Pet Banks History for kids: The Panic of 1819
Andrew Jackson blamed the
Panic of 1819 on the mismanagement
Second Bank of
the United States. The Panic of
1819 had had a devastating effect on the nation resulting in foreclosures,
bankruptcies, the loss of homes and livelihoods, high
unemployment, rampant inflation, the inability to obtain credit,
plummeting land values and over crowded debtors prisons. The Panic
of 1819 had fostered a profound distrust
of banks, bankers and paper money in the minds of many Americans.
Andrew Jackson swore to bring about the destruction of the
Second Bank of the United States and started the
Pet Banks History for kids: The State Banks
The Second Bank of the United States, the National Bank was
responsible for only 20% of the currency supply - the state banks
accounted for the rest. The states were free
to charter however many intrastate banks they wished. The Second
Bank was the envy of state banks because,
although it was a commercial enterprise, it received all of the
government’s deposits including the foreign customs duties. The
Second Bank could
make therefore make more loans than state banks and received
lucrative interest payments in return. It was the only bank
permitted to have offices across the nation and their Bank notes
were the only ones accepted for payment of federal taxes. The state
banks were at a massive disadvantage but this changed with Andrew
Jackson's Bank War.
Pet Banks History for kids: Andrew Jackson and the Bank War
The charter for the
Second Bank of the United
was signed into law by President
James Madison on April 10, 1816.
When the 20 year charter expired, Congress was required
to approve or deny renewal of its charter.
A bill was
passed by Congress re-chartering the bank but President Jackson vetoed the bill
on July 10, 1832 initiating the Bank War. Jackson believed that the
Second Bank benefited the wealthy at the expense of the majority of
the American population and that it had become too powerful. The U.
S. government owned 20% of its capital but private investors owned
the rest. It was a privately held banking corporation and 40
congressmen held stock in the bank - most of them were Jackson's
Andrew Jackson and the Pet Banks
Bank War had been one of the issues of the 1832
presidential election. Andrew Jackson received the approval of the
people and was re-elected by a large majority over Henry Clay. The
President took his majority as confirmation that the American people
believed in his war against the national banking system. At the
beginning of his second term in office the Second Bank of the United
States had about $9 million belonging to the government.
President Jackson directed that this money should be drawn out as
required, to pay the government's expenses, and that no more
government money should be deposited in the Second Bank of the
United States. All future deposits were to made in certain state
banks - those that were controlled by Jackson's political friends.
His political opponents referred to these as Jackson's 'Pet Banks'.
Andrew Jackson and the Pet Banks
the Attorney General, withdrew government deposits from the Second
Bank, and deposited them into seven State banks, known as the "Pet
banks." By the end of 1833 the number of Pet Banks had increased to
Pet Banks: The Deposit and Distribution Act of 1836
and Distribution Act of 1836 was passed placing federal revenues in
various banks across the nation.
Pet Banks and Wildcat Banks for kids: The Free Banking Era
The twenty-three Pet Banks were state
banks that were chosen by Jackson to be deposited with US Treasury
funds. However, the closure of the Second Bank led to the Free
Banking Era. This period, referred to as the Free Banking Era,
lasted from 1837-1864. States regained their power in the banking
industry and each state was allowed to issue charters for new banks.
It became much easier to open a financial institution and by 1837
there were ninety-nine Banks. There was a lack of banking
regulations. Some of these new banks became known as the "Wildcat
Banks". A 'wildcat' was slang term meaning a rash speculator. The
Wildcat Banks were often small banks that issued more notes than
they could possibly hope to redeem. The Wildcat Banks were not
backed by specie (gold and silver) they distributed practically
worthless currency backed by questionable security, such as
mortgages and bonds. Many of the Wildcat Banks operated in the
frontier towns in the West where many land speculators borrowed as
much money as they could. The excessive loan practices of the
Wildcat Banks caused many more banknotes to be in circulation than
there were deposits to cover them. Some of the Pet Banks, tempted by
large government deposits, also started to lend money to land
speculators more freely.
Pet Banks and Wildcat Banks: The Specie Circular
unsubstantiated loans to land speculators led to President Jackson
Specie Circular. He knew this was lead to yet another
financial disaster unless he took action. In the Specie Circular
President Jackson forbade the land officers to receive anything
except gold and silver and certain certificates in payment for the
The Pet Banks
presidency ended on March 4, 1837.
The open lending policies contributed to the financial
Panic of 1837, which led to a lengthy period of economic issues which had
to be dealt with by the next president, Martin Van Buren.
Pet Banks for kids
The info about the
Pet Banks provides interesting facts and
important information about this important event that occured during the presidency of the 7th President of the United States of America.
Pet Banks for kids - President Andrew Jackson Video
The article on the
Pet Banks provides an overview of one of the Important issues of his presidential term in office. The following
Andrew Jackson video will
give you additional important facts and dates about the political events experienced by the 7th American President whose presidency spanned from March 4, 1829 to March 4, 1837.
Interesting Facts about
Pet Banks for kids and schools
of the Pet Banks for kids
The Pet Banks, a Important
event in US history
Andrew Jackson Presidency from March 4, 1829 to March 4, 1837
Fast, fun, interesting timeline about Important events in
the Pet Banks
● Pet Banks & Domestic
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