12-4 Prosperity and Panic

Ø Jackson’s policies caused the economy to collapse after he left office and affected the next election.

Ø The condition of the economy continues to affect the outcomes of presidential elections.

ONE AMERICAN’S STORY

Nicholas Biddle was the kind of person that Andrew Jackson neither liked nor trusted. Biddle was wealthy, well educated, and came from a socially prominent Philadelphia family. He was also the influential president of the powerful Second Bank of the United States—the bank that Jackson believed to be a monster of corruption. Jackson declared war on Biddle and the bank during his 1832 reelection campaign. But Biddle felt sure of his political power.

A VOICE FROM THE PAST

I have always deplored making the Bank a [political] question, but since the President will have it so, he must pay the penalty of his own rashness. . . . [m]y hope is that it will contribute to relieve the country

of the domination of these miserable [Jackson] people.

Nicholas Biddle, from a letter to Henry Clay dated August 1, 1832

For his part, Jackson vowed to “kill” the bank.

Mr. Biddle’s Bank

At the time of Jackson, the Second Bank of the United States was the most powerful bank in the country. It held government funds and issued money. As its president, Nicholas Biddle set policies that controlled the nation’s money supply. Although the bank was run efficiently, Jackson had many reasons to dislike it. For one thing, he had come to distrust banks after losing money in financial deals early in his career. He also thought the bank had too much power. The bank made loans to members of Congress, and Biddle openly boasted that he could influence Congress. In addition, Jackson felt the

bank’s lending policies favored wealthy clients and hurt the average person. To operate, the bank had to have a charter, or a written grant, from the federal government. In 1832, Biddle asked Congress to renew the bank’s charter, even though it would not expire until 1836. Because 1832 was an election year, he thought Jackson would agree to renewal rather than risk angering its supporters. But Jackson took the risk.

Jackson’s War on the Bank

When congress voted to renew the bank’s charter, Jackson vetoed the renewal. In a strongly worded message to Congress, Jackson claimed the bank was unconstitutional. He said the bank was a monopoly that favored a few at the expense of the many. The Supreme Court earlier ruled that the bank was constitutional. But Jackson claimed elected officials had to judge the constitutionality of a law for themselves. They did not need to rely on the Supreme Court. His veto message also contained this attack on the bank.

A VOICE FROM THE PAST

“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…. But when the laws undertake to make the rich richer and the potent more powerful, the humble members of society… have a right to complain of the injustice of their Government.”

Andrew Jackson, veto message, July 10^th, 1832

Jackson’s war on the bank became the main issue in the presidential campaign of 1832. The National Republican Party and its candidate, Henry Clay, called Jackson a tyrant. They said he wanted too much power as president. The Democrats portrayed Jackson as a defender of the people. When he won reelection, Jackson took it as a sign that the public approved his war on the bank. In his second term, Jackson set out to destroy the bank before its charter ended in 1836. Jackson had government funds deposited in state banks, which opponents called Jackson’s “pet banks.”

Nicholas Biddle president of the Second Bank of the United States fought back, by making it harder for people to borrow money. He hoped the resulting economic troubles would force Jackson to return government deposits to the bank. Instead, the people rallied to Jackson’s position. Eventually, the Second Bank of the United States went out of business. Jackson had won the war, but the economy would be a victim.

Prosperity Becomes Panic

Most of the nation prospered during Jackson’s’ last years in office. Because it was easier to borrow money, people took out loans to buy public land, and the economy boomed. But the “pet banks” issued too much paper money. The rise in the money supply made each dollar worthless. As a result, prices rose. Inflation, which is an increase in prices and decrease in the value of money, was the outcome. To fight inflation, Jackson issued an order that required people to pay in gold or silver for public lands.

Jackson left office proud of the nation’s prosperity. But it was puffed-up prosperity. Like a balloon, it had little substance. Because of Jackson’s popularity, his vice-president, Martin Van Buren, was elected president in 1836, within a few months after Van Buren took office, a panic, spread through out the country. It became know as the Panic of 1837. People took their paper money to the banks and demanded gold or silver in exchange. The banks quickly ran out of gold and silver.

When the government tried to get its money from the state banks, the banks could not pay. The banks defaulted, or went out of business. A depression, or severe economic slump, followed. The depression caused much hardship. Because people had little money, manufactures no longer had customers for their goods. Almost 90 percent of factories in the East closed in 1837. Jobless workers had no way of buying food or paying rent. People went hungry. They lived in shelters or on the streets, where many froze in the winter. Every section of the country suffered, but the depression hit hardest in the cities. Farmers were hurt less because they could at least grow their own food. The depression affected politics, too.

The Rise of the Whig Party

In the depths of the depression, Senators Henry Clay and Daniel Webster argued that the government needed to help the economy. Van Buren disagreed. He believed that the economy would improve if left alone. He argued that “the less government interferes with private pursuits the better for the general prosperity.” Many Americans blamed Van Buren for the Panic, though he had taken office only weeks before it started. The continuing depression made it almost impossible for him to win reelection in 1840.

Van Buren faced a new political party in that election During Jackson’s war on the national bank, clay Webster, and other Jackson opponents had formed the Whig Party. It was named after a British party that opposed royal power.

The Whigs opposed the concentration of power in the chief executive, whom they mocking called “King Andrew” Jackson. In 1840, the Whigs chose William Henry Harrison of Ohio to run for president and John Tyler of Virginia to run for vice-president.

The Whigs nominated Harrison largely because of his military record and his lack of strong political views. Harrison had led the army that defeated the Shawnees in 1811 at the Battle of Tippecanoe. He also had been a hero during the War of 1812. The Whigs made the most of Harrison’s military record and his nick name, Old Tippecanoe.” The phrase “Tippecanoe and Tyler too” became the Whig election slogan.

The Election of 1840

During the 1840 election campaign, the Whigs emphasized personalities more than issues. They tried to appeal to the common people, as Andrew Jackson had done. Harrison was the son of a Virginia plantation owner. However, because he had settled on a farm in Ohio, the Whigs said Harrison was a true Westerner. They used symbols of the frontier, such as a log cabin, to represent Harrison. The Whigs contrasted Harrison with the wealthy Van Buren. Harrison won in a close election.

At his inauguration, the 68-year-old president spoke for nearly two hours in cold March weather with no hat or coat. He came down with a cold that developed into pneumonia. On April 4^th, 1984, one month after being inaugurated, Harrison died, the first president to die in office. The election of 1840 showed the importance of the West in American politics.