Following Jefferson, Jackson supported an "agricultural republic" and felt the Bank improved the fortunes of an "elite circle" of commercial and industrial entrepreneurs at the expense of farmers and laborers. After a titanic struggle, Jackson succeeded in destroying the Bank by vetoing its 1832 re-charter by Congress and by withdrawing U.S. funds in 1833.
1833 Democratic cartoon shows Jackson destroying the devil's Bank.
The bank's money-lending functions were taken over by the legions of local and state banks that sprang up. This fed an expansion of credit and speculation. At first, as Jackson withdrew money from the Bank to invest it in other banks, land sales, canal construction, cotton production, and manufacturing boomed. However, due to the practice of banks issuing paper banknotes that were not backed by gold or silver reserves, there was soon rapid inflation and mounting state debts. Then, in 1836, Jackson issued the Specie Circular, which required buyers of government lands to pay in "specie" (gold or silver coins). The result was a great demand for specie, which many banks did not have enough of to exchange for their notes. These banks collapsed. This was a direct cause of the Panic of 1837, which threw the national economy into a deep depression. It took years for the economy to recover from the damage.