The Second Bank of the United States

How a Volcano in Indonesia Destroyed the Second Bank of the United States

What Happened?

Tambora, a volcano located on an Indonesian island, erupted in 1815 and set off a chain of events that contributed to the collapse of the Second Bank of the United States.

Why is this Important?

The last couple of decades in American politics have depicted environmental and economic policies as incompatible with one another. For instance, conservationist policies are often attacked as slowing economic growth and vice versa. Tambora’s role in bringing down the Second Bank of the U.S. demonstrates that climate change is not simply a necessary consequence of economic growth. As you will find out, climate change can have serious economic repercussions as well. In this case, climate change, resulting from Tambora’s eruption, contributed to westward expansion in the U.S., inflation in the U.S., the Panic of 1819, and ultimately, the collapse of a major financial institution: the Second Bank of the United States.

The Bank’s Background

The Bank was controversial with or without Tambora. The Bank was plagued by concerns regarding its constitutionality and its potential to oppress the states. See below:

James Madison’s notes on national banks, which indicate his concern that a national bank would benefit a few individuals at the expense of the common person:

Thomas Jefferson’s letter to George Washington, in which Jefferson articulates his view that a national bank would be unconstitutional:


So why is Tambora Important?

Tambora created a plethora of negative economic consequences for which the Bank would be scapegoated. Despite early concerns about the Bank and the Tambora-induced challenges it faced, the Bank ran efficiently once Tambora’s effects subsided. The Bank even succeeded in establishing a uniform national currency, one of its primary objectives, by 1832, when Congress voted to recharter the Bank. Yet, the Bank was so unpopular early on because of its perceived responsibility for Tambora’s negative economic effects that it would never fully regain the trust of the people or the states. But how exactly did Tambora destroy the Bank’s reputation?

Westward Expansion: Romanticism and Adventure or a Destination of Desperation

Westward expansion is often romanticized, but it was driven by the desperate conditions resulting from Tambora induced weather. Tambora induced weather destroyed American crops and disillusioned Americans on the east coast. Below, see the Niles’ Weekly Register’s take on the weather’s deathly toll.

Niles’ Weekly Register (August 10, 1816, page 385-86):

Below, see Thomas Jefferson’s take on the effect of the weather on Virginia crops and morale.

Jefferson (page 38):

Tambora and Native Americans

Prior to Tambora’s eruption, westward expansion proceeded at a snail’s pace because of Americans’ desire to avoid conflicts with Native Americans. Tambora made weather conditions in the east so desperate that Americans were now willing to venture west even with the threat of Native Americans.

Believe it or not, treaties with Native Americans honoring their territory were respected until westward expansion gained steam after Tambora’s eruption. You can view some of these treaties below.

Treaty of Hopewell:

Treaty of Holston:

Fool’s Gold: Funding Westward Expansion

Tambora devastated European crops as well, and despite its impact on the American east coast, Tambora spared crops in America’s westernmost regions. Consequently, a major market for American crops developed, and the American economy boomed. With the American economy booming, it appeared that funding for westward expansion would be plentiful, but state banks recklessly issued paper money that threatened to derail the economy. State banks issued more paper money than could be tracked, and they overestimated the scope of the economic boom. Consequently, the Second Bank stepped in to limit the ability of state banks to issue paper money.

Strike One: The Bank as an Oppressor of the States

Because people desperately wanted to travel west, and the economy was doing well, few understood why the Bank was interfering with the funding for westward expansion. To many, such interference justified the Bank’s critics concern that the Bank would tyrannize the states. Below see primary sources expressing concern over the Bank’s activities.

Concern that the Bank tried to bully local Philadelphia banks into paying the Second Bank more money than it owed:

The Governor of Virginia expresses his dismay over the Second Bank imposing hardships on Virginia’s state banks:

The Governor of Ohio’s complaint that the Second Bank is corrupt and an affront to state sovereignty (page 17):;view=1up;seq=1

McCulloch v. Maryland, a Supreme Court case in which Maryland sought to tax the Second Bank out of existence:

The Weekly Aurora blasts the Second Bank as corrupt (page 90):

A letter from a Pennsylvania citizen to his state legislature, complaining that the Bank wasn’t serving its intended purpose and served the wealthy at the expense of everyone else:

Enter the Jacksonians

Opponents of the Bank evolved into the Jacksonians. The Jacksonians effectively mobilized opposition to the Bank throughout the Bank’s existence in their attempt to undermine the institution. Jacksonians argued that the Bank threatened slavery, served aristocratic interests at the expense of the common person, and posed a danger to southern agrarian interests. The Jacksonians’ tactics proved effective. See below a newspaper article demonstrating the receptiveness of the Jacksonians’ attacks.

Richmond Enquirer describes Jackson’s veto of the Second Bank as necessary to prevent power abuse:


The Bank might have been forgiven if its unpopular policies had succeeded in preventing an economic collapse. But such policies failed to save the economy, and the Bank was blamed for the ensuing panic. The heavy influx of paper money in the currency, issued by state banks, crashed the economy. The Bank was tasked with the nearly impossible mission of keeping these state banks under control. Given how unregulated state banks were, they could pop up overnight and begin lending. Keeping the flow of paper money in the currency at a safe level depended on the goodwill of the states, and since they resented the Second Bank, they would not cooperate with its policies.

Continued Jacksonian Pressure

The Jacksonians further mobilized popular disaffection resulting from the Panic against the Second Bank. They accused the Bank of trying to shut down every other bank in the country. They also attacked its constitutionality, its ties to foreign creditors, its corruption, its aristocratic nature, and its lack of congressional oversight. The Jacksonians also falsely accused the Bank of failing to establish a uniform national currency.

War? Kind of. The Bank War.

By 1832, the question of whether or not to recharter the Bank was in full swing. Congress generally favored recharter, and so the Jacksonians sought to delay a vote on the Bank’s fate. See below, an investigation of the Bank for “violations” designed to pressure Congress into delaying a vote on the Bank.

Investigation of the Second Bank of the United States:;view=1up;seq=6

Congress ultimately voted to recharter the Bank, and Andrew Jackson quickly vetoed. See below Jackson’s speech on his veto of the Bank.

Jackson’s veto:

A Referendum on the Bank

After the veto, Andrew Jackson, an obvious opponent of the Bank, and Henry Clay, an ardent supporter of the Second Bank, squared off in the Election of 1832. Both candidates saw the Election of 1832 as a referendum on the Bank. The Election revealed that the states sided with Jackson in opposition against the Bank, as the Bank won 219 of 286 possible electoral votes. The election also revealed that the Bank was unpopular with the people, as Jackson won an outright majority (52%) of the vote in a four candidate race.

Wrapping Up

The Bank actually ran efficiently after the Panic of 1819 subsided and completed the goals set for it by 1832. Despite this, the Bank’s interference with westward expansion and its perceived responsibility for igniting the Panic of 1819 would prove impossible to overcome. Both westward expansion and the Panic of 1819 were triggered by the effects of Tambora’s eruption.

Want More?

You can find the full version of this paper, along with a bibliography, here:


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