Jackson came to the presidency with a jaundiced view of banks in general, and especially the Second Bank of the United States (or "BUS"). This was a bank in private hands with a very special relationship with the government. The government used it as a repository for all its gold and silver, and the bank's bills were accepted as equivalent to gold for any payments to the government.
At this time there was no government issued paper money. Any bill of paper "money" was actually an I.O.U. from a particular bank "redeemable as specie"; specie meaning gold or silver. A puzzling question to the economic novice might be "Why wouldn't everyone convert any paper he had to gold or silver; certainly trusting a bank to redeem it some day had the disadvantage of uncertainty when compared to getting your gold or silver today. Banks did have crises of confidence leading at times to their collapse, or "suspension of payment" in specie.
However that may be, the existence of paper money has been credited with greatly increasing the amount of commerce that could go on. One example of how banking could greatly facilitate commerce is as follows: A farmer wants to buy a farm for $1000. While the farmer can't immediately produce $1000, the banker deems him a "good risk" i.e. concludes that, over time, he will be able to supply the $1000, and something additional ("interest") to make it worth while for the banker to risk his money. So the banker provides the man with a paper or papers that the bank warrants to be redeemable for the $1000, and the man signs a contract to return $1000 plus interest to the bank over time - which the proceeds of the farm will allow him to do. The consequence if he doesn't will be that land is forfeited to the banker.
As long as the bank enjoys trust, the papers supposed to be worth $1000 will be accepted by the former owner of the land, who may either save them, deposit them in a bank, or redeem them.
Had it been necessary for the farmer to carry a pile of gold to the seller, it is quite likely that the bank would not have had it on hand.
Perhaps what I'm saying is too obvious, or on the other hand, it may be largely wrong.
One function of the BUS, which most historians say it performed well (though Jackson didn't think so) was to maintain the stability of all the circulating currency. Under normal conditions it was believed, and the rule generally held good, that a bank should have immediate access to "specie" worth one fifth the value of the bills it put into circulation. This was thought, and generally proved, sufficient for the bank to be able to redeem the claims that would be made on it. In theory, everyone could try to redeem their bills on the same day so that even a "solid" bank, by these standards would be unable to fulfill its pledge, but under normal circumstances this did not happen. However, a bank that had immediate access to only a tenth or a twentieth of the specie value of its circulating bills was a real danger to itself and to its clients. The BUS would try to detect such situations in the making, and when detected, would buy up large quantities of the paper of the offending bank, and present them for redemption. Thus the bank which tried to lend far more money than it could reliably stand behind might be put in embarrassing straights which would stop them from such activities.
One result of this was that the bank had two kinds of enemies. One kind was exemplified by Jackson and Thomas Hart Benton; i.e. those who basically considered gold and silver the only legitimate form of currency. The other class of enemies were bankers, or their business partners, who were kept by the BUS from involvement in risky schemes (which they probably thought they were entitled to attempt).
There were also quite legitimate causes for concern about the BUS. It did enjoy an advantage over other banks; and for this, it paid little price of accountability to the government. Also, with its unaccountability and great money power, it could in effect bribe candidates or occupants in office, or buy newspapers to campaign for those friendly to its interests. When its existence was threatened, in the 1832 election year, it did these things on a large scale.
Jackson came into office believing that the bank, in its current form, was a menace and that something had to be done about it. Though bold when committed to a course, he did not, tend to rush into things. And there is good reason to suppose he might have only set out to constrain rather than destroy the bank, if the other side had shown a will to compromise.
For his second cabinet, he had even appointed Louis MacLane, who was pro bank, secretary of the treasury. And his message to Congress at the start of the 1831-2 was conciliatory. The opposition could not know this for sure though, and could well be supposed that Jackson considered war on the bank an unpopular issue, and meant merely to keep out of the debate until after the election, (almost surely his last) when he might, with perhaps even more allies in Congress, to kill the bank.
Clay considered the bank issue, if it could be made an issue, to be in his favor.
In 1836, the bank would die, or cease to be national bank, if not rechartered by congress. Clay, Webster, and others convinced Nicholas Biddle, the bank's President that it could be rechartered in 1832 with the present congress, and Jackson's need (so they though) to avoid the issue in order to be re-elected. But Clay and Webster indicated they could not be so sure of the recharter (and they might lose interest in the matter) if it were put off until after 1832.
If Jackson did veto the bill, he might lose the critical votes of Pennsylvania, the home of the bank, and other states with a strong commercial interest. Or, as Biddle might see it, as least bring in a veto proof majority in Congress for the bank.
Roger B. Taney, Jackson's Attorney General said "Now as I understand the application at the present time, it means in plain English this - the Banks says to the President, your next election is at hand - if you charter us, well - if not, beware of your power".
Probably this move, understood just as Taney put it, convinced Jackson that no compromise could be made with the bank.
An odd anti-Jackson combination was taking shape in Congress. The proponents of Tariffs and of the U.S. as a nation with national transportation projects, joined their most extreme ideological opponents, headed by Calhoun. The most extreme of these, including Calhoun, claimed a state's right to declare federal laws (especially tariffs) Null, and secede from the Union if the Union sought to force them to comply.
The first major act of these "strange bedfellows" was, in January 1832, the rejection of Martin Van Buren for Ambassador to Great Britain. He had been appointed in the congressional recess and served since the summer. He been a fine secretary of state. No one could doubt he was well qualified for the job. The action seemed like little more than the National Republican's indulgence of Calhoun's personal feud with Van Buren. In fact a tie vote was artificially contrived so that Calhoun could exercise the Vice-president's right of breaking such ties. This only made it easy for Jackson to have Van Buren, rather than Calhoun, as Vice President in his next term.
In January too, a formal proposal was made to recharter the bank. Administration forces in Congress did all they could to obstruct its passage, or buy time, while the administration press worked on public opinion. They launched an investigation into the bank, turning up much pressure exerted on journalists and politicians. In June the recharter bill passed both houses, and soon after, Jackson vetoed the bill, and accepted it as an election issue. When Van Buren returned from Europe, after several weeks of visiting following the news of his Senate rejection, he found a haggard Jackson declaring "The bank, Mr. Van Buren is trying to kill me but I will kill it".
The veto message was a stirring campaign document, one of the most powerful ever, though some have said it smacked of demagogy, or class warfare. Part of it went "...when the laws undertake to add to ... make the rich richer and the potent more powerful, the humble members of society - the farmers, mechanics, and laborers ... have a right to complain of the injustice of their Government". That is about as demagogic as it gets, and very mild indeed by modern standards.
The constitutional justification of the veto, contained in the message, is generally considered poor. Jackson was still hedging a bit, not quite asserting that the Constitution unconstitutionally gives the president the right to veto a bill. He was still rationalizing his veto on the grounds that he considered the Bank unconstitutional, despite the Supreme Court's ruling to the contrary. A modern president would avoid the issue of constitutionality as beside the point.
Biddle compared Jackson's veto message to "the fury of a chained panther biting at the bars of his cage ... a manifesto of anarchy, such as Marat or Robespierre might have issued to the mobs". And he and his allies were well satisfied that it would prove Jackson's undoing. This only proved how little they understood the electorate.
On September 26, 1931, the first national convention in American History nominated William Wirt for president under the banner of the Anti-Masonic Party. This strange and short lived party formed partly because of the apparent murder of William Morgan, an ex-mason, who had tried to publish the Masons' secret rituals, and denounced them.
Political Anti-Masonism may have also represented an attempt to harness the growing anti elitism, and as it happened, both major candidates for president were or had been high in the Masonic order. The Masons do seem to have been a kind of social network of great use to the climber in society. It did seem to many that politicians and judges who were Masons were letting alleged conspirators off easily.
The Anti-Mason candidate, Wirt was close in principals to Henry Clay, the National Republican candidate, and regretted having to run against Clay. The Anti-Masons, in fact, drew heavily from the ranks of National Republicans. Some Anti-Masonic and National Republican strategists felt the two parties needed each other to beat Jackson, and tried to get both parties to nominate the same man for president. Clay could have renounced the Masons and run with the Anti-Masonic party, as many did. Clay scorned the Anti-Masons, and would not approach them, though entertained some hopes that Wirt might send support his way.
The two parties remained separate, and the National Republicans nominated Clay for president in December. The Democratic party also held a convention almost half a year later, in May. They made Van Buren the Vice Presidential candidate, and Jackson's candidacy was taken for granted.
The Jackson Democrats continued to weld together a most impressive organization, and the Democratic press worked overtime to sway public opinion against the bank. They also continued the parades, glee clubs, Hickory pole raisins and other morale boosting ploys for the party. The bank reprinted and distributed speeches of Clay and Webster, and even Jackson's Veto Message, which they erroneously though was bad for Jackson. The bank also used more or less outright bribery, such as loans to journalists and politicians. At any rate, newspapers, living on ads paid for by conservative businessmen, were 2/3 - 3/4 in favor of the bank.
In the end, Jackson won 55 percent of the popular vote, and 219 electoral votes to Clay's 49 and Wirt's 7. John Floyd of Virginia got South Carolina's 11 votes
On May 6, Jackson and his entourage embarked on a tour of the country, mostly in the Northeast, where pro Union sentiment was especially strong. He was greeted by huge cheering crowds wherever he went, and received an honorary Doctorate of Law from Harvard, to the disgust of John Quincy Adams. He finally had to cut the trip short due to "bleeding at the lungs", at least partly due to the bullet he had carried in his chest for more than 20 years.
Soon after, at this zenith of his popularity, Jackson set out the ensure the demise of the Second Bank of the United States. The Bank's money still gave it enormous power, and Nicholas Biddle was more desperate than ever to preserve the bank, as later events would show.
Jackson had already kicked his pro-bank Secretary of the Treasury, McLane, upstairs to the more prestigious State Department (Livingston was willingly made ambassador to France). McLane's replacement was William J. Duane, at first thought to be amenable to Jackson's bank position. He also said he would resign should he be unable to carry out the President's policy.
In the summer of 1833, Amos Kendall went on a trip around the country looking for banks into which the Federal banking deposits could be deposited should they be withdrawn from the BUS. While some banks were afraid of the BUS's vengeance, or refused on principle to accept the deposits, the trip proved that there were plenty of banks which would agree to hold government funds despite the BUS's wrath. When Jackson told Duane to begin transferring Federal deposits to other banks, however, Duane refused, and would not resign. Jackson dismissed Duane, and he left, establishing another Jackson precedent - the firing, without pretense of resignation, of a cabinet member.
Roger B. Taney then replaced Duane, a man who enthusiastically supported the destruction of the BUS. As the withdrawal of funds went forward, the bank began a severe tightening of funds, restricting loans, and calling in as many debts as it could. The opinion of Remini, Bowers and others is that this went far beyond anything justified by the reduction in the banks funds, and that the bank in fact deliberately engineered a panic. The panic was real, causing wide-spread loss of jobs, and grinding to a halt of industry.
At first, National Republicans accepted the panic as being caused by the withdrawal of bank funds. As it continued and deepened, the country became more polarized. It was in this period (in 1834) that the National Republicans assumed the name of Whigs, the name, since the 17th century of the English party against an all powerful king, and for giving the highest authority to Parliament. Thus they labeled Jackson "King Andrew I", and drew political cartoons depicting him as a king, with a scepter labeled "Veto".
Before 1834 was over, however, many former friends of the bank became disgusted at its conduct, and even the governor of Pennsylvania economically aided as it was by the Bank in Philadelphia, denounced the bank. Webster separated himself from the other National Republicans on this issue, spoke out against it (as he had spoken out against Nullification), and became, for a while, a good friend of the Democratic administration.
In the end, the BUS was stripped of the funds which the government had placed in its keeping. It lost its friends, including Clay, and quietly lost its standing as a national bank. It was rechartered as a state bank in Pennsylvania, but only lasted a few years after that.