The administration oozes daily rhetoric about issues and concerns that focuses on the allegation that there are different classes in the US and that those at the top of the socio-economic spectrum are taking advantage of those the WH deems not receiving a fair shake. It is a class warfare campaign and has strong populists overtones. We’ve seen this movie before in our history–actually several times. There were the same arguments between Adams and Jefferson in the very earliest days. Similar arguments were made by T. Roosevelt to some extent and the really hammered by Woodrow Wilson and then of course FDR. Surely everyone remembers Williams Jennings Bryant and his cross of gold message. No one was more anti-elite in rhetoric than Harry Truman yet his administration was filled with exactly those types in all positions of influence. Now we are hearing the same theme again.
Those adopting this line always rail against Wall Street, “moneyed interest” , bankers or the alleged privileged and well-connected. What is always interesting about these arguments is that they are advanced by those who are in fact part of the 1% and among the elites themselves and are usually surrounded by elites a la the current administration. Bankers are always at the top of the list of those attacked because they control some of the flow of money. Jefferson opposed the original bank of america but Hamilton won the argument with Washington and it was created and then died shortly thereafter due in part to the same old argument that it favored and worked only for the benefit of the wealthy. Well of course banks do deal with those who have some money. Money is their business so is it surprising that they mostly interact with those who have money to deposit or wish to float a loan.
We created the Second Bank of the US in 1816 under Madison but it only had a 20 year charter. It was conservative and restricted credit to those who were credit worthy and the banking system functioned quite well during this period. We grew and prospered. The economic growth was uneven and the common man didn’t directly benefit that much from the bank but they sure did overall because the overall economy was improving steadily in the long view. The class warfare rhetoric rose again to the fore when Andrew Jackson ran for President. He was rough and tumble and came from modest backgrounds and sure had “baggage”. I mean how many men today would have a chance to be President that had been involved in duels and even killed men doing so? What about being a bigamist which he was technically. Makes Newt look like a choir boy by comparison. But elected he was. He didn’t like the Second Bank or the bankers in general. There was a strong geographic element to the class warfare talk of that day because the populists were mostly from the South and the West. It was the elites and money interest of the East that were the target. That remained true for generations. Somewhat ironic today that those mostly shouting the class warfare language are from the elite East where the money interest still reside. The big banks then just as today were mostly in the East because that is where the big money was. The money came from the trade of the big ports of the East and the fledgling industrial growth of that nation which was concentrated in the area.
When the charter for the Second Bank came up for renewal Jackson vetoed the bill. He took the reasonable position that it was unconstitutional since it was not a power granted to Congress under the Constitution and that foreign interests profited too much and influenced it too much with their money. He also said it favored the East over the other regions of the country which was mostly true and that it only made those rich bankers get richer. He chose to ignore the fact that even though those things might be true we were growing, expanding and had a great GDP for those days. He was a very determined warrior against the Bank and even before it formal demise in 1836 he withdrew the funds of the US from the Bank and deposited them with local and regional banks. Those banks in turn began to practice what we would call easy credit and the loans flew out the doors and the speculations especially in western lands took off again. Those bank issued paper money supposedly backed by gold. The speculation became so intense that even Jackson got concerned and required in future that all land purchases had to be paid for in “specie” gold and silver. That naturally caused an immediate credit crunch. People started wanting to withdraw their money from the banks by submitting their paper money for gold or silve and the banks couldn’t meet the demand and many of them collapsed. That led to a great panic of 1837 and a severe depression which lasted well into the next decade.
Monetary and fiscal policies are critical to the proper functioning of our economy and yes those policies will always have to be implemented by banks and bankers. We must have them. We can’t run our economy without them because then you would be left with an anarchic trade and barter system which is not very efficient or practical. The Federal Reserve system doesn’t “favor” the rich currently. It favors us all. The Federal Reserve system is no inherently evil or there only to enrich the 1% as established. It was set up to be run by bankers with only limited political influence through the board. The Fed isn’t our problem it is the politicians wanting to tinker with it and control it even more. I sure don’t like many of the things it has done in the last few years and don’t like most of the current members of the board and especially Bernancke. But do you want the politicians to have even more control over our monetary policy? You want the politicians with a simple vote or threat of reprisal or regulation to control the money flow and money supply. Ever time there was the slightest advantage for some more inflation to make people feel good temporarily they would be opening the spigots. If anything we need more independence of the Federal Reserve board. We need more members who elected by the regional banks and fewer appointed by the politicians in Washington of whatever party. Before all those 99% ers destroy the Wall Street banks we best think long and hard about what will replace them. There will have to be something to replace them for sure. I would not want Barney Frank to control our monetary policy and would not want Dodd to be in charge of the money flow from the Federal Reserve or Elizabeth Warren to be the regulator of banks around the country. It ain’t perfect by a long shot but it has served us pretty darn well for almost a century. We can have bankers or czars. I’ll take the bankers any day. At least they can be sued for fraud and set to jail for criminal acts but czars? It takes revolution to get rid of them if my remembrance of history is correct. An important aside–Jackson before he went off the rails did pay off the entire national debt only to have it balloon again after the closure of the Second Bank. If only….
“If a national debt is considered a blessing, then we can get on by borrowing. But as I believe it is a national curse, my vow shall be to pay the national debt. A. Jackson. www.olcranky.wordpress.com