Even before the nullification issue had been settled, another controversy occurred that challenged Jackson's leadership. It concerned the rechartering of the second Bank of the United States. The first bank had been established in 1791, under Alexander Hamilton's guidance, and had been chartered for a 20-year period. Though the government held some of its stock, it was not a government bank; rather, the bank was a private corporation with profits passing to its stockholders. It had been designed to stabilize the currency and stimulate trade; but it was resented by Westerners and working people who believed, along with Senator Thomas Hart Benton of Missouri, that it was a "monster" granting special favors to a few powerful men. When its charter expired in 1811, it was not renewed.
For the next few years, the banking business was in the hands of state-chartered banks, which issued currency in excessive amounts, creating great confusion and fueling inflation. It became increasingly clear that state banks could not provide the country with a uniform currency, and in 1816 a second Bank of the United States, similar to the first, was again chartered for 20 years.
From its inception, the second Bank was unpopular in the newer states and territories, and with less prosperous people everywhere. Opponents claimed the bank possessed a virtual monopoly over the country's credit and currency, and reiterated that it represented the interests of the wealthy few. On the whole, the bank was well managed and rendered valuable service; but Jackson, elected as a popular champion against it, vetoed a bill to recharter the bank. In his message to Congress, he denounced monopoly and special privilege, saying that "our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress." The effort to override the veto failed.
In the election campaign that followed, the bank question caused a fundamental division between the merchant, manufacturing and financial interests (generally creditors who favored tight money and high interest rates), and the laboring and agrarian elements, who were often in debt to banks and therefore favored an increased money supply and lower interest rates. The outcome was an enthusiastic endorsement of "Jacksonism." Jackson saw his reelection in 1832 as a popular mandate to crush the bank irrevocably -- and found a ready-made weapon in a provision of the bank's charter authorizing removal of public funds. In September 1833 he ordered that no more government money be deposited in the bank, and that the money already in its custody be gradually withdrawn in the ordinary course of meeting the expenses of government. Carefully selected state banks, stringently restricted, were provided as a substitute. For the next generation the United States would get by on a relatively unregulated state banking system, which helped fuel westward expansion through cheap credit but kept the nation vulnerable to periodic panics. It wasn't until the Civil War that the United States chartered a national banking system.