U.S. History STAAR ( State of Texas Assessments of Academic Readiness) Practice Test

What role did pet banks serve during Andrew Jackson's presidency?

1. They provided loans to businesses

2. They managed government funds and deposits

3. They were primarily focused on foreign investments

4. They operated as insurance companies

The correct answer is: They managed government funds and deposits

During Andrew Jackson's presidency, pet banks played a significant role in managing government funds and deposits. After Jackson determined that the Second Bank of the United States was too powerful and posed a threat to individual liberties, he took steps to dismantle it. He withdrew federal funds and redistributed them to various state-chartered banks, which became known as "pet banks." This move aimed to decentralize banking power and reduce federal control over finances. These pet banks were responsible for handling government deposits, thereby directly managing the flow of public funds and influencing the local economies where they operated. This strategy, however, also led to issues like inflation and instability within the banking system, demonstrating the complexities of Jackson's approach to banking and economic policy. The incorrect options do not accurately reflect the primary function of pet banks during this period, as they were not primarily focused on business loans, foreign investments, or operating as insurance companies. Instead, their main role was to serve as the storage and management facilities for government funds.