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Jackson, the Bank War, and the Legacy of the Second Bank of the United States

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  • Peter L. Rousseau

Abstract

President Jackson vetoed the bill to recharter the Second Bank of the United States on July 10, 1832. I describe events leading to the veto and through the bank's dissolution in 1836 using private correspondence and official government documents. These sources reveal a political process through which charges against the bank took hold, accomplices and backup plans were lined up, and the bank was ultimately destroyed with the assistance of chartered banks in New York City. Although the aggressive means by which the bank was dismantled led to a system-wide financial failure and recession in the short term, the long-run outcome was likely a wider diffusion of banking services and a more efficient allocation of capital. The Federal Reserve benefited from applying a more rigorous regulatory structure onto the grid that the populists, free bankers, and National Banking System established.

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  • Peter L. Rousseau, 2021. "Jackson, the Bank War, and the Legacy of the Second Bank of the United States," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 501-507, May.
    • Handle: RePEc:aea:apandp:v:111:y:2021:p:501-07
    DOI: 10.1257/pandp.20211095
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    References listed on IDEAS

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    1. Bray Hammond, 1936. "Free Banks and Corporations: The New York Free Banking Act of 1838," Journal of Political Economy, University of Chicago Press, vol. 44(2), pages 184-184.
    2. Rousseau, Peter L., 2002. "Jacksonian Monetary Policy, Specie Flows, And The Panic Of 1837," The Journal of Economic History, Cambridge University Press, vol. 62(2), pages 457-488, June.
    3. Warren E. Weber, 2006. "Early state banks in the United States: how many were there and where did they exist?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 30(Sep), pages 28-40.
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    More about this item

    JEL classification:

    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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