Financial History Issue 116 (Winter 2016) | Page 30

THE BANK WAR By Paul Kahan In the wake of the Great Recession of 2008, voices on both the right and the left criticized the Federal Reserve, often arguing that it exercised too much control over the American economy. Some went so far as to call for the Fed’s abolition and for the United States to return to the gold standard. A few semesters later, during a lecture on Jacksonianism in my introduction to American history class, a student commented that history was repeating itself, noting that the rhetoric and concerns about the Bank War were reflected in memes he saw on the Internet. That the Bank War is a crucial turning point in the political history of the United States is unquestionable. As historian David Kinley noted more than a century ago, the conflict over the Bank of the United States was fought “with a violence of partisan feeling that entered… [few other] discussions which determined measures that were to be worked into our political life.” Though professional historians are well aware of the Bank War’s importance to American political and economic history, few Americans today know that the Bank War and its aftermath led to the first congressional censure of a President, the first Senate rejection of a cabinet nominee, the first use of the filibuster in US history and at least one fatal duel. Congress had chartered the First Bank of the United States (BUS) for 20 years in 1791, but President James Madison allowed the institution’s charter to expire in 1811. The outbreak of the War of 1812 and the economic chaos it wrought convinced Andrew Jackson, Nicholas Biddle and the Fight for American Finance Andrew Jackson Nicholas Biddle many of the bank’s most ardent opponents that the country needed a central bank, so in 1816, Congress granted the Second Bank of the United States a 20-year charter. Though many of the BUS’s opponents recognized the need for a central bank, they did so only grudgingly. Moreover, some policy missteps during the Panic of 1819 fostered animosity toward the BUS, particularly in the South