and ideas that feel absolutely foreign to our
modern mindset. The rare occasion of being able to see, with some degree of
clarity, how what was transformed into what is can often be a cause for some
excitement. Jackson’s re-characterization of the role of the American
corporation strikes me as absolutely fundamental to the way corporate entities
are viewed in the modern United States, and thus potentially represents an
incredibly important moment of transition in American social and political
history.
While I don’t necessarily expect
you to share my elation, which I admit is deeply strange, do please take the
opportunity to read and see for yourself,
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