Big Banks Being Big

ALEXANDER HAMILTON lost the gunfight to Aaron Burr, a stupid way to end a brilliant career as the primary designer of the American economic system. He won the more important fight; the fight over the nature and structure of the American economic system, against a far worthier adversary, Thomas Jefferson. The new nation would have a system featuring big cities full of heavy industry and exploited workers, big banks, and a centralized government-sponsored monetary system and currency, all presided over by a few powerful men, benefitting the few at the expense of the many. Hamilton, bear in mind, was intelligent enough to realize that a country with big institutions overseeing a big economy would of necessity be owned, operated, and managed by an elite few big men, men of the "better sort", as they were called in his day. There is, after all, only so much room at the top, and when dealing with huge assets, mob rule democracy simply will not suffice. Jefferson's vision, of a localized American economy of yeoman farmers, small banking institutions, limited industry, and currency and financial regulations left in the hands of the various states, seems almost too quaint to even imagine today. It could never have produced a wealthy powerful America, strutting its economic and military stuff on the world stage, and that's just the way dreamy Tom wanted it. So much for Jefferson's naive idealism. The first Bank of the United States, Hamilton's baby, lasted from 1791 to 1811, functioned as the repository of government money, and served as a currency stabilizer, until criticism that its conservative fiscal policies were stifling economic growth resulted in its non rechartering. In 1816 it successor emerged, and lasted until Andrew Jackson killed it in the eighteen thirties, for exactly the opposite reason; it was too big, too intrusive on state sponsored banks. Plainly, however, the expanding nation needed and wanted big, far reaching financial service institutions to fuel an economy of vast potential for growth. The American industrial revolution began in earnest after the Civil War, as did the era, ongoing today, of big, privately owned banks. With Rockefeller, Vanderbilt, and Carnegie running rampant in the late nineteenth century and early twentieth, big banks, both public and private, were inevitable. During one of capitalism's regular big crashes in 1908, banker J.P. Morgan personally arranged for the United States government to retain solvency, through his beg bank. At this point, the need for an actual Bank of the United States, one which would not only endure but would be free from all allegations of political and financial corruption, was urgently understood by most economists. Thus our much maligned Federal Reserve Bank system was established in 1912, with its limited scope of regulatory activity, its independence, and its decentralized approach to branch affiliates. Big private banks can as a last resort borrow money from the Fed, and the Fed regulates the interest paid by the borrowers, and that's about it. But, that seems to be enough. The Federal Reserve system has functioned smoothly and effectively for over a hundred years, neither too stiflingly oppressive with regulating power, nor too impotent to have a real stabilizing effect on the economy. The undergirding philosophy is that by regulating the big boys, the rest will fall into place, a balance of power, if you will. The great depression of 1929 demonstrated the need for more government involvement in and regulation of the economy and its big private banks, and the regulatory regimen installed in the nineteen thirties served the nation well, until 1980, when the forces of deregulation, aka billionaire's banking club, once again reared its ugly head. Since 1980, when the government withdraw from big banking oversight, the concentration of wealth in America and the level of corruption has reached levels never seen before, and the wealth concentration and financial corruption, still with us toady, is pervasive. Hence, the crash of 2008, the Bush-Obama too big to fail bailout, and all the rest, including trillions of dollars of vanished taxpayer money, criminal financial executives serving no jail time, and being vastly overpaid, while managing our money like a game of monopoly on drugs. The Unites States banking and financial system is either under regulated or over regulated, take your pick. Indisputably, however, one fact remains: the bigger the money, the more the monitoring required to prevent corruption, for, verily, we all know what the love of money is.