THE BANK CRISIS

The Second Bank of the United States was chartered in 1816 (it was a crucial part of Henry Clay’s “ American System”). The bank issued national currency, regulated loan rates, and controlled state banks. The bank had been run since 1823 by Nicholas Biddle. As stated previously, Jackson was suspicious of government involvement in the economy. These suspicions extended to the National Bank.

Henry Clay was going to run for president in the 1832 election and wanted to use the bank as a campaign issue. Clay began pushing to have the bank rechartered, even though its original charter did not expire until 1836, Clay was convinced that national support of the bank would swing supporters his way, Jackson vetoed the rechartering proposal, claiming it served special interests and few others. This increased his popularity with the public and helped to ensure his reelection in 1832.

Jackson wanted to destroy the National Bank, and in 1833, he ordered that money be removed from it and placed in state or local banks (Jackson’s political enemies called these his ‘”pet banks”). To keep the National Bank going, Biddle increased interest rates and called in loans that had been made to state banks. The results of this Bank War would eventually be the Panic of 1837 and a depression that would last into the 1840s.