Illinois State Bank
Illinois State Bank
Abraham Lincoln, like Henry Clay, favored federal control over the nation’s banking system, but by 1835 President Jackson had effectively killed the Second Bank of the United States. In 1835 Lincoln crossed party lines to vote with pro-bank Democrats in the chartering of the Illinois State Bank. As in the internal improvements debates, Lincoln searched for the best available alternative to his first choice. Lincoln felt, according to historian and Lincoln biographer Richard Carwardine:
"A well-regulated bank would provide a sound, elastic currency, protecting the public against the extreme prescriptions of the hard-money men on one side and the paper inflationists on the other; it would be a safe depository for public funds and provide the credit mechanisms needed to sustain state improvements; it would bring an end to extortionate money-lending."
Opponents of the bank initiated an investigation designed to close the bank in the 1836-37 session of the Illinois State Legislature. On January 11, 1837] Lincoln made his first major legislative speech supporting the bank and attacking its opponents. In the speech Lincoln condemned "that lawless and mobocratic spirit ... which is already abroad in the land, and is spreading with rapid and fearful impetuosity, to the ultimate overthrow of every institution, or even moral principle, in which persons and property have hitherto found security."
Blaming the opposition entirely on the political class, calling politicians "at least one long step removed from honest men," Lincoln argued:
"I make the assertion boldly, and without fear of contradiction, that no man, who does not hold an office, or does not aspire to one, has ever found any fault of the Bank. It has doubled the prices of the products of their farms, and filled their pockets with a sound circulating medium, and they are all well pleased with its operations."
Westerners in the Jacksonian Era were generally skeptical of all banks, and this was aggravated after the Panic of 1837 when the Illinois Bank suspended specie payments. Lincoln still defended the bank but the bank was too strongly linked with the failing credit system, leading to devalued currency and loan foreclosures, to generate much political support.
In 1839 Democrats led another investigation of the Bank, with Lincoln being a Whig representative on the investigating committee. Lincoln was instrumental in the committee’s conclusion that the suspension of specie payment was related to uncontrollable economic conditions rather than "any organic defects of the institutions themselves." However the legislation allowing the suspension of specie payments was set to expire at the end of December 1840, and Democrats wanted to adjourn without further extending it. In an attempt to avoid a quorum on adjournment, Lincoln and several others jumped out of a first story window, but the Speaker counted them as present and “the bank was killed."
By 1841 Lincoln was less supportive of the bank, although he would continue to make speeches around the state supporting it. Lincoln had concluded, "If there was to be this continual warfare against the Institutions of the State ... the sooner it was brought to an end the better."