Tuesday, December 11, 2012
Take It To The Bank
Teh Wiki informs us that on this date in 1815:
This was a direct response to President Madison's 7th Annual Message to Congress on December 5th:
Although the embarrassments arising from the want of an uniform national currency have not been diminished since the adjournment of Congress, great satisfaction has been derived in contemplating the revival of the public credit and the efficiency of the public resources.
The arrangements of the finances with a view to the receipts and expenditures of a permanent peace establishment will necessarily enter into the deliberations of Congress during the present session. It is true that the improved condition of the public revenue will not only afford the means of maintaining the faith of the Government with its creditors inviolate, and of prosecuting successfully the measures of the most liberal policy, but will also justify an immediate alleviation of the burdens imposed by the necessities of the war.
It is, however, essential to every modification of the finances that the benefits of an uniform national currency should be restored to the community.
To put it into context, the War of 1812 created a great deal of chaos in our nation's financial state.
The war had...led the federal government to rack up significant debt. Without the First Bank, the government had to rely more heavily on state banks to help finance the war. The influx of federal government deposits to these institutions led them to issue greater quantities of banknotes and loans.
The proliferation of banknotes increased money in circulation and resulted in inflation, because too much money was chasing too few goods. Without the First Bank’s ability to limit the state banks’ issuance of paper currency, there was no longer an entity that could control the amount of money created. In addition, strong demand for loans during the war increased interest rates and thus bank profits. Without the restraining hand of the Bank of the United States, state banks became less cautious in their lending habits and credit expanded rapidly.
In effect, the country found itself in circumstances similar to those after the Revolutionary War: mounting debt from a war with England, soaring prices, and devalued money from rising inflation. These problems and the resulting economic consequences would soon lead the United States to make another attempt at creating a national bank. In 1816, President James Madison signed the bill that would create the second Bank of the United States.
All banking institutions were alike in their desire to swell their proﬁts to the greatest extent, howsoever correct and virtuous the directors might be in their private characters; and he would guard against every public robber of every grade, whether he be a Governor General of India or a Bagshot highwayman. He would put it out of the power of this bank to commit frauds on the community, without ruin to itself.
Anyway, the constitutionality of the National Bank was challenged and upheld in McCulloch v. Maryland (1819):
Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional.
Yet when President Andrew Jackson vetoed the Second Bank 16 years later, he noted:
The Congress, the Executive, and the Court must each for itself be guided by its own opinion of the Constitution. Each public officer who takes an oath to support the Constitution swears that he will support it as he understands it, and not as it is understood by others. It is as much the duty of the House of Representatives, of the Senate, and of the President to decide upon the constitutionality of any bill or resolution which may be presented to them for passage or approval as it is of the supreme judges when it may be brought before them for judicial decision. The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both. The authority of the Supreme Court must not, therefore, be permitted to control the Congress or the Executive when acting in their legislative capacities, but to have only such influence as the force of their reasoning may deserve.
I can't argue with that. Now...how does this apply to today's manufactured crisis?
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Yes, well, Jackson, USSC, Trail of Tears.
That whole "everyone gets to decide for themselves" thing had some real downside to it.
Posted by: Snarki, child of Loki | Dec 12, 2012 7:53:17 AM
Given what he did to my Cherokee peeps on the Trail, he ain't my favorite preznit, that's for sure.
Posted by: NTodd Pritsky | Dec 12, 2012 9:44:24 AM