Simon Schama: America’s phobia of banks

Roundup: Historians' Take

[Simon Schama is the author of ‘The American Future’ (Bodley Head) and a contributing editor of the FT]

Unaccustomed as they are to being told to stand in the corner wearing dunces’ hats, American bankers, so it’s been reported, are getting grouchy about the “stress tests” inflicted on them by the Treasury as a condition of receiving bail-out funds. They have, it’s rumoured, been “pushing back” against restrictions on executive pay. Beggars, it seems, can be choosers. But before they get just a bit above themselves, perhaps they should ponder the long history of the love-hate relationship between banking and government in America.

They could do worse than to take a look at the $20 bill. For there, breaking into the space separating the words “Federal” from “Reserve” is the cresting mane of Andrew Jackson, the most hair-conscious president of the United States. Aside from cultivating his pompadour as the insignia of a free frontier spirit, his locks tied in an eelskin, the seventh US president was also the sworn enemy of paper currency and central banking.

Jackson, who was in the White House from 1829-1837, was a new brand of politician in American life. No one would confuse him with the Virginian gentlemen-planters who had dominated high office in the early republic. He had been Indian fighter, scourge of the British and darling of the frontier crowds. But what really got his dander up was the Bank of the United States, the institution granted the monopoly to print paper money. The “Monster”, he declared at the height of his presidential knock-down battle with its president Nicholas Biddle, “wants to kill me but I will kill it”.

And destroy the Bank of the United States Jackson did, vetoing the Senate’s renewal of its charter in 1832 and running for re-election as the champion of People v Monster. The result of the liquidation of monetary regulation was predictable: wildcat speculation. Two months after Jackson left office in March 1837, the second of the great American financial meltdowns was under way (the first was in 1819). Another swiftly followed in 1839 under the administration of Jackson’s hand-picked successor, Martin Van Buren. On the eve of the civil war, Jackson’s wish for monetary decentralisation had come true beyond his wildest dreams There were 7,000 local currencies circulating in the republic and an epidemic of counterfeiting. It took Lincoln’s Banking Act of 1862, born of a desperate need for dependable credit to fight the war, for a modicum of monetary order to be salvaged from what Biddle had accurately prophesied would be monetary anarchy.

Jackson, as John Meacham’s recent, elegantly written and excessively generous biography reminds us, was an exceptional figure in American politics in many ways: in his repellent enthusiasm for the ethnic cleansing of Native Americans, his dismissal of inconvenient Supreme Court opinions and his certainty that he was the incarnation of popular democracy in heroic action. This armour-plated egotism allowed him to brush off a Congressional vote of censure as if it were an affront to the American people. (It had been provoked by his attempt to bleed the Bank to death by diverting Treasury deposits to local state banks). The fact that enthusiasts of a central bank – from Alexander Hamilton who had created the first in 1791 – to Jackson’s enemy Biddle, were admirers of the Bank of England, only reinforced the conviction of the veteran general that such institutions were damnably un-American. Whether his bankophobia was the cause of his re-election in 1832 is open to debate but there is no doubt that in his mistrust of paper currency and his almost paranoid suspicion of the Bank’s monopoly of issue, Jackson tapped into a pulsing vein of American insecurity about the moral character of money....

[Referring to William Jennings Bryan's "Cross of Gold" speech in 1896 ....]

It was an American work of art, this speech; as native to its dark soil as Whitman’s verse or Twain’s fierce ribaldry. It was landscape, social drama and religion all poured into the same hot mould of patriotic social pride. The crowd that heard it saw the cornfields and the prairie pastures in Bryan’s rolling cadences; then he took them aloft over a continent of social pain. It was gold, the stuff of the Midases of Wall Street, that was inflicting this suffering. What did those who hoarded it know of the true America of sweat and prayer? By the famous peroration, Bryan had given the Democratic party, victorious or not, their new gospel. To the Midases “we will answer their demand for a gold standard by saying to them, ‘You shall not press down upon the brow of labour this crown of thorns, you shall not crucify mankind upon a cross of gold.’” Shameless, transported by the gospel truth, Bryan stopped, took some steps back and then, arms out, assumed the posture of the martyred Saviour. Then the din broke over him.

We have, lest it be forgotten, another serious Christian in the White House; another president who, for all the cool threads, winds up his rhetorical passions to speak for Plain Folk. Sure, he won New York. But he also won Indiana. And, unlike Jackson, and unlike Bryan, Obama has never wanted to wage war on the Monied Interests. His inclinations for taking it to Wall Street are a lot less combative than Franklin Roosevelt’s. Obama is trans-racial, trans-sectional, trans-ideological. He believes in a great national cuddle. Whether in the hard times that, for all this financially budding spring, are certain to lie ahead, he can actually be transformational, and make – as American history yearns for him to do – money moral again, remains, as you knew I would say, to be seen.
Read entire article at Financial Times

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