Bank War

Definition

The Bank War was a political struggle in the 1830s led by President Andrew Jackson against the Second Bank of the United States. This conflict arose from Jackson's belief that the bank was unconstitutional and favored the wealthy elite at the expense of the common people. The Bank War was marked by intense debates over banking practices, state versus federal authority, and issues of economic power that shaped the early American banking systems.

5 Must Know Facts For Your Next Test

1. The Bank War intensified after President Jackson vetoed the recharter of the Second Bank in 1832, arguing it was a monopoly that favored a privileged few.
2. Jackson's opposition to the bank rallied support from many farmers and workers who viewed it as an entity that hindered their economic opportunities.
3. The conflict led to significant shifts in political alliances, resulting in the formation of new political parties, including the emergence of the Democratic Party.
4. Following Jackson's removal of federal deposits from the Second Bank, many state banks flourished, leading to increased speculation and eventually contributing to financial instability.
5. The Bank War solidified a long-lasting debate in America over banking regulation and control, influencing future monetary policy and financial institutions.

Review Questions

• How did Andrew Jackson's views on banking influence his actions during the Bank War?
  • Andrew Jackson believed that the Second Bank of the United States was an unconstitutional institution that primarily served the interests of a wealthy elite. His distrust of centralized banking power motivated him to veto its recharter in 1832 and withdraw federal funds. This action not only weakened the bank but also aligned with his broader vision of promoting economic opportunities for ordinary Americans, thereby reshaping banking in early America.
• Evaluate the consequences of Jackson's decision to remove federal deposits from the Second Bank and place them into pet banks.
  • Jackson's decision to move federal deposits into pet banks had far-reaching consequences for the American economy. It effectively dismantled the power of the Second Bank, leading to an increase in state-chartered banks. This shift caused a rapid expansion of credit and speculation, which eventually contributed to financial instability and economic panic in the late 1830s. The move highlighted tensions between federal authority and state interests regarding banking practices.
• Analyze how the Bank War reflects broader themes in American politics regarding democracy and economic power during this period.
  • The Bank War serves as a key example of how economic power dynamics influenced political discourse in early America. Jackson's battle against the Second Bank can be viewed through the lens of Jacksonian Democracy, which emphasized populism and equality while challenging established elites. This conflict encapsulated ongoing struggles between federal control and states' rights, as well as differing visions for America's economic future. It set precedents for future debates on government involvement in financial systems and laid groundwork for future reform movements.

Related terms

Second Bank of the United States:

The Second Bank was established in 1816 to serve as a national bank, intended to stabilize the economy and regulate currency but became a focal point of controversy during the Bank War.

Pet Banks: These were state banks selected by Andrew Jackson to receive deposits from the federal government after he withdrew funds from the Second Bank, effectively undermining its power.

Jacksonian Democracy: A political movement during the presidency of Andrew Jackson that promoted greater democracy for the common man and sought to limit federal power, particularly in financial matters.