Shylock: as banker
The American Revolution was one of those fortunate occasions, in the worlds annals, when selfishness joined hands with patriotism, greed with philanthropy, to do a great work. But, the work done, such elements could no longer be held together. There were thousands of inborn Tories among the nominal Whigs who aided in achieving American independence. England interfered with their interests, and they fought against her. But as soon as free from her rule themselves, they sought to adopt her various systems of tyranny and monopoly, to elevate and enrich themselves at the expense of the people. One of these adoptions was her system of banking, which, in order to live and grow, every one of the Colonies had been obliged partly to dodge and partly to reject. Some of those aristocratic patriots were perfectly frank in expressing their views.
Alexander Hamilton was the first Secretary of the United States Treasury. He was a great and honorable man. But he had little faith in democratic institutions. In 1787 he said:
" I believe the British government forms the best model the world has ever produced. * * * All communities divide themselves into the few and the many. The first are the rich and well-born; the other, the mass of the people." ["Debates of the Constitutional Convention." Yates, page 135.]
Even before the formation of the Constitution, Hamilton declared that the country had already begun "to tire of an excess of democracy."
Such a man would naturally urge the establishment, in America, of a virtual supplement to the Bank of England. He was the father of The Bank of the United States the earlier corporation of that name, which, in 1791, was chartered for twenty years with a capital of ten million dollars. The younger Pitt the long-headed Prime Minister of England is said to have prophesied a little in regard to it, the prophecy being this:
"Let the Americans adopt their funding system and go into their banking institutions, and their independence will be a mere phantom." [Money Question." Berkey, page 303.]
From that day to this, we have been illustrating the point of the astute English statesman. What was American trade, American property, practical American welfare from 1789 to 1861 ? And what has it been again in the spiders parlor the well-woven "monetary stringency" of 1893 ? Our whole financial situation is nothing but a tail hitched to a kite the gold of the Bank of England. When this kite has been "pulled in," the ridiculous tail has always followed to the ground.
When our thirteen original States came under the compact of the Constitution, they turned over to the Federal Government all power of instituting money, as all of them desired to secure a sound and uniform currency. Thus the States were expressly debarred from "coining money," emitting "bills of credit," or making anything but gold and silver coin a tender in payment of debts. Congress was empowered to "borrow money on the credit of the United States," and as no nation can negotiate a loan without a formal promise to pay, the right to issue certificates of indebtedness was implied in the compact, while a specific proposition to vest the government with power to issue "bills of credit" was defeated. At the same time it was understood and expressly declared by the framers of the Constitution that in case of war or to meet any other great national requirement, the government could issue acknowledgments of value received from the people, redeemable in taxes, provided and secured by these same people. This is the Constitutional basis of the Treasury Note, as elaborately explained by John C. Calhoun, following the lead of Franklin, Adams, Jefferson and Jackson, and as established by the various decisions of our Supreme Court.
As the Federal Government was denied by its founders the constitutional power to " emit bills of credit," and as the States were expressly prohibited from doing so, what right had either to delegate a power which neither possessed, to any corporation ? When Hamiltons illegitimate Bank of the United States was conceived, Jefferson was Secretary of State. He opposed it with all his might. So did Madison in Congress. In 1811, when it applied for a renewal of its charter, Congress denied the application. The bank was pronounced "unconstitutional, anti-American," and strictly "a British institution."
But as Franklin had said, a civilized people must have some system of money, whether good or bad, constitutional or unconstitutional, if they are to exchange their productions and are to grow at all in wealth. There never had been coin enough in America and never could be, to represent her transfers of property. Such being the practical fact, Jefferson, Adams, Madison, Jackson, and those early statesmen of the republic who were true to the people, endeavored to furnish them a money measured by the gold and silver dollar, but at normal volume the addition being made of government taxes, the peoples own inevitable debts to themselves. Such money is the United States Treasury Note, as the only honest supplement to gold and silver coin.
As explained some way back, an inflated bank-issue, promising redemption in gold, is a thing that in the structure of the earth, God and nature have made a lie. But a treasury-note is a certificate to the holder that, for value received by the United States, he possesses purchasing power equal to that of coin and corresponding to the face of his certificate which is good for all his taxes, for every other mans taxes, and for all dues to the government. Treasury-notes, therefore, held by the people are redeemable in the peoples own obligations obligations which they must incur, if they exist as a nation. Such money is its own security. It has no need to go to any Hebrew junk-box for redemption. It is, in fact, nothing but a constant adjustment of balances between a government and its citizens.
The Fathers of American Democracy were foiled in their aim to bless the people with such a money. Independence achieved and peace established, society segregated into the various oligarchies which have since ruled the country. We have heard a great deal about the "Southern oligarchy of slaveholders." But the banking oligarchy of the North, the manufacturing oligarchies, the railway, tariff and party oligarchies these colossal and secretive forces have cramped and stripped the ignorant masses on every hand, depressing them as nearly as possible into beasts of burden. Meanwhile, with some glorious exceptions, the brassy and blatant "American press" has been owned and controlled by the same oligarchies; while the pulpit, once the natural defender of the poor and needy, has been everywhere intimidated whenever its influence now grown rather effeminate, has possessed intelligence enough to instruct and aid us.
Hamiltons illegitimate Bank of the United States was soon extinguished as unconstitutional. But immediately after the Revolution the various States were taken in hand by the money-power which easily found a way to render its own interests constitutional enough for all practical purposes without regard to any principles laid down in parchments. The States granted charters to banks of issue so rapidly that for one bank in the country in 1781 there were one hundred in 1815. Twenty-five charters were issued by the legislature of Pennsylvania in 1813 but were vetoed by the Governor. The next session of that persevering legislature passed a bill over the veto, chartering forty-one banks, with a capital of seventeen millions of dollars. Thirty-seven of them got into operation at once and then suspended specie payments.
But there is no need to follow in detail the villainous and ridiculous record of our Anglo-American State Banks. Almost their chief business was to "suspend," as soon as really called on to meet their obligations. It was impossible for them to avoid it: they were founded on that principle. From 1809 to 1861 they suspended specie payments ten times or once in five years. The Eastern banks were of course better than the "wild-cat" species of the West and South-West; yet the Commissioners report of the banks of Connecticut, for example, from 1837 to 1849, shows that their average loans and discounts were more than eleven and a half millions a year while their average specie was less than four hundred and eighty thousand. They carried a debt, payable on demand in coin, twenty-four times as large as the amount of coin to pay it. Their financial pyramid was one inch square at the bottom and two feet square at the top. [Labor and Capital a New Monetary System, &c: by Edward Kellogg. See, also, Berkey.] But these were "good, sound banks," in pretty "good times." In 1809 the Farmers Exchange Bank of Gloucester, Rhode Island was found to have nearly six hundred thousand dollars of its bills afloat and eighty-six dollars of coin for their specie basis. Here was a pyramid which measured one square inch at the bottom and fifty square feet at the top. [Sumners History of American Currency, Henry Holt & Co., Pubs, 1874, page 62.]
The Chief Designers, however, made no mistake in this architecture. They intended that their structures should fall down frequently but should fall on innocent and ignorant industry which would thus be crushed, but the ruins of which would be picked up by the rich to make them richer. American bankers, in short, had now thoroughly learned all the tricks of their trans-Atlantic partners, the great confidence-men of the Bank of England. For a hundred years the two sets of "operators" have conducted the most consummate swindle on earth. A few intelligent observers have long understood it and have now and then exposed it. But the poor wretches who constitute the "masses of the people" have only just begun to comprehend its enormous wickedness.