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The Pet Banks in Jacksonian Politics and Finance, 1833–1841*

Published online by Cambridge University Press:  03 February 2011

Harry N. Scheiber
Harry N. Scheiber
Affiliation:
Dartmouth College
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Extract

In September 1833, Andrew Jackson issued an executive order ending deposit of Federal funds in the Bank of the United States, which had been the government depository since 1817. The culmination of Jackson's long struggle with the Bank and its friends in Congress, this measure closed a chapter in the political history of the era. To the conservative Jacksonians, “victory over the Bank of the United States was a consummation” that freed the state banks and business enterprise from the control of a powerful and despised institution. To the radical, hard-money faction of the Democratic party, however, “removal of the deposits” (as the order was popularly termed) was merely a first step toward more fundamental reform—elimination of the monetary disturbances that they attributed to reliance on bank paper for the currency of the country. Because of this divergence of views, partisan and factional disputes over Jacksonian financial policy did not cease with victory over the Bank. Central to the continuing debate was the relationship of die Treasury Department to the group of state-chartered banks, usually called the “pet banks,” in which Federal funds were deposited after September 1833. My purpose here is to review Treasury operations in die period 1833–1841, to suggest the political role of die pet banks and the economic impact of financial policy in die administrations of Jackson and Van Buren.

Type
Articles
Information
The Journal of Economic History , Volume 23 , Issue 2 , June 1963 , pp. 196 - 214
Copyright
Copyright © The Economic History Association 1963

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References

1 Chambers, William N., Old Bullion Benton: Senator from the New West (Boston: Little, Brown and Co., 1956), p. 206Google Scholar.

2 Ibid., Sellers, Charles G. Jr, James K. Polk, Jacksonian, 1795–1843 (Princeton: Princeton Univ. Press, 1957), pp. 223ff.Google Scholar; Hammond, Bray, Banks and Politics in America from the Revolution to the CM War (Princeton: Princeton Univ. Press, 1957), passim.Google Scholar

3 A useful brief account of Treasury problems in the Jacksonian period is in Taus, Esther R., Central Banking Functions of the United States Treasury (New York: Columbia Univ. Press, 1943). Pp. 34–41. For Jackson's views and those of his advisers on the issue of the deposits, seeGoogle ScholarSchlesinger, Arthur M. Jr, The Age of Jackson (Boston: Little, Brown and Co., 1945), pp. 228–29Google Scholar; Redlich, Fritz, The Molding of American Banking: Men and Ideas (2 vols.; New York: Hafner Publishing Co., 1947-1951), I, 176–77Google Scholar; and Swisher, Carl Brent, Roger B. Taney (New York: Macmillan Co., 1935), passimGoogle Scholar.

4 , Hammond, Banks and Politics, pp. 419–20Google Scholar.

5 Adams, John Quincy, in Congressional Globe, 25th Cong., 1st Sess. (1837), Suppl., p. 266Google Scholar. See also Scheiber, H. N., ed., “Some Documents on Jackson's Bank War,” Pennsylvania History, XXX, No. 1 (01 1963), 52–53Google Scholar.

6 Reports of the Secretary of the Treasury of the United States, III (Washington, 1837), pp. 670–71, 692Google Scholar. Hereafter cited as Treasury Reports, III.

7 Scheiber, Harry N., “George Bancroft and the Bank of Michigan, 1837–1841,” Michigan History, XLIV (03 1960), 83 n.Google Scholar; Senate Documents, 25th Cong., 3d Sess. (1839), No. 304 (serial 342), pp. 10–13Google Scholar; Miles, Edwin A., Jacksonian Democracy in Mississippi (James Sprunt Studies in History and Political Science, XLII). (Chapel Hill: Univ. of North Carolina Press, 1960), pp. 71–74Google Scholar; Hoffmann, William S., Andrew Jackson and North Carolina Politics (James Sprunt Studies in History and Political Science, XL). (Chapel Hill: Univ. of North Carolina Press, 1958), p. 119Google Scholar.

8 See “Recommendations of Banks,” letterbook in Correspondence of the Secretary of the Treasury, Record Group 56, National Archives (hereafter cited as Treasury Correspondence); House Reports, 24th Cong., 2d Sess. (1837), No. 193 (serial 307), I, 15Google Scholar; II, 51 ff. See also Neu, Irene D., Erastus Corning, Merchant and Financier, 1794–1872 (Ithaca: Cornell Univ. Press, 1960), pp. 96–97Google Scholar.

9 Treasury Reports, III, 647–48.

10 ibid., 648, 459–60.

11 , Swisher, Roger B. Taney, p. 276Google Scholar; , Sellers, Polk., P. 226Google Scholar.

12 , Swisher, Roger B. Taney, pp. 239–44Google Scholar; Woodbury to Morris Canal & Banking Co., April 19, 1836, “Letters to Banks,” Treasury Correspondence, stating that fifty to one hundred applications for deposits were pending; Woodbury to Bank of Michigan, March 18, 1836, ibid.;, E. Hastings to Woodbury, January 8, 1835, “Letters from Banks,” ibid.; Treasury Reports, III, 355, 690, 647; Senate Documents, 24th Cong., 1st Sess. (1836), No. 356 (serial 283), pp. 9–12Google Scholar; ibid., No. 334 (serial 282), pp. 4–5.

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16 Woodbury to Merchants' & Mfrs.' Bank of Pittsburgh, November 3, 1834, “Letters to Banks,” Treasury Correspondence; see also idem to Morris Canal & Banking Co., April 16, 1836, ibid.

17 Treasury Reports, III, 648.

18 ibid., 648–49; House Reports, 24th Cong., 2d Sess. (1837), No. 193 (serial 307), I, 77–79Google Scholar; ibid., II, 527, 571–72, 592; Bank of Michigan to Woodbury, March 11, 1836, “Letters from Banks,” Treasury Correspondence; , Taney to Buren, Martin Van, July 20, 1837, Maryland Historical Magazine, VIII (1913), 324Google Scholar.

19 , Sellers, Polk, pp. 225–26Google Scholar; O'Leary, Paul M., “The Coinage Legislation of 1834,” Journal of Political Economy, XLV, No. 1 (02 1937), 85–86Google Scholar.

20 ibid. See also Senate Documents, 24th Cong., 1st Sess. (1836), No. 334 (serial 282), p. 6Google Scholar.

21 Treasury Reports, III, 649, 678; V. S. Statutes-at-Large, IV, 689; V, 9.

22 A country bank holding a government deposit could not rely on the normal regional ebb and flow of credit in setting a safe reserve ratio. Thus the Bank of Louisville resigned as a depository in 1834, its cashier asserting that no state bank, “whatever may be its resources or credit, … can … extend its accommodations commensurate with the deposite of a public fund, liable to be withdrawn at a notice too short to be complied with, without oppressing its debtors.” Thurston, A. to Taney, R. B., Feb. 17, 1834, in Senate Documents, 25th Cong., 3d Sess. (1839), No. 304 (serial 342), pp. 3–4Google Scholar. See also , Miles, Jacksonian Democracy in Mississippi, pp. 74–75Google Scholar; and ibid., p. 133, for the change in situation after government deposits mounted, post-1834.

23 V. S. Statutes-at-Large, V, 52. A Whig-Democratic coalition supported the bill.

24 Woodbury to Morris Canal & Banking Co., April 16, 1836, “Letters to Banks,” Treasury Correspondence; Treasury Reports, III, 645.

25 Treasury Reports, III, 691.

26 U. S. Statutes-at-Large, V, 115.

27 ibid., 52, sec. 12. Woodbury opposed the Deposit Act because of its provision for distribution of the surplus and because of the restrictions it placed on the Treasury in its management of the deposits.

28 Treasury Reports, III, 689–94 and Table E. The three older deposit banks not reappointed either would not or could not comply with the terms of the Deposit Act.

29 U. S. Statutes-at-Large, V, 52, sec. 1; Woodbury to D. Strong, December si, 1836, “Letters to Banks,” Treasury Correspondence”.

30 He added, however, that he would welcome information of “less objectionable” banks interested in deposits I Woodbury to A. Lathem et al., November i, 1836, ibid.; see also idem to M. Dawson, October 30, 1836, ibid.

31 Ohio Statesman (Columbus), August 9, 16, 1837. The largest deposit was held by the Commercial Bank at Cincinnati, the most heavily Democratic in terms of directors' affiliations.

32 For cases of Whig bankers approaching the Treasury through Democratic business associates, see Charles Butler to Woodbury, July 30, 1836, “Letters from Banks,” Treasury Correspondence; Scheiber, “George Bancroft and the Bank of Michigan,” pp. 89–90; Morgan, Ketchum & Co. to Z. Wildman, February 5, 1835, Zalmon Wildman Papers, Ohio Historical Society, Columbus.

33 Timberlake, Richard Jr, “The Independent Treasury and Monetary Policy before the Civil War,” Southern Economic Journal, XXVII, No. 2 (10 1960), 93Google Scholar; , Sellers, Polk., pp. 230 ffGoogle Scholar.

34 Woodbury to Commercial Bank of Lake Erie, October 3, 1836, and other entries for 1836–1837, “Letters to Banks,” Treasury Correspondence. Some applications for deposits were rejected because applicant banks did not maintain 25 per cent specie reserves (idem to P. C. Fuller, April 29, 1837, ibid.).

35 See House Reports, 24th Cong., 2d Sess. (1837), No. 193 (serial 307), II, 63.

36 Reports of the Secretary of the Treasury of the United States, IV (Washington, 1851), p. 30Google Scholar(hereafter cited as Treasury Reports, IV); Senate Documents, 24th Cong., 2d Sess. (1836), No. 29 (serial 297), pp. 1–3.

37 Senate Documents, 24th Cong., 1st Sess. (1836), No. 356 (serial 283), p. 8Google Scholar. The West included Ohio, Indiana, Illinois, Missouri, and Michigan Territory.

38 Senate Documents, 24th Cong., 2d Sess. (1836), No. 29 (serial 297), pp. 1–2Google Scholar.

39 Applicants for 320 acres or less who were either actual settlers or residents of the state in which the land was located might continue to pay with bank paper until December 15, 1836. After that time only specie would be acceptable from any purchaser, although Virginia land scrip remained acceptable in certain cases.

40 Circular reprinted in Treasury Reports, III, 764.

41 , Timberlake, “The Specie Circular and the Distribution of the Surplus,” Journal of Political Economy, LXVIII, No. 2 (04 1960), IIIGoogle Scholar.

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43 T. P. Handy to Woodbury, October II, 18–36, Commercial Bank of Lake Erie Papers, Western Reserve Historical Society, Cleveland.

44 James Hall to Woodbury, October 15, 1836, “Letters from Banks,” Treasury Correspondence. Another Cincinnati bank, the Ohio Life Insurance and Trust Company, procured more than $600,000 in specie, much of it from New Orleans, Baltimore and Philadelphia, during the period July 1, 1836-May 1, 1837. State of Ohio, Executive Documents, 1837–1838, No. 30, p. 104; Micajah T. Williams to S. Perkins, October 27, 1836, Simon Perkins Papers, Western Reserve Historical Society.

45 See Macesich, George, “Sources of Monetary Disturbances in the United States, 1834–1845,” THE JOURNAL OF ECONOMIC HISTORY, XX, No. 3 (09 1960), 418, 424–25Google Scholar. At the same time revised discount policies of the Bank of England increased the strain on eastern bankers. See Matthews, R. C. O., A Study in Trade Cycle History (Cambridge: The University Press, 1954), pp. 57–58Google Scholar.

46 James Hall to Woodhury, October 15, November 7, 1836, “Letters from Banks,” Treasury Correspondence; T. P. Handy to J. Woodbridge, September 1, 1836, Commercial Bank of Lake Erie Papers.

47 Woodbury to Hall, November 18, 1836, “Letters to Banks,” Treasury Correspondence; Treasury Reports, III, 691–92. Bray Hammond has called to my attention that this is an unusually early reference by a public official to “central banking” in the United States.

48 Woodbury to Hall, September 3, 1836, “Letters to Banks,” Treasury Correspondence. On favoritism in the issue of Treasury drafts see Govan, T. P., Nicholas Biddle (Chicago: Univ. of Chicago Press, 1959), p. 310Google Scholar; and Treasury Correspondence, “Letters to Banks,” correspondence of 1836 with Bank of Alabama at Mobile.

49 Taylor, George R., The Transportation Revolution (New York: Rinehart & Co., 1951), pp. 338–43Google Scholar; Hidy, R. W., The House of Baring in American Trade and Finance (Cambridge: Harvard Univ. Press, 1949), pp. 206–9CrossRefGoogle Scholar.

50 A total of about $18 million was paid to the states in January and April. , Timberlake, “The Specie Circular and the Distribution,” pp. 112, 115–16Google Scholar.

51 See note 38, above.

52 See note 46, above, and House Executive Documents, 25th Cong., 1st Sess. (1837), No. 30 (serial 311), pp. 45, 53Google Scholar.

53 Treasury Reports, IV, 17. See also Worley, Ted R., “Arkansas and the Money Crisis of 1836–37,” Journal of Southern History, XV, No. 2 (05 1949), 178–91CrossRefGoogle Scholar.

54 Treasury Reports, IV, 6, 98.

55 Woodbury to John Fleming, March 24, 1837, “Letters to Banks,” Treasury Correspondence. See also House Executive Documents, 25th Cong., 1st Sess. (1837), No. 30 (serial 311), p. 50Google Scholar.

56 Treasury Reports, IV, 55–60.

57 , Taus, Central Banking Functions, pp. 41 ff.Google Scholar; , Timberlake, “The Independent Treasury and Monetary Policy,” pp. 92–97Google Scholar.

58 As of September, the deposit banks had not yet paid $1.17 million in Treasury drafts issued on them to meet the third installment of the surplus distribution. Treasury Reports, IV, 67.

59 ibid., 97; U. S. Statutes-at-Large, V, 201, 206.

60 Register of Debates, XIV (25th Cong., 1st Sess. [1837]), p. 1127Google Scholar.

61 For Jackson's views, see , Jackson to Taney, R. B., April 14, 1838, Maryland Historical Magazine, IV (1909), 306–7Google Scholar.

62 House Executive Documents, 25th Cong., 2d Sess. (1838), No. 279 (serial 328), pp. 3–5Google Scholar.

63 ibid., 25th Cong., 3d Sess. (1839), No. 66 (serial 346), pp. 1–5.

64 Senate Documents, 26th Cong., 2d Sess. (1841), No. 180 (serial 378), p. 4Google Scholar.

65 , Hammond, Banks and Politics, pp. 361, 328Google Scholar.

66 , Timberlake, “The Specie Circular and the Distribution,” pp. 113, 117Google Scholar.

67 The first pet banks recommended in 1833 creation of a new Treasury bureau to coordinate deposit-bank operations and put forward Reuben Whitney as candidate for bureau head, but their proposal was rejected. This indicated Taney's and Woodbury's common intention to retain close supervision of Treasury relations with the banks. See House Reports, 24th Cong., 2d Sess. (1837), No. 193 (serial 307), passim.

68 Woodbury's reports to Congress emphasized the strain imposed on the banks by the Deposit Act. Taney declared that the Deposit Act had completely undermined Jackson's hard-money policy. See Taney to Van Buren, July 20, 1837, Maryland Historical Magazine, VIII (1913). 324Google Scholar. For an earlier Democratic allegation that a Whig Congressional cabal supported the Deposit Act in hopes of producing a panic, see , WashingtonGlobe, 11 9, 1836Google Scholar.

69 Maryland Historical Magazine, VIII, 324; Treasury circular of July 3, 1837, “Letters to Banks,” Treasury Correspondence; Amos Kendall to John Thompson et al., July 1, 1837, Baker Library Archives of Dartmouth College.

70 Andrew Jackson to Moses Dawson, December 17, 1837, Ohio Statesman (Columbus), January 4, 1838. For other revealing Jackson letters on the crisis, see Whealen, John J., ed., “The Jackson-Dawson Correspondence,” Historical and Philosophical Society of Ohio, Bulletin, XVII, No. 1 (01 1958), 3–30Google Scholar.

71 Isaac Fletcher to E. B. Chase, May 15, 1838, Fletcher Papers, Baker Library Archives of Dartmouth College. On Senator Robert Walker's change in views on banking, see Shenton, James P., Robert John Walter: A Politician from Jackson to Lincoln (New York: Columbia Univ. Press, 1961), pp. 24–27Google Scholar.