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Jackson, Biddle, and the Bank of the United States

Published online by Cambridge University Press:  03 February 2011

Bray Hammond
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Extract

More than forty years have passed since Catteral's monograph on the second Bank of the United States was published, and, though that account has never been superseded, it antedates all recent literature on central banking and therefore presents inadequately the public purposes of the bank. Furthermore, it includes nothing about the bank's Pennsylvania successor, which failed, and thus omits the denouement of Biddle's conflict with Jackson. The inevitable effect of the failure, in the rough justice of history, was to make Jackson seem right and Biddle wrong; and this impression, especially in the absence of attention to the purpose and functions of the bank, seems in recent years to have been strengthened. I think it needs correction.

Type
Articles
Information
The Journal of Economic History , Volume 7 , Issue 1 , May 1947 , pp. 1 - 23
Copyright
Copyright © The Economic History Association 1947

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References

1 On the organization of the bank, besides Catterall, R. C. H., Second Bank of the U.S. (Chicago: The University of Chicago Press, 1983)Google Scholar, see Walters, Raymond Jr., “Origin of the Second Bank of the U.S., ” The Journal of Political Economy, LIII (1945), 115.Google Scholar

2 The Bank of England and the Bank of France came under government ownership in 1945. The modern term “central bank” was not used till nearly a century after Biddle's death. Hamilton used the term “public bank, ” and the nineteenth-century equivalent was “bank of issue.”

3 Taus, E. R., Central Banking Functions of the Treasury, 1789–1941 (New York: Columbia University Press, 1943)Google Scholar, Appendix III and IV; Dewey, Davis R., Financial History of the U.S. (New York: Longmans, Green and Company, 1931), p. 168Google Scholar; Bassctt, John Spencer, The Life of Andrew Jackson (New York: The Macmillan Company, 1931), p. 586.Google Scholar

4 I use the term “private banks” in preference to the common term “state banks” because it brings out the essential differences between the central bank and the units of the banking system regulated by it. I therefore include as private those “state banks” proper owned in whole or part by state governments; for functionally these “state banks” proper differed little if any from the private banks.

5 R. C. H. Cattcrall, Second Bank, P. 85.

6 McCulloch v. Maryland (1819), 4 Whcaton, p. 315; Osborn v. Bank, of the United States (1824), 9 Wheaton, p. 737. The arguments in these cases were constitutional, not economic.

7 Gallatin, Albert, Writings, ed. Adams, Henry (Philadelphia: J. B. Lippincott and Company, 1879), IiI, 334, 336, 390; II, 426.Google Scholar

8 Ibid., II, 461. Sec also Nies’ Weekly Register, XXXV (1828–19), 37.

9 Catterall, R. C. H., Second Bank, pp. 24–26; American State Papers, Finance (Washington: Gales and Seaton, 1858), IV, 768–69.Google Scholar

10 Smith, Vera C., Rationale of Central Banking (London: P. S. King and Son, 1936), p. 40.Google Scholar

11 Statements on Biddle's central-bank policy will be found in McGrane, Reginald C., Correspondence of Nicholas Biddle (Boston: Houghton Mifflin Company, 1919), pp. 34–36, 51 56–58.Google Scholar Catterall discusses the subject admirably in his chapter v, with the limitation that central banking was no better understood in his day than in Biddle's—if as well. See also J. S Bassett, Andrew Jackson, pp. 585–86.

12 Benton, T. H., Thirty Years’ View (New York: D. Appleton and Company, 1897), I, 159.Google Scholar

13 Swisher, C. B., Life of Taney (New York: The Macmillan Company, 1935), pp. 166–69.Google Scholar

14 Even Gallatin in 1831 took pains to defend the bank's constitutionality without a reference to the court's decisions, of which he remarked in a footnote he had not known. Gallatin, Writings, III, 327. He was in Europe when McCulloch v. Maryland was decided, but not Osborn v. Bank of the United States. It is notable that he would discuss constitutionality without learning till he was through that the Supreme Court had said something on the subject.

15 R. C. McGranc, Correspondence of Biddle, 172. For Benton's ideas, see his Thirty Years’ View, I, 436.

16 Bassett, J. S., Correspondence of Andrew Jackson (Washington, D.C.: Carnegie Institution, 1931), V, 491Google Scholar; Benton, Thirty Years’ View, I, 436.

17 The principal argument against the bank's constitutionality was not this, of course, but that Congress had no power to charter a bank outside the District of Columbia.

18 Shambaugh, Benjamin F., Fragments of the Debates of the Iowa Constitutional Conventions of 1844 and 1846 (Iowa City: State Historical Society of Iowa, 1900), pp. 69, 70, 71.Google Scholar

19 Col. Benton on Banks and Currency, Hunt's Merchants’ Magazine, XXXVIII (January 1858), 560–61.Google Scholar

20 The United States Magazine and Democratic Review (Washington: Langtree and O'Sullivan, December 1838), III, 368.Google Scholar Alexander Hamilton's son, James A. Hamilton, a friend of Jackson and a speculator in New York real estate, seems to have been a Democrat by trade.

21 United States Comptroller of the Currency, Annual Report, 1916, pp. 913–14.Google Scholar

22 Tocqueville, Alexis de, Democracy in America, ed. Bradley, Phillips (New York: Albert A. Knopf and Company, 1945), I, 409.Google Scholar

23 In a number of western states and territories they achieved prohibition: in Arkansas, Illinois, Iowa, Wisconsin, California, and Oregon—though in the last two the impetus was more than agrarian.

24 T. H. Benton, Thirty Years’ View, I, 158.

25 Alexis de Tocqueville, Democracy in America, I, 409.

26 Taney made himself ridiculous: he told the pet banks the government funds would enable them to lend more, he gave them checks on the B.U.S. to protect them from the monster, and then he helplessly asked them not to use the checks.—Catterall, R. C. H., Second Bank., pp. 302–5. United States Secretary of the Treasury, Annual Reports (1833), III, 369Google Scholar; 23d Congress, 1st Session, Senate Document No. 16, 321 ff.

27 Retirement of the public debt was inflationary in that it spread a feeling of elate satisfaction and closed a field for conservative investment. Gallatin had thought the retirement would be a good thing but later found to his dismay that it was “a signal for an astonishing increase in the indebtedness of the community at large.”—Adams, Henry, Life of Albert Gallatin (Philadelphia: J. B. Lippincott and Company, 1879), p. 656.Google Scholar

28 See a contemporary English observer, “Causes and Consequences of the Crisis in the American Trade, ” Edinburgh Review, LXV (July 1837), 227–28.Google Scholar The impetus given new banks by the prospect of closing the B.U.S. was observed everywhere. Benton exclaimed that he had not joined in putting it down in order “to put up a wilderness of local banks.”—34th Congress, 2d Session, January 1837, Register of Debates, p. 610. See also Hammond, Jabez, History of Political Parlies in New York (Coopcrstown: H. and E. Phinncy, 1846), II, 434, 489.Google Scholar

29 See McCulloch, Hugh, Men and Measures of Half a Century (New York: Charles Scribner's Sons, 1889)Google Scholar; Cable, John Ray, The Bank, of the State of Missouri (New York: Columbia University. Press, 1923)Google Scholar; Preston, Howard H., History of Banking in Iowa (Iowa City: State Historical Society of Iowa, 1922).Google Scholar

30 St. Louis Beacon, September 1, 1831, September 12, 1831; Nilet’ Weekly Register, September 17, 1831, p. 37. The duel was fought with pistols at five feet, Major Biddle being nearsighted, and each man killed the other.

31 R. C. H. Catterall, Second Bank, PP. 214 ff.

32 Ibid., p. 139.

33 The authorized capital of the bank under Pennsylvania charter was $35,000,000, as it had been under national charter. It appears, however, that the shares ($7,000,000 par) held by the government under the national charter were not reissued to new owners and that the actual paid-in capital of the Pennsylvania corporation was only $28,000,000.—Knox, John J., History of Banking (New York: Bradford, Rhodes, and Company, 1903), pp. 78–79.Google Scholar

34 J. S. Bassett, Correspondence of Jackson, V, 495, 498, 500, 504 ff.; Raguet, Condy, Financial Register, II (Philadelphia: Adam Waldie, 1838), 58.Google Scholar

35 Albert Gallatin, Writings, III, 398.

36 Presidents’ Letter Book, No. 1, 542, Biddle MSS, Library of Congress.

37 29th Congress, 1st Session, House Document No. 3x6, p. 405.

38 Condy Raguet, Financial Register, I, 342–46.

39 Ford, Thomas, History of Illinois (Chicago: S. C. Griggs and Company; New York: Ivison and Phinney, 1854), p. 227.Google Scholar

40 Report of delegates to the Bank Convention, New York, November 1837; Condy Raguet, Financial Register, I, 229.

41 Philadelphia Gazette, October 10, 1839.

42 These represented payment of $7,900,000 to the government for its stock in the bank. This sum included a premium of about $1,000,000, besides which the government had received dividends of over $7,000,000 during the twenty years of the bank's existence. The net gain to the government from its original investment of $7,000,000, which it paid for in bonds, is estimated by Knox at $6,000,000 and by Cattcrall at $8,000,000—John J. Knox, History of Banking, p. 79; R. C. H. Catterall, Second Bank., P- 474- In the settlement for the government stock, agreed upon in 1837 (Catterall, Second Bank., pp. 373–75), the administration had held out for a premium in a way which indicated it had no doubt of the bank's solvency.

43 29th Congress, 1st Session, House Document No. 226, p. 408.

44 R. C. McGrane, Correspondence of Biddle, p. 337; Reminitcenses of James A. Hamilton (New York: Charles Scribncr's Sons, 1869), p. 312.Google ScholarPubMed

45 Niles’ Weekly Register, LVI (April 6, 1839), p. 84.Google Scholar

46 29th Congress, 1st Session, House Document No. 226, p. 486.

47 29th Congress, 1st Session, House Document No. 226, 419 ff.; 475 ff.; also opinion of Judge Barton, Philadelphia Inquirer, May 10, 1842.

48 Philadelphia Public Ledger, April 11, 1842.

49 Philadelphia Public Ledger, April 30, 1842. The court had much to say of “the singularly loose method” by which the directors had conducted the business of the corporation.

50 Bank of the United States v. Biddle, Parsons’ Select Cases in Equity (Philadelphia, 1888), II, 33 ff.

51 Democratic Review, III (December 1838), 372–73.Google Scholar

52 John J. Knox, History of Banking, p. 79.

53 Federal Deposit Insurance Corporation, Annual Report (Washington, 1940), p. 66.Google Scholar

54 29th Congress, 1st Session, House Document No. 226, p. 533.

55 Laws of Pennsylvania 1835–36, p. 43; 29th Congress, 1st Session, House Document No. 226, p. 532. See report of the stockholders’ committee, April 3, 1841, 29th Congress, 1st Session, House Document No. 226, esp. pp. 414–16, 425 ff. This report confirms, it seems to me, the opinion of Judge Barton a year later. I do not go into the cotton transactions, which Judge Barton discusses at length, because to discuss them adequately takes too much space. They show Biddle's audacity, ingenuity, and casuistry, but it is not clear that they cost the bank much, except indirectly by deterioration of management. The loan policy, though less irregular, did the bank more direct damage.

56 For some account of the bank's methods, see Sister Madeleine, M. Grace, Monetary and Banking Theories of Jacksonian Democracy (Philadelphia: The Dolphin Press, 1943)Google Scholar, chaps, iv and v. The author seems to believe Biddle morally culpable.

57 29th Congress, 1st Session, House Document No. 226, pp. 475–516.

58 Philadelphia Public Ledger, April 1, 1842.

59 See his criticism of “mere'men of business” as administrators of the B.U.S.—R. C. McGrane, Correspondence of Biddle, p. 27.

60 It will be recalled that, in his earlier literary days, he prepared a popular edition of the Lewis and Clark journals.

61 R. C. McGrane, Correspondence of Biddle, pp. 325, 333, 335; Tyne, C. H. Van, Letters of Daniel Webster (New York: McClure, Phillips and Company, 1902), p. 213.Google Scholar

62 R. C. McGrane, Correspondence of Biddle, p. 333. See also earlier correspondence with Thomas Cooper regarding the presidency, pp. 272, 277–282, 293, 296, 323.

63 Adams, John Quincy, Memoirs, ed. Adams, C. F. (Philadelphia: J. B. Lippincott and Company, 1876), X, 361.Google ScholarPubMed

64 McGrane, Reginald C., The Panic of 1837; Some Financial Problems of the Jacksonian Era (Chicago: The University of Chicago Press, 1924), p. 205Google Scholar; R. C. McGrane, Correspondence of Biddle. The Jacksonian opinion of Biddle is reflected in Schlesinger, Arthur M., Age of Jackson (Boston: Litde, Brown and Company, 1945)Google Scholar, which I have not referred to in this essay because I reviewed it in the May 1946 issue of this Journal.

65 It is not clear which party Biddle supposed might make him president. The second Bank of the United States was both nurtured and destroyed within the Democratic party. Its creators and friends included Madison, Monroe, Gallatin, and Crawford; its three presidents, Jones, Cheves, and Biddle, were party members. Its greatest enemies were likewise pillars of the party—Jackson himself, Bentori, and Taney. Jackson's cabinet was divided. The Whigs championed the bank less for its own sake than because Jackson's course left them no choice, and they abandoned it with relief as soon as they could. They were not interested in having bank credit restricted.