Organized Crime

Americans were not always slaves to government bureaucracy in the way that they are today. One of the best historical examples of this is how Americans once utilized the Jeffersonian states’ rights tradition of nullification and interposition to assist President Andrew Jackson in his battle to defund the Second Bank of the United States, the successor of the first Bank of the United States (BUS).

The BUS originally had a twenty-year charter (beginning in 1791) that was not renewed by Congress because the bank did exactly what the Jeffersonians feared it would do: It created 71 percent price inflation in its first five years, generated boom-and-bust cycles, and corrupted politics. It was resurrected by Congress in 1816 to ostensibly help to monetize the war debt related to the War of 1812.

In the same year that the BUS was resurrected—1816—Indiana and Illinois amended their state constitutions to prohibit the BUS from establishing branches within their jurisdictions. North Carolina, Georgia, and Maryland joined in the battle by imposing heavy taxes on BUS branches that existed within their borders. Their obvious intent was to tax them out of business. The whole story is told by James J. Kilpatrick in his book, The Sovereign States: Notes of a Citizen of Virginia.

Understanding that such taxes could destroy the BUS the federal government brought suit in Maryland (McCulloch vs. Maryland, 1819), confident that Chief Justice John Marshall, a pro-bank nationalist who idolized Alexander Hamilton, would rule in its favor. And so he did, famously coining the slogan, “the power to tax is the power to destroy.”

But that was back in the day when the opinion of the Supreme Court was viewed as just the opinion of the Supreme Court and not a commandment handed down from God, as it is today. In the 1820s Americans were still of the opinion that there were three branches of government, not just one (the judicial), and that all three branches should have an equal say on constitutional issues, as should the citizens of the sovereign states through acts of nullification, if need be. The Constitution, after all, is silent on the subject of who is to be “the” arbiter of constitutionality and certainly does not give sole responsibility to the federal judiciary.

Despite Marshall’s opinion that the BUS was constitutional and that state taxes on it were illegitimate, numerous states continued to harass the bank. Ohio imposed a $50,000 per year tax on each of two branches of the BUS. When the bank refused to pay up the Ohio state auditor ordered a deputy, one John L. Harper, to collect the tax. As Kilpatrick explains it:

[O]n the morning of September 17, Harper made one last request for voluntary payment. When this was denied, he leaped over the counter, strode into the bank vaults, and helped himself to $100,000 in paper and specie. He turned this over to a deputy . . . stuffing this considerable hoard into a small trunk, with which the party thoughtfully had come equipped.

The Ohio legislature considered Marshall’s opinion, and the existence of a national bank, to be a dire threat to citizen sovereignty and a dangerous precedent for all Americans, not just the people of Ohio. It issued a proclamation that: “To acquiesce in such an encroachment upon the privileges and authority of the States, without an effort to defend them, would be an act of treachery to the State itself, and to all the states that compose the American Union.”

The Ohio state legislature stated that it was aware of the “theory” that the Supreme Court should be the lone interpreter of the Constitution—a theory that was invented by John Marshall, by the way. But it also declared that “to this doctrine . . . they can never give their assent,” writes Kilpatrick. The Ohio legislature quoted Jefferson’s Kentucky Resolutions to bolster its case that each party to a constitutional contract has an equal right to interpret the Constitution for themselves. John Marshall was wrong, they said, and considered themselves to be under no obligation to acquiesce in his “ruling.”

The Ohio legislature then promised to return the $100,000 if the BUS left the state. If not, it threatened a law that would forbid “the keepers of our jails” from imprisoning any person “committed at the suit of the Bank of the United States”; prohibit Ohio courts from “taking acknowledgements of conveyance where the Bank is a party”; and forbade “our courts, justices of peace, judges and grand juries from taking any cognizance of any wrong alleged to have been committed upon any species of property owned by the Bank.” It then denounced the Supreme Court and Chief Justice John Marshall for their violation of the constitution.

The BUS fought back, having federal marshals arrest and imprison the Ohio state treasurer. While in prison the keys to the state government’s vaults were physically taken from him and federal bureaucrats helped themselves to the $100,000. This infuriated Ohioans even more, and they continued to oppose the Bank, as did many other states. Kentucky and Connecticut adopted the Ohio position on the Bank; South Carolina imposed a special tax on stockholders in the Bank within the state; the New York and New Hampshire legislatures enacted resolutions urging that the bank not be re-chartered. As James J. Kilpatrick concluded:

In the face of this unrelenting warfare, the bank could not survive. Withdrawal of the public deposits began in August of 1833, under Jackson’s order; and when Pennsylvania Governor Wolf, who had been one of the Bank’s staunchest supporters, denounced the institution in March of 1834, public opinion was fatally influenced against the Bank. The Pennsylvania senate adopted fresh resolutions urging that the Bank not be re-chartered. The following month, the United States House of Representatives adopted the same view, and the Bank’s days came to an end.

President Andrew Jackson is generally credited with vetoing the recharter of the Second Bank of the United States, which he certainly did. But he had a lot of help in his long, drawn-out political battle, and that help came from the people of the free, independent, and sovereign states who opposed any move in the direction of granting a monetary monopoly to the politicians in Washington, D.C.