In 1832, Nicholas Biddle, president of the Second Bank of the United States, applied for an early renewal of the bank’s charter. He feared that bank opponent, President Andrew Jackson, would move to destroy the bank after he was re-elected. So, Biddle tried to outmaneuver the president before the election. His opponent, Henry Clay, and other National Republicans (future Whigs), supported Biddle’s move because they wanted to make it a campaign issue. Both houses of Congress voted to re-charter the bank in July.
On July 10, Jackson promptly vetoed the bill. Among his many reasons, Jackson argued that the bank was unconstitutional even though Congress and two presidents—George Washington and James Madison (who had once been an opponent)—had chartered the bank in 1791 and 1816. Moreover, the Supreme Court under John Marshall had unanimously declared the bank to be constitutional in McCulloch v. Maryland (1819).
President Jackson did not just want to use his executive authority to prevent the re-charter of the bank, he wanted to kill the existing bank. The bank had approximately $79 million in assets and $37 million in liabilities, making it a solvent and sound financial institution. Jackson wanted to remove government deposits to destroy the bank and had the support of Attorney General Roger B. Taney.
However, other members of the administration opposed the action and refused to carry out Jackson’s will. The president responded with a “Saturday-night massacre,” similar to Nixon’s actions during Watergate. When Treasury Secretary Louis McLane refused, Jackson moved him to State and appointed William J. Duane in his place. When Duane did not obey Jackson’s wishes because he warned it would result in reckless lending, the president fired him too. The compliant Roger Taney was put into Treasury, though Jackson made it an interim appointment not subject to Senate approval so that Taney could act quickly and without restraint against the bank.
Treasury Secretary Taney drew down bank assets by the end of the year by paying bills but making no additional federal deposits. Instead, Taney placed the government’s deposits in state “pet banks.” Two cabinet members resigned in protest, and Vice-President Martin Van Buren distanced himself from the policy. Congress responded by refusing to confirm Taney, and, on March 28, 1834, censured the president because he “assumed upon himself authority and power not conferred by the Constitution and the law.” It is the only censure of a U.S. President in history.
President Biddle retaliated against Jackson by sharply curtailing bank loans and caused a brief financial panic and recession. Meanwhile, as predicted, the state banks greatly expanded their lending and even started circulating its notes as currency. The Bank of Kentucky was one of those banks.
The Bank of Kentucky issued bank notes that seemed to circulate as currency in violation of Article I, section 10 of the Constitution (which enumerated limitations upon state governments), which read: “No State shall…emit Bills of Credit.” In addition, the bank stock was owned by the state. The president and board of the bank was selected by the state legislature. In short, the bank was closely tied to the state.
The case of Briscoe v. Bank of Kentucky was originally argued before the Supreme Court in 1834, and Chief Justice John Marshall was prepared to rule that the actions of the state bank were unconstitutional. He planned to rest this decision on the precedent of Craig v. Missouri (1830), which blocked bank certificates circulating as money because they were a violation of the Constitution. However, by 1835, Marshall was dead, and the Bank of the United States was defunct. The new chief justice of the Supreme Court was Roger Taney, the Treasury secretary who helped kill the bank.
In the case of Briscoe v. Bank of Kentucky (1837), the Court had to weigh the constitutionality of circulating notes by state-chartered banks. The Court thus had to grapple with several larger issues including the principle of federalism due to the competing powers of national and state governments regarding banks. Moreover, important political and economic issues of a growing divide between commercial and agrarian interests, and increasing sectionalism between North and South formed the background of the case.
The court decided the Briscoe case by a vote of 6 to 1, with the majority breaking with precedent and upholding the circulating notes as constitutional because they were not bills of credit. The Court narrowly defined a “bill of credit” as a note issued by the state, on the faith of the state, and designed to circulate as money. Even though the notes in this case were redeemable by the bank, which was closely related to the state, the Court argued that they were not redeemable by the state and therefore were constitutional.
The lone dissenter, Justice Joseph Story, recognized the direction the Court was taking with the decision and wrote that the Court was breaking with precedent. He wrote a withering dissent that warned the decision was setting the Court “adrift from its former moorings.” He wrote that he delivered the dissent with “profound reverence and affection” for the former Chief Justice Marshall.
The Briscoe case represented a decisive turn from John Marshall’s economic and constitutional nationalism in favor of states’ rights. Taney and the Supreme Court were completing the financial revolution of Andrew Jackson and adopting the outlook of the Democratic Party. Briscoe was part of Taney’s judicial shift that year that saw the Court restrict the Contract Clause of the Constitution in the more famous Charles River Bridge v. Warren Bridge (1837) case.
Briscoe v. Bank of Kentucky (1837) Supreme Court decision:
Tony Williams is a Constituting America Fellow and the author of five books including Washington & Hamilton: The Alliance that Forged America.