On the other hand, the National Republican party, headed by Clay and Webster, immediately took sides as defenders of the bank against President Jackson. Although the bank's charter would not expire until 1836, a bill was introduced into Congress in the Spring of 1832 and passed for a renewal of the charter. It went to President Jackson in July and he vetoed it with a ringing document. President Biddle of the bank was reported as having said that he would defeat President Jackson for reelection on account of his veto of the bank bill. This threat aroused the General, and he declared "By the Eternal that is too much power for any one man to have in this country," and was then more than ever determined to destroy the bank. The presidential campaign was then on, Henry Clay being the opponent of General Jackson, and the leader of the friends of the bank. The bank charter was the chief issue of the campaign, but Jackson's popularity was so great that he won re-election by an overwhelming majority. Taking his re-election as an endorsement of his position on the bank question, President Jackson proceeded to deal the death blow to what he considered his enemy. On the pretext that the bank was unsafe he ordered the secretary of the treasury to remove from it the government deposits, and place them in certain state banks. Secretary Duane refused to do this, and Jackson removed him and appointed Roger B. Taney in his stead. Taney carried out the wishes of his superior. No more deposits were made in the United States Bank and warrants for current expenses soon exhausted the government balance there.

The government funds were then deposited with state banks carefully selected with reference to party loyalty. This raised a storm of protest from Jackson's political opponents, who branded the proceeding as unlawful, being a violation of the contract under which the bank came into existence. The bank had paid $1,500,000 as a bonus for the government deposits during a period of twenty years and now it was deprived of the benefits of these deposits three years before the expiration of the time. Party feeling ran high, and in the ensuing Congress a resolution of censure was passed by both houses as follows: Resolved, that the president, in the late proceeding 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." The president protested against the proceeding, but the resolution stood upon the records until 1837, when it was expunged in an all-night session of the Senate, after a fierce party struggle. The withdrawal of the deposits was a serious blow to the Bank of the United States, but it continued on until the expiration of its charter in 1836. It then took out a charter as a state bank, and continued business until 1841, when it failed. Nicholas Biddle was reduced from wealth to pauperism. Thus ended the great bank war, in a triumph for President Jackson. Specie payments were suspended again in 1837, the only retaliation against Jackson's victory, and the country was again to struggle for a time with state banks and wildcat currency.

The state banks in existence in 1833, when Andrew Jackson transferred the deposits to them, were of all kinds, based upon every conceivable system and form of legislation. It seemed as though the period of nearly thirty years just prior to the enactment of our National Banking Act was to be used for testing every theory and making every experiment that could be necessary in order to culminate finally in the national banking system. The banks in Massachusetts were the best managed. Being under severe restrictions, and a penalty in case of failure to pay specie on demand, they were the most stable. The "Suffolk Bank System" of Boston also acted as a powerful check against improvident management. This system arose from the determination of the solvent banks of Boston to compel the smaller banks located in the remote corners of the state to redeem their notes by keeping on deposit in Boston a fund for this purpose. The notes were presented daily through a clearing house, in very much the same way as checks are cleared. Any bank refusing to keep a fund for this purpose was liable to have its notes thrown out or refused, and thus be discredited. This system, which at one time included over five hundred banks, served to restrict note issues and proved a valuable expedient for the time being.

In New York the "Safety Fund System" was established, by which each bank was required to deposit with the state treasurer three per cent of its capital as a fund for the security of note holders and depositors. In case the fund became exhausted all the solvent banks were to be taxed to replete it. The fund was afterwards set aside for the protection of note holders only, it having been found wholly insufficient to protect both note holders and depositors. The "Safety Fund System" resembled in many respects the present Canadian banking system, which has a safety fund of five per cent. as a protection for note holders. Other expedients were tried in various states. In some of them the state had a voice in the management of the banks and in others it was a sharer in the profits. Thus the country went, feeling its way, until the panic in 1837 caused hundreds of banks to fail, no doubt covering up many an instance of defalcation and dishonesty. That panic proved that the safety fund system of New York was wholly inadequate, and that state then adopted the "Free Banking System," which permitted anyone to form a bank and issue notes without a charter from the legislature, as had been the custom in the past. The notes must be based, however, upon either United States bonds or bonds of the State of New York, or approved real estate security, deposited with the state treasurer. In case of the failure of a bank the state treasurer was authorized to sell the securities and apply the proceeds to the redemption of the outstanding notes of the bank. Other states copied after the free banking system of New York, and it became very popular. The merits of the system depended chiefly upon the quality of the securities and the convertibility of them in a time of stringency. Real estate mortgages were subject to great depreciation and at forced sale bonds often brought much less than their face value.

In some other states no adequate attempt was made to protect the note circulation or supervise the banking system, and the result was a large number of banks of the most irresponsible character, many of them permeated with dishonesty, so bad as to win the title of Wild Cat Banks. Senator Sherman, in his "RecSafety Fund System

Free Banking System ollections," referring to wild cat banking in the 40's and 50s, says: "We had every diversity of the bank system devised by the wit of man, and all these banks had the power to issue paper money. There was no check or control over them." Manifold evils resulted from this want of uniformity and of public regulation. Counterfeiters plied their dishonest practices to an alarming extent, and there were 5,400 spurious notes catalogued as being in circulation at one time. "Counterfeit Detectors" and "Bank Note Reporters" were important publications to which bankers and merchants subscribed, in order to be posted on the spurious bills in circulation. Disputes between buyer and seller as to the goodness of the bank notes were of almost constant occurrence, and if there was a bank in the town the cashier was constantly appealed to for his opinion on the genuineness of notes in circulation.