Andrew Jackson: Profiled People in Economics and Banking
Executive Summary
- Jackson was a strong opponent of private banking interests.
Introduction
Jackson abolished the second private banking controlled central bank. But did not institute a public central bank. This led to chaos, with states issuing their own currencies. He considered killing the private central bank his most important presidential accomplishment. However, while he supported a debt-free government-issued currency, he took the Southern position against the American School of Economics, which promoted tariffs and major infrastructure investments.
Jackson’s view of banking is expressed in the following quotation.
“You are a den of vipers. I intend to rout you out and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning.” ~ Andrew Jackson / AZ Quotes
Andrew Jackson’s Error
Jackson did not understand that while a private central bank (which was the design of the second Bank of the United States) was an enormous liability, the country did need a central bank, and he could have created a public central bank. This error of having no central bank is expressed in the following quotation.
“Senator Thomas Hart Benton of Missouri stated in 1831, “I object to the renewal of the charter of the Bank of the United States because I look upon the bank as an institution too great and powerful to be tolerated in a Government of free and equal laws. Its power is that of a purse; a power more potent than the sword.” A strong coalition of small bankers and farmers and their strong ally in the White House led the charge, and in 1836, the second bank’s twenty-year charter was allowed to expire. Jackson’s fears were naïve and misguided. He thought that by killing the central bank, he was diminishing private bank power and elevating “the people.” In fact, without a central bank to provide liquidity and stability, the nation would enter an era of repeated banking crises. Historian Charles Geisst explained: “By curtailing the development of a central bank, the commercial banking institutions of the day were given more de facto power over their own states’ banking systems than otherwise might have been the case.” Investment firms took advantage of the federal government’s absence from the banking sphere to enter unregulated securities and bonds markets, creating unstable and panic-ridden financial markets that otherwise could have been supervised and overseen by a strong central bank that had the nation’s financial health as its first priority. Still, Jackson felt empowered to get rid of the bank, based on his fears. Government policies, no matter how erroneous, trumped bank profitability. It is important to point out the stakes in these early debates. Both advocates and opponents of the early banks recognized that national and centralized banking could solve formidable financial problems and increase credit to both the government and the populace. The debates surrounding these banks did not focus on the profitability or success of the bank itself, but about what a national bank meant for the country. It was a debate about the nature of the democracy.”
Source: How the Other Half Banks
https://www.amazon.com/How-Other-Half-Banks-Exploitation/dp/0674286065
In essence, Jackson moved to an unregulated banking system and never replaced the second Bank of the United States with another centralized entity.