There was a first, second, and the current Federal Reserve. The second was called, “The President, Directors, and Company of the Bank of the United States.” It was chartered by James Madison in 1816, for a 20 year life, and was supposed to expire in 1836. The bank was a private corporation which handled all the fiscal events of the U.S. Government. 20% of its stock was held by the federal government, with the remaining 80% owned by 1,000 Europeans and many of the wealthiest Americans. It was literally, the largest, richest corporation in the world. Sound fishy? Let me tell you why it was!
Alexander Hamilton, that lover of big government, and first Secretary of the Treasury, established the First Bank of the United States, in 1791, which was America’s first central bank. It had a charter lasting 20 years. It was supposed to stabilize the currency, pay off the war debts, raise money for the new government, create a common currency, and be a central bank. Hamilton was killed by Aaron Burr in 1804 in a duel, so he didn’t live to see his First Bank’s 20 year charter end, which was killed by Congress in 1811. The First Bank’s original building still sits in Philadelphia at 128 South 3rd St.
Getting back to the Second Federal Reserve, which began its life in 1816. The War of 1812, (which America never should have gotten itself into), left America in a literal shambles, with disarray everywhere. Republicans John Taylor and John Randolph led a movement which called both the First Bank and the Second Bank unconstitutional. In 1819, a clumsy expansion, caused a credit crunch, mass unemployment, and a sharp drop in property values, which continued until 1822. Andrew Jackson took office in 1829, and despised a large, powerful central government, and a similar bank as well. The Supreme Court had ruled that the bank was indeed Constitutional, but that didn’t satisfy the bank’s opponents. Jackson rejected these arguments, and insisted that the bank was a corrupt institution, and dangerous to American liberties. Jackson vetoed the Bank’s re-charter efforts in 1832, and his veto was upheld. He then destroyed it by withholding the federal government’s deposits, thereby bankrupting it. Federal funds then were re-directed to private banks, ending the life of the Second Bank of the United States, or the second early day Federal Reserve, which followed the First Bank of the United States, an even earlier Federal Reserve.
Jackson argued that the Second Bank, in the form presented to him, was, “incompatible with justice, sound policy, and the Constitution.” It would be the federal government’s banker and broker of its loans, as well as receiving, transporting, storing and disbursing federal funds. Jackson said the bank had almost “monopolistic market power,” which moved money in and out of America and foreign nations at will, increasing its stock value, unfairly benefitting the stockholders, since it was supposed to be a government institution. It also exempted foreign stockholders from taxation, but American stockholders were taxed on the bank’s stock increases. He suggested that the Bank should be auctioned off to private investors, thereby eliminating what had become a hugely profitable so-called government institution, which was privately owned.
Former President John Adams, in 1813 called the charter U.S. Bank a swindle, and a “Sacrifice of public and private interest to a few aristocratical friends and favorites.”
On a trip a couple of years ago, my wife and I toured Jackson’s home near Nashville, The Hermitage, and I have a two volume set of books on Jackson. Liberals hate him, and most conservatives love him. He beat the Brits at the battle of New Orleans in 1812, taking 60 casualties and costing the Brits over 600 dead. He moved Indians from Florida to a new reservation, and held the Presidency twice. “Old Hickory” was a neat guy, and his killing the second Federal Reserve was wonderful. – don@coloradogold.com