Some History on Too Big to Fail

by Gary Berg-Cross

Both Andrew Jackson, he of the $20 bill, and banks being too big to fail are in the news.  There is an interesting historical connection here in that Jackson’s fight with the 2nd Bank of the United States illustrates some of the issues about moneyed interest and breaking up that influence and banks.

As most of us know Founder Alexander Hamilton set the stage for a big national bank, replacing state banks as part of a centralizing, mercantilist approach consistent with his “English” policies. Within early America’s growingly competitive capitalistic system the first national bank provided a large sources of credit for commerce.

In 1816, Congress provided money to establish the 2nd Bank of the US with considerable power & influence to print money, provide loans, pay bills and yes, collect taxes as well as circulating dollars around the country to spark growth.

This Bank was a hybrid affair with most of the money coming from private  investors but the government provided 1/5th of the bank and thus “owned” a 1/5 share.. something that became quite important in later battles.

By 1820 or so the Bank of the US had $35 million in capital which meant it had lots of influence. It could make money easy or hard to access and since it had investor stockholders its decisions could and did give "exclusive money-making opportunities to its stockholders.”

As historian Daniel Feller explains:

 "the Bank of the United States helped the government to do its business 

effectively and efficiently. But it also helped the people who owned stock in the bank. "

According to historian Michael Beschlos in “Presidential Courage: Brave Leaders and How They Changed America, 1789-1989.” The Bank had considerable power over average citizens and politicians as well.  The well known Pol Henry Clay, for example, had a hidden “loan” from the Bank. Indeed “many of his political enemies had loans from the bank or were on its payroll. http://www.britannica.com/event/Bank-War

Andrew Jackson, a man of the 99% here, had his reasons to  oppose the Bank:

• It was a dangerously centralized financial power
• It held an unconstitutional monopoly on finance that only helped the rich get richer
• It made the economy vulnerable to foreign and special interests
• It held too much influence over federal politicians
• It favored the North (where most financial centers were located) over the South and West

 And, of course Bank President Nicholas Biddle, his agents and political allies opposed Jackson and made him look like a tyrant. 

“ With an ability to spread vast sums of money among newspaper editors, Senators and Congressmen, Biddle seemed unassailable.” http://americastrust.us/presidentialcourage.html

Despite this and the threat to destroy the economy as Jackson campaigned for re-election (shades of today), Jackson prevailed. 

When Congress, at Biddle’s behest, voted to renew the Bank’s charter Jackson vetoed the measure and gradually moved to cripple the Bank by withdrawing government money. Here's how he did it:

“On October 1, 1833, Jackson decreed that no more government money could be deposited into the (Bank) B.U.S. Instead, Jackson thought the states should have more control, so he made it easy for all kinds of individuals to charter their own institutions, many of which were classic fly-by-night operations. The banks then would often issue their own notes and a bit of trivia is the fact that the term "wildcat" originated long before it was used in the oil industry.” https://www.buyandhold.com/bh/en/education/history/2002/a_jackson_pt_4.html

Sort of a break up strategy in effect which ultimately succeeded in crippling the Bank.  And enough of the 99% understood and supported this type of breakup.  The Senate couldn't come up with a two-thirds majority to override the election year veto and Jackson's defeat of Clay in the election meant that the Bank was not renewed.  What followed was not great economic times, but perhaps we can learn from that lesson too along with the influence of too-big-to- fail capital and its influence on politics and income disparity. 

More at https://en.wikipedia.org/wiki/Bank_War

Who Won the Battle Over the Church-State Wall of Separation in 1832?

by Gary Berg-Cross

As we advance (or is it retreat?) into the primary season we are likely to see a “faux pas” of wedge issues as part of the cultural wars that pols use.  Issues about religious beliefs and the separation of church and state context are type of these. Examples include lingering issues over religious exemptions to the Affordable Health Care Act and the Religious Freedom Restoration Act but new ones continue to pop up.  

A recent one concerned a family bakery owned by a Christian who refused to make wedding cakes for homosexual couples. The Colorado Court of Appeals ruled that he can’t refuse them. The baker was on Fox News' "The Kelly File" to present his point of view and a counter view was argued by Rob Boston.  You can see the snippet at: https://www.youtube.com/watch?v=LXZTBd0GFUk

A sad aspect of contemporary life is that our political and judicial systems are quite damaged and sometimes sweep things under the rug rather than addressing challenges.

I happen to be reading Jon Meacham’s American Lion: Andrew Jackson in the White House ( a free google books version is available.) which provides a view of when a wedge issue was dealt with pretty directly by populist, 7^th president Jackson rebutting early attempt by Evangelicals to break through the wall of separation by inserting prayer as a wedge issue into the political process.

Meachen notes (see also a related article) that on religion Andrew Jackson was a surprising figure in American life. While respected the religious aspect of life he refused to formally join the Presbyterian church while in public life.  He thought it would be seen as craven to wave one’s religion at people. And while grew more faithful as he aged  presidentially, as far as politics he was essentially Jeffersonian on church and state, endorsing Jefferson’s “wall of separation.” He did so partly because he believed the church could be corrupted by the state and certainly in part because he could see it corrupting politics in his own time.

Jackson did have real battles with the clergy on moral issues and their calls for the formation of what was to be called the “Christian party in politics.” Jackson was a political enemy of the Evangelical Protestants of the day, who denounced his policies and supported his opposition - the Whig Party and Henry Clay. In the midst of these cultural wars political

opponents like Clay counted  on the Evangelical vote to defeat Jackson in the election year  of 1832 when Jackson ran for a 2^nd term.  And a cholera outbreak (natural event but looked on as divine punishment by some) provided an  issue –should the Federal government intervene in a terrible cholera epidemic by appealing to prayer?  Jackson refused to endorse legislation setting up a national day of prayer to address the cholera outbreak.

As discussed by Meachem, Jackson was called on by members of Congress along with “influential” religious leaders (they of the 2^nd Great Awakening) to call for a national day of prayer and fasting in response to a cholera epidemic. It does harken back to an era when infections were not understood and religious tradition dictated appeals to divine power to heal what doctors could not. Cholera was perceived, sort of like Hurricane Katrina to some, as divine retribution among many pious evangelicals.  To them prayer was a necessary as part of the remedy.

In a word Jackson refused (and prevailed).  To be sure he softening the argument by not challenging the efficacy of prayer. Indeed he could say that hoped “that our country may be preserved from the attacks of pestilence....  

But he opposed government participation in something that should be up to individual conscience and not act for government.  For to make the federal government involved would be, he said:

“While I am constrained to decline the designation of any period or mode as proper for the public manifestation of this reliance. I could not do otherwise without transcending the limits prescribed by the Constitution for the President “

and he feared that this religious encroachment could:

“disturb the security which religion now enjoys in this country in its complete separation from the political concerns of the General Government and without feeling that I might in some degree disturb the security which religion nowadays enjoys in this country in its complete separation from the political concerns of the General Government.”

It might not be Supreme Court law, but it is historical precedent that contemporary, populist pols might look to: avoid craven responses and be guided by constitutional limits and founder wisdom to handle these type of wedge issues.