The Northern states in America were increasingly industrializing throughout the 1820s, while the South remained mostly agricultural. The North and the South were divided not only by geography but by government. In 1828, Congress passed a tariff which mostly benefited the North. A tax on imports would increase the cost of British goods, mostly bought by people in the South. Because there was less interest in British textiles, the British would not buy as much cotton from the Southern states. Vice President John C. Calhoun was from the South and many looked to him to help against these “tariffs of abominations."

John Calhoun had actually supported the Tariff of 1816 but realized if he wanted to be reelected, he needed to reexamine this decision. Many in the South felt these tariffs were a reason to succeed from the Union. Calhoun had an alternate idea--the doctrine of nullification. Calhoun stated the federal government’s power came from the states. If a state found a federal law unconstitutional and detrimental to the states interests, the state could nullify or refuse to follow that law. With this controversial topic at hand, Henry Clay stepped in. In 1832, Congress passed a new tariff bill with lower rates. This was not enough for the Southern states. The Southern states made a majority of the House of Representatives and the nullification was put into law on November 24, 1832. South Carolina refused to acknowledge the tariff: President Jackson was not happy.

Jackson took this nullification crisis very seriously. He asked Congress to allow him to use federal troops to enforce the federal laws in the case of nullification. Henry Clay stepped in again with a revised tariff in a compromise bill. This bill made sure the Northern and Southern states could feel nothing was lost. This nullification crisis was one of the great moments of Jackson’s presidency showing his strength. However, if nullification had been successful, the Southern states may have succeeded earlier.

In 1816, the Second Bank of the United States was created for a term of 20 years. This bank concentrated the government’s finances in a private corporation and many had reservations about this. The United States used this bank to deposit federal funds and pay national debts. Because the bank was not controlled by the government, it was only answerable to directors and stockholders, not the American voters. Mostly those who supported the bank benefited from industrial and commercial businesses. They wanted to control the economy and make the currency strong. Those against the bank, mostly farmers, did not trust the federal government. Many questioned which side President Jackson would take.

When Jackson was elected in 1828, Nicholas Biddle was in charge of the Bank of the United States. Biddle was not a politician, but a businessman. He underestimated the power of a popular president, which would ultimately be not only his downfall, but also the downfall of the bank. In 1833, supporters of the bank, Daniel Webster and Henry Clay, introduced a bank recharter bill. They thought that even though they did not need to recharter for four more years, the current Congress should do this because Jackson would not risk losing votes in Pennsylvania and other business states by vetoing the bill. Jackson’s response was "The bank is trying to kill me, sir, but I shall kill it.” He was in direct opposition to the bank. Helped by attacks against the bank in the press, Jackson vetoed the Bank Recharter Bill. In doing so, he also removed government deposits from the Bank of the United States and placed them in state banks. Jackson did not lose any support and was elected by an overwhelming majority to a second term. Biddle, upset he had lost his institution, reacted by making it difficult for businesses to get their money back. This created an economic downfall in 1833 and 1834.