Jackson Vetoes Second Bank Recharter, Triggering Financial Manipulation by Both Sides

President Andrew Jackson vetoes legislation to renew the Second Bank of the United States’ charter, four years before its scheduled expiration, delivering a “popular and effective” message declaring the Bank “unauthorized by the Constitution, subversive to the rights of States, and dangerous to the liberties of the people.” While Jackson frames his opposition as defending “the planters, the farmers, the mechanic and the laborer” against “the monied interest,” the veto triggers a cycle of financial manipulation by both the president and Bank president Nicholas Biddle that destabilizes the economy and demonstrates how personal power struggles between political actors can supersede public interest. The recharter application, submitted early by Biddle in alliance with Senators Henry Clay and Daniel Webster, represents a calculated political maneuver to pressure Jackson into making a decision before the 1832 presidential election, hoping to use the Bank as a wedge issue.

Jackson’s response to electoral victory—removing federal deposits from the Second Bank in late 1833 and placing them in state banks—triggers deliberate economic sabotage by Biddle. Rather than attracting new private deposits or raising capital to offset the loss of government funds, Biddle announces the Bank will instead limit credit and call in outstanding loans, deliberately engineering economic contraction to create public backlash against Jackson and force deposit restoration. This “Biddle’s Contraction” causes widespread business distress as the Bank’s loans fall from 53 percent of assets in 1832 to around 40 percent in 1835. Historian Edward Pessen describes Biddle as “a man fighting fire with fire, ready to drive banks to their knees and bring economic activity to a halt” to achieve political objectives, demonstrating how financial institutions can be weaponized against public welfare when their leaders prioritize institutional preservation over economic stability.

Biddle’s strategy backfires catastrophically, alienating potential supporters and confirming Jackson’s warnings about the Bank’s “irresponsible power” serving wealthy interests rather than national needs. The Second Bank’s charter expires in 1836, and Biddle accepts Pennsylvania’s offer to convert it into a state-chartered bank. The removal of the Bank as a regulating force enables state banks to print currency and lend money in exorbitant amounts, producing high inflation that combines with Jackson’s policies favoring hard currency to trigger the Panic of 1837—a severe financial crisis. The Bank War demonstrates kakistocracy through both leaders: Jackson’s personal vendetta against banks (rooted in a decades-old land deal where paper notes became worthless) shapes national economic policy, while Biddle’s willingness to inflict economic pain on citizens to preserve institutional power shows how financial elites manipulate markets for political ends, leaving the nation without stable banking until the Federal Reserve’s creation in 1913.