But who were these 'pet banks'?
One of them was Union Bank of Baltimore (UBB). Its chief counsel, a director and major stockholder of UBB was none other than...ROGER B TANEY, the Secretary of the Treasury drafted in by Jackson to withdraw those federal funds!
But was this decision taken because of the UBB's financial status and business acumen?
Nope.
UBB was run by Taney's close friend Thomas Ellicott.
The relationship between Taney, Ellicott and UBB is covered in great detail in Secretary Taney and the Baltimore Pets: A Study in Banking and Politics, by Frank Otto Gatell in The Business History Review, Vol. 39, No. 2 (Summer, 1965), pp. 205-227.
Talk about corruption!!
The term 'pet banks' was coined (pardon the pun) to indicate the political loyalty of the banks chosen to accept federal funds from Jackson: they were loyal to Jackson.
So how did those banks repay Jackson?
Rampant speculation, which caused the 1837 Panic.
The Pet banks responded to the government's largesse by expanding their loans, not only quickly counteracting Biddle's contraction but exacerbating the speculative boom that characterized the closing year's of Jackson's administration.
...Pet banks became an additional form of Democratic Party patronage. Their number rose from seven, to twenty two, to thirty five, and eventually to over ninety. It was impossible not to compromise standards of financial integrity in bringing so many banks in to the fold, especially when all banks on the list run by Whigs were kept off the list.
[source : Daniel Walker Howe, What Hath God Wrought: The Transformation of America, 1815-1848, Page 393]
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