America’s Bank

If a presidential candidate today were to question the US Federal Reserve’s right to exist, at best the comment would be considered a joke or worse, the ravings of a lunatic.

As you’ll soon see, however, this sort of opinion in the early days of the United States wasn’t uncommon.

Between the War of Independence which ended in 1783 and the early 1900s, many people opposed any form of concentrated authority in the United States, including a central bank.

This opposition was based on a fear that with such an institution, the government could exercise an undue amount of control over citizens’ lives.  

For instance, in 1791, the Philadelphia-based First Bank of the United States was chartered for 20 years. Anti-federalists, however, strongly opposed this central bank’s existence as a sign of government dominance, and blocked the charter from being renewed.

In lieu of a central bank, banks at the regional and state levels were forced to issue their own banknotes.  

During the War of 1812 against Britain, the lack of a regulated central currency in the United States caused fiscal chaos. To better secure their market interests, businesses began to favor both centralized tariffs and regulation, which led to the establishment in 1816 of the Second Bank of the United States.  

Soon enough, however, the hopes for a strong central bank faced yet another hurdle in Andrew Jackson, the seventh American president.

Jackson opposed centralized banking as he saw it as an extension of the wealthy minority’s power over the poorer majority. His opinion, which echoed a populist current at the time, was that banking was an elitist, anti-democratic force.

In 1836, to combat what he saw as an unfair and inappropriate amount of economic and political power held by the central bank, Jackson vetoed the charter renewal for the Second Bank of the United States.

His opposition dealt a death blow to the dream of a central bank for the rest of the century.