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To address economic instability after the War of 1812, the Second Bank of the United States was chartered. As a private corporation with public duties, it served as the U.S. Treasury's fiscal agent. Its primary goals were to stabilize the national currency and regulate credit issued by private banks, ensuring a more stable financial system for the young nation. -
The Panic of 1819, the nation's first major financial crisis, led to widespread economic hardship. Many blamed the Second Bank of the U.S. for its tight credit policies. That same year, the Supreme Court's ruling in McCulloch v. Maryland upheld the bank's constitutionality. The landmark decision affirmed the federal government's implied powers and prohibited states from taxing federal institutions, strengthening national authority over states' rights. -
Andrew Jackson, a strong opponent of the Second Bank of the United States, was elected president. Viewing the bank as a corrupt monopoly benefiting the wealthy elite over the common person, his election signaled an impending major confrontation with the powerful financial institution and its supporters. -
In his first annual message to Congress, President Jackson officially declared his opposition to the Second Bank of the United States. He questioned its constitutionality and argued it had failed to create a stable currency while wielding excessive economic power. This speech marked the public start of his campaign against the bank's continued existence. -
The Bank War defined the 1832 presidential election. Jackson's powerful veto of the bank's recharter resonated with voters wary of centralized financial power. He overwhelmingly defeated pro-bank candidate Henry Clay. Jackson interpreted his landslide victory as a clear public mandate to dismantle the Second Bank of the United States. -
Senator Henry Clay, Jackson's political rival, pushed for an early recharter of the bank to make it an issue in the 1832 election. Congress passed the bill, but Jackson vetoed it with a forceful message. He denounced the bank as an unconstitutional institution that dangerously concentrated power and wealth among a privileged elite. This veto became a defining statement of his presidency. -
Acting on his election mandate, Jackson ordered the withdrawal of all federal funds from the Second Bank of the United States. The money was placed in state-chartered banks, derisively called "pet banks" by his opponents. This decisive move crippled the Second Bank, accelerating its collapse and marking a critical step in Jackson's victory in the Bank War. -
In response to Jackson's removal of federal deposits, his opponents in the Senate, led by Henry Clay and Daniel Webster, successfully passed a resolution of censure against him for abusing presidential power. This unified opposition to Jackson's policies led to the formation of the Whig Party, built on a platform of resisting executive tyranny and advocating for a stronger legislative branch. -
With the Second Bank's charter expired, the Jackson administration issued the Specie Circular. This executive order mandated that all payments for government land be made in gold or silver ("specie"). The policy aimed to curb the rampant land speculation that was being financed by the unstable paper money issued by Jackson's "pet banks." -
Shortly after Jackson left office, the nation was hit by the Panic of 1837, a severe economic depression. It stemmed from factors including the Specie Circular, falling cotton prices, and the collapse of land speculation. This downturn presented a major challenge for President Martin Van Buren and proved politically damaging to the Democratic Party. -
In response to the Panic of 1837, President Van Buren proposed an Independent Treasury system. Passed in 1840, the act created a system where the U.S. Treasury would hold its own funds in its own vaults, dealing only in hard money. The goal was to completely separate the federal government's finances from the nation's private banking system. -
The economic hardship following the Panic of 1837 dominated the 1840 presidential election. Whig candidate William Henry Harrison defeated the incumbent Democrat, Martin Van Buren. Harrison's victory was the culmination of the political realignments that began during the Bank War, solidifying the new two-party system.