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

Telling a Fuller Story About Sensationalized Claims

By Gary Berg-Cross

Sensational claims have been taken to task here in the Secular Perspectives blog. Luis Granados took on The supposedly scientific Prayer Study proving the existence of God and Robert of rwahrens just had to rant about:

“another of those idiotic news items where they take a common every day item and claim that the government has paid an exorbitant price for it. This one is for muffins. Muffins they claim the government paid $16 for.”

Both blogs expose an instance of a sensationalized claim, seemingly but not really grounded in facts, which advances some popular bias and lingering hope. Wouldn’t it be great if Science could prove that God exists and that we can get what we pray for - or at least what we good people pray for to the right god and not what those fanatics are praying for. Luis shows some of the fraud behind the claim for prayer. The news report that Robert took on week about alleged spending $16 a piece for breakfast muffins and $8 for a cup of coffee for employees attending a conference in Washington two years ago was quickly countered by avalanche of criticism that pointed out it was a half baked report. Only later did papers like the Washington Post report, that the price included not just a muffin, but a continental breakfast of baked goods, fresh fruit, coffee, tea, soft drinks, tax tips as part of the use of the conference space.

Media is prone to over-hyped and controversial news pieces because of the pressing need to increase viewership/readership. On the other hand it may not cover protests such as Wall Street is being occupied against corporate greed. There is a good argument that it did not get adequate coverage till there was a sensationalized violence- see Op-Ed: Wall Street is Occupied protest not getting media coverage

Sensationalism sells and may include reporting about generally insignificant matters and events such as $16 muffins appeal to the emotions are proxies for important arguments such as whether government is too big and wasting money. Equivalent dog whistle stories such as corporate wooing of pols by overpaying for Redskin booths and services may not be given equal treatment.

Consider the quick response to the grand muffin claim after The Washington Post, among other media outlets, pronounced word of the offense in a front page story, based on a Justice Department auditor's report. Senior Republican Senator Chuck Grassley who is on the Senate Judiciary Committee (which has oversight of the Justice Department), said the report was a blueprint for the first cuts that should be made by the "super committee" searching for at least $1.2 trillion in savings. Later NBC's Brian Williams featured the Justice Department's offense in that day evening's news lineup. As rwahrens feared an ill-informed link was made to sensationalized examples of wasteful government spending such as the Lockheed bill for $640 for custom molded toilet seat covers.

Wyatt Kash, Editorial Director of AOL Government contextualized the sensationalization well:

“Regardless, to put the blame totally on government employees, as the auditors and then the media so quickly did, and not at least in part on what and how hotels routinely charge for conferences services, is another example of how easy it has become in America to demonize the federal workforce--a group of dedicated public servants who in reality are working tirelessly to protect our country, provide services to the needy and tackle problems that are bigger than any one of us can solve alone. “

More examples of loud stories include misleading statements, omitting key facts and information and half truths as discussed in my Flexible Thinking in a Time of Imprecise Statements.

Advocates can get away with this because we live in a time of head spinning news overload. In our news cycle one story steps on the previous so rapildy that we don’t have to reflective on the core information that often is no more than half truth and innuendo. See my Stressed Buffet Offered by the Hurricane, News Quake for more on this phenomena.