by John Yoo
As he suggested in his First Annual Message, Jackson did not feel bound by Madison's view or that of the Supreme Court. Jackson's objections to the Bank were not just constitutional; he believed that its concentration of power threatened individual liberties. The Second Bank had come to dominate the American economy and finance in a way unmatched by any other company or institution since.
The Second Bank was a private corporation chartered by the federal government, which held one-fifth of its stock and appointed one-fifth of the directors. By law, only the Second Bank could keep and transfer government funds, help in the collection of taxes, lend money to the government, and issue federal bank notes. Its $13 million in notes, which served as a form of paper currency, made up almost 40 percent of all notes in circulation, and its $35 million in capital was more than double the annual federal budget.80 It made 20 percent of the nation's loans and held more than one-quarter of its deposits.81 States could also charter banks, whose notes often came into the possession of the Second Bank during the course of normal business.82 Because it could call in those notes for repayment at any time, the Second Bank effectively dictated the credit reserves of the state banks, and thus of the entire national banking system.83 As with the Federal Reserve Bank today, the Second Bank's control over the supply of money allowed it to influence, if not control, the nation's lending activities, interest rates, and economic growth. Its stock was held by 4,000 shareholders, 500 of them foreigners, who enjoyed profits of 8 to 10 percent per year.84
Jackson decided to rein in, and then destroy, the Second Bank. He viewed it as an institution that benefited a small financial elite. Its first president, a former Navy and Treasury Secretary appointed by Madison, speculated in the Bank's stock, benefited from corrupt branch operations, and almost drove it into bankruptcy.85 He resigned after a congressional investigation.86
During the Monroe administration, the Bank was widely blamed for the Panic of 1819, which closed several state banks, bankrupted many farmers and businesses, and sparked a sharp increase in unemployment.87 The years after the War of 1812 witnessed a dramatic increase in land speculation fueled by bank notes. During the Panic, the Second Bank demanded that state banks redeem their notes in hard currency, which caused a sharp contraction of credit, a run of bankruptcies, and a rapid increase in unemployment.88 Jackson was elected to the Senate by the Tennessee legislature in 1823 in part because of his public stance against the Bank. Political movements rose to oppose the Bank, with states enacting laws heavily taxing the Bank or trying to drive branches out of their territory.89
Ironically, by the time Jackson became President, the Bank had changed its ways and had become a powerful aid to the striking economic expansion of the 1820s and 1830s. Under Bank President Nicholas Biddle, the scion of a patrician Philadelphia family, the Second Bank cleaned up its finances.90 It ended internal corruption and kept a reserve of hard currency worth roughly half the amount of notes outstanding to prevent the speculative practices that had produced the Panic. Through its special relationship with the federal government and its holdings of specie and state bank notes, it effectively controlled the national money supply and had a profound effect on the amount of credit and growth in the economy.91 Biddle believed that government oversight and public involvement in the Bank's operations were unwelcome and unnecessary,92 and he made sure his influence was felt by paying newspaper editors and legislators to defend the Bank. Biddle was not a corrupt speculator, as were some of his predecessors, but a highly educated, intelligent man who brought great ability and energy to the job of administration. Neither Biddle nor his Bank would go quietly.93
The approach of the 1832 presidential elections prompted the first round in the fight between Jackson and Biddle's Bank. In his Second Annual Message to Congress, Jackson proposed folding the Bank into the Treasury Department, but the legislation establishing the Bank itself was not up for reauthorization until 1836.94 As the elections neared, Jackson agreed not to seek any changes in the Bank's charter until after the elections.95 A convention of National Republicans -- the group that had split off from the Democratic Party to oppose Jackson -- nominated Henry Clay as their presidential candidate.96 Sensing a political opportunity, Clay convinced Biddle to seek renewal of the Bank's charter four years early.97 Both the House Ways and Means Committee and the Senate Finance Committee had issued reports the previous year, finding the Bank constitutional and praising its operations (Biddle had personally drafted the Senate report). The Bank paid to distribute both reports throughout the country.98 Jackson chose Senator Thomas Hart Benson, with whom he had once fought a duel that ended with a bullet in Jackson's shoulder, to lead the fight against the Bank.99 Clay's supporters in the House and Senate passed the bill in the summer of 1832 by 28-20 in the Senate and 107-85 in the House.100 In pushing the Bank Bill and working with Clay, Biddle had lived up to the charges that the Bank was a politicized institution, and had thrown down the gauntlet before a man who had never shrunk from a fight.
The initial setbacks steeled Jackson's determination. Van Buren came to see Jackson at midnight shortly after the votes. Jackson was stretched out on a sofa, his health suffering. Upon greeting his visitor, he declared, "The bank, Mr. Van Buren, is trying to kill me, but I will kill it."101 And he did. Jackson issued a thundering veto on July 10, 1832. For the first time in presidential history, a veto message extensively discussed political, social, and economic as well as constitutional objections to legislation.102 Jackson portrayed the bill as a "gratuity" and a "present" transferred from the American people to the Bank's shareholders.103 The Bank occupied the position of a monopoly that benefited "a privileged order, clothed both with great political power and enjoying immense pecuniary advantages from their connection with the Government," at the expense of "merchant, mechanic, or other private citizen[s]" who are not allowed to pay their debts with notes, rather than hard currency.104 Such wealth, Jackson argued, ought to give "cause to tremble for the purity of our elections in peace and for the independence of our country in war," because the Bank would use its wealth to "influence elections or control the affairs of the nation."105 Foreign shareholders, Jackson feared, might cause the financial system to collapse during a war -- "[controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence" would pose a greater threat to national security than an enemy's armies and navies.106
Although the message broke from practice by introducing his policy views, the lasting impact of Jackson's veto remains his thinking on the President's independent authority to interpret and enforce the Constitution. He conceded that the precedents of the Supreme Court and previous Congresses had upheld the Bank;107 however, Jackson declared that the Constitution established the executive as an independent and coordinate branch whose decisions could not be dictated by the Court. "The Congress, the Executive, and the Court must each for itself be guided by its own opinion of the Constitution," Jackson wrote.108 In fulfilling its constitutional functions, each branch has an equal and independent duty to decide upon the constitutionality of legislation, whether in passing, enforcing, or adjudicating it. "The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges," Jackson declared.109 And, he emphasized, "on that point the President is independent of both."110 He concluded that "[t]he authority of the Supreme Court must not, therefore, be permitted to control the Congress or the Executive when acting in their legislative capacities ..."111 Jackson would only grant the courts "such influence as the force of their reasoning may deserve."112
Jackson remained convinced that Jefferson had been right in 1791. A national bank was not necessary and proper to execute the government's constitutional powers, because it was not truly indispensable. Congress, for example, has the power to coin money. It had already established a mint; therefore, a national bank could not truly be necessary and proper to execute that power. Jackson closed by linking his constitutional and policy objections to the higher
goal of democracy and liberty:
It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society -- the farmers, mechanics, and laborers -- who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government. There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing. In the act before me there seems to be a wide and unnecessary departure from these just principles.113
Jackson's call to freedom does not fit modern conceptions of either liberal or conservative policy, but seems more libertarian. He wanted to support the common man by reducing, rather than expanding, the role of government in society. Jackson believed that government regulation entrenched the rich in power; getting the government out of the way would allow individual talents and merit to come to the fore.
Presidents from Washington to John Quincy Adams had vetoed 9 pieces of legislation; Jackson vetoed 12. He was the first President to make use of the "pocket veto," in which the executive vetoes bills enacted just before Congress goes into recess, without the possibility of override. Washington set the precedent for using the veto purely on policy grounds, but it was Jackson who transformed the power into one that gave the President significant leverage in the legislative process itself. The President would not use the veto only to protect the Constitution against encroachment by the legislature. Jackson's veto of the Bank presented a striking declaration of independence from the other branches of government. He gave no deference to the views of Congress, the Supreme Court, or even past Presidents. Jackson believed that the President should use his power affirmatively to prevent the other branches from violating his view of the Constitution, even if their policy did not infringe on executive branch prerogatives. The implication was that the other branches were also free to use their authority to advance their constitutional views, and they were in no way bound by the President.
Jackson made the President a permanent player in the legislative process, one whose power far exceeded any individual member of Congress. As Leonard White has observed, Jackson endowed the Presidency with the political force of two-thirds of Congress.114 Because of Jackson, any modern President with the support of 34 Senators can stall any legislation. Not only does the veto give the President blocking power, but the mere threat of a veto provides him with a political advantage in influencing legislation.115 Forceful Presidents have combined the veto power with the right to propose bills to ensure that Congress begins with the administration's proposals first.
Jackson's veto was greeted with howls of protest. Biddle wrote to Clay that Jackson was a demagogue calling for anarchy.116 Daniel Webster told the Senate the President was grabbing for "despotic power."117 "[A]lthough Congress may have passed a law, and although the Supreme Court may have pronounced it constitutional," Webster said, "yet it is, nevertheless, no law at all, if he, in his good pleasure, sees fit to deny it effect; in other words, to repeal and annul it."118 Webster foresaw that Jackson's example would lead to today's presidential influence over legislation. His veto message "claims for the President, not the power of approval, but the primary power, the power of originating laws."119 Clay followed with the claim that the veto was reserved for extraordinary moments when Congress had acted rashly.120 Now, Clay observed, the President's veto had become a threat used to influence legislation, which was "hardly reconcilable with the genius of representative government."121
Jackson obviously aimed his message over the heads of Congress to the American people, and it was reproduced in newspapers and pamphlets by the tens of thousands, some at the expense of Biddle, who thought the arguments so specious that they made for good propaganda. More importantly, with the presidential elections approaching, Jackson was asking the people to decide the Bank issue by voting for him. As Remini writes, "[N]ever before had a chief executive taken a strong stand on an important issue, couched his position in provocative language, and challenged the American people to do something about it if they did not approve."122 Jackson transformed the presidential election into a plebiscite; victory in the 1832 election would give the President a popular mandate to pursue the destruction of the Bank.
Jefferson, too, had turned the election of 1800 into a referendum, but it was not so much on a single issue as it was a struggle between the Federalists and Republicans for power. The first nominating conventions, held by the two parties in 1832, strengthened the link between popular wishes and his reelection. There was no mistake about the issues involved--Jackson's exercise of his constitutional powers stayed at the center of the election. National Republicans, who nominated Clay and counted Webster and Calhoun among their leaders, argued that Jackson had seized unconstitutional powers and was bent on tyranny.123 A National Republican newspaper, for example, accused Jackson of annulling "two houses of Congress, the Supreme Court, and the Constitution of the United States."124 Another asked, regarding Jackson and his veto, "Could it have any effect but to swell the power and augment the influence of the Executive ...?"125 A third declared that the Constitution was "a dead letter, and the will of a DICTATOR is the Supreme Law!"126
Democrats responded that Jackson represented the wishes of the common man against the concentrated power of the Bank and a wealthy aristocracy.127 They had the luck to fight against a Bank determined to make itself a bigger target by interfering in the election. Biddle paid to reprint Webster's and Clay's speeches against the veto, and poured roughly $100,000 into the campaign.128 Democrats used this as ammunition against Clay, claiming he fronted for a Bank that was trying to buy the election and bribe public officials.129 Rather than run from Jackson's use of presidential power, Democrats welcomed the focus on their leader and used mass rallies, parades, and campaign events to make him the center of the campaign.130
Jackson won reelection overwhelmingly. He gained 219 electoral votes to Clay's 49, with a third-party candidate receiving seven.131 Jackson won all of the South and the West except for Clay's home state of Kentucky and South Carolina, which gave its votes to someone who was not running. He lost only four other states, all in the Northeast. He won about 55 percent of the popular vote, with 687,502 in his favor against 530,189 for his opponents, only a slight decline from his percentage of the vote in the first election.132 The election vindicated Jackson's decision to gamble on his opposition to the Bank. It transformed the nature of the Presidency by grounding his political support on the majority, rather than the states, the Electoral College, or his political party. Jackson would use this broad base to claim that his views on policy were those of the American people, and to lay an equal, if not superior, claim to that of Congress for the mantle of representative of the democracy.
The second term began with a renewed offensive against the Bank. Old Hickory was not going to wait four years for "the Monster" to go quietly. In spring 1833, Jackson decided to transfer all federal funds from the Second Bank to state banks.133 Withdrawal would drain about half of the deposits from the Bank, effectively crippling it. Jackson believed that this would prevent Biddle from pushing a recharter bill through Congress.134 It also placed the general in his favorite position, that of dictating events. On March 19, Jackson read a paper to his cabinet, laying out his policy toward the Bank.135 He would not suffer its recharter and he would manage federal funds through state banks
or possibly a new federal bank limited to doing business only in Washington, D.C. (which would not run afoul of Jackson's constitutional objections).136 With only Taney in agreement, the rest of the cabinet thought it best to keep the government's business with the Bank.137 Treasury Secretary Louis McLane argued in a lengthy letter to Jackson against withdrawal because of the effect on the economy and worries about mismanagement by the state banks.138 The 1816 statute establishing the Second Bank authorized only the Treasury Secretary to withdraw federal funds from the Bank and required him to explain his reasons to Congress.139
Congress opposed any withdrawal. Calhoun, Clay, and Webster continued to dominate in the Senate, where the Jacksonians had failed to win a majority in the 1832 elections. Even the Democratic House overwhelmingly declared that federal deposits were safe in the Bank.140 The President responded by drawing on his full constitutional powers to get the Bank out of the business of holding the government's money, and sparked a political and constitutional controversy of a kind that has rarely been repeated in the nation's history. Jackson first rearranged his cabinet to get McLane out of Treasury -- he was moved to State -- replacing him with William Duane, a known opponent of the Bank.141 Once in office, however, Duane got cold feet and delayed any decision.142