the year is 1819. a man sits on trial for refusing to let his institution pay taxes to the state of maryland this will become one of the most important supreme court cases in history and will finally put an end to the question of constitutionality surrounding the bank of the united states the man is james mccullough he's the head of the baltimore branch of the second bank of the u.s his name will be immortalized in the annals of constitutional law he's also an embezzler who just stole one and a half million dollars worth well over 40 million today but he won't spend a day in jail [Music] the second bank of the u.s did not start off very well the older group of conservative merchants and honest public servants people like hamilton or albert gallatin were all dead or retired the people in charge now were caught up in the new spirit of the age which is to say they were all swindlers speculators or embezzlers steven gerrard the last honest director of the bank resigned and discussed shortly after writing these words the board of directors had no interest in acting as a check on the state banks or on anyone for that matter instead they encouraged an orgy of speculation in public lands out west with cheap credit available for everyone the baltimore branch was most at fault for this partially because of the massive embezzlement i mentioned earlier bank officers would take money from their own bank to participate in all the speculation and they didn't always pay it back when they lost their bets either this was literally mccullough's excuse i meant to pay the money back officer but i lost it gambling if i had won it'd be as good as paid back fun fact embezzlement wasn't illegal back then they tried to get mccullough on a vague charge of conspiracy but it didn't hold up in court so at this point the president of the bank william jones was under lots of public pressure so he set out to change course he stopped offering all the easy credit and began to demand that loans owed to his bank be repaid he succeeded at popping the speculative bubble which is good in a way but it led straight to the panic of 1819 banks were new toys at this point and even the people running them didn't always understand how they interacted with the rest of the economy the panic of 1819 was the first financial crash in our nation's history but there were many more on the way isn't capitalism fun land values were crashing cotton which was the nation's most important export by now fell 25 in a single day state banks were calling in loans all over to stay solvent desperately trying to gather up enough species to pay off what they themselves owed because in a panic everyone asks for their gold and silver back people don't want paper as we discussed last episode banks loan out more in notes than they ever have saved up in specie and it's not a problem when times are good but once people start panicking and asking for their gold back you know that not every bank will end up staying in business it's a mad dash for cash kind of like a game of musical chairs there aren't enough seats by design some banks will be fine but others will fail in a worst case scenario the early failures can even cause a chain reaction making more and more banks insolvent that didn't happen here but there were a lot of foreclosures especially out west and it wasn't only the speculators who suffered even after the foreclosures some state banks still couldn't pay their loans to the u.s bank so they handed over the real estate instead the bank was saved but the people were ruined all the flourishing cities of the west are mortgaged to this money power they are in the jaws of a monster so the bank of the us wasn't the most popular institution in america at that time and at first yielding to the greedy new spirit of the age and then sloppily trying to correct itself after the bank was definitely responsible for the panic there was no question about that knowing this when the bank of the u.s started calling in loans maryland was a little upset and decided to tax the bank in retaliation and that's what led to mccullough v maryland this was it finally the supreme court had a chance to weigh in on the constitutionality of the national bank it should have closed the book once and for all on this question and on paper it did after this decision federal banks were now officially constitutional but in public perception it did anything but after all mccullough himself was a speculator and an embezzler he was a really bad poster boy for this huge institution that was understandably terrifying for some people the common people wanted someone honest and down to earth someone who shared their values and understood their pain they wanted andrew jackson for president andrew jackson's success at the battle of new orleans was one of the few bright spots in the war of 1812 that we talked about last time but his victory actually happened after the war was over a peace treaty had already been signed overseas word traveled slow back then anyway most americans ended up thinking that jackson personally had won the war and it was hard to convince them otherwise andrew jackson would become president in 1828 with the help of martin van buren a genius political strategist and organizer van buren was the founder of the modern democratic party the oldest political party in the world which he created from jefferson's democratic republican party after it split into factions jackson was very popular and he was a great horse for van buren to hitch his wagon to about his personality though here's what you need to know about him after the battle of new orleans jackson set up a military dictatorship over the city for months and remember the war was over at this point but he would execute soldiers who tried to go back home and when a federal judge ordered him to stop and give control back to the civilian authorities jackson had the judge thrown in jail in the years before his presidency when he wasn't seizing lands from his native american enemies and allies alike or participating in the slave trade jackson was dueling he participated in dozens of duels throughout his lifetime in 1806 a man named charles dickinson accused jackson of cheating while betting on a horse race jackson could not let that go and challenged him to a duel even though he knew dickinson was an excellent shot sizing up the situation jackson decided to let dickinson shoot first he hoped that in dickinson's haste to fire he might miss well he didn't miss the bullet lodged deep into jackson's chest close to his heart jackson grimace raised his pistol and as he started to bleed out focused with fury and intensity on the man in front of him who was helpless by the rules of dueling dickinson had to stand still jackson pulled the trigger but the hammer caught at half it didn't fire he slowly cocked his pistol again he took careful aim and fired murdering dickinson before collapsing himself jackson survived the duel but he would be in constant pain from that bullet which stayed lodged next to his heart for the rest of his life of that duel jackson later said if he had shot me through the brain sir i should still have killed him this is the person who the bank of the united states would have to deal with the bank mr van buren is trying to kill me but i will kill it walking into these crosshairs was a man named nicholas biddle as a person he was very different from jackson biddle was an aristocrat an academic and a young prodigy he graduated from princeton at the age of 15 first in his class he was an editor of portfolio an important literary journal at the time and he was an assistant in james madison's administration then he became a pennsylvania state senator and finally the president of the second bank of the u.s by age 37. nicholas biddle was a good central banker and a brilliant man but being in control of the nation's most powerful financial institution at such a young age kind of went to his head as we've discussed the state banks resented the power the u.s bank held over them from time to time biddle was questioned by the senate committee on banking about this they asked him if any state banks had ever been injured by the bank of the u.s and this was his reply never that was a good answer but unfortunately he kept talking there are very few banks which might not have been destroyed by an exertion of the powers of the bank none have ever been injured biddle was really bad at politics but he had a good understanding of his role as a central banker and he managed the american financial system well during his time unlike his predecessors he was very aware of his responsibility not just to private investors but to the public the currency was in the best shape it had ever been and the economy was booming under his watch even so attacks on the bank started to appear in democratic newspapers which worried biddle and his allies in the senate like henry clay with the renewal of the bank's charter coming up soon they wondered would jackson recharter the bank of the u.s or not they decided to try and force jackson's hand by bringing a bill to recharter the bank up for consideration early this was right before the election of 1832 when jackson was running for a second term let's pause there was that a good move do you think they knew that jackson didn't like banks and he hated the bank of the us but he was more of a shoot from the hip kind of guy and not really a policy person was jackson really making these kinds of decisions by himself he was influenced by his kitchen cabinet as it was called which was an informal group of friends and advisors prominent among them was martin van buren who would be jackson's choice for vice president in the coming election as well as his hand-picked successor to be the next president so what do we know about van buren well he's the one who set up that democratic newspaper network so he could have pushed them to run the anti-bank editorials that were now popping up historian bray hammond thinks that van buren prepared not merely to end philadelphia's financial primacy and the bank of the united states but to have new york assume philadelphia's place van buren was from new york and he actually became governor there in 1828 the same year that jackson was first elected president but he served only two and a half months before leaving to join the jackson administration before leaving one of the main bills he made sure to get passed through the legislature was the one setting up the new york safety fund system this bill required the banks there to pay into a central fund which would protect their creditors in case of a financial shock it was an early form of deposit insurance the same role that the fdic plays today this system united new york banks and helped wall street eventually emerge as the country's financial center in 1828 that center was still in philadelphia where the bank of the united states was headquartered but at this time most of the federal government's revenue was raised by the tax on imports most of which came through new york harbor wall street banks definitely wanted to get their hands on that money which they considered rightfully theirs and they resented seeing it claimed by a philadelphia philadelphia-based bank the war over the second bank may have been due to legitimate constitutional concerns that jackson had i suppose but that had already been settled by mccullough v maryland so was it a popular revolt against the money power did jackson just hate banks or did it have as much to do with the rising power of wall street than anything else let me know what you think in the comments back to biddle and henry clay they put the bank of the u.s up for a vote in congress four years early while there was some opposition it passed pretty easily 167 to 85 in the house and 28 to 20 in the senate after all the bank had done the job they asked it to do while van buren's newspapers denied this u.s currency was very stable at this time henry clay thought jackson wouldn't dare veto this popular and important bill during an election year um he was wrong denied the president of the bank has told us that most of the state banks exist by its forbearance should its influence become consented into the hands of a self-elected directory whose interests are identified with those of the foreign stockholders will there not be cause to tremble for the purity of our elections in peace and for the independence of our country and war it will make the american people debtors to aliens and nearly the whole amount due to this bank if we cannot at once make our government what it ought to be we can at least take a stand against all new grants of monopolies and exclusive privileges against any prostitution of our government to the advancement of the few at the expense of the many he sounds almost like bernie sanders there doesn't he and jackson may have actually believed what he was saying in this speech or it could have been really disingenuous either way the speech was ridiculous full of xenophobia and conspiracy theories yes the second bank did have a rough start but after biddle took over the bank had been a major asset for the country either way clay and biddle seriously underestimated jackson's will to destroy this bank they also completely misread the american people the bank issue would not work in their favor for the coming election like they hoped jackson's veto would have major financial and political repercussions america wouldn't have a central bank again for 77 years still the interests of the few somehow kept advancing at the expense of the many in fact wealth inequality would keep growing to become the worst it had ever been but that's some 50 years in the future next episode we'll look at the immediate fallout from this terrible decision