What was the impact of Jackson placing federal deposits in "pet banks"?

The decision by President Andrew Jackson to place federal deposits in "pet banks," which were state-chartered banks not affiliated with the Second Bank of the United States, significantly contributed to the Economic Panic of 1837. This action was part of Jackson's broader opposition to the Second Bank, which he viewed as a symbol of elite corruption and an institution that favored the wealthy over the common citizen.

By withdrawing federal funds from the Second Bank and redistributing them to these smaller banks, Jackson aimed to weaken the national bank and decentralize financial power. However, this move led to the proliferation of unregulated lending practices among the pet banks. Many of these banks issued excessive amounts of paper money and risky loans, which created a speculative bubble in land and other investments.

When the bubble burst, and borrowers were unable to repay their loans, the banks began to fail. Furthermore, the subsequent monetary instability, including a withdrawal of credit, contributed to a broader economic downturn, culminating in the Panic of 1837. This economic crisis was characterized by widespread bank failures, unemployment, and a significant drop in land values, as many speculators could not honor their debts.

Thus, the placement of federal deposits in pet banks not only undermined the stability of the banking