state of the Bank and the state of the currency were satisfactory in 1830, but the Bank had begun in 1827 to issue branch drafts which stimulated credit and soon produced mischief. Of the war on the Bank it is not necessary to speak in detail. In December, 1831, Clay was nominated for President by the National Republicans, and he and his friends determined to bring on the question of the re-charter of the Bank as a campaign issue. The re-charter was passed by Congress and vetoed by the President in 1832. The issue in the campaign was thus made up between the personal popularity of Jackson and of the Bank. The former won an overwhelming victory which he construed to mean that the people had weighed the question of re-chartering the Bank and had decided against it.
In September, 1833, he removed the deposits from the National Bank on his own responsibility, and placed them in selected state banks which would agree to keep one-third of their note circulation in coin, redeem all notes on demand, and issue no notes under a five-dollar denomination. This was to be an experiment. In the meantime the administration was eagerly pressing on the extinction of the public debt. The consequences were such as to prove that, however popular such a policy may be, it may easily be carried too far. The public deposits were loaned by the Bank to merchants, then recalled and paid to the public creditors, and then reinvested by them, so that the money market was subjected to recurrent and sudden shocks. The withdrawal and transfer of the deposits constituted another and more violent operation of the same kind, so that there was a crisis and panic in the spring of 1834. The eight or nine millions of public deposits were a continual source of mischief to the money market. By the contraction of the Bank of the United States to pay the deposits, and the contraction of the state banks to put themselves within the rule for receiving the same, the currency, in the summer
