Thursday, July 10, 2014
You Are The Second Bank...Goodbye!
Jackson says of the court, they think the bank of the United States is constitutional, I don't think it's constitutional. Their opinion doesn't matter to me. I'm the president, they're over the judiciary, he vetoes it.
- Newt Gingrich, December 18, 2011
Yeah, I like defending/picking on Good Ole Historian And Disgraced Speaker Newt when it comes to the Judiciary. I only thought of him because President Andrew Jackson vetoed the Second Bank of the United States on this date in 1832. At the time, Mr 20 Bucks 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'd argue that the Bank, just like the Fed, is constitutional, but I can't take issue with his essential logic. Everybody in government--that includes voters--must interpret the Constitution and act accordingly.
It's true that 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 this did not prevent Jackson from vetoing the early renewal bill and letting the old charter expire. SCOTUS might have found the Bank to be allowed, but that opinion carried place obligation on the Executive, who can veto whatever he wants for whatever reasons. What's permissible doesn't necessarily translate into policy (wise or otherwise).
As an aside, Jackson provided fodder for Lincoln in debate with Stephen Douglas. He called out the latter for inconsistency regarding Dred Scott.
Anyway, Old Hickory was hardly alone in his resistance to a national bank. Thomas Jefferson wrote to John Taylor of Caroline in 1816, about a month after President Madison signed legislation chartering the Second Bank:
The system of banking we have both equally and ever reprobated. I contemplate it as a blot left in all our constitutions, which, if not covered, will end in their destruction, which is already hit by the gamblers in corruption, and is sweeping away in its progress the fortunes and morals of our citizens.
And I sincerely believe, with you, that banking establishments are more dangerous than standing armies...
Taylor later wrote a response to McCulloch that boiled down to this: if Congress can incorporate a bank, it can end slavery. And we can't have that!
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.
Interestingly, Virginia's House members split on the final vote, 8-10 (it passed 80-71), whilst both Senators voted in favor (it passed 22-12). A more interesting development, however, is that James Madison supported the Second Bank whilst leading opposition to the First.
Turns out that 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.
So in President Madison's 7th Annual Message to Congress on December 5th, 1816:
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.
In response, the Senate created a select committee on finance and a uniform national currency (predecessor to the standing Finance Committee created the following year). The House did, as well, and John C Calhoun (a Democratic-Republican) reported out a bill that eventually made it through the sausage grinder.
Oddly enough, Calhoun would later resign as Vice President under Jackson so he could run for Senate to defend nullification. THAT was definitely unconstitutional. Wonder what Gingrich would think of that good ole defender of nullification and slavery?
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"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."
Precisely the problem with the Roberts court, including (but not limited to) Burwell.
Posted by: Rmj | Jul 10, 2014 12:16:34 PM