President Andrew Jackson’s “pet banks” were…
A. Located in his favorite states
B. Empowered to issue national currency
C. Home to federal money after the Bank Wars
D. Issuers of currency who closed their doors before their banknotes could be redeemed
The correct answer and explanation is :
The correct answer is C. Home to federal money after the Bank Wars.
Explanation:
During Andrew Jackson’s presidency, the Bank of the United States (BUS) was a central institution that managed federal funds and acted as a national bank. Jackson, a staunch opponent of centralized banking, vetoed the recharter of the BUS in 1832, leading to a significant financial and political conflict known as the “Bank War.” In the aftermath of his victory over the Bank, Jackson sought to dismantle the BUS and remove federal deposits from it.
To accomplish this, Jackson began transferring the federal government’s funds into various state-chartered banks, which were referred to as “pet banks.” These were state banks that Jackson selected based on their political allegiance to him and his policies. The term “pet banks” was used somewhat derisively by opponents who believed that Jackson was using these banks as political tools, rewarding his supporters and circumventing the national bank’s role in managing federal funds.
These state banks became the primary institutions where federal money was deposited after the closure of the national bank. However, Jackson’s move had significant economic consequences. The pet banks, not being as regulated as the BUS, engaged in risky practices such as issuing large amounts of paper money (which was not backed by gold or silver), contributing to an economic boom that eventually resulted in the Panic of 1837. This financial crisis was marked by widespread bank failures and economic instability, partly as a result of the reckless behavior of the pet banks.
Therefore, “pet banks” were essentially home to federal money after the Bank Wars, but they were not empowered to issue national currency, nor did they close their doors before their banknotes could be redeemed. They were, however, a major part of Jackson’s effort to dismantle the central banking system.