On the eighth day of June, 1845, Andrew Jackson lay dying at his estate, the Hermitage, in Central Tennessee. A war hero, a governor, a congressman, and President of the United States, he had accomplished much. But as his body gave out, surrounded by his three adopted sons, he could only muster the strength to speak of one achievement. Fading away, his last words were, “I killed the bank.”
No one knows if Jackson actually said this, but his war against the Second Bank of the United States is one of the most well-known items of his presidency. However, what is lesser-known is the critical role that then-congressman James K. Polk played in Jackson’s disassembly of the National Banking system.
But what was the impetus for this disassembly? In the first half of the 19th century, the newly-formed United States of America faced its first major financial crisis: the Panic of 1819, caused largely by the Second Bank of the United States. Through brilliant political maneuvering first in Congress and later in the White House, Jackson, with the help of Polk, was able to solve the problems that led to this major economic disaster.
The Great Panic of 1819
In 1819, an economic recession set in motion by cotton markets falling by 25% caused the president of the Second National Bank, William Jones, who was Secretary of the Navy under President Madison, to resign his position, former Speaker of the House of Representatives Langdon Cheves succeeding him.
The immediate major cause of the Panic of 1819 was a decline in the cotton market. This decline resulted from loose administration of the Second National Bank under its first president, William Jones.
Jones, had run the bank in a very loose manner, allowing mortgages to go unpaid, providing unsound loans, and allowing state banks’ overextended notes to remain in circulation. Cheves foreclosed on these mortgages, causing mass homelessness, called in these loans, resulting in widespread bankruptcy, and redeemed the notes, causing banks themselves to be without money.
Langdon Cheves resigned his position in 1822, the office being taken over by the egotistical Nicholas Biddle, but the damage had already been done.
Jackson and the Bank
This was the first major economic panic that struck the United States, and it revealed that a national bank, what Sir Oswald Mosley would over 90 years later call “That consecrated combination of private interests and public plunders,” was not as much of a universal positive as certain people would have the public believe. Andrew Jackson, Polk’s mentor and role model, famously hated concentration of federal power and Washington elitism, of which the bank had been a textbook example.
When Jackson took office in 1828, he planned to let the bank wither away, since was a divisive issue within his Democratic Party and its charter expired in 1836, with little chance of renewal. However, Whigs in congress, most notably failed Presidential candidate Henry Clay, realized that if the President were forced to take action against the bank, he would lose the bank-supporting state of Pennsylvania in 1832, costing him the election if the rest of the states fell within party lines.
With this in mind, the Whigs prompted Bank President Biddle to petition congress for early renewal of the institution’s charter.
The renewal was met with overwhelming success in both houses of the legislature, and now Jackson’s veto was the only possible way to stop the national bank; the Whigs had forced his hand.
This was a serious problem for Old Hickory. He would not stand to have the Bank continue, but he intended to serve a second term, which was not very likely to happen if he lost the support of Pennsylvania by vetoing the charter. He needed adequate justification for his veto to convince Pennsylvanians that the bank was not on their side.
Jackson commissioned the House of Representatives’ Committee on Ways and Means to look into the bank’s allegedly corrupt behavior. The majority of the Committee found the Bank to be violating its charter in several ways, including usury, foreigners voting for directors, building houses to rent, and suspicious subsidies and loans to printers, editors, and lawyers. In all twenty-two charges were levied, seven of them amounting to forfeiture. This was enough for Jackson to go through with the veto.
Jackson now had to eloquently convey his reasoning in a veto message to be certain that his pro-bank supporters would understand. Employing the Postmaster General and a nephew of his to draft the message, he also asked future Chief Justice of the Supreme Court Roger Taney for assistance.
His veto message made the claim that the Bank only benefited the richest class of citizens, at home and abroad, citing large foreign investments in the Bank (chiefly from Great Britain). When it was released to the senate, congressional Whigs and so-called “bank democrats” underestimated how much the message would resonate with the public. Many thought it made the President look foolish. With that in mind, Bank President Biddle made 30,000 copies of the message and ordered them to be distributed across the country to ensure Jackson’s defeat in November of 1832. Jackson won the election by a sweeping margin of 16.8%.
Upon Jackson’s reelection, Biddle attempted to induce an economic recession in order to make Jackson’s popularity fall. This, of course, failed, but it is an excellent indicator of Biddle’s character.
Jackson’s denial of the bank’s renewal wasn’t the end of his feud with the Bank; he had shown the public that the Bank was up to no good but according to its charter, it still had four years left to engage in corruption.
Polk Steps on the Scene
The war on the bank had reached a critical moment and President Jackson was determined to prove that the bank had violated its charter as soon as he could; the accusations of the committee weren’t enough to win over some skeptics. He needed someone with an unassailable record to present the facts of the bank’s corruption. For this he turned to his protégé. In reference to the Bank, Jackson wrote to Polk, “An investigation kills it and its supporters dead. Let this be had. Call upon the Sec of the Treasury who must agree with me that an investigation by Congress is absolutely necessary.”
Although Polk was not the chairman of the Committee of Ways and Means, Jackson felt closer to him and because of this entrusted more of the responsibility of the investigation to Polk than to the actual chairman, a New York attorney named Gulian Verplanck.
Jackson made clear to Polk that he was to keep an eye on the chairman and make sure that his report included every possible detail about the bank. This would be a difficult task since Verplanck was connected with many Bank supporters so it was entirely possible for him to knowingly lie in his report to protect his banking friends’ interests.
Just as the Jacksonians had feared, Verplanck reported the bank to be financially sound. His report was generally well-received and unquestioned in the House, and now it was up to Polk to convince them of the bank’s corruption.
Polk countered with a minority report. It declared, among other things, that the bank didn’t have enough money for standard procedure, citing specifically securities issued by the government that were not paid off due to President Biddle refusing to deliver the money until after making several shady decisions unloading the bank’s debt. Polk also argued that the bank was an executive issue rather than a legislative one, and it should be ultimately the President’s decision.
The young representative’s report garnered much attention, such that in an ironic gesture Biddle used money from the bank to fund a Whig newspaper in Tennessee in an unsuccessful attempt to steal the next election from him. In a similar vein, Jackson found that Biddle also funneled $80,000 to congressmen in apparent bribes to pass his institution’s charter extension.
Apart from Biddle’s scrambling to destroy him, Polk’s report was a resounding success. There were still many stubborn anti-Jackson congressmen, but Polk had convinced enough of them to eliminate the possibility of overriding the Presidential veto: there was no possibility of the bank’s recharter efforts returning.
The charter of the Second Bank of the United States expired in 1836, and became a private corporation. Three years later it was defunct, and by 1841 it had been liquidated.
Results: No National Banking System Until 1913, Polk’s Political Career Takes Off
Shortly after the bank stopped operating as the National Bank, banks in New York refused to allow customers to make withdrawals from their accounts in hard currency. This caused the Panic of 1837, which Polk also had a hand in rectifying, details to come.
During Polk’s Presidency, the Independent Treasury system was established and the Federal scourge of a national bank would never come again. That is, until the Federal Reserve System, which continues to this day, was established in 1913.
This, however was not within Polk’s power to prevent, so we can safely say that Polk had played a crucial role in successfully eliminating banking from the Federal Government and preventing panics like the one in 1819, which stemmed from corrupt administration in the national bank, from ever happening in the foreseeable future.
Polk gained more of Jackson’s favor during the whole affair, and the President supported Polk for Chairman of the Committee on Ways and Means and Speaker of the House of Representatives, for which he did not get chosen on his first attempt.
James K. Polk’s involvement in the destruction of the Second Bank of the United States attached fame to his name which helped him get elected for Governor of Tennessee and later President of the United States.
While it may not be true that Andrew Jackson’s final utterance was about his hatred of the bank, the sentiment is preserved in an 1833 letter to Polk. At this time, it was thought that Jackson was using the National Bank simply as a pawn in his political game. Jackson thoroughly denied this in his letter, saying, “I have always been opposed to the U. States Bank, Nay all Banks.” Polk helped Jackson fulfill his dream of taking on the bank, and the Second National bank, which caused the Panic of 1819, may have continued to exist had he not played this vital role.
Some would argue that the 1819 Recession was caused by enforcement of conservative credit policies (inclusive of State banks), and that the decline of the cotton market exacerbated the downturn, but was not the catalyst. What leads you to your opinion that the cotton market was a root cause and what’s your source of the stated 25% decline?
Hello, A NJ Gentleman, thank you for your feedback. Professor Michael Ward, of California State University, Northridge, states here that “The calamity resulted from the declining value of cotton.” Also, the University of Houston’s Digital History Textbook contains the information that “The panic had several causes, including a dramatic decline in cotton prices.” The credit policies and their enforcement certainly also contributed, as I said. Bank President Cheves called in loans and forclosed on mortgages that his predecessor had carelessly allowed. As for the 25% decline, historian George Dangerfield notes on pages 73 and 74 of his book, “The Awakening… Read more »
Thank you for providing further context. Perhaps I’m being too nuanced, but I’m more inclined to agree with UofH on “several causes”. IMO the credit policies were the fuel of the recession, such that any number of lightning strikes or matches would have ignited the fire that resulted. So, I’d agree with your characterization that the “recession [was] set in motion by cotton markets falling”. Keep up the good work and consider referencing some of your sources on future posts.