Saturday, January 24, 2015

On William Jones, the First President of the Second Bank of the United States

a) The dude was a political appointment. b) He had zero experience in banking. c) He had filed personal bankruptcy. And d) it is generally agreed upon by historians that his policies resulted in the Panic of 1819.......Yeah, I would say that the origins of central banking in this country (Washington ultimately siding with - over Jefferson - and capitulating to the statist, Hamilton) are a wee-bit shaky. Agreed?
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7 comments:

dmarks said...

Something made by those who back up their opinions with guns, no doubt.

January 24, 2015 at 4:55 PM
Will "take no prisoners" Hart said...

Washington was a great man in many regards but this was a terrible decision that continues to haunt us even today in the form of Greenspan, Bernacke, Paulsen, Geithner, Yellen, etc..

January 24, 2015 at 9:58 PM
dmarks said...

Will, we've had other ideas come along with us from those days that were quite bad: such as slavery and tariffs.

One is gone, the other mostly gone. It is long past due to bury the idea of a State-owned bank (as opposed to the justifiable regulation of banks controlled by the people and not the State).

January 25, 2015 at 9:23 AM
BB-Idaho said...

"Inflation and the risk-taking behavior of frontier banks threatened the nation’s financial stability. Frontier banks were beyond the regulatory reach of the state banks, however, because the state banks had no means to compel banks outside their state to exchange their notes for specie. In addition, on the frontier there was no cooperative network of banks to ensure sound practices as there was from one state to another. This situation prompted the federal government to charter the Second Bank of the United States in 1816. Like state banks and the First Bank of the United State, the Second Bank of the United States was PRIVATELY OWNED."
"The Second Bank of the United States was NOT a government-owned bank, but a privately chartered institution...Many people also believed that the Bank had the potential to be abused since a private bank is not accountable to the people."
"The idea of the citizens’ money going into a private bank to be lent out for a profit for the bank’s owners seemed undemocratic and contrary to the ideals of the new Republic. Resentment was also high that the federal deposits that made the Bank so much money did not earn the public coffers any interest."
---So Andrew Jackson replaced it,
"With the stabilizing influence of the Second Bank of the United States gone, many banks resumed their old habits of overextending credit and printing too many banknotes. This caused paper currency to become unreliable, and speculative loaning, especially in the West, mushroomed to dangerous levels. In order to rein in this printing and lending spree, Jackson had the Treasury issue a Specie Circular—an order to other banks that only specie (metallic gold or silver money) might be used to purchase public land on the frontier. The Specie Circular had such a negative effect on land sales that it triggered a recession in 1837."
All of which suggests that banks,
private or government, can screw
things up. You can bank on it.

January 25, 2015 at 2:05 PM
Will "take no prisoners" Hart said...

So, a guy with no banking experience and who couldn't even manage his own finances had a stabilizing effect on the entire economy? Sometimes the cure is even worse than the disease, BB.

January 26, 2015 at 2:12 PM
BB-Idaho said...

He probably did as well as the
big biz experienced fellows that
have been appointed the last few decades?

January 26, 2015 at 2:51 PM
Will "take no prisoners" Hart said...

Oh, you won't get me defending the likes of Greenspan, Bernanke (the man who single-handedly tripled the monetary base), Paulsen, Geitherner, etc.. That's for certain.

January 26, 2015 at 4:51 PM

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