Since its inception under Treasury Secretary Alexander Hamilton in 1791, a Bank of the United States had been a hot topic of debate in the early years of the republic until its charter lapsed in 1811. Proponents, such as Hamilton, argued that banks were the "nurseries of national wealth." Proponents, however, countered that a national bank would give a handful of wealthy elites undue influence in the economy. The debate continued largely along these lines when the Second Bank of the United States was chartered in 1816. Proponents, such as Andrew Jackson and his supporters, argued that the Bank was merely the tool of moneyed interests which sought to deprive the liberty and wealth of the common man. There was also politics at work. Nicholas Biddle, the banks director, was a fierce foe of Jackson, as was Senator Henry Clay of Kentucky. Both sought to use the Bank as a political issue against the popular president when a bill for recharter was submitted 4 years early. "The Bank is trying to kill me," Jackson is reported to have told an associate, "but I will kill it." Despite his veto, Jackson went on to win re-election - and to kill the Second Bank of the United States.
Questions to Consider
Washington, July 10, 1832
To the Senate:THE BILL "TO MODIFY AND CONTINUE" the act entitled "An act to incorporate the subscribers to the Bank of the United States" was presented to me on the 4th July instant. Having considered it with that solemn regard to the principles of the Constitution which the day was calculated to inspire, and come to the conclusion that it ought not to become a law, I herewith return it to the Senate, in which it originated, with my objections.
A bank of the United States is in many respects convenient for the government and useful to the people. Entertaining this opinion, and deeply impressed with the belief that some of the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the states, and dangerous to the liberties of the people, I felt it my duty at an early period of my administration to call the attention of Congress to the practicability of organizing an institution combining all its advantages and obviating these objections. I sincerely regret that in the act before me I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the Constitution of our country.
The present corporate body, denominated the president, directors, and company of the Bank of the United States, will have existed at the time this act is intended to take effect twenty years. It enjoys an exclusive privilege of banking under the authority of the general government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of many millions to the stockholders.
An apology may be found for the failure to guard against this result in the consideration that the effect of the original act of incorporation could not be certainly foreseen at the time of its passage. The act before me proposes another gratuity to the holders of the same stock, and in many cases to the same men, of at least $7 million more. This donation finds no apology in any uncertainty as to the effect of the act. On all hands it is conceded that its passage will increase at least 20 or 30 percent more the market price of the stock, subject to the payment of the annuity of $200,000 per year secured by the act, thus adding in a moment one-fourth to its par value. It is not our own citizens only who are to receive the bounty of our government. More than $8 million of the stock of this bank are held by foreigners. By this act the American republic proposes virtually to make them a present of some millions of dollars. For these gratuities to foreigners and to some of our own opulent citizens the act secures no equivalent whatever. They are the certain gains of the present stockholders under the operation of this act, after making full allowance for the payment of the bonus.
Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people. It is due to them, therefore, if their government sell monopolies and exclusive privileges, that they should at least exact for them as much as they are worth in open market. The value of the monopoly in this case may be correctly ascertained. The $28 million of stock would probably be at an advance of 50 percent and command in market at least $42 million, subject to the payment of the present bonus. The present value of the monopoly, therefore, is $17 million, and this the act proposes to sell for $3 million, payable in fifteen annual installments of $200,000 each.
It is not conceivable how the present stockholders can have any claim to the special favor of the government. The present corporation has enjoyed its monopoly during the period stipulated in the original contract. If we must have such a corporation, why should not the government sell out the whole stock and thus secure to the people the full market value of the privileges granted? Why should not Congress create and sell $28 million of stock incorporating the purchasers with all the powers and privileges secured in this act and putting the premium upon the sales into the treasury?
But this act does not permit competition in the purchase of this monopoly. It seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of government. It appears that more than a fourth part of the stock is held by foreigners and the residue is held by a few hundred of our own citizens, chiefly of the richest class....