Pet banks refer to the state-chartered banks that were selected by President Andrew Jackson to hold federal government deposits after he withdrew them from the Second Bank of the United States during the Bank War. These banks were seen as loyal to Jackson and his political agenda, leading to their nickname as 'pet banks.'
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President Andrew Jackson distrusted the power and influence of the Second Bank of the United States, which he saw as a threat to the democratic principles of his administration.
In 1833, Jackson ordered the removal of all federal deposits from the Second Bank and placed them in a network of state-chartered banks, which became known as 'pet banks.'
The pet banks were selected by the Secretary of the Treasury based on their perceived loyalty to Jackson's political agenda, rather than on financial stability or sound banking practices.
The removal of federal deposits from the Second Bank and their placement in the pet banks was a key part of Jackson's efforts to destroy the power of the national bank and decentralize financial power.
The pet banks were used by Jackson to distribute federal funds to his political allies and supporters, further fueling the Bank War and the Nullification Crisis.
Review Questions
Explain the role of pet banks in the context of the Bank War between President Andrew Jackson and the Second Bank of the United States.
During the Bank War, President Andrew Jackson distrusted the power and influence of the Second Bank of the United States, which he saw as a threat to democratic principles. In 1833, Jackson ordered the removal of all federal deposits from the Second Bank and placed them in a network of state-chartered banks, known as 'pet banks.' These pet banks were selected based on their perceived loyalty to Jackson's political agenda, rather than on financial stability or sound banking practices. The pet banks were used by Jackson to distribute federal funds to his political allies and supporters, further fueling the conflict between the president and the national bank.
Analyze how the creation of pet banks was connected to the Nullification Crisis of 1832-33.
The pet banks were a key part of President Andrew Jackson's efforts to decentralize financial power and undermine the influence of the Second Bank of the United States. By placing federal deposits in state-chartered banks that were loyal to his political agenda, Jackson was able to distribute these funds to his supporters, which exacerbated the tensions between the federal government and the state of South Carolina during the Nullification Crisis. The Nullification Crisis arose when South Carolina declared the federal tariffs of 1828 and 1832 unconstitutional and null and void within the state's borders, leading to a standoff with the federal government. The creation of the pet banks, and Jackson's use of them to consolidate his political power, was seen by many as a contributing factor to the Nullification Crisis and the broader struggle over the balance of power between the states and the federal government.
Evaluate the long-term consequences of President Andrew Jackson's decision to establish the pet banks and remove federal deposits from the Second Bank of the United States.
The establishment of the pet banks and the removal of federal deposits from the Second Bank of the United States had significant long-term consequences. By decentralizing financial power and distributing federal funds to his political allies, Jackson weakened the influence of the national banking system and contributed to the growth of state-level financial institutions. This, in turn, led to greater economic instability and a series of financial crises, including the Panic of 1837, which was exacerbated by the policies of the pet banks. Additionally, the Bank War and the Nullification Crisis further eroded the balance of power between the states and the federal government, setting the stage for the eventual outbreak of the Civil War. The legacy of the pet banks and the Bank War continues to shape debates over the role of the federal government in regulating the financial system and the balance of power between the states and the national government.
The political struggle between President Andrew Jackson and the Second Bank of the United States, which culminated in Jackson's decision to remove federal deposits from the bank and place them in state-chartered 'pet banks.'
A political crisis in 1832-33 in which the state of South Carolina declared that the federal tariffs of 1828 and 1832 were unconstitutional and therefore null and void within the state's borders.
A national bank chartered in 1816 that served as the federal government's fiscal agent, but was viewed by President Andrew Jackson as a dangerous monopoly that needed to be destroyed.