Andrew Jackson 1767-1845 A brief biography
Background of the "Bank Wars"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.