2.3.3. The Mid-Atlantic States (1825-1865): Jacksonians and Banks


  • Before railroads appeared on the scene, banks were by far the most controversial corporations.  Hamiltonians, who envisioned America as a centralized nation relying heavily on industry and trade, viewed banks as essential to that vision and to achieving greatness for the nations.  Jeffersonian and, later, Jacksonian Democrats, who wanted a more localized and less industrial society, viewed banks as a threat to their vision and, because of their great financial power, as a threat to democracy itself.  New York was a central battleground for these competing visions.
  • In New York, Martin Van Buren’s liberal “Bucktail” Democrats recognized that banks were needed to provide capital for a rapidly growing state, but they were concerned about excessive bank power.  They did not prohibit banking in the state’s 1821 constitution s but required a 2/3 vote of the legislature for all new corporate charters, thus effectively restricting bank growth.  In 1829, a Democratic legislature enacted a Safety Fund Law that allowed banks to incorporate more freely but placed them under close regulation and created a state banking commission, the first state financial regulatory agency in America.



Key cases:

Thomas v. Dakin – New York, 1839 (22 Wendell 81); Warner v. Beers – New York, 1840 (23 Wendell 103); DeBow v. People – New York, 1845 (1 Denio 13); Gifford v. Livingston – New York, 1845 (2 Denio 380)

  • In 1838, in the midst of a depression caused in part by banking restrictions, Whigs took control of the legislature and passed a more liberal banking law.  But the law passed by less than a 2/3 majority, and a prolonged battle over the law’s validity that illuminated Americans’ continuing anxieties about the role of banks in a modern democracy.
  • In Dakin, New York’s supreme court held that the 2/3 rule of the 1821 constitution applied to banking laws.  But the following year, in Warner, the Court of Errors and Appeals – composed partly of judges and partly of state senators, many of whom had voted for the 1838 law – overruled Dakin.  They reasoned that an exception must be made to the 2/3 rule because the new law promoted equality of opportunity, which after all was a primary goal of the 1821 constitution.  Four years later, in DeBow, the supreme court struck back, defending its decision in Dakin and dismissing Warner as a legislative, not a judicial decision.  But in Gifford, the Court of Errors and Appeals had the last word, holding by a small majority that Warner was decisive and that the 2/3 rule did not apply to the 1838 banking law. 
New York branch of Bank of the United States (1827) - courtesy New York Public Library

Banknote, New Jersey Merchants Bank (1861) - courtesy New York Public Library

“The excess of banking, and the impure obtaining of bank charters, were the evils the [1821 constitutional] convention sought to remedy.” – Senator Eleazer Root, in Warner

“I cannot conceive any law less in hostility to the design of the constitution in this regard, or in effect more conformable to its spirit … It opens to all persons, without inquiring whether they are friends or foes of the ruling powers, the business of banking and the issuing of paper currency.” – Senator Gulian Verplanck, in Warner

“I hope the day is not very distant when this, and other kindred laws, which needlessly shackle men in their lawful pursuits, will either be greatly modified, or wholly erased from the statute book.  I as … a believer in the sentiment that the people are governed too much.”  - Justice Greene Bronson, in DeBow