Cox: Banking ghosts haunt Clinton in Philadelphia
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Just a few blocks from where Democrats have been celebrating Hillary Clinton’s nomination for the presidency this week stands a handsome Greek-Revival building that once housed the central bank of the new American nation. The Second Bank of the United States derived its charter in 1816 from the antecedent founded by Alexander Hamilton.
Today, the Second Bank houses a portrait gallery of famous locals, such as Benjamin Franklin, American revolutionaries and various French mercenaries who helped the 13 colonies defeat the British crown. In one small anteroom at the back is a small exhibit on the bank itself, with a large portrait of the man who ensured the institution’s demise. The painting is, fittingly, “the ugliest” depiction committed to oil of Andrew Jackson, the seventh U.S. president, in the opinion of a park ranger at the museum.
This former pillar of the American establishment not far from where Democratic rallying cries to break up the country’s largest financial institutions are taking place – in an arena branded by one of them, Wells Fargo – haunts the election of 2016 in ways worthy of reflection. Long before Donald Trump disrupted American politics with his populist excoriation of Washington and Wall Street, Jackson did something similar in Philadelphia – and won.
The charismatic frontier lawyer from Tennessee, who became a military hero by defeating the British at the Battle of New Orleans in 1815, waged the so-called “Bank War” that ultimately took down Hamilton’s fiscal creation. The affair also guaranteed Jackson, the first Democratic Party president, re-election in 1832. That campaign against the moneyed classes mirrors today’s race for the presidency, yet in an odd form of political reverse.
“Whether in the courtroom, the battlefield, or the White House, Andrew Jackson took opposition to his authority personally,” says a plaque next to Jackson’s unflattering portrait in the bank today. “As president, he refused to consider the Bank of the United States as anything but a ‘monster’ that threatened the nation and by extension, Jackson himself.”
Jackson’s philosophical tussle with Hamilton’s version of a central bank extends back before his election to the presidency in 1828. Convinced he had been denied the office in a close race four years earlier by elites like then-Speaker of the House Henry Clay – who instead anointed the privileged son of a previous president, John Quincy Adams – Jackson ran on a radical reform platform that derived wide support from agrarian interests, particularly in the slavery strongholds of the South. When he won, Jackson held the first inaugural ball open to the public.
Early in his first term, Jackson sowed the seeds for taking on the powers of the Second Bank, whose charter would need to be renewed in 1836. According to Michael Barone, a resident fellow at the American Enterprise Institute, “Jackson argued that government interference in the economy would inevitably favor the well-entrenched and well-connected. It would take money away from the little people and give it to the elites.”
The president asked Congress to reconsider whether the bank deserved its station given that it had “failed in the great end of establishing a uniform and sound currency,” a reference to several financial panics that had occurred in the preceding decade.
As Jackson built on his opposition to the institution’s purpose, the bank, led by the Princetonian financier and editor of a literary magazine, Nicholas Biddle, sought support from the president’s political rivals. Chief among them was Clay, who would unsuccessfully challenge Jackson for the presidency in 1832 as a National Republican. In defeat, Clay would go on to help found the Whig Party.
Jackson, who told Secretary of State Martin Van Buren “the bank is trying to kill me, but I will kill it,” turned the future of the institution into a referendum against the urban American elite. As Trump supporter Newt Gingrich co-wrote a year ago, in an essay comparing the real-estate mogul’s appeal to Jackson’s, “millions supported Andrew Jackson because they deeply distrusted the Bank of the United States and other instruments of elite power over the average citizen.”
Biddle fought against Jackson’s attempts to dismantle the bank, even after he won a second term by promising to do so. “This worthy president thinks that because he has scalped Indians and imprisoned judges, he is to have his way with the Bank,” proclaimed Biddle. “He is mistaken.” In the end, it was Biddle who miscalculated, retaliating by withdrawing credit and provoking economic crisis. That only lent greater legitimacy to critics who feared its unaccountable powers.
The Second Bank, without a renewal of its charter, became a private company in 1836 and was eventually liquidated. It was not for another 70-odd years – and after numerous financial panics – that Congress sought to replace its duties, among them acting as the chief watchdog of private banks, with the creation of the Federal Reserve in 1913.
Today, Hamilton – the founder of the bank that Jackson tormented – is considered a national treasure. And both political parties are actively bashing banks. It is, however, the Republicans and their disruptive leader Trump who most embody Jackson’s populist ideals. Indeed, their party platform lays out a plan to turn the financial system into a de facto network of community banks.
Democrats, too, want to curtail the power of giant financial institutions, by enforcing the existing Dodd-Frank Act and brandishing the breakup stick should they fail to follow the rules. That is, however, a less radical vision – more Biddle than Jackson. And look at how that turned out.