The Half Has Never Been Told: Slavery and the Making of American Capitalism (53 page)

Clay’s opponents
included most of Jackson’s core constituencies from the 1828 election. In the veto summer their representatives united at the first-ever national convention of the Democratic Party. They included many southeastern and southwestern enslavers who lacked personal connections to merchants and bankers. The Democrats also included small farmers, tenants, and the rural landless of the southern and northwestern
frontiers, urban workers, and Robert Potter sitting in the Granville County jail: everyone energized by Jackson’s assertive refusal to accept anything less than white male equality.

The B.U.S. openly subsidized Clay’s presidential campaign. In so doing, it did much to prove Jackson’s points—which Biddle foolishly publicized by having tens of thousands of copies of the Veto Message distributed
throughout the country. He thought that everyone who read it would agree that Jackson had produced a “a manifesto of anarchy,” addressed to a “mob.” But when all the votes were cast, Biddle’s “mob”—or, in Jackson’s terms, the “people”—had sustained the president’s veto of the pro-bank Congress, reelecting Jackson by a clear majority in both popular and electoral votes.
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Anyone who understood
at the subrational level why Robert Potter’s support increased with each conflict he fought against the Granville County elite would also understand why Clay and Biddle and the B.U.S. went down to inglorious defeat in November 1832. The destruction of the B.U.S. definitively established popular but white-males-only democracy as a winning play in the US political competition. White men forced to the
margins of the changing US economy usually chose the Democrats as their political home, and would do so for the next fourteen decades. Frontier enslavers, even if they were outside of the old bank cliques, didn’t want the same kind of democracy that Jackson’s hottest partisans among common white men wanted. But the two groups could cooperate, at least during good times.
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Yet even though Jackson
believed he was acting to protect opportunity for all white men, his policies repeatedly gave the frontier’s entrepreneurial elite exactly what most of them wanted: more Indian lands, more territories to the west for slavery, free trade for cotton, and, finally, destruction of all limits on their ability to leverage enslaved people’s bodies as credit. The majoritarian philosophy of the new Democratic
Party would be fatally alloyed by its commitment to both slavery’s expansion and the unregulated, unstable economy that one-eyed entrepreneurs desired. But in the short term, the 1832 election convinced Jackson that the people now expected him to cut off the Monster Bank’s power to divert the blessings of government to the well-connected. And Jackson’s most fervently populist followers had
long been anticipating a moment of confrontation with the nefarious powers who they thought were scheming to steal the independence and equality promised to white men by American citizenship. The B.U.S. charter allowed it to serve as the central bank until 1836, so Jackson pushed his advisers to find a legal or quasi-legal way to move against the bank. Finally, the president ordered Secretary of
the Treasury Louis McLane to remove government deposits from the B.U.S. Instead, McLane issued a report showing that Biddle’s staff had managed the deposits judiciously. So Jackson reshuffled his Cabinet. Roger Taney eventually became the secretary of the treasury, and in September 1833 he began to draw down the $10 million in federal money that was still sitting in the B.U.S. account.
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Needing
somewhere to put federal money, the executive branch decided to distribute it among individual state-chartered banks. “Those which are in hands politically friendly will be preferred,” wrote one of Jackson’s most trusted political operatives. The opposition press called the recipients of federal money the “pet” banks. The Union Bank of Nashville was the chosen “pet” for Tennessee, for instance.
It just happened to have been founded by
the brother-in-law of James K. Polk, Jackson’s main political lieutenant in the state. The ranks of the “pets” soon expanded to over thirty. While the eastern institutions that received federal deposits were conservative with the new influx of money, banks at the leading edge of southwestern expansion used government funds as an excuse to expand lending
dramatically. The Mississippi pets’ directors knew that after land sales in the Chickasaw and Choctaw cessions, government land offices would deposit hundreds of thousands of dollars. Anticipating these new reserves—which were also, they might have remembered, liabilities that could be withdrawn—the banks began to print and lend their own paper money. By late 1833, Mississippi banks had twenty times
as much paper floating around the economy as they had gold in their vaults to back it up. From Columbus, Mississippi, a boom town in the state’s northeastern corner, D. W. Jordan chortled, “Here I can make
money money
” to his North Carolina relatives. John Knight reported that Natchez cotton was 18 cents per pound. He wanted to buy a woman for his wife, and Isaac Franklin was now charging $1,000
for a well-schooled house servant. “We shall do well this season,” Franklin wrote.
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Back in Philadelphia, however, the Monster Bank still had claws. After Jackson’s withdrawal of the deposits, Biddle fought back. In November 1833, the B.U.S. began to call in all its loans. As he deliberately induced a massive recession, Biddle announced that “the other banks and the merchants may break, but
the Bank of the United States shall not.” Businesses closed down. Factories and workshops stood idle. Retail districts had no buyers. The slowdown threatened devastation to heavily leveraged planters and cotton merchants. Interest rates offered to the brokers who flocked to New Orleans every fall to buy the cotton harvest rose to 25 percent. Cotton purchases dropped, pushing the recession up the rivers
into the Crescent City’s vast watershed. In Mississippi, wrote one Natchez lawyer, “times are very hard, the mad course of the president has caused more ruin in the country than was ever known before.” Now John Knight watched cotton prices plummet to 9 cents per pound. The price of slaves followed. “I tried every Bank in this City for a check on the North,” wrote a panicked Isaac Franklin from
New Orleans, “[but] none will.” “The Bank [here] will not discount a dollar,” confirmed his Natchez allies.
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Many blamed Jackson. Elite southwestern Jacksonians turned apostate. Robert Walker, previously one of Jackson’s Mississippi political lieutenants, switched sides. Franklin Plummer was the only holdout, and he was reportedly wavering. Loyalist J. F. H. Claiborne expressed anti-bank views
at a public meeting in Natchez, and was physically assaulted and beaten by the
mostly wealthy crowd. A torrent of complaints poured into the offices of congressmen. Philadelphia businessman John Wurts wrote a letter imploring James K. Polk to use his “personal and political influence . . . to provide some remedy to check the impending evil.” From Tennessee, John Welsh warned that “even the enemies
of the Bank here freely admit that all this distress may be corrected by a return of the deposits to the U.S. Bank.” Henry Clay, meanwhile, organized the Senate to censure Jackson for removing the deposits. But the president refused to quail. When a delegation of businessmen visited Jackson, he said: “What do you come to me for, then? Go to Nicholas Biddle. We have no money here, gentlemen. Biddle
has all the money.” The bank, Jackson believed, was confirming the warnings of his Veto Message. His loyal followers agreed: Jackson loyalist Terry Cahal told James K. Polk that Tennessee Bank allies were squealing that the “mob” was plotting a revolution in which “the rich [will be] plundered by the rabble.” But this kind of talk reinforced the Jacksonian claim that B.U.S. supporters hated
white men’s democracy, while Jackson partisans cheered his attack on the bank: “
Crush it forever!!
It is a
Monopoly
which ought not to exist among us.”
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The recession winter of 1833–1834 was difficult, but by spring the economy began to cooperate with Jackson. Good harvests in Europe and new supplies of precious metal for circulation in the Western economies raised consumer demand and lowered
interest rates. But one of the most significant factors that turned the southwestern economic climate from bank war to boom was the replication of the C.A.P.L.’s slave bonds on a far vaster scale. The new banks began to appear right as the bank war began, starting with the Union Bank of Louisiana in 1832. Structured on the C.A.P.L. model but significantly larger, the bank sold $7 million in “faith
bonds” through the agency of the Barings. The proceeds of the faith bonds were to fund the capital-intensive projects of shareholders—in other words, to help them buy slaves—and back a massive commercial credit operation that would help move the annual pile of cotton from steamboat landings to Liverpool docks. By 1834, the Union Bank was taking up a lot of the slack left in New Orleans by the retreat
of the B.U.S. In November 1834, it became a pet bank, opening access to another pool of money.

Next, the state legislature established the Citizens’ Bank of Louisiana with $12 million in faith bonds, and then authorized several other smaller institutions (for instance, the Atchafalaya Railroad and Banking Company, capital $2 million). Louisiana’s orgy of bank-creation increased the number of
the state’s banks from four to sixteen and expanded the total amount of authorized capital from $9 million to $46 million. By 1836, New Orleans
had the densest concentration of banking capital in the country, outpacing Philadelphia and New York and suggesting that Louisiana might become the nation’s financial power center in the near future. The Florida territory, with fewer than 100,000 residents,
launched multiple banks, including its own Union Bank, for which it issued faith bonds. Alabama also funded its banking system with bonds, selling most to the Rothschilds of Paris, Europe’s most powerful bankers. In 1832, the total amount of the bank loans available to southwestern borrowers had been under $40 million, including $30 million lent by the B.U.S. By 1837, despite the retreat of
the B.U.S, southwestern bank loans soared to more than $80 million—one-third of the national total and more than that of any other region. Southwestern legislatures had authorized significantly more banking capital in the 1830s than what the B.U.S. had earlier applied to the economy of the entire United States.
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Image 7.4. An elderly but still pugnacious Andrew Jackson as President, slaying the many-headed Hydra of the nefarious Second Bank of the United States. The head with the top hat is Nicholas Biddle. “General Jackson slaying the many headed monster,” Henry B. Robinson, 1836. Library of Congress.

Although some of the banks were ostensibly chartered to create investment in the state’s
infrastructure—including railroads, or, in the case of the New Orleans Gas Light and Banking Company, modern municipal utilities—the
major purpose of the splurge was to rush seeds of growth into the fields of southwestern entrepreneurs’ dreams. In the course of a mere four years, from 1833 through 1836, 150,000 enslaved people were moved from the old states to the new. They cleared and planted
and harvested millions of new acres, and the US cotton crop doubled in size. Meanwhile, the bonds created by southwestern states—each one a guarantee of an income stream from the labor of mortgaged hands—found buyers in all of the major financial centers of the Western world—London, New York, Philadelphia, Amsterdam, Hamburg, Bremen, and Paris. Investors around the world voted their confidence in
slavery’s expansion. And rising London prices for southwestern securities, statistics demonstrate, pushed up slave prices in New Orleans.
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The irony is obvious, in hindsight. Andrew Jackson had mobilized common white male anger at arrogant, antidemocratic supporters of the B.U.S. and its allies. He and his followers, from the lowliest voter to loyal congressmen, metaphorically Potterized Biddle
and George Poindexter and all the members of the old southwestern bank-vault factions that had monopolized frontier opportunity and tried to tell ordinary citizens to keep quiet. In fact, cartoons of the day even depicted Jackson chopping off the penile snakeheads of a hydra-headed Monster Bank.