>> Wednesday, September 09, 2009
Loomis begins a series on financial catastrophes in US history with a look at the 1837 Panic, which among other things underscores the avant la lettre wingnuttery of Andrew Jackson. Obviously the story of the Second Bank is complicated, but the degree to which Jackson personalized the whole affair is really quite remarkable. His hostility toward Henry Clay (whose rechartering bill Jackson vetoed) stretched back to Clay's role in the investigation of Jackson's Floridian thuggery during the first Seminole War; Jackson's broader hostility toward the Bank of the US originated at more or less the same time, during the Panic of 1819 (which the Bank helped create by inflating a land bubble of its own).
Jackson used that earlier depression to help build an undeserved reputation as champion of the "common man" and an enemy of parasitic speculators. His claim that central banking was a mere instrument for enriching the elites served as the rationale for his attack on the Bank from 1832 onward. What few people remember, however, is that Jackson was a hard currency zealot who sided with landowners and merchants during the 1819 depression and violently denounced any suggestion that public relief be extended to debtors -- in this case, through the creation of a state-run loan office to extend new sources of credit to replace those being choked off by private banks. Jackson and several other Nashville-area cotton planters wrote a scathing letter to the state senate denouncing the proposal, then followed it up with a series of meetings with planters in adjacent counties, all in an ultimately futile effort to kill the bill. Jackson claimed that the "will of the people" demanded that the relief effort be scotched; as for the actual will of the people, it was quite likely more supportive than skeptical of the need for state action. Jackson, however, believed that indebted people simply needed to work harder and shun all extravagance -- a noble suggestion, to be sure, from a man who owned nearly 50 human beings and a thousand-acre plantation.
Rooted in this earlier history, Jackson's war with the bank during the 1830s was a bizarre and complicated saga; no one emerged with much dignity, and Nicholas Biddle and Jackson's Congressional opponents somehow managed to give the president enough room to convince a great many people that his views on central banking were correct, when in fact Jackson was monumentally ignorant on the subject. Using evidence gathered from the radio transmissions beamed into his brain from outer space, Jackson insisted that the Bank was fundamentally unsound. When a House investigation -- one that Jackson himself requested -- demonstrated that the Bank was perfectly solvent, Jackson reiterated the charges and went ahead with plans to withdraw federal deposits from the BUS and distribute them to state banks that were overwhelmingly run by his own political supporters. The long-term results were, as Eric points out, disastrous, but they were the logical results of Jackson's scorched-earth attitude toward any national institution outside the Executive branch.