When Andrew Jackson assumed office as the 7th U.S. president, he railed against the Second Bank of the United States. Jackson believed that this financial institution, which was the forerunner of today’s Federal Reserve System, was destructive because it held too much power over the U.S. economy and it served the privileged elite at the expense of the working class. Perhaps more importantly, Jackson opposed the Bank because it supported many of his political opponents. Consequently, Jackson set out to destroy the Bank.

The Second Bank of the United States

Following the War of 1812, Congress chartered the Second Bank of the United States (the First Bank’s charter had expired in 1811). Inflation had run rampant during the war, and the Bank was created to stabilize the economy. However the Bank ultimately made matters worse by printing paper money and increasing lending to banks and businesses. This led to a boom of economic prosperity in the late 1810s that crashed with the Panic of 1819.

When the Bank attempted to offset inflation by contracting the paper money in existence (i.e., deflation), many people could no longer cover their loans. A massive wave of bankruptcies, foreclosures and bank failures ensued in what became the worst economic depression in U.S. history up to that time. The depression ended within two years, but many did not forget the Bank’s role in the economic crisis.