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Article Excerpt
ARTICLE CONTENTS
INTRODUCTION I. THE BANK WAR AND SUB-TREASURY SYSTEM A. Economics, Politics, and the Constitution 1. Economics 2. Politics 3. The Constitution B. The Administrative Organization and Control of Monetary Policy 1. The Bank of the United States 2. Contracting with "Pet" Banks 3. The "Sub-Treasury" System II. ROTATION IN OFFICE A. Rotation's Democratic Rationale B. Objectification of Office C. Bureaucracy at the Post Office D. The Limits of Reform III. REGULATING STEAMBOATS A. "Bursting Boilers and the Federal Power" B. Regulatory Design C. Administration 1. A Fast Start 2. Executive and Congressional Relations 3. Organization and Process 4. Results 5. Science, Technology, and Steamboat Regulation IV. POLITICAL AND LEGAL CONTROL OF ADMINISTRATION A. Congress and Administration B. Judicial Review of Administrative Action V. ADMINISTRATIVE LAW IN "THE DEMOCRACY" A. The Legal Accountability System B. The Political Accountability System C. The Administrative Accountability System
Nobody knows what he will do when he does come .... My opinion is, that when he comes he will bring a breeze with him.
--Daniel Webster, 1829 (1)
INTRODUCTION
Daniel Webster's words, written on the eve of Andrew Jackson's inauguration, described not just a man or an administration, but an era. It was a breezy three decades of technological, territorial, social, economic, and, perhaps above all, political change. (2) Technologically, America went from the age of the sailing vessel, the stage coach, and the quill pen to the age of the steamboat, (3) the railroad, (4) and the telegraph. (5) The technological revolutions in transportation and communications fueled economic growth and transformed the economy. Production of goods moved steadily from artisan or household fabrication toward industrial production organized on a factory model. (6) Because manufacturing is capital intensive and relies heavily on the credit system, industrialization tended to produce not only stronger economic growth, but also stronger swings in the economic pendulum of boom and bust.
Revolutions in technology and industrial organization changed peoples' lives and were experienced as revolutions in social (7) and economic relations. Americans were wealthier, but economic life became both less secure and more depersonalized. (8) Even more profoundly, factory production stripped workers of social status and of control over their own labor. Many Americans embraced these changes. But fear of corporate monopoly, soft-money speculation, and the debasement of the value of honest toil also fueled a groundswell of anxious popular sentiment. (9)
Urbanization further fanned the flames of popular anxiety. The factory system required that workers be brought together in large numbers. Population and economic growth occurred, therefore, at hubs where transportation and communications facilitated industrial and commercial activity. (10) In the cities these newly urbanized and proletarianized Americans jostled together with wave after wave of foreign immigrants whose languages, customs, and religions reinforced native-born Americans' sense of a crumbling social order. Of thirty-one million Americans counted in the 1860 census, approximately one in eight was of foreign birth. (11) The United States began to see its first organized campaigns for workers' rights and restrictions on immigration. (12)
Economic and social change also exacerbated regional tensions. Manufacturing and urbanization were largely confined to the North and the East. And while northerners and southerners had viewed themselves as living in rather different societies almost from the time of the colonization of North America, the industrializing and urbanizing Northeast became ever more distant socially from the plantation South. While these territorial divisions would ultimately lead to war, social divisions between easterners and westerners were also pronounced. Andrew Jackson came to the presidency as a man of the West, embodying the agrarian, republican values of the more newly settled portions of the country. Easterners were, by contrast, more comfortable with an economy built on commerce and manufacturing and with politics centered around traditional elites. (13) During the Jacksonian era, massive territorial expansion exacerbated these North-South (14) and East-West divisions. When Jackson arrived for his inauguration from Tennessee, the United States was only precariously settled on the western banks of the Mississippi and had no solid territorial claim to nearly one half of the lands lying between the Mississippi and the Pacific. By 1860, through war, annexation, purchase, and compromise with foreign powers, all of the territory that would ultimately comprise the forty-eight contiguous states was under United States dominion.
The rules and practices of politics were changing as well. (15) By the time of Jackson's election, the states comprising the United States were shifting rapidly from restrictive, property-based voting regimes to eligibility rules that promoted universal white male suffrage. (16) In most states this broadened electorate, rather than the state legislature, chose Electoral College delegates who were pledged to particular candidates. (17) Candidate selection thus shifted from congressional caucuses to party conventions. These changes in voting rules and nominating practices transformed political participation. In 1824 roughly twenty-seven percent of the eligible population voted in the presidential election. In the period 1828-56, the percentage of the eligible population that voted in presidential elections averaged sixty-nine percent. (18) Hence, from Jackson forward presidents could claim, with some justification, that they were the representatives of the people. (19)
Changes in voting rules, voter participation, and the democratic symbolism of the presidency demanded a reorganization of partisan political life. In order to elect a president, parties had to function both locally and nationally. Politics was no longer controlled by local notables, well-born, and well-to-do amateurs. It was becoming, if not a profession, at least a job. Much of politics remained local, but it could be mobilized nationally because it was supported by patronage distributed from Washington. (20)
The massive changes that swept through Jacksonian America would seem to have set the stage for equally substantial changes in American governance. Political entrepreneurs usually mobilize to respond to what they perceive to be the underlying demands of the times. New issues emerge, old problems are redefined, and the political process generates new institutions to deal with both. And as government pushes out into new fields or deploys new techniques, governmental novelty generates anxieties about the control of governmental power and the accountability of governmental officials. If this pattern of governmental development is generally true, (21) Jacksonian America should have been a boom time for activist government and for the growth of administration and administrative law.
Yet that is not the conventional story of Jacksonian democracy. According to that story, Jacksonian America was characterized not by the building of national capacities, but by the triumph of antigovernment, anti-state political ideology. "The Democracy" that Andrew Jackson symbolized was about power to the people, and to the states and localities, not power to the federal government. (22)
From the perspective of electoral politics and partisan ideology, this conventional story is doubtless correct. In the late 1820s and early 1830s, a political realignment split the Jeffersonian Republican party into two warring factions. (23) The nationalist Clay-Adams wing became the National Republicans, which shortly morphed into the Whigs. The Whig party line embraced change. It emphasized a neo-Hamiltonian program of federally funded internal improvements, regulation and promotion of credit through a powerful national bank, and protective tariffs to aid the growth of American manufacturing. (24) The "Old Republican" wing of the Jeffersonian Republicans became the Jacksonian Democrats, or sometimes just "The Democracy." The Democratic party line was deeply conservative, even reactionary. It appealed to the anxious majority of Americans troubled by developments that the Whigs viewed as "progress." (25) Ideologically, Jacksonian Democrats insisted on strict construction of the Constitution, a small and frugal federal government, and states' rights. (26)
Electorally, the Democrats triumphed. (27) And, as a result, "The Democracy's" political preferences also triumphed. (28) Thomas Jefferson had hoped that the government could operate so invisibly that citizens would hardly notice it. (29) Alexis de Tocqueville, visiting America at the beginning of the Jacksonian era, explained the strength of Americans' attachment to the Union in terms of a federal system that left citizens free to pursue their local interests through local politics. In his words, "The Union is a great republic in extent, but the paucity of objects for which its Government provides assimilates it to a small State." (30)
Given their small government ideology and electoral successes, the Jacksonians might be expected, at most, to have left a weak national government much as they found it. To be sure, the federal government grew in the age of Jackson. While population doubled from 1830 to 1860, federal expenditures more than quadrupled. (31) And federal government civilian employment also grew faster than population. (32) But, as Leonard White again tells us, these increases in the size of the national government were not fueled by the government's taking on new functions. (33) He echoes the conventional view that the expansion of governmental functions in the period 1829 to 1862 affected primarily state and local government, not the federal establishment. (34) Such changes as there were in the administrative system during the Jacksonian era White ascribes to "changes in magnitude, in complexity, and in the influence of external forces, principally the political party." (35)
If these descriptions are accurate, there should be little in the Jacksonian era to hold our attention. If one is interested in how law evolves as it both builds and binds administration, a government that systematically avoids innovation is not likely to be very revealing. Yet, however persuasive this conventional story, it obscures some crucial developments in an era that is notoriously difficult to characterize. (36)
First, changes in the scale of government can have effects that yield qualitative changes in government organization and practice. As size increases, reliance on bureaucratic or administrative systems of control almost necessarily displaces accountability structured through personal responsibility and loyalty. (37) Indeed, when substantial increases in the scale of administrative activities were combined with Jackson's political program to democratize administration through rotation in office, the bureaucratization of administration was almost assured. Experienced officials can operate on custom and institutional memory; constant turnover in personnel demands rules and routines. The Jacksonian period thus ultimately produced another revolution, one that changed both the understanding of the idea of "office" and ideas about how official fidelity to public duty should be controlled. (38) Democracy begat bureaucracy. (39)
Second, although the Jacksonian Democrats opposed the Whig program of federal initiatives to stimulate economic development, their ideology was not the ideology of laissez-faire. Following Marvin Meyers, (40) Matthew Crenson argues persuasively that Jacksonian Democratic belief involved first and foremost a belief in republican virtue. Government had a high purpose: to make men good. But republicanism for the Jacksonians was not the classical republican ideal of the pursuit of virtue through civic engagement. It featured instead a commitment to governmental action that would tend to assure that virtue, understood as honesty and hard work, would be rewarded. (41)
To be sure, this commitment yielded mostly a negative program: avoidance of monopoly (hence the antipathy to the "Monster Bank" and to corporate charters generally); suppression of economic activity that was viewed as mere speculation (hence the Jacksonian aversion to all banks and the embrace of a "hard money" policy); and limitations on government actions, such as the funding of internal improvements, that were thought to lead to "systematic corruption." (42) Yet the notion that government should make men good sometimes demanded that government grow. The refusal to recharter the Bank of the United States required that its functions be taken back into the government itself. As John M. McFaul put it in his study of Jacksonian financial policy, "This study ... documents a curious but ... familiar pattern of events in American political history: ... Jacksonians with their anti-state, anti-government bias ended up strengthening both state and government." (43)
Indeed, the Jacksonian period witnessed energetic exercises of national governmental authority to relocate Indian tribes, (44) enforce federal tariffs, (45) and press the boundaries of the United States to the Rio Grande and the Pacific. (46) At least where the War Department was the administrative instrument, whether to relocate Native Americans, enforce customs duties, or annex territory, Jacksonians were not bashful about projecting national power.
Of greater interest from the perspective of this article, the Jacksonian period also spawned regulatory innovation and the creation of entirely new administrative institutions. One tentative step was the Patent Reform Act of 1836. (47) Since 1793 the United States had operated a pure registration system for patents. Any inventor presenting a formally complete application for a patent was entitled to receive one with no exercise of judgment about whether the invention was really new or was sufficiently useful or important to warrant a patent. (48) The 1836 statute created the new office of Commissioner of Patents, which was charged with examining alleged new inventions or discoveries and issuing a patent only if he found that they were in fact new and "sufficiently useful and important" to warrant patentability. (49) While this reform to some degree removed the patentability question from the common law courts and placed it in an adjudicatory administrative agency, (50) it was a partial measure. The Commissioner of Patents was given no rulemaking authority, and administrative precedents were surely difficult to develop when administrative appeals went to special boards appointed for each individual dispute. Moreover, these ad hoc boards' decisions were subject to further review by federal circuit courts in a de novo proceeding in the form of a bill in equity. (51) Under this system, the Patent Office took some of the load off of the courts, but the development of the law of patentability remained largely in judicial hands, as it is today. (52)
The rise of steamboat travel had more transformative effects. The human carnage that resulted from collisions, fires, and bursting boilers fueled popular demand for governmental action and propelled a reluctant Congress into authorizing a much bolder regulatory innovation--the national government's first major health and safety regulatory program. Moreover, as will be discussed in much greater detail below, that program pioneered (1) "scientific regulation"; (2) the "board" or "commission" form of administrative organization that would loom so large in Progressive and New Deal regulatory legislation; and (3) the use of administrative rulemaking as a principal technique for articulating regulatory standards. (53)
Old issues of governmental organization were also reopened and given new forms. For example, in addition to the establishment of the Court of Claims, similar, prolonged campaigns to establish a "Home Department" (54) and to augment the status and authority of the Attorney General (55) bore fruit during the Jacksonian era. And the democratic mandate claimed by a popular--that is, popularly elected--President rekindled the struggle between the President and Congress over political control of appointments and removals. It also energized congressional oversight, investigation, and reorganization of administrative departments. (56) Finally, resolution of conflicts concerning the supervisory powers of upper level officials and their powers of direction became ever more critical to the maintenance of administrative consistency and the rule of law. (57)
Growth and development of administrative capacities despite the dominance of small government ideology are hardly unique to Jacksonian America. The constitutional politics of the whole of the antebellum period tends to obscure the relatively continuous growth and organizational development of national administrative capacity in the first century of the American Republic. (58) This is not, of course, to claim that developments followed a simple, linear trend line or to deny the transformative effects of the Civil War. If war is the great state builder, a civil war that successfully subdues sectional rebellion is the great consolidator of national power. (59) It would take some years after peace was restored to work itself out, but a regime change would occur. A new constitutional understanding would emerge in the postbellum world, one more sympathetic to the recognition of the uses of national power and less hostile to both the building and recognition of national administrative capacities. (59)
In short, the conventional story of the postbellum emergence of national authority and a bureaucratized administrative state is hardly a historiographical conceit. But, like the Republican period of 1800 to 1829, in the "middle-period" from Jackson to Lincoln, ideological commitments and constitutional politics provide only a partial picture of how American government actually operated. Alongside the democratization of American governance, administration and administrative law were evolving in the Jacksonian era in response to a changing national reality. "The Democracy" laid waste the remains of the Federalist political system of rule by social and economic elites that Jefferson's "revolution" had not dismembered. But the institutionalization of democratic reform also promoted the building of state capacities, the bureaucratization of offices, and regulatory innovation. At the same time, the recognition of the democratic authority of the executive branch sharply restricted the development of modern forms of judicial review of administrative action. The result was a distinctive structure of administrative legal authority and control of administrative action that contrasts starkly with our twenty-first-century understanding of administrative law.
All of the developments that characterize that evolutionary process cannot be explored here in any detail. This article will concentrate on three major topics: (1) the development of monetary policy and the internalization of government regulation of the money supply; (2) rotation in office and the shifts in ideas, organization, and technique that redefined the public service in the Jacksonian era; and (3) the regulatory system for steamboat transportation. These three case studies illustrate the major themes of administrative development in the Jacksonian Era. And in each case, although in slightly different ways, administrative innovation emerges out of democratic commitments.
The first, the de-chartering of the Bank and the internalization of monetary policy, is a harbinger of many Progressive Era regulatory reforms. Here, as in that later period, reform was motivated by loss of faith in private institutions and popular revulsion against the corruption of politics by the power of private monopoly. To control private power, democratic reformers were required to build state capacity. The second, rotation in office, is essentially a bureaucratization story. Democratization of offices yielded the bitter fruits of incapacity and corruption. Those disagreeable effects generated countermovements of reorganization and reform that began to build a functionally differentiated and hierarchically controlled civil service. Finally, popular demand for the regulation of steamboat travel not only thrust the federal government for the first time into domestic health and safety regulation, but it also introduced the quite modern theme of harnessing regulatory authority to both practical experience and scientific learning. Here, democratic demands for action generated a response that featured democracy's twentieth-century rival, administrative expertise.
These developments reveal different aspects of the development of national administration in response to the democratization of politics. Indeed, from the standpoint of institutional design or public administration, they are unified by little more than a common thread of institutional experimentation. The Jacksonians had theories of politics, but no theories of administration. Their reforms and initiatives were driven by both political commitments and emerging public demands, but neither motivation implied much, if anything, about administrative structure or technique.
Yet, however eclectic (and reluctant) the Jacksonian approach to building national administrative capacities, the emergence of those capacities would seem to suggest that corresponding attention be given to administrative accountability and control. Here, administrative law did play its conventional roles: mediating the struggle between presidents and Congresses for the control of administrative implementation; structuring the internal mechanisms of accountability within bureaus and within the executive branch as a whole; and providing opportunities for external accountability to law through judicial review of administrative action.
The development of administrative accountability in the Jacksonian era is not, however, necessarily a success story. This was an era whose administrative practices often challenge our contemporary understandings. We tend to assume that internal administrative structures, rules, and processes should be designed to assure the rule of law, not allegiance to persons, parties, or ideologies. Rotation in office and party control of administrative appointments and removals in Jacksonian America hardly facilitated fidelity to impersonal norms of effectiveness and legality. It was also an era in which interbranch struggles for political control of administration, and the inherited common law techniques of judicial review, revealed the weakness of administrative law, both as a set of consensus norms for the mediation of interbranch conflict and as an external check on administrative legality.
But this account anticipates and oversimplifies a complicated story. Parts I through III of this article will analyze the administrative structures and practices that grew up around the internalization of monetary policy in the sub-Treasury system, the system of rotation in office, and steamboat regulation. These parts provide, in some detail, a portrait of the body of administrative law that administrators of the Jacksonian period constructed from the often-divergent imperatives of congressional legislation, partisan political struggle, and administrative necessity. Part IV examines political and legal accountability in the Jacksonian era in order to illuminate some aspects of political control not touched on in the preceding case studies and to give content to the mid-nineteenth-century understanding of the role of courts in overseeing administration. A concluding Section summarizes the contributions of Jacksonian Democracy to public administration and administrative law.
I. THE BANK WAR AND SUB-TREASURY SYSTEM
The so-called "Bank War," generated by President Andrew Jackson's determination to curb the power of the Second Bank of the United States, has been studied from multiple perspectives. Economic historians explore the effects of Jackson's victory--the removal of the Bank from its position as the chief fiscal and monetary agent of the national government--on the boom and bust economic cycles of the mid-nineteenth century. Political historians see the Bank War through the lens of the partisan ideological competition of the Jacksonian era, and mine the conflict for what it reveals about political beliefs and commitments, particularly those of Jacksonian Democrats. Students of constitutional and administrative history take particular interest in the perennial separation-of-powers issues evident in the struggles between the President and Congress in Jackson's second term. Those issues include: the appropriate use of the presidential veto, the power of the President to direct the actions of executive officers, and the power and responsibility of the President to make constitutional judgments independently of the judiciary.
Each of these perspectives has much to teach us about governance in the Jacksonian era. This article's focus, however, is on the less-studied question of what the Bank War and its aftermath reveal about the administrative techniques and structures deployed in implementing monetary policy in the mid-nineteenth century. The demise of the Second Bank of the United States ushered in first the so-called pet bank system--the practice of placing government deposits in politically favored state banks. That system was then superseded by the "sub-Treasury" or "independent Treasury" system, which lasted until the creation of the Federal Reserve System in the twentieth century. The administrative organization of fiscal agency for the federal government and the control of monetary policy thus passed through three distinct stages in the Jacksonian period. The statute that chartered the Second Bank of the United States delegated fiscal agency and monetary policy to a private institution that was expected to be guided by standard, conservative banking practices. The pet bank system shifted control of monetary policy strongly in the direction of the political branches, a form of regulatory control that was unlikely to produce sound monetary policies. The unhappy experience with pet banks thus gave way to the sub-Treasury device--a system in which the government, through the Treasury, provided its own depositary and exchange services and had effective control over its funds. This last approach substituted a public bureaucracy for many of the standard safekeeping and exchange functions we normally associate with the private banking system.
Yet, while the focus in these pages will be on administrative organization of monetary policy, the changes that occurred during the Jacksonian period cannot be understood without some description of the economic, political, and constitutional dimensions of the Bank War and the events that followed the expiration of the charter of the Second Bank of the United States. Moreover, the constitutional dimensions of the Bank War include important and continuously contested issues at the intersection of constitutional and administrative law--the President's authority to direct subordinate officers, Congress's power to limit that authority, and the coordinate powers and responsibilities of the courts, Congress, and the executive branch to interpret the Constitution.
A. Economics, Politics, and the Constitution
1. Economics
The standard or conventional economic analysis of Jacksonian monetary policy is relatively straightforward. (61) In the beginning there was the First Bank of the United States. The Jeffersonian Republicans opposed the Bank on political and constitutional grounds and allowed its charter to expire. Chastened by the severe economic dislocations that followed, the Jeffersonians chartered a Second Bank of the United States, which provided the Republic with a sound currency and the government with an effective fiscal agent. The political struggle between Andrew Jackson, as President of the United States, and Nicholas Biddle, as President of the Second Bank of the United States, ended in the destruction of the Second Bank's central banking role when Jackson vetoed its recharter in 1832 and ordered the withdrawal of all government funds on deposit with it.
Government funds were then deposited in selected state banks, which used the federal deposits as reserves to issue a blizzard of paper notes. State bank paper fueled a frenzied speculative bubble, particularly in the acquisition of public lands. The bubble was almost self-perpetuating. The receivers of the federal land offices redeposited these state bank notes in the state banks, where they were treated as additional deposits upon which to issue yet more paper.
Seeing that the speculative boom was spiraling out of control, the federal government made the situation worse. First, Jackson instructed the Secretary of the Treasury to issue the so-called "specie circular," which required that, after August 15, 1836, all payments for public lands be made in gold or silver. Then Congress passed legislation that required the distribution of the federal surplus to the states in proportion to their populations. The specie circular had the effect of moving gold and silver to state banks in the South and West, where land sales were substantial, and away from eastern centers of commerce. The proportionate depositing of the federal surplus with state treasuries made it impossible for the federal Treasury to correct these imbalances by moving excess deposits from the West to the East, where they were needed to ensure liquidity.
The consequence of all these actions was a sharp contraction of credit and a bursting of the bubble. Banks called in their loans, debtors defaulted, and the banking system floundered. After a brief recovery in 2838, the economy plunged into a severe depression that lasted until at least 1843. In this conventional story, banking politics triumphed over sound economics and the country paid the price. Some version of this narrative appears in virtually all of the major accounts of the period. (62)
The conventional account was challenged root and branch by Peter Temin's well-known 1969 book, The Jacksonian Economy. (63) According to Temin's analysis, the speculative bubble, and the collapse of prices and the banking sector that occurred when the bubble burst, both resulted from changes in international markets that affected the volume of gold and silver imported into and exported from the United States. Temin argues that neither the boom nor the bust were caused by the destruction of the Bank of the United States, the use of government deposits to finance speculation, the specie circular, or the distribution of surplus federal funds to the states. (64) But, whatever the soundness of Temin's account, the traditional story is based in large part on the understandings of people who witnessed both the bank war and the panic. (65) And for the purposes of domestic politics and policy in the mid-nineteenth century, what people believed at the time was what mattered. The puzzle for us is to understand how economic policy could have become so deranged by political considerations.
2. Politics
Andrew Jackson's political opposition to the Bank of the United States was both ideological and personal. (66) Ideologically, Jackson believed in republican virtue as exemplified by those he viewed as the productive elements of society--hardworking, ordinary Americans like farmers and mechanics. The Bank of the United States (BUS) was a statutory monopoly with special privileges. It represented elite financial, commercial, and manufacturing interests, not the interests of ordinary Americans. Indeed, Jackson viewed all banks as potential promoters of speculation rather than honest work.
Jackson also considered the Bank a threat to majoritarian democracy. It exercised enormous financial power pursuant to a statutory charter that left it unaccountable to the President, to Congress, or to the electorate. Moreover, financial power could be converted into political power. In Jackson's view, the Bank was not just unaccountable to the government; it had the capacity, by deploying its financial resources for political ends, to shape the government for its own purposes. As a majoritarian democrat and a believer in the ordinary American as the backbone of a democratic republic, Jackson's ideological commitments virtually demanded that the Bank's power be brought under governmental control.
Jackson's objections to the Bank were based on personal factors as well. He had been brought to the verge of bankruptcy by the deflationary policies of the Second Bank--policies that had been made necessary by the incompetent inflationary machinations of that Bank's first president. From personal experience Jackson associated banks, and particularly the Bank of the United States, with speculative excesses and squeezes on worthy, small debtors. In addition, Jackson firmly believed that the BUS had used its funds in the election of 1824 to defeat both him and other Democratic candidates. Hence, whether the BUS had or had not interfered in the election, Jackson's belief that the Bank's power could undermine the right of suffrage was more than an abstract ideological commitment. And in some sense his beliefs became self-fulfilling. Once Jackson confirmed his intent to suppress the Bank's power by vetoing the 1832 legislation rechartering it four years before its charter was to expire, undisguised political warfare broke out between the Jackson Administration and the Bank and its allies in Congress. If the Bank had stayed out of politics before, it was in politics now.
Returned to office following his veto, and after a campaign in which the Bank was a major issue, Jackson interpreted his new mandate as a mandate to defang the Bank. This may not have been true--many contemporary observers believed Jackson won despite his opposition to the Bank, not because of it--but Jackson believed it. Nicholas Biddle then played into Jackson's hands by artificially curtailing credit in 1833, thereby precipitating a panic. If the electorate had not rallied to Jackson's anti-Bank banner before, they were attracted to his position when Biddle flexed the Bank's monetary muscle.
Still, the Bank had considerable political support both in Congress and in the general public. (67) And it still had four years to run on its federal charter. Congress had rechartered the BUS shortly before the 1832 elections precisely because the Bank's supporters believed that its popularity with the electorate would force Jackson to sign the bill. (68) Anticipating legislative opposition, even after the 1832 elections, Jackson did not seek legislation to rein in the Bank. He used his wholly executive powers instead.
Believing that the Bank's power emerged importantly from its position as the sole depositary for federal government funds, Jackson decided to withdraw them. But the statute establishing the Bank allowed removal of the government's funds only by the Secretary of the Treasury, who was required to state his reasons to Congress. Faced with a Secretary of the Treasury, Louis McLane, who favored the Bank, Jackson moved him to the State Department and replaced him with William Duane, a known Bank opponent. Once in office, however, Duane declined to remove the deposits. On his construction of the banking statutes, the only legitimate reason that he could give Congress for removal was that the deposits were unsafe with the BUS. Because it seemed to Duane that they were not only safe, but also safer there than in alternative depositaries, he could not bring himself to make the necessary finding. In exasperation, Jackson removed Duane as Treasury Secretary and substituted Roger Taney, who promptly did the President's bidding.
Jackson had properly read the congressional mood. Taney was a recess appointment. When Congress returned, the Senate refused to confirm him. In addition, the Senate passed resolutions censuring the President both for removing the deposits and for removing Duane. The Senate resolutions declared that those actions, combined with the President's use of the veto, revealed Jackson to be embarked on a sinister campaign to aggrandize the power of the presidency.
Whatever the truth about Jackson's intentions--the opposition press often referred to him as "King Andrew"--he had won the Bank War and, in the process, substantially increased the powers of the presidency. After the election of 1834, when the Democrats regained control of both houses of Congress, the Senate's censure resolutions were expunged from the records and the Bank's charter was allowed to expire. Moreover, in Robert Remini's words:
In mortally wounding the Bank, President Jackson awarded himself tremendous powers over the financial operations of the country. Through his Treasury Secretary, he could direct the movement of vast sums of money in and out of state banks. Jackson never intended to seize this power, but the fact remained that he had it. And once taken he was extremely reluctant to part with it.... (69)
3. The Constitution
The Senate censure resolutions were motivated by the strongest of partisan motives, but they raised serious constitutional questions. Jackson's veto of the Bank bill had relied in part on a determination that a national bank, in the form provided, was unconstitutional. But had not M'Culloch v. Maryland (70) decided that question? Was Jackson claiming that the President's view of the constitution trumped the Court's? Was it constitutionally proper for a President to remove a cabinet official because the President disagreed with the official's exercise of a discretion that was conferred on him by statute? Was the veto provided in the Constitution meant to allow the President to stymie the will of Congress any time Congress lacked a veto-proof majority?
Andrew Jackson would have answered no, no, yes, and yes to those questions. In asserting the President's power as forcefully as he did, Jackson made important contributions to our understanding of the presidency and its relationship to administration. (71)
President Jackson's veto of the rechartering of the Second Bank of the United States gave rise to two different constitutional complaints. One was that to the extent that the veto was based on policy grounds, it, like a number of Jackson's other vetoes, exceeded the proper role of the President in approving or disapproving legislation. That complaint was based on prior practice or constitutional convention, not the text of the Constitution. But, while it was true that former Presidents had vetoed legislation largely on constitutional grounds, this was not the uniform practice. President Madison, for example, had vetoed the first attempt to charter the second BUS wholly on policy grounds. (72)
More to the point, the political position of the presidency had shifted. Because of the broadening of the electoral base and the move to popular selection of presidential electors, Jackson was the first President who could realistically claim to be popularly elected. He believed that he wielded veto power in the name of a majority of the people. Jackson's practice both reflected and solidified a change in the institutional relationships within the national government.
If Jackson's policy vetoes asserted a presidential equality with the Congress in legislation, his constitutional objections to the Bank claimed for the President an equal status with the Supreme Court in interpreting the Constitution. Jackson's critics interpreted this as a claim that the President was above the law. (73) But Jackson's veto message made no such assertion. To be sure, the Supreme Court had decided in M'Culloch v. Maryland that Congress had the power under the Constitution to charter a national bank. And much of Jackson's veto message chipped away at particular features of the bill rechartering the second Bank in an unconvincing fashion. Yet Jackson had two connected arguments that were both persuasive and important.
First, a crucial part of the M'Culloch rationale was that it was not proper for the Court to inquire into the degree of necessity for congressional action that was premised on the Necessary and Proper Clause. In Jackson's words:
Under the decision of the Supreme Court, therefore, it is the exclusive province of Congress and the President to decide whether the particular features of this act are necessary and proper in order to enable the bank to perform conveniently and efficiently the public duties assigned to it as a fiscal agent, and therefore constitutional.... (74)
Jackson generalized this position in his well-known claim that every public officer takes an oath to support the Constitution and swears to uphold it as he understands it. (75) But that was not a claim that the President or Congress was entitled to nullify a judicial decision deciding a particular constitutional controversy. The Court had ruled on the constitutionality of the statute rechartering the second Bank in M'Culloch. But it had also indicated that the question of whether the Bank was "necessary and proper" was a prudential question for Congress. Hence, concluded Jackson, "The authority of the Supreme Court must not ... be permitted to control the Congress or the Executive when acting in their legislative capacities, but to have only such influence as the force of their reasoning may deserve." (76) As stated, Jackson's constitutional position literally has no point of tangency with any claim that the President is above the law or that the Constitution authorizes the Chief Executive either to override judicial decisions or to refuse, on constitutional grounds, to enforce a law as passed and signed.
Like the veto controversy, (77) the constitutional debate over the removal of the government's deposits from the BUS, and over the removal of a Treasury Secretary who declined to follow the President's instructions, reopened questions that have continued resonance with twenty-first-century administrative and constitutional lawyers. (78) Jackson's political opponents had two connected legal complaints. The first was that in removing the deposits, Roger Taney willfully misconstrued the statute under which he was authorized to act. The formidable trio of Henry Clay, Daniel Webster, and John C. Calhoun all argued that the general purpose of the statute was to ensure safe and faithful custody of the government's funds--Duane's position before his removal. Because Taney had conceded that the money was safe and the Bank faithful, the Senators concluded that he lacked any authority to remove the government's money. (79) Taney relied instead on the plain text of the statute, which placed no restriction on the Secretary's authority, save the requirement to report his reasons to Congress. (80)
We need not attempt to resolve who had the better of this statutory argument. The only important point from the standpoint of administrative law is that Taney's action was a dramatic illustration of the tens of thousands of interpretive decisions that are made by executive officials, most of which are unlikely ever to be subjected to judicial review. In our Chevron-saturated legal world, we are likely to forget that agency statutory interpretation is not important because the courts give agencies deference. It is important because in most cases federal statutes mean what administrative agencies take them to mean. (81) If Congress disagrees, it is not without tools with which to shape agency or executive statutory construction. The one on display in the removal controversy was the Senate's refusal to confirm Roger Taney as Secretary of the Treasury. That action hardly saved the Bank's position, but it surely reminded Jackson that go-it-alone executive action had its costs.
The opposing senators' second argument was a constitutional claim that was also premised in part on the statute. According to Henry Clay, the statute vested authority to remove deposits in the Secretary of the Treasury, not in the President. In discharging Duane for refusing to follow his instructions, Jackson had, in effect, usurped the Secretary's statutory authority. In Clay's view this was part of a more general scheme by President Jackson to paralyze the Congress and consolidate all power in the President. (82) Clay thus reopened the debate about the President's removal power and the position of the Treasury Department.
It is often said, even by the Supreme Court, (83) that the First Congress settled this question in 1789, in its extensive debates concerning whether the Constitution presumed a presidential power of removal or removal dependent on Congress's statutory prescriptions. But the so-called decision of 1789 was ambiguous. The language adopted in the statute establishing the Treasury Department satisfied both those who thought that Congress could decide whether the President should be able to remove the Secretary of the Treasury and those who believed that the Constitution gave him unfettered authority to do so without congressional authorization. (84)
The Whig leadership in Congress contested Jackson's authority to direct the actions of Executive Branch officials, and the President's control over the Treasury, from a number of directions. But all of their attempts to curb the President's power failed. The Senate passed Henry Clay's resolution: "Resolved, that the President, in the late Executive preceedings in relation to the public revenue, has assumed upon himself authority and power not conferred by the constitution and laws, but in derogation of both." (85) Jackson responded by presenting a "protest" (86) that reasserted the President's power to control executive officers, including the Secretary of the Treasury, and to remove them at his pleasure. Jackson's staunch defender in the Senate, Senator Thomas Hart Benton, then waged a continuous campaign to expunge the censure resolution from the Journal of the Senate and, as has been noted, succeeded when the Democrats retook control of the Senate in the 1836 elections. (87)
But the Whigs were not finished. Clay also offered a resolution denying the President's power to remove officers at his pleasure and instructing the Judiciary Committee to consider legislation requiring that removals receive the consent of the Senate before they became effective. (88) No such legislation ever passed. The Senate did pass a bill requiring the President to give reasons for removal whenever a nomination was made to the Senate to fill a vacancy occasioned by a presidential removal. (89) But that bill was never reported out of the House committee to which it was referred.
The issue came back when the Whigs gained the presidency in 1840. After Harrison's death, his successor, the crypto-Whig John Tyler, proposed to save the liberty of the people by keeping public funds from the control of the Executive Branch. Tyler evocatively presented his plan as establishing "a complete separation ... between the sword and the purse." (90) Nothing less, presumably, would prevent the emergence of executive despotism. Tyler's plan was presented to Congress in 1841 in a bill that established an independent Board of Exchequer, which would have exclusive power to receive, hold, and disburse public money. (91) The Board's five members were protected from presidential control by a provision that allowed their removal only for physical inability, incompetence, or neglect or violation of duty--with the reasons for removal to be laid before the Senate. Perhaps because Tyler had few friends in either party in Congress, nothing ever came of this proposal to give Congress effective control over the administration of public funds by turning the Treasury Department into what we would now characterize as an "independent agency."
In some sense, therefore, the struggles over the Bank of the United States reestablished the President's powers of direction concerning Executive Branch policies and actions that had atrophied under the Jeffersonian Republicans. (92) But this position hardly established the elected monarchy that Clay, Webster, and others occasionally invoked. As the Supreme Court subsequently made clear in Kendall v. United States, (93) where legislation gave an executive official no discretion, a direction from the President (in this case Jackson again) that countermanded the explicit terms of a statute did not protect the officer from a writ of mandamus. In those admittedly rare instances where Congress leaves no implementing discretion, executive authority can be controlled by legislation.
Perhaps more importantly, the power to direct generated by an implicit threat of removal does not give the president a power of direct implementation where Congress has authorized action by a different officer. For example, while the requirement that land offices only accept specie in payment for public land purchases is often called "Jackson's specie circular," that circular was issued by Levi Woodbury, Secretary of the Treasury, (94) at President Jackson's direction. (95) Using statutorily authorized officers as conduits for presidential policies was as common in Jackson's time as it is today. (96) But these "directions" are not claims that the President can himself exercise the officer's statutory authority. Both Jackson and Taney fully understood this. Indeed, Roger Taney, while Jackson's Attorney General, clearly articulated the legal distinction, insisting that while the president could remove an officer, he could not substitute his action for the action conferred on the officer by statute. (97) And authority, once given to an officer, may be removed. The effect of the specie circular was annulled when Congress, in 1838, passed a resolution making it unlawful for the Secretary of the Treasury to create any difference between the payments that were to be received for the various branches of federal revenue (land sales, taxes, fees, etc.). (98)
Moreover, the politics of appointments and removals do not necessarily follow the formal authority laid down in the Constitution or in the statutes. Jackson's removal of Duane gave practical effect to his formal, constitutional claims, but prudent Presidents do not pick such fights with Congress very often. Nor is the formal power to appoint officers a guarantee that presidents will be able to choose officials free from powerful congressional influence. Commenting on the degree to which the Congress had insinuated itself into the appointments process by the end of the Jacksonian era, Leonard White concluded, "In this aspect of the struggle for power, the legislative branch emerged relatively a victor in 1861 even though the executive still held high [i.e., constitutional] ground." (99) Roger Taney was hardly the only appointment rejected by Congress during the Jacksonian period. Indeed, with the exceptions of Jackson and Polk, presidents in the Jacksonian era were forced to yield substantial control over appointments to Congress. (100)
Finally, Jackson's victory for presidential control of administration did not set the tone for the remainder of the nineteenth century. Tyler's Exchequer bill suggested his willingness to capitulate to Congress on the question of the control of the Treasury. (101) And, aside from President Polk, the remaining presidents of the Jacksonian era were relatively weak. The battles between presidents and congresses over appointments and removals would continue throughout the nineteenth century and beyond. (102) Indeed, in this never-ending struggle, Jackson's successes were a high water mark from which presidential power and authority over administration ebbed almost continuously (Abraham Lincoln's tenure excepted) until world wars and major depressions reenergized presidential leadership. (103)
B. The Administrative Organization and Control of Monetary Policy
Whatever the political disputes between Federalists and Jeffersonian Republicans or between Jacksonian Democrats and Whigs concerning the Bank of the United States, no one doubted the importance of a sound and stable currency. Nor was there much argument about whether agriculture, commerce, and manufacturing required a well-functioning credit system or whether the government (and others) required efficient and trustworthy fiscal agents for collections, payments, and transfers. The question was how to organize these functions in ways that were effective, consistent with the Constitution, and politically viable, given competing political visions of the meaning of accountable and democratic governance. Building on prior efforts, the Jacksonian period saw experiments with three different methods for holding and dispersing the government's money and for regulating the soundness of the currency.
1. The Bank of the United States
The chartering of a national bank was contentious from the very beginning of the Republic. The first substantial dispute over public policy in Washington's administration arose out of Thomas Jefferson's declaration that Alexander Hamilton's plan to charter a national bank was unconstitutional. (104) Jeffersonian Republicans disliked the first Bank of the United States for reasons similar (105) to those later voiced by Jacksonian Democrats. Hence, when that Bank's charter came up for renewal in early 1811, the recharter bill failed in the Senate by the casting vote of Vice President George Clinton.
The demise of the First Bank left the national government without a fiscal intermediary to hold and disburse its funds. Albert Gallatin, Secretary of the Treasury, acted to fill the void by instructing all Collectors of Revenue to deposit their collections in one or more state banks selected by the Secretary or by the Collector where there was no designated depositary bank in the relevant locale. (106) The Treasury then entered into agreements with the depositary banks concerning how they were to carry out their fiscal intermediary functions for the government. (107)
The new contractual system worked well for a short period. But a combination of the fiscal strains of the War of 1812, the proliferation of state banks, which issued a blizzard of paper notes, and the flight of specie out of the country because of trade imbalances, rapidly produced a crisis. Banks were unable to redeem their notes in gold or silver; the United States was forced to accept depreciated state bank paper in payment for debts due the government; and because most of this paper was not accepted outside of the locale where it was issued, interstate trade and government transfers rapidly became difficult, if not impossible. (108)
In 1816, the chastened Republicans chartered the Second Bank of the United States. Presumably, a chartered national bank could solve both the payments and the soft currency problems. A properly funded and administered national bank, with branches all over the country, could make payments in specie, if demanded, or in its own notes, redeemable in specie at any of the Bank's branches. A merchant in Ohio could thus have confidence in a national bank note, even though it was issued in Boston. The payments and fiscal-transfers problem would be solved.
Soft money was more difficult. But once confidence was restored sufficiently that state banks could again redeem their notes in specie, the BUS could regulate the issuance of state bank notes by influencing their specie reserves. Because the BUS was the depositary bank for all U.S. government funds, it accumulated large quantities of state bank paper. By constantly presenting this paper for specie redemption, state banks would be limited in the amount of new paper that they could issue. This regulatory effect assumed, of course, that the state banks would operate in a sound manner, that is, that they would maintain reasonable reserves of specie against the possible redemption of their outstanding notes. Because any bank that was...
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