Removal of Deposits
Removal of Deposits
REMOVAL OF DEPOSITS
REMOVAL OF DEPOSITS. The removal of deposits was the next step in President Andrew Jackson's campaign against the Second Bank of the United States after he vetoed its recharter in July 1832. Under its existing charter, due to expire in 1836, the bank acted as the exclusive fiscal agent of the federal government and the custodian of its funds. It was also the country's only truly national financial institution, with branches throughout the states. Deeply convinced of the bank's corrupting influence on politics, and fearful that it would use its favored position and tremendous financial leverage to again try to force a recharter, Jackson determined to defang the bank by removing public moneys from its control.
In the spring of 1833, following his election to a second term and the resolution of the South Carolina nullification crisis, Jackson consulted his cabinet on the advisability of removal. Most members, including the Treasury secretary Louis McLane, were opposed, but Attorney General Roger Taney strongly approved. The bank's charter gave sole authority to remove federal deposits to the secretary of the Treasury, reporting directly to Congress. In March the House of Representatives voted overwhelmingly that the deposits were safe where they were. Jackson paid no heed. To facilitate removal he elevated McLane to the State Department and appointed the bank opponent William John Duane secretary of the Treasury. When Duane unexpectedly balked at ordering the removal, Jackson dismissed him in turn and put in Taney. In September Taney duly ordered that federal receipts henceforth be deposited in selected state-chartered banks, while existing balances in the Bank of the United States were drawn down to meet current expenses.
Critics denounced the removal as financially reckless and politically high-handed, even tyrannical. The Bank of the United States president Nicholas Biddle retaliated by sharply curtailing loans, triggering a panic that sent businessmen crying to Congress for relief. There, reaction against the removal prompted Jackson's myriad political enemies to coalesce under the new name of Whigs. Whigs charged Jackson with undermining the country's financial system in pursuit of his vendetta against Biddle, with corruptly steering federal funds to politically favored state banks, and with brazenly usurping congressional and ministerial authority—all evidence, they said, of a despotic purpose that threatened the foundations of republican government. In March 1834 the Senate adopted unprecedented resolutions, sponsored by the Whig leader Henry Clay, censuring Jackson for having "assumed upon himself authority and power not conferred by the Constitution and laws, but in derogation of both."
Unifying Jackson's opponents while invigorating his supporters, the removal episode furthered the emergence of a national two-party system. Democrats, led by Jackson, made opposition to chartered banking, first at the federal and then at the state level, a central element in their creed. Despite Whig fulminations, the removal itself held up. The financial distress quickly subsided, while the Bank of the United States, discredited by Biddle's over-reaction, was not rechartered and ceased to be a federal institution in 1836. Taney, rejected as Treasury secretary by an angry Senate in the wake of the removal, was later nominated and confirmed to succeed John Marshall as chief justice of the Supreme Court, while the Senate censure of Jackson was expunged just before he left office in 1837.
Catterall, Ralph C. H. The Second Bank of the United States. 1902. Reprint, Chicago: University of Chicago Press, 1960. Classic account, sympathetic to the bank.