The Age of Jackson and the Art of American Power, 1815-1848

4. The Fire Bell in the Night

72 4 The Fire Bell in the Night This momentous question, like a fire bell in the night, awakened and filled me with terror. Thomas Jefferson The states have no power, by taxation or otherwise, to retard, impede, burden or in any manner control the operations of the Federal government or its agencies. John Marshall If you persist, the Union will be dissolved. . . . You have kindled a fire which all the waters of the ocean cannot put out, which seas of blood can only extinguish. Thomas Cobb The War of 1812 pounded the last nails in the coffin of a viable national Federalist Party. Much of the next decade became known as the “Era of Good Feelings” as the Republican Party, an amalgam of Jeffersonians and Jacksonians, dominated American politics, and the mostly New England Federalists dwindled toward oblivion.¹ Despite the hypocrisy, the Republicans stole shamelessly from the Hamiltonian playbook even The Fire Bell in the Night 73 as they persisted in vilifying it. The reason was simple—fifteen years of disastrous Republican policies forced them to abandon their party’s practices, if not the principles. President James Madison led that flip-flop by calling on Congress to develop the national economy with new canals, better roads, and a protective tariff for infant industries battered by a postwar deluge of cheaper priced, better made British goods. To the astonishment and often dismay of his followers, Thomas Jefferson himself endorsed this idea: “We must now place the manufacturer by the side of the agriculturalist .”² The 1816 Tariff Bill passed by large majorities in each house, and Madison signed it into law on April 27. He soon wielded his pen again for the National Road Bill, which appropriated a $100,000 downpayment on an ambitious scheme to construct a federal highway from Baltimore to Wheeling. The president, however, failed to muster enough votes to pass an internal improvements bill, as it proved impossible to spread the benefits to enough districts and states. A core of Jeffersonian purists known as Old Republicans and led by Virginia representative John Randolph shrilly denounced and voted against each of these heresies . The Federalists were at once vindicated and further diminished in ranks with each subsequent election.³ Among all the ideas that Alexander Hamilton conceived and brought to fruition, he was perhaps fondest of the Bank of the United States.4 His finest creation launched and guided a decade of unprecedented American economic growth and prosperity. Hamilton was a student of history. Among history’s most vital lessons is that markets left to themselves sooner or later self-destruct, either through frenzied speculative bubbles that burst or voracious businesses that eliminate their rivals and exploit consumers through monopoly or oligopoly rule. These disasters, however, are not inevitable. Sensible government policies and institutions can bring out the best market forces while restraining the worst. Treasury Secretary Alexander Dallas understood all this. Although he was a devoted Jeffersonian in principle and politics, he embraced Hamiltonism for policies. In 1815 he issued a report with the dire conclusion that the nation faced a worsening and unbreakable vicious cycle of debt, joblessness, bankruptcy, and depression unless the Bank of the United States was reestablished. He proposed a structure nearly identical to that of Hamilton’s institution. The bill that was hammered out The Fire Bell in the Night 74 in Congress provided for a second bank capitalized initially with $35 million, three and a half times more than the initial investment in the first bank. The government would own 20 percent of the institution and the public 80 percent. Investors had to pay coin for at least onefifth of their shares. The second bank was headquartered in Philadelphia , and branches opened elsewhere. The government appointed the president and five of the twenty-five directors, and stockholders elected the others. The bank was empowered to serve as the sole deposit for federal funds. Finally, the bank would pay the federal government $1.5 million during its first four operating years. Solid majorities of 80 to 71 in the House and 22 to 12 in the Senate approved the bill as hard practical realities edged out lofty ideals. Most western and southern congressmen voted in favor for two reasons—their own party proposed it, and they looked forward to the credit the bank might provide hard-pressed farmers and merchants in their regions. For this they were willing to deafen their...