Bank War

Definition

The Bank War refers to the political conflict in the 1830s between President Andrew Jackson and supporters of the Second Bank of the United States. This conflict centered around the legitimacy and power of the federal bank, with Jackson opposing it due to his belief that it favored the wealthy elite at the expense of ordinary citizens. The Bank War played a crucial role in shaping the development of banking and financial institutions in the United States, ultimately leading to the demise of the Second Bank and significant changes in American banking policy.

5 Must Know Facts For Your Next Test

1. The Bank War intensified after Andrew Jackson's 1832 veto of the recharter bill for the Second Bank, arguing it was unconstitutional and detrimental to the public.
2. Supporters of the Second Bank, including Henry Clay, viewed it as essential for economic stability and growth, while Jackson's opposition led to a broader debate about federal power.
3. Jackson's administration transferred federal funds from the Second Bank to various state banks, known as pet banks, which resulted in increased state-level lending and speculation.
4. The conflict over banking issues during this period led to a rise in anti-bank sentiment and contributed to the formation of new political parties, such as the Whigs.
5. The dissolution of the Second Bank in 1836 set a precedent for future banking practices in America, leading to a more decentralized banking system that would influence economic development.

Review Questions

• What were Andrew Jackson's primary reasons for opposing the Second Bank of the United States during the Bank War?
  • Andrew Jackson opposed the Second Bank primarily because he believed it concentrated too much financial power in a single institution, which favored wealthy elites over ordinary citizens. He viewed it as unconstitutional and detrimental to democracy. This opposition was rooted in his populist beliefs, as he aimed to dismantle what he saw as an unfair financial system that did not serve the interests of all Americans.
• How did the outcome of the Bank War influence future banking practices in the United States?
  • The outcome of the Bank War resulted in the closure of the Second Bank of the United States, leading to a more decentralized banking system. By transferring federal funds to state banks, known as pet banks, it fostered local lending practices but also increased risks and speculation. This shift away from a central bank laid the groundwork for future banking regulations and practices that would evolve throughout American history.
• Evaluate the long-term impacts of Andrew Jackson's policies during the Bank War on American economic development and political landscape.
  • The long-term impacts of Andrew Jackson's policies during the Bank War significantly altered American economic development and its political landscape. By dismantling the Second Bank and promoting state banks, Jackson's administration encouraged a more fragmented banking system, which led to increased speculation and financial instability. Politically, his actions fueled anti-bank sentiment that contributed to party realignment, giving rise to new political movements like the Whigs. This era established enduring debates over federal versus state control of banking and finance that would continue to shape American economic policy.

Related terms

Second Bank of the United States: A national bank chartered in 1816 that acted as a depository for federal funds and played a crucial role in stabilizing the nation's currency.

Andrew Jackson: The seventh President of the United States, serving from 1829 to 1837, known for his populist approach and strong opposition to the Second Bank.

Pet banks: State banks selected by Andrew Jackson to receive government deposits after he vetoed the renewal of the charter for the Second Bank of the United States.