The issue of central banking has been the source of significant controversy in the United States, from its founding in 1776 to today’s clashes over monetary power. In light of President Trump’s ongoing challenges to the Federal Reserve over independent monetary policy and his recent dismissal of one of its governors, examining the history behind presidential warfare against central banking is as relevant now as ever.
The battle began with the First Bank of the United States, championed by Alexander Hamilton and the Federalists. Despite staunch opposition from Thomas Jefferson and the Democratic-Republicans, who viewed the bank as an unconstitutional corporate monopoly that would “break down the most ancient and fundamental laws,” the bank was established in 1791 with a 20-year charter. President Madison later reinstated it as the Second Bank of the United States in 1816 after the War of 1812. This institution, just over a decade later, would face an existential threat from Andrew “Old Hickory” Jackson, whose famous bank war is perhaps the most consequential presidential assault on central banking in American history.
While some laud Jackson as a champion of economic freedom against financial monopolies, others consider him a disaster for liberty, claiming that the methods he employed in his bank war gave rise to the imperial presidency seen today. This raises an important question: Was Jackson’s victory over the banks a triumph for liberty, or did it merely expand federal authority under the guise of constraining it?
Andrew Jackson was born to humble beginnings as the son of Scotch-Irish immigrants along the North-South Carolina border. His subsequent rise to fame as a war hero positioned him as the self-made “people’s man,” a distinction he would carry for the duration of his political career. Jackson’s defeat in the 1824 election, despite winning both the electoral college and popular vote, fueled populist sentiment against political and economic elites and propelled him to a decisive victory in the 1828 election. Jackson’s political motivations were rooted in a deep distrust of financial and political elites, a firm belief in states’ rights, and an aim to dismantle corruption in the government. This populist mandate led him to become one of the nation’s “most vigorous and powerful chief executives,” expanding presidential authority beyond the scope of any of his predecessors and ushering in a new era in which the president was seen as a direct representative of the people.
As president, Jackson largely made decisions based on his own experiences and opinions rather than being guided by a larger agenda. For his supporters, this worked insofar as his personal opinions largely reflected those of the masses. However, this also meant that many of his grudges and personal losses were reflected in policy. One of the reasons for his strong interest in abolishing the Second Bank, for example, was his personal dispute with the president of the bank, Nicholas Biddle.
Jackson made several promises upon his ascension to the presidency, chief among them being dismantling the Biddle-led “hydra of corruption.” Jackson saw the bank as a clear attempt to oust economic and political power from the hands of the common man and into the hands of an insulated oligarchy, which had been artificially inflated in power during the Era of Good Feelings. He condemned the bank as an elitist power grab and an unconstitutional usurpation of popular sovereignty. In 1832, after Congress sent a bill to renew the Second Bank’s charter to Jackson’s desk to sign, he issued one of the most famous vetoes in American history, declaring the Bank “unauthorized by the Constitution, subversive to the rights of States, and dangerous to the liberties of the people.” After a lengthy battle with both Congress and Biddle, Jackson ultimately succeeded in killing the bank with his veto pen.
Whether selfishly motivated or not, Jackson had a strong ideological grounding for his opposition to the Second Bank. In the Constitution, there was no clause expressly granting Congress permission to create a national bank of any kind. Although its original existence was justified under the Necessary and Proper Clause, the Hamiltonian notion of “implied powers” used by the Supreme Court was, to many, a spurious exegesis of the Constitution. Thomas Jefferson was highly skeptical of the bank, rejecting the mercantilist belief that trade needed to be centrally managed and foreseeing that Washington, DC would have complete control over loans and credit since the states would lack the power to regulate money internally. Naturally, this led to disparate outcomes, as the centralized bank did not serve all interests equally; instead, it was highly dependent on the prevailing political climate.
Jackson recognized that allowing a single entity to control the country’s money flow allowed it to undertake more risky ventures than it would in a competitive environment. The Bank made bad loans, and then simply wrote them off as “credit.” Jackson himself lost nearly all of his fortune in the Panic of 1796, as his land speculation was based on promissory notes, which also made him suspicious of printed fiat currency. Already an advocate for the use of gold and silver, this experience with money mismanagement contributed to Jackson’s desire to move monetary power away from a federal system.
Jackson looked beyond the principle and considered the bank in practice. As Murray Rothbard astutely observed, “over the centuries, government has, step by step, invaded the free market and seized complete control over the monetary system.” Its greatest tool in achieving this has been the use of central banking and the weaponization of inflation to pursue political ends. This is precisely what Andrew Jackson observed from the Second Bank, which was favoring the wealthy and influential at the expense of normal citizens who had less clear ties to power. For example, because the bank was focused on maintaining influence from the central hub of Washington, DC, it was extremely difficult for people interested in expanding westward to secure funding. Jackson saw this expansion as imperative to the nation’s long-term prosperity, and the bank’s clear disfavor towards expansionism was yet another strike against its possible recharter. The Bank was managed and endorsed by the elite, and Jackson wished to return to a state banking system more favorable to the common man.
While Jackson’s grievances with the bank were indeed legitimate, his strong-armed weaponization of executive power only created more problems than they solved. Jackson was motivated by the notion that he was a “direct representative of the people” and had a political prerogative to execute the law, even if it meant imposing his will at the cost of violating his own supposed commitment to state sovereignty. Jackson justified himself by conflating his own will with that of the American people as a staunch opponent “to the norms and rules established by the elites” that he believed betrayed their duties. In many ways, he became the self-anointed political demagogue the Framers labored to prevent. He used his authority to run “roughshod over the Constitution’s constraints on his power” and accumulate executive power that paid no heed to “constitutional or even precedential boundaries.”
Before Jackson, the veto was primarily invoked only when presidents believed an act violated the Constitution. While Jackson dismissed it out of hand as unconstitutional, he was also the first president to veto a bill on political grounds. Jackson’s political objections set the precedent for the veto being used as a partisan political tool, readily abused by subsequent presidents against any legislation they personally disagreed with. Even the pocket veto—allowing bills to die by refusing to take any action on them until Congress adjourns—became a weapon in his arsenal, allowing him to bypass any potential congressional overrides.
Moreover, Jackson’s constitutional arguments against the bank had already been rejected by the Supreme Court in McCulloch v. Maryland (1819), which affirmed that the federal government possessed implied powers to establish a national bank. Rather than submit to his country’s legal procedures, Jackson instead asserted the radical new doctrine of departmentalism, which declared—without precedent and in clear violation of Marbury v. Madison (1803) and the separation of powers—that each branch of government had a coequal right to interpret the Constitution. Jackson’s veto, in summation, ignored both the will of Congress and serial Supreme Court decisions.
Jackson attempted to usurp Congressional power of the purse in September 1833 by removing the Second Bank’s treasury deposits and giving them to state-run pet banks run by his partisan supporters that lacked any statutory authority and were often of dubious quality. After Secretary of the Treasury William Duane refused, Jackson fired him and appointed Roger Taney, who promptly carried out the withdrawals despite never even being confirmed by the Senate. Jackson incessantly condemned such insider dealings from the national bank, but had no qualms about replicating them when it became politically expedient for him to do so with his pet banks or through the spoils system.
This, coupled with his decision to actively sabotage a legally chartered institution rather than fulfill his presidential obligation to execute existing law (including the Second Bank, which remained legal until 1836), led to Jackson’s censure by the Senate in 1834 for assuming “upon himself authority and power not conferred by the Constitution and laws, but in derogation of both.”
Andrew Jackson’s bank war highlighted the “deep tensions between executive authority, constitutional limits, and economic liberty” and revealed a perplexing paradox still seen in American populism today: Many presidents must concentrate their own power to dismantle a different concentration of power. Jackson’s bank war was a masterclass in political maneuvering, but also a disaster for presidential fidelity to constitutional limitations and consolidated power where it was least accountable: the presidency itself.
In principle, Jackson successfully challenged an institution widely seen as a tool for political and economic elites by eliminating the Second Bank of the United States and delaying the rise of another centralized financial authority for over seven decades. In practice, however, it was a pyrrhic victory. His power-grabbing created a foundation for the emergence of an unaccountable federal bureaucracy, a far more powerful central bank in the Federal Reserve, and a modern presidency that weaponizes its power to achieve political ends. Jackson’s most recognizable memorial is his face on the $20 paper currency he detested, issued by the central bank he fought tooth and nail to abolish.
Whether Andrew Jackson’s Bank War was truly a victory for liberty is complicated, but in the end, his story serves as a cautionary tale of how the methods we choose to constrain government power are, ultimately, just as relevant as the constraints themselves.
