End the Fed and Old Hickory

Randall Wray kicks off a discussion of the movement to reform or eliminate the Federal Reserve with a look at Andrew Jackson’s 1832 refusal to extend the charter of the Second Bank of the United States (effectively forestalling the creation of a central bank in the US):

The basis of his objection to the US Bank was its “exclusive privilege of banking under the authority of the General Government, a monopoly of its favor and support” which accorded to its owners some $17 million as the “present value of the monopoly”. Those owners consisted of an elite aristocracy of Americans and foreigners. Jackson argued that it would be far more just if Congress were to “create and sell twenty-eight millions of stock, incorporating the purchasers with all the powers and privileges secured in this act”—that is, sell the stock to the American people. “If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full value”.

He also recognized that the set-up ensured a net transfer of wealth from the West to the Eastern aristocrats. Further, “Of the twenty-five directors of this bank five are chosen by the Government and twenty by the citizen stockholders” (of whom a third were foreigners). Thus, “The entire control of the institution would necessarily fall into the hands of a few citizen stockholders, and the ease with which the object would be accomplished would be a temptation to designing men to secure that control in their own hands…There is danger that a president and directors would then be able to elect themselves from year to year…It is easy to conceive that great evils to our country and its institutions might flow from such a concentration of power in the hands of a few men irresponsible to the people.” (I do love the phrase “designing men”—worthy of a Veblen or a Galbraith.)

Read the whole thing here at EconoMonitor.