Harriet Tubman is in; President Andrew Jackson is out.
Treasury Secretary Jacob Lew’s decision to replace Jackson on the front of the $20 bill with abolitionist and Underground Railroad conductor Tubman has been widely praised. It honors women’s role in American history and, indirectly, disparages slave-owner Jackson, who moves to the back of the $20 bill. But there is another irony to Jackson’s traditional place on the $20 bill: He was an ardent critic of paper money.
To illuminate this oft-forgotten part of the story, we put some questions to historian Jessica Lepler of the University of New Hampshire and author of “The Many Panics of 1837: People, Politics, and the Creation of a Transatlantic Financial Crisis.” Here are her edited and condensed answers.
Q. What was the paper currency of Andrew Jackson’s era?
A. In Jackson’s time, gold and silver coin (commonly called specie) were the only federally sanctioned currencies. But coin was scarce, and to supplement the money supply, banks issued paper notes that were, in theory, redeemable for coin. In practice, banks printed more notes than they could ever redeem in coin at one time. (Indeed, part of the point of paper money was to promote economic growth by expanding the currency.)
The value of any bank’s paper notes depended on the bank’s ability to fulfill its promise to trade the paper for coin. When Jackson was elected in 1828, there were more than 300 U.S. banks, and the number doubled during his administration. People had to evaluate whether to accept many varieties of paper money as payment for goods. If they miscalculated, they could suffer significant harm.
Q. Why was Jackson so opposed to paper currency and their bank creators?
A. His hostility stemmed partly from personal experience. At a young age, he speculated in land and paper. But his opposition was also political and focused on the Second Bank of the United States (BUS), which was the closest thing America had to a central bank.
The BUS was the only bank chartered by the federal government. It was entitled to hold government funds and, unlike state-chartered banks, it could operate in many states. In practice, the BUS collected bank notes from one part of the country and returned them to banks in other parts of the country, demanding specie in exchange. This checked banks’ ability to create too much paper money, but it also conferred huge powers on the BUS – powers that Jackson considered undemocratic.
Q. Who else opposed paper currency?
A. Jackson was elected by a coalition within the Democratic Party. Some of his supporters detested paper money, banks and the economic change they fostered. But other allies simply wanted to limit the power of the BUS and transfer the government deposits to their own local banks. The BUS' main supporters were the other major party, the Whigs, who saw the national bank as a tool for economic development.
Q. What was the “bank war”?
A. It consisted of a series of battles. Most important, Jackson vetoed the renewal of the BUS' charter, which forced the BUS to reorganize as a state-chartered bank. Jackson also ended the BUS' monopoly over government deposits. The Treasury was being flooded with money from a combination of the sale of confiscated Indian lands and tariffs on imported goods purchased largely with money from the sale of slave-grown cotton.
So great was the inflow of revenues that the government actually paid off the national debt. Jackson diverted all the Treasury’s revenues into so-called “pet banks” – the state-chartered banks of his supporters. The BUS responded by tightening credit for merchants and demanding that banks honor their promises to convert paper currency to specie.
Q. What was the Specie Circular and why did Jackson issue it?
A. Jackson’s redistribution of government funds to “pet banks” pleased one faction of his supporters but infuriated the other. The anti-bank faction demanded an end to the explosion of paper money and the multiplication of banks. The Specie Circular was an executive order requiring all purchases of federal lands be made in specie. With the Specie Circular and other policies, Jackson aimed to attract gold coin to the U.S. and to eliminate the need for banks and bank paper.
Q. What was the Panic of 1837, and did Jackson’s policies cause it?
A. On March 4, 1837, even as Jackson’s successor – Martin Van Buren – was being sworn in, the financial system was falling apart. In New York, New Orleans and London, there were commercial and financial failures. By May, banks suspended specie payments. To this day, economists and historians argue whether Jackson’s policies caused the panic or whether other forces were involved.