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Chapter 12 Section 4-Prosperity and Panic
Transcript of Chapter 12 Section 4-Prosperity and Panic
Jackson retires and his Vice President Martin Van Buren takes over, becoming the 8th President in 1837
Van Buren was a lifetime politician, not the "common man" like Jackson was
Jackson left Van Buren the issue of the bank and the economic crisis that resulted
The Panic of 1837 defined Van Buren's Presidency
Causes of the panic included that fact that during the 1830s, the government sold millions of acres of public land in the West. Farmers bought some land, but speculators did as well. Speculators borrowed money from state banks to pay for the land. Without the Bank of the United States around, state banks could lend money without limit, they could print as much paper money as they wanted. When the bank was around, state banks had to get permission from the Bank of the United States to issue loans
What problem do you see?
The state banks had to print more and more paper money to give out loans that were not backed by gold or silver, at this time the country was on the "Gold Standard", which meant all paper money was backed by Gold or Silver, Example-A country under the gold standard would set a price for gold, say $100 an ounce and would buy and sell gold at that price. This effectively sets a value for the currency; in our fictional example $1 would be worth 1/100th of an ounce of gold.
Jackson demanded that any speculators trying to get a loan had to pay for the land with gold or silver, not with paper money
When speculators went to the bank to trade in the paper money for gold and silver, the banks did not have it because those state banks printed paper money that the U.S. Government no longer supported with Gold because the Bank of the United States shut down, without the Bank of the United States to provide actual gold in exchange for paper money, paper money turned into just a piece of paper
With the banks not having this hard money, the people panicked
Bank after bank closed and things got worse with an oversupply of cotton crippling the southern farmers
At one point, 90% of the nation's factories were closed, and thousands were out of work
The President got the blame as most do for economic trouble
Van Buren did not do much to help, but did try to set up a more stable banking system and cut White House spending, with neither one being very successful
Van Buren got the complete blame for the crisis, and his political career tanked
The upstart Whig Party saw a chance to defeat the powerful Democratic Party with the struggles of Van Buren and chose William Henry Harrison as its candidate
The Whig's ran Harrison against Van Buren in the 1840 Presidential Election
Harrison was at the start of the modern campaign by making speeches, touring the country, and having rallies
Harrison was not a Washington Politician so his supporters relied on his military record and the campaign slogan "Tippecanoe and Tyler too" to rally support as Harrison's running mate was John Tyler
They also tried to appeal to Jackson voters by creating an image of Harrison as the "common man" just as Jackson was
They painted Harrison as a humble, Ohio farmer, born in a log cabin and achieving his accomplishments through grit and determination
Harrison was actually a wealthy Virginian with the finest education from birth but the log cabin image stayed and helped Harrison greatly
The Whigs also attacked Van Buren as the reason for the Panic of 1837 and that he participated in lavish spending as President, when in reality Van Buren cut White House spending
Harrison supporters sold campaign souvenirs, badges, and other items with campaign slogans
The Democrats tried to paint Harrison as an aging, unqualified ex military man. Harrison would have been 68 years old when he would have become President, the oldest at that time
That did not matter as Harrison won easily
The Whigs had a party platform of creating a new Bank of the United States, improving roads, and raising tariffs
One month into his term, Harrison died of pneumonia and Vice President Tyler took over
Tyler was put on the ticket to balance it and did not really agree with the Whig platform
Tyler did his own thing and vetoed the plan for the bank and the Whigs responded by having everyone but one leave his cabinet and denounce him from the party
The Second Bank of the United States was the most powerful bank in the country, it held the government funds and issued money, it was run by a guy by the name of Nicholas Biddle
Biddle ran the bank well, but Jackson had issues with it, he had come to distrust banks in general because he had lost money in bad financial business moves earlier in his life, he also thought the bank had too much power as the bank made loans to members of Congress and Biddle openly said that he could influence Congress
Jackson also felt the bank favored wealthy people and were unfair to the "common" people
Jackson also hated the bank for another reason, remember that he blamed political opponents for his wife's death, who was one of the people who publicly bashed Rachel Jackson?
Nicholas Biddle......so it was also a chance to get some revenge, something Jackson was always a fan of
For the bank to be open it needed a charter, or written grant from the government, in 1832 Biddle asked Congress to renew their charter to keep the bank open even though their current charter did not expire until 1836
Biddle did this because 1832 was an election year and Jackson was running for re-election and Biddle thought Jackson would not have the guts to attack him and the bank during an election year......right
Jackson took on the bank and when Congress voted to renew the banks charter, he vetoed the bill, claiming the bank was unconstitutional and was a monopoly that favored the rich and the friends of Biddle
The Election of 1832 was a battle over the fate of the Bank of the United States, Jackson's opponent...give you a wild guess
Though by this time Mr. Clay was beginning to age a bit
Clay was the candidate for the new Whig party, who called Jackson a tyrant and dictator and that he was only trying to kill the bank because he wanted all power for himself, Jackson and his Democratic Party said he was simply defending the "common" man against the bias and greed of the bank
The voters sided with Jackson and he won re-election in 1832 and immediately went to work on killing the Bank once and for all
He had government funds put into state banks which Jackson's opponents called "pet banks" in order to limit the influence of the bank and to put it in control of less money
Biddle fought back by limiting the loans the bank gave to people, he hoped that by causing people to lose money that would pressure Jackson to give in because the "common" people were getting hurt.....right
Instead Jackson held firm and the people blamed Biddle and the bank, causing the bank to eventually go out of business, giving Jackson his victory over Biddle and the Bank, however it ended up crippling the U.S. economy, but Jackson wasn't around to deal with it
At this time, you could go to the Bank and trade in a $100 bill in exchange for $100 worth of Gold
Section Assessment P.387
#3 and 4, due Thursday