The Republicans took the Banks to task in 1865.
The banks have responded by becoming the Republican Party.
According to Wickipedia: Abraham Lincoln (February 12, 1809 – April 15, 1865) served as the 16th President of the United States from March 1861 until his assassination in April 1865. He successfully led his country through its greatest internal crisis, the American Civil War, preserving the Union and ending slavery. Before his election in 1860 as the first Republican president, Lincoln had been a country lawyer, an Illinois state legislator, a member of the United States House of Representatives, and twice an unsuccessful candidate for election to the U.S. Senate. As an outspoken opponent of the expansion of slavery in the United States, Lincoln won the Republican Party nomination in 1860 and was elected president later that year.
When Lincoln took office, Congress was out of session. The only available means Lincoln had to finance the war effort was to go to the Associated Banks of New York, run by British agents Gallatin and Astor. The government depended upon these banks for specie, and the government budget was financed through the sale of bonds to these banks. America was then mortgaged to Britain, as the U.S. debt was sold overseas to the Rothschild and Baring banking houses.
But, Carey and his circles organized an alternative, whose spirit was set forth by Lincoln in his famous Dec. 3, 1861 “Annual Address to Congress.” The significance of this address cannot be overstated, as the British were well aware.
Lincoln’s emergency economic measures included:
- A nationally regulated private banking system, which would issue cheap credit to build industry;
- The sale of long-term, low-interest bonds (5:20s) to the general public and to the nationally chartered banks;
- The increase of tariffs until industry was running at full tilt;
- Government construction of railroads into the middle South, promoting industrialization over the Southern plantation system–what Carey called “a peace-winning program” to industrialize the South.
The national banks were intended to serve a useful purpose by being both investors in the future wealth of the U.S. through the purchase of 20-year bonds at 5% (the 5:20s) and through the issuance of long-term, low-interest loans to manufacturers, as well as by acting as a medium for the circulation of currency. Instead of selling the U.S. debt to the British, the citizens would buy the debt. The policy was identical to Hamilton’s: The debt would be the basis for credit for industrial development.
James Gallatin, the New York Associated Banks, and their friends in the British government went nuts. On Dec. 28, 1861, they suspended specie payment to the government. They suspended payment of gold owed to their depositors, and stopped transferring to the government the gold which they had pledged for the purchase of government bonds. The banks of other cities immediately followed suit. They came to Washington to present their alternative to Lincoln: high-interest bonds to be sold to the European banking syndicates; deposit of U.S. government gold in private banks for the investment use of the bankers; and a tax on basic industry to finance the war.
Lincoln showed the bankers the door, something which could be usefully repeated all over the world today.
While Lincoln fought the Eastern bankers, the Treasury issued several hundreds of millions of new greenbacks. Jay Cooke was employed to become sole agent for the 5:20 bonds. Carey’s associates Colwell and Elder prepared the propaganda to sell the bonds, and were appointed to posts in the Treasury Department. Cooke sold over $1.3 billion worth of bonds to the citizens of the U.S. between 1862 and 1865.
The original bill authorizing the sale of the 5:20 bonds contained no provision for paying the interest on the bonds in gold. If the bill as prepared by Thaddeus Stevens’s House Ways and Means Committee had passed the Congress, it would have had the effect of severing the domestic economy of the U.S. from the British early in Lincoln’s administration.
The British pound sterling at the time was the world reserve currency. But, before the bill was passed, August Belmont and James Gallatin worked out a compromise with Congress which allowed the bonds to be purchased with greenbacks, but the interest to be paid in specie.
This compromise was the first step in pegging the value of the U.S. national currency, the greenback, to gold, and allowed August Belmont and other New York merchants engaged in the export-import trade to speculate in gold through the Associated Banks and thus create fluctuations in the greenback as measured by the British gold standard.
Lincoln had to bring the national banks under his control, out of the condition of anarchy and treason. Lincoln succeeded, through the enactment of two bills, the National Currency Act of February 1863, and the National Banking Act of June 1864.
Since the time of Andrew Jackson’s removal of government deposits from the Bank of the United States, there was no national bank and no national currency, which, in effect, meant no national sovereignty. Each bank issued its own notes. In January of 1862, there were 1,496 banks in the U.S., 7,000 legitimate notes and 5,500 counterfeit notes. The specie payment on these notes was now suspended.
Banks promoting the most outrageous schemes and responsible to no one were the order of the day. The large private banking houses, like the House of Morgan, used large credit lines from Europe to add to the chaos.
Lincoln attacked the British dominated banks through the following steps:
- First of all–strict federal supervision of bank chartering, eliminating chaotic state banking practices. State chartered banks fell from 1,466 to 297, while federal banks increased to over 1,600.
- Secondly–regulations were imposed covering minimum capitalization, reserve requirements, the definition of bad debts, reports on financial condition and identity of ownership and other elements of safety to depositors. Every bank director had to be an American citizen, and three-quarters of a bank’s directors had to be residents of the state in which the bank did business. Interest rates were limited by state usury laws, with the maximum allowable rate set at 7%.
- The third step concerned the control of currency. There were to be two kinds of legal money: greenbacks and bank-issued notes. Government-authorized bank-issued notes were strictly regulated. Banks were required to deposit bonds with the Treasury to qualify as a circulator of notes, and strict specie and money reserves were also required.
During the war, $450 million in greenbacks were issued. It is doubtful the war could have been won without the issuance of the greenbacks. By creating $450 million worth of greenbacks, Lincoln increased, by increasing government credit, government spending by 300%! The revolutionary nature of the greenbacks, of putting a nation in charge of its own currency, cannot be overstated. The Venetian system of finance was based upon limiting payment to gold, and controlling the gold supply, as was the Venetian-inspired British system.
But the British-allied Northern bankers and their congressional spokesmen forced several compromises, while the British government itself organized every possible opposition.
Frantic over the American System financial policy, the British began a massive organizing drive in the U.S. in support of free trade. John Stuart Mill and Chancellor of the Exchequer William Gladstone controlled the Cobden Clubs–Britain’s worldwide agitators for free trade. These were heavily deployed into the free trade wing of the Republican Party and abolitionist movement.
There was speculation on Wall Street to depreciate the greenbacks, by Belmont and other New York merchants engaged in export-import trade.
The second compromise forced on Lincoln was his appointment of British agent and rabid free-trader Hugh McCullough as first Comptroller of the Currency, which he had to do to get enough votes to pass the National Banking Act. Lincoln appointed McCullough in March of 1865, one month before the war’s end.
Lincoln and Carey were quite aware of the problem created by such compromises. Several steps were taken. First, at Lincoln’s request, Thaddeus Stevens authored a bill to outlaw all sale of gold in the New York Gold Room.
Just three days before Lincoln’s death, McCullough initiated an attack on Lincoln with an open letter to Carey in the Chicago Tribune, in which he called for a reduction of the protective tariff, an immediate return to specie (elimination of the greenback), and contraction of the currency. The article was accompanied by the following excerpt from the London Times:
“He [McCullough] is what few Americans are; a sound political economist. He has studied the philosophy and theory as well as the practice. To read his letters and treatises anyone who did not know that he was American might imagine that he was an Englishman or a Scotsman, who had never embraced the delusion so prevalent on this side of the Atlantic, that as the resources of America are not half developed it is competent to American statesmen to run riot in world experiment and set as defiance the dearly bought experience of older communities. McCullough is, as far as his published opinions testify, a worthy successor of Adam Smith, Mill, Ricardo….”
Lincoln responded with a brutal attack on McCullough–and was killed three days later. In fact, just before his assassination, Lincoln and Carey were making major moves to wipe out some of the most pernicious British-controlled New York banks. They had already severely restricted their speculative real estate loans by law.
In fact, on the day he was assassinated, Lincoln was considering the problem of how to combat speculation by bringing the national currency (the greenbacks) up to par value without contracting the supply. He was planning to break with the British gold standard altogether. At Lincoln’s request, Carey wrote a series of open letters to Speaker of the House Schuyler Colfax that were titled, “How to Defeat England without Fighting Her.” Carey argued against the heteronomy with which U.S. economic policy was carried out. Carey said that Lincoln had been forced to put his signature to bills that he did not consider in the national interest.
Carey called for the creation of a national economic policy planning body under the control of the Executive branch, which Lincoln did set up shortly before his death, called the Commission on Revenue.
Lincoln’s assassination constituted a virtual coup d’état. A single bullet had succeeded in wiping out the hope of the world.
Lincoln’s successor, Andrew Johnson, in his inaugural address, signaled a total reversal of Lincoln’s economic policy. He called Lincoln’s tariff “a clearly recognized outrage.” He concluded his inaugural with the statement: “Free trade with all the markets of the world is the true theory of government.”
Almost the entire Johnson cabinet were outright British agents or corrupted by British ideology.
In late 1865, McCullough officially announced his intention of reversing the American System and all that Lincoln fought for. His policy was to rapidly contract the national currency (the greenback) and return the nation immediately to specie payments and direct taxation of productive wealth (looting) to pay off the national debt. Within the context of a policy which called for destroying the nation’s industrial base to pay off foreign debts, any positive program for reconstruction of the South was impossible.
The congressmen and senators allied with Carey launched a counterattack in defense of Lincoln’s program–that action, even if rear guard at times, was responsible for the continued growth of American industry and the scientific development of the last three decades of the 19th century, which turned this nation into the most technologically advanced nation in the world.
(paraphrased from the writings of Rochelle Ascher)
The banking industry has long courted the Republican Party. The courting began with President Andrew Johnson and continues to this day.
Senate Minority Leader Mitch McConnell (R-Ky.) is “unabashedly courting Wall Street bankers for political money” and “happy to scratch their backs if they’ll scratch his,” opines McConnell’s home state newspaper, the Lexington Herald-Leader, in an unusually strong rebuke.
In a staff editorial headlined “McConnell to big banks’ rescue,” the Herald-Leader decries McConnell’s pandering to Wall Street executives and repeated use of the catch phrases outlined in an anti-financial reform memo written by pollster Frank Luntz. Here’s a sample of the Herald-Leader’s outrage:
McConnell’s statements are perfectly calibrated to inflame the public. He insists the bill would “allow endless taxpayer-funded bailouts for big Wall Street banks.”
Their resemblance to the truth is another matter.
McConnell, it should be remembered, voted for the bailout of the big investment banks in the fall of 2008, when it was the only alternative to global economic meltdown.
We have read that the Republicans have a plan for financial reform, but McConnell isn’t talking up any solutions, just trashing the other side’s ideas with no respect for the truth.
While the intricacies of financial regulation are complicated, McConnell’s calculus is pretty obvious.
WASHINGTON — In the face of stiff GOP opposition, Obama administration officials want Senate Democrats to purge a $50 billion fund for dismantling “too big to fail” banks from legislation that aims to protect against a new financial crisis. Republicans contend the provision would simply continue government bailouts of Wall Street.
The sweeping bill aims to prevent a recurrence of the crisis that nearly caused a Wall Street meltdown in 2008. Beside creating a mechanism for liquidating large firms, House and Senate bills would govern previously unregulated derivatives, create a council to detect system wide financial threats and establish a consumer protection agency to police lending, credit cards and other bank-customer transactions.
President Barack Obama declared Friday that he would veto the bill if it doesn’t regulate the freewheeling derivatives market. “We can’t afford another AIG,” the president said, referring to the giant insurance conglomerate that relied heavily on the complex, sometimes exotic investment instruments.
Separately on Friday, the government accused Goldman Sachs & Co., Wall Street’s most powerful firm, of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was collapsing two years ago.
One senior Treasury official said Friday that the fund for dismantling giant failing banks, which would be financed by large financial institutions themselves, is unnecessary. He said the costs of dismantling the firms could be recouped from the industry after liquidation.
If the chairman of the Senate Banking Committee, Christopher Dodd, D-Conn., complies, that would remove one component of the bill that Republicans have persistently used to rally opposition. But it was unclear whether that step alone would yield any Republican votes.
Senate Republicans stood solidly against the bill Friday after GOP leader Mitch McConnell persuaded Susan Collins, R-Maine, to join 40 fellow lawmakers in expressing their opposition and demanding further negotiation.
McConnell suggested it wouldn’t be enough to satisfy Republicans.
“I appreciate the Obama administrations recognition of the need to substantively improve this bill,” McConnell said. “And I hope we can work with them to close the remaining bailout loopholes that put American taxpayers on the hook for financial institutions that become too big to fail.”
The Huffington Post: July 25th, 2010