What was the Fuss over the National Bank?
bobsheridan at earthlink.net
Tue Jun 27 02:58:05 PDT 2006
Yes, and I was curious about attitudes toward banks and banking prior to
the great controversy of the Jefferson & Jackson eras.
Italian and German bankers had operated for centuries.
Dutch bankers financed a shipping and colonial system that generated
revenue from Nieuw Amsterdam to the Caribbean, South Africa, Batavia,
The Bank of England, I see, began in 1694 as the result of the 1688
revolution of the English civil war, url:
That places it in time before our Salem witch-craft outbreak of 1692, as
a point of reference to our colonial period.
Part of the hostility, I believe, is that prior to Marshall's
pro-corporation decisions in Ogden and the Dartmouth College charter
case, most business was not done in the corporate form, but sole
proprietorships and partnerships. Corporate charters were issued for
big projects such as colonies, plantations, East and West Indies
operations, universities. Ordinary business people partnered up but
most probably did not apply for corporate charters. I'm not sure what
shipping or factoring interests did as to business form; perhaps they
formed a joint stock company and sold shares. Whether they needed a
corporate charter, I'm not sure. After experiences such as the South
Sea Bubble; maybe there were restrictions or reforms. Lloyds of London,
insurance, depended, I believe, on individuals accepting unlimited risk
on their own hook as shareholders, i.e. not using the corporate form
we're familiar with today.
Banking corporations especially would have been seen as vehicles for the
wealthy, highly-placed, and influential, to wax fat off traded paper, at
the expense of and far beyond the means of the small farmer,
artisan-mechanic, or merchant. Jefferson sympathizes with the latter
while Hamilton favors the former. Marshall's decisions spark use of the
corporate form by anyone, coincident with and a spur to the growing
economy, early 19th century. Today we have Wells-Fargo branches in
Safeway stores, representing a democratizing of the banking and
corporate forms, and popular attitudes about them, that were quite
foreign to Jefferson-Hamilton, and Jackson, and the common folk who felt
threatened by the elite banks of Hamilton and Jackson's nemesis in
Philadelphia, Nicholas Biddle.
Paul Finkelman wrote:
> Bob: My point is that 1) there were no banks in the colonial period;
> 2) federalism is irrelevant in the colonial period, so my question is
> how does Prof. Wilson's argument survive if it is based on a series of
> assumptions about colonial banks and federalism in the colonial period
> that are simply flat out wrong. His earlier dicussion, I believe,
> centered on planters owing money to Britain (which is mostly a
> colonial issue) and I just don't see what that has to do with banks.
> Furthermore, of course, he ignores the fact that one of the richest
> planters in the United States signed the bank bill into law in s1791
> (Washington); a small planter (Madison) singed the bill for the 2nd
> bank of the US with the support of both Jefferson, in retirement, and
> Calhoun, in Congress. THe whole discussion of English tobacco factors
> seems to be completely irrelevant to the bank issue, especially in the
> 1830s but even earlier. Again, the Bank had substantial southern
> support in Congress in 1791 (a majority of southerners in the House
> and Senate supported it).
> Jacksonian opposition to the Bank was to a great extent a function of
> small farmer/debtor opposition to the anti-inflation policies of the
> Bank. Small famers like inflation, which creates cheap money to pay
> off debts and but new land. Speculators like it; the Bank did not,
> hence after 1818 the bank is seen as hostile to small famer and debtor
> interests; while state and local banks are not.
> Paul Finkelman
> Bob Sheridan wrote:
>> Query: Wouldn't we have heard repeatedly if there were a bank in an
>> American colony? Under the British mercantile system, wouldn't it
>> have to have been a British chartered bank, such as the Bank of
>> England (don't ask me when that was founded)? Weren't the notable
>> plantation owners of the Virginia and Maryland 'tidewater
>> aristocracy' in debt to London 'factors' which I understand to be
>> merchant sellers who sold to them on credit? And took payment in
>> hogsheads of tobacco?
>> There must have been private lending and borrowing going on in the
>> colonies, but I wonder whether some of it represented what we might
>> recognize as a banking operation.
>> Did British lenders threaten American colonists with withdrawal of
>> credit if they persisted in their errant ways?
>> Paul Finkelman wrote:
>>> Sean Wilson keeps talking about banking in the "colonies" but isn't
>>> the first bank chartered after 1776? Sean writes: " It is no
>>> coincidence that the only banks that existed in early colonial
>>> america were in New York, Boston and Philadelphia. (The first bank,
>>> the Bank of New York, was organized by Hamilton)." My recollection
>>> is that the Bank of NewYork was chartered in 1784 -- there are no
>>> colonies then. Again, of couse Sean is right that "the issue with
>>> the national bank in colonial america is not a federalism issue"
>>> because fedealism itself is not an issue until after Independence.
>>> Given this, I wonder what exactly Sean is talking about here?
>>> Paul FInkelman
>>> Sean Wilson wrote:
>>>> With respect, I think you are missing a key point. Banking did not
>>>> arrive in the colonies as a state-federal matter. Banking arrived
>>>> as an inherently suspicious activity with direct ties and cultural
>>>> practices too close to the power center of the British crown. (At
>>>> least that is the way the Virginians -- the leaders of agrarian
>>>> hegemony -- saw it). It is no coincidence that the only banks that
>>>> existed in early colonial america were in New York, Boston and
>>>> Philadelphia. (The first bank, the Bank of New York, was organized
>>>> by Hamilton). Remember, New York was the only state not to vote for
>>>> independence (they abstained). It was this set of interests and
>>>> clientele that contemplated secession during the war of 1812.
>>>> Remember that New York was a bastion of loyalty for Britain during
>>>> the revolution. When things were going bad, the British army saw
>>>> more colonial enlistments from the New York and New Jersey area
>>>> than did Washington's army.
>>>> Now, the issue with the national bank in colonial america is not a
>>>> federalism issue. It isn't which government should partner with
>>>> these new "stock jobbers." That misunderstands the central point.
>>>> The issue is that Virginians saw these people as: (a) having
>>>> questionable loyalty; (b) taking people's land and money using a
>>>> suspicious kind of vehicle (finance capitalism); (c) always tending
>>>> to be from the north; (d) threatening agrarian hegemony; and (e)
>>>> always financing and supporting federalist causes. To make matters
>>>> worse, they were now so much in bed with the governing regime that
>>>> they had convinced the "aging patriarch" (washington) to go along
>>>> with a new scheme that would allow the federal government to prop
>>>> up the new banking institutions by giving a central new york bank
>>>> millions of dollars and not even having a real say over how the
>>>> bank operated. Remember, the new bank was technically a private
>>>> institution where by government leaders only had indirect controls.
>>>> They call it a national bank, but it was a private new york
>>>> financial institution composed of Hamilton's friends and chartered
>>>> by friends of hamilton who had infested the new government -- even
>>>> though these "enemies" were supposedly beaten in the war. This was
>>>> not an argument about "hey, the states should be the one proping up
>>>> the banking industry, not the feds." It was an argument against ANY
>>>> organ of the public trust giving this new system a skeletal
>>>> structure, public endorsement, taxpayer support, and greater legs
>>>> to walk on. These developments made planters and virginians in
>>>> particular quite concerned.
>>>> By the time Andrew Jackson comes around, the issue changes. Jackson
>>>> tries to attack the new form of wealth by doing what you said:
>>>> pulling government money out of the national bank and putting it in
>>>> state banks in the south. So by jackson's day, the issue wasn't as
>>>> much about banking as suspicious kind of enemy presence as it was
>>>> "ok, let's use southern ones." In short, by jackson's day, it
>>>> became more about the voting loyalties of the people running the
>>>> bank and less about banking as an suspicious cultural and political
>>>> activity in and of itself.
>>>> */Howard Schweber <schweber at polisci.wisc.edu>/* wrote:
>>>> But why do any of these objections and concerns to the expansion
>>>> of a modernizing system of banking specifically apply to a
>>>> national bank in a way that they would not apply equally to state
>>>> Dr. Sean Wilson, Esq.
>>>> Penn State University
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>>> Paul Finkelman
>>> Chapman Distinguished Professor of Law
>>> University of Tulsa College of Law
>>> 3120 East 4th Place
>>> Tulsa, OK 74104-3189
>>> 918-631-3706 (office)
>>> 918-631-2194 (fax)
>>> paul-finkelman at utulsa.edu
>>> Starting July 1:
>>> Paul Finkelman
>>> President William McKinley Distinguished Professor of Law
>>> Albany Law School
>>> 80 New Scotland Avenue
>>> Albany, New York 12208-3494
>>> 518-445-3386 (office)
>>> 518-605-0296 (cell)
>>> pfinkelman at albanylaw.edu
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