A Republic No More. Jay Cost

of Representatives had even voted 109-46 to affirm that the deposits were secure. Duane had told Jackson that he would resign his office so the president could appoint somebody to carry out the order, but when the time came, the secretary refused to step down. So, Jackson fired him, replacing him with Roger Taney in an executive coup reminiscent of the “Saturday Night Massacre” during the Nixon administration.⁶⁷

      For Jackson, the legal niceties of the Second Bank charter were irrelevant. He had fought the Second Bank in the election, had won handily, and now had a mandate from the people to do exactly what he pleased, the law be damned. The Senate, controlled by Clay and the National Republicans, disagreed, and censured him by a vote of 26-20, the first and only such Senate act against a president.⁶⁸

      This, of course, did not deter Jackson, who instructed Amos Kendall, a key Kitchen Cabinet advisor, to find state banks willing to take on the public funds. Kendall was explicit that one of the criteria for selecting banks was that they were friendly to the administration, and an analysis of the historical record has demonstrated that approximately 79 percent of all “pet” banks selected to house government deposits were controlled by Jacksonians, with most of the rest being held by independents or National Republicans friendly to the administration. And so, in violating the law, Jackson not only destroyed his greatest political enemy, he also found a new form of patronage to secure his coalition.⁶⁹

      But Biddle had one last arrow in his quiver: a credit contraction. Inevitably, the federal assault on the Second Bank would have provoked some kind of response from the latter, if for nothing else than it was unsure of just how far Jackson was willing to go.⁷⁰ Nevertheless, historians have generally concluded that Biddle took matters farther than he needed to; what’s more, there is Biddle’s own admission to being motivated by politics to inflict economic pain on the country.⁷¹ He wrote to one correspondent, “The relief, to be useful or permanent, must come from Congress and from Congress alone. If that body will do its duty, relief will come – if not, the Bank feels no vocation to redress the wrongs inflicted by these miserable people. Rely upon that. This worthy President thinks that because he has scalped Indians and imprisoned judges, he is to have his way with the bank. He is mistaken.”⁷² To another, he wrote: “Nothing but the affidavits of suffering abroad will produce any effect in Congress. . . . Our only safety is in pursuing a steady course of firm restriction – and I have no doubt that such a course will ultimately lead to restoration of the currency and the recharter of the bank.”⁷³

      Thus, between January 1834 and October 1834 the Second Bank’s reserve ratio rose from 0.371 to 0.670, and its specie reserve increased from $10 million to $15.6 million. The effect of this action was to drive the economy into a relatively mild recession, something on the order of the contraction experienced in 1949.⁷⁴ In the end, what stopped the Second Bank’s squeeze was the widespread acknowledgment that the institution was sound, even with the deposits removed, and thus in a position to give relief, especially to New York investors. Still, even as Biddle loosened credit restrictions, he refused to help the banks in Washington and Baltimore, whose misfortunes traced back to the mismanagement of local pets (run by friends of Taney, no less).⁷⁵

      Biddle’s lesson failed to take hold in the public mind, and his contraction meant the destruction of whatever credibility the Second Bank still had. Biddle slinked off the national scene; he secured for it a state charter in Pennsylvania, but it failed during the Panic of 1837. So complete was Jackson’s victory, the United States would not implement anything approaching a sensible monetary policy until the Civil War.

      Historians have remembered the period that spans Jefferson’s inauguration in 1801 to the close of Jackson’s presidency in 1837 in different ways. It has been called Jeffersonian Democracy and Jacksonian Democracy; it has been said to mark the rise of the market economy, the first full flowering of American nationalism, the birth of Manifest Destiny, and so on.

      Here, we have examined it from a different perspective, tracking the demise of the Republicans’ orthodoxy, their embrace of a more expansive government, and the corresponding rise of governmental corruption. The Republican Party had been organized to stop this growth of government, the loosening of the constitutional structures, and ultimately the corruption that followed; yet by the end of Monroe’s tenure, they had accepted all of the Federalist agenda, and more.

      Thus, less than a generation after his death, Hamilton’s ideological triumph was all but complete. The reason for his victory should be clear enough by now: the Republican opposition of the 1790s was never more than that. It was a critique, a dire prophecy of doom and gloom, a jeremiad; it was not a positive program to deal with the nation’s challenges. For all of its faults, at least Hamilton’s agenda realistically addressed the problems facing America. How to establish real independence vis-à-vis the European powers? How to grow the national economy? How to bind the states into a permanent union? These are the questions that Hamilton obsessed over. His Republican opponents were not so burdened because, as an opposition party, they did not have the obligations of governance. When they finally got their hands on the levers of power, and faced the challenges that the former secretary of the treasury did, they discovered—sooner or later—the wisdom of the Hamiltonian perspective.

      But—and herein lies the central paradox at the heart of American political corruption—none of this means the initial Republican critique of Hamilton was wrong. It simply means it was not suited to the demands of a would-be American empire. The Republicans, as we saw in Chapter One, were deeply concerned about retaining the balance among different forces in society for the sake of the public good; this was at the front and center of Madison’s thinking. When Hamilton found its straightforward interpretation to be ill-suited for his national program, the Republicans warned that his innovations threatened the balance and would ultimately lead to corruption as factions within society would gain leverage to implement their own selfish ends. As we saw in Chapter One, that is precisely what occurred.

      And, as we saw in this chapter, it occurred again when the Republicans mimicked Hamilton’s program. Congress quickly turned internal improvements and protective tariffs into opportunities for electoral gamesmanship. Graft became an increasingly common phenomenon in the fast-expanding executive departments. Bad management, stockjobbing, political payoffs, and needless economic pain characterized the early management of the Second Bank of the United States. Jackson—the closest thing America has ever had to a caesar—shoved the Native Americans aside without regard to their treaty rights. And, worst of all, the Bank War between Jackson and Biddle was a fundamentally lawless test of wills that drove the country straight into an economic recession.

      All of this can be traced—either indirectly or, in many cases, directly—to the growth of government beyond the Madisonian vision of the Constitution. Americans may have decided that they had no choice but to grow the government, that the demands of an Empire of Liberty required a more expansive view than that drawn up in Philadelphia in 1787. Nevertheless, in so doing, they effectively threw off a key tenet of Madison’s thinking, that a considered delineation of political power across well-designed institutions was necessary to prevent corruption and protect a true republic. In other words, the problem was not so much that they abandoned their old ideas of limited government; it was, rather, that they did not update the government’s institutions to handle these new powers responsibly.

      Indeed, Jefferson’s demurral from seeking a constitutional amendment for the Louisiana Purchase is illustrative. It was inconvenient for him to pursue such a structural update to the original design; better instead to seize the power before the unpredictable Napoleon changed his mind. While on the extreme end of the spectrum, this was not an isolated incident. In case after case during this period, we see Republicans behaving just as the Federalists did. The political externalities of national greatness were so pressing, they refused to consider whether the old structures of government could exercise these new powers responsibly.

      Indeed, they could not. As a consequence, corruption came to the United States of America—and as we shall see, it was here to stay.

       3