 My name is Patrick Newman I Might have met some of you yesterday. You should have seen me I was wearing a polo and shorts looking like I was a caddy So hopefully I've dressed up a little bit. I swear. That's not my profession though The way higher education is going that might be what I'm gonna end up doing over the next ten years, but we'll see So the title of my talk is the Jacksonians Bank war Liberty versus power So I wanted to talk given this is a means Institute event I wanted to talk about cronyism So those policies that don't benefit the public at large but benefit various special interests things like licenses Central banking taxes tariff subsidies, etc. All right that we know or economically inefficient and harmful and Given that we're at Jekyll Island I wanted to talk about monetary cronyism because this is the famous site where in November 1910 a bunch of Elite New York City bankers sort of scheme to devise the Federal Reserve system that all of us in this room are so grateful That we're living under you know And how I you know given that it's been a rough year for all of us. We've had to deal with a lot We've all had to wear a lot. I wanted to try and talk about and be on an optimistic note And talk about a reform against monetary cronyism Particularly Andrew Jackson's fight against the second Bank of the United States, which Climaxed in his triumphant sort of veto against the recharter So this is from my book my forthcoming book titled Liberty versus power cronyism in the United States 1607 to 1849 at least that's the tentative title the Mises Institute will be publishing it next year. I'm very grateful for that it was Completed with a generous research grant by Hunter Lewis and I continue the story of Murray Rothbard and conceived in Liberty because Rothbard his essential thesis was that history is a Climactic Eternal battle between liberty and power the forces of liberty so those libertarians who are fighting for greater individualism decentralization free markets Anti-cronyism in the forces of power so the status that support greater government central planning Greater coercion in cronyism to benefit themselves in other political and business elites So the history of the United States Particularly the early history of the United States should be understood as a great battle between Liberty and power right so when the power wins when they take control of the government cronyism increases central banking increases protective tariffs increases taxes increases subsidies increases debt increases Etc. Etc. Right and when the forces of liberty take control cronyism declines right We move to free trade we move to decentralized money the gold standard We move to paying off the debt so on and so forth Unfortunately, and this is something that Rothbard speaks about a conceived in liberty and this is something that I discuss in my book is that when forces of liberty win they're able to get some reforms done, but Power starts the corrupt the old phrase of Lord Acton power tends to corrupt and absolute power corrupts absolutely Holds true where eventually the people in control they start to support their own Versions of central planning and government intervention to benefit themselves and their favorite supporters. They want to win reelection They want to expand their political base We've seen this in our lifetimes and this certainly happened in the past when you certainly had much more libertarian Political parties particularly the Jeffersonian Republicans in the Jacksonian Democrats All right, who were legitimately concerned about cronyism and they were legitimately Limited government in anti-government intervention. They got a lot of hate now given that we're in the world of politically correct culture in the cancel culture and people have have sort of demonized These figures ripping down statues particularly of Andrew Jackson. They certainly had their flaws But I think they have a lot of good stuff about them that no one learns about you You know at least in modern high school or college and etc All right, and what I want to concentrate on is the Jacksonians who I think get criticized far too much And really deserve a much better place in history because the Jacksonians Andrew Jackson included as well as his prominent political advisors Martin Van Buren Thomas Hart Benton James Cape Polk Amos Kendall right all the names we all know right most of them probably not They were they were they were libertarians. They were a free market. They were anti-government intervention They were anti-tariff. They were anti-debt They were anti-central banking. All right, and it's important to understand this because what I want to try and show is that You know they were able to get it done in with the tenacity and the persistence All right, and the it's a drive to to whittle down the state and do it to fight for you Believe in they got they they managed to accomplish most of their goals before power ended up corrupting them so that's at least sort of a Somewhat optimistic note. I want us to all Hopefully leave this talk Thinking about okay, so my story begins with central banking in the United States or even just banking in general a lot of people if you read histories Such as Roger Lowenstein's America's Bank this history on the Federal Reserve It's footnoted in the the little handout They give at Jekyll Island and they would say oh banking before the Federal Reserve was chaotic And this is due to the free market right in reality. That's not true banking problems were for banking problems were generally Exaggerated in what problems existed were not due to the free market because there's a significant amount of government intervention If you wanted to operate a bank you had to have a corporate charter a restrictive license basically you had to get from the state Legislature right banks were periodically allowed to suspend Species payments the convertibility of their notes and deposits in the gold Governments state governments invested a significant amount in their banks All right And so what happened on the state level basically happened on the federal level this cronyism was magnified So we all know the story of the first Bank of the United States with you've got Alexander Hamilton pushing for it in 1791 Jefferson puts up a valiant stand, but it's not enough Washington ends up signing the bank bill this is something I talk about in my book Because he was allowed to move Choose the the location of Washington DC and he wanted to put it a little near all of his property in Northern Virginia So it's actually a true story as to why he sort of signed ended up signing the bank bill But anyway, I can't tell too much about that now or else you're not gonna read the book So I got to keep everyone you know hopefully a little interested right That bank has a 20-year charter it lasts until 1811 All right chartered fails to get renewed you get the War of 1812 blah blah blah blah blah All right, we fight Great Britain. We try and take over Canada and Florida. We're not super successful. All right in 1816 Congress charters another central bank right the second Bank of the United States as it's now known This was at the behest of leading financiers John Jacob Astor and Stefan Gerard who bought a tremendous amount of government debt during the war at highly depreciated rates and They pushed to have bank stock exchangeable for government debt so this would push up the price of their debt and Increased the rate of return they earned on their investments right and this bank was like the first bank of the United States Only bigger and instead of a 20 million dollar capitalization It had a 35 million dollar capitalization the government Congress owned one-fifth of the bank that appointed one-fifth of the directors It had a monopoly over interstate banking So it was the only bank congress would charter that could operate branches across state lines And it was also the institution where the government stored all of its money So this is a huge subsidy. All right, so this was just like the first Bank of the United States It was an engine John Randolph of Roanoke a great Theorist who who's totally neglected now put up a valiant stand in Congress but the bank got chartered all right and It opened its doors in 1817 and what does it do? Well, again, we're all Austrian economists and fellow travelers here. So we know what's going to inflate It's gonna engage in credit expansion and this led to an Austrian business cycle theory artificially lowering interest rates encouraging malinvestments This culminated in a panic of 1819. However, what's also not known is that this institution Righted its inception was an enormously corrupt institution I cannot stress this enough where the government officials running the instant running the bank Particularly at the Baltimore branch the main branches in Philadelphia. They were basically engaging in enormous amount of illegal activities So various government officials Including one cashier named James McCulloch He was they were lending themselves money to speculate in stock that they falsely claimed to secure with collateral And they falsely claimed to have gotten the main board's approval in various other activities bribing Local government officials and politicians that the bank was depicted as this giant Hydra It's various heads and its tentacles were sort of Corrupting everything with it with its credit expansion, right? And I actually think that's a really good depiction of a central bank. It's a Hydra I think you know, it's a great if you could have that in a modern money in banking textbook You open up the first page and you see a giant Hydra and he's a alright. This is central banking I'd say all right. Well so far, you know, I would think about assigning this to my students, but Though the bank was engaged in enormous amount of corruption in mid-1818 Congress starts to investigate the bank The bank also starts to contract credit because it's starting to lose specie from abroad this leads to the panic of 1819 in The early part of the year right which bear in mind was by far the most significant event In that year it was not the Missouri crisis over slavery. It was the panic of 1819 That's what the public cared about and they were really upset because they thought that the central bank correctly caused this Engaged in a huge boom and then led to a bust right and The panic of 1819 as Murray Rothbard describes led to a huge resurgence in hard money Lez a fair thought so men who were starting their political careers and you Jackson James K. Polk of Tennessee Amos Kendall of Kentucky Martin Van Buren of New York Thomas Hard Benton of Missouri They started their political careers scarred by this This panic and they wanted to reform the system because they said there's something that's terribly wrong With this central bank. We got to get rid of it or we got to do something against it now in the early 1820s The bank had a lot of friends. Okay, it paid off various newspapers in return for favorable loans Most notably the national intelligence sir in Washington DC So espoused various pro-central banking articles in return get some nice cushy loans from the bank Okay, this might be something new to you guys, but the media is often in connection with the government I don't know this again. We all learned something new here, right now But this was continuing for many years The bank had employed various high-profile politicians who owned stock in who performed legal work for the bank Henry clay of Kentucky Daniel Webster of Massachusetts even John Quincy Adams. Who's the president from 1825 to 1829? Owned stock in the bank. Okay, so it had friends in high places. The bank also Had the young Hamiltonian Nicholas Biddle the arrogant central banker who started working for the bank in 1819 became its president in 1823 who wanted to nationalize the monetary system. Okay, and most importantly It had the legal defense that had chief justice of the Supreme Court John Marshall who defended the bank in McCulloch versus Maryland in early 1819 Marshall said that the bank could not be taxed various states particularly Maryland tried to tax the bank like they tax their other banks McCulloch said no, I mean excuse me Marshall said no You can't do that and also by the way the Constitution the federal government can pretty much do whatever it wants All right, and something that's not known again You want an instance of cronyism is John Marshall owned stock in the bank? And he sold its shares right before the court case, but again things to make you go. Hmm. All right You know what's what's going on here, right? Well, the bank had a lot of friends in high places just like the Federal Reserve, right? however Martin Van Buren after the corrupt election of 1824 when John Quincy Adams was able to deprive And Andrew Jackson of his victory basically created the Democratic Party this new libertarian organization It's the same Democratic Party of today Some slight differences as you can as I'm sure you can imagine and Andrew Jackson defeats John Quincy Adams and was he start doing in 1829? Well, he starts attacking the bank because Andrew Jackson had his flaws But he was generally against anti. He was generally against central bank he was well learned in various free market economics and He didn't know exactly what to replace the bank with he eventually settled on the independent treasury at least his supporters Separating the federal government entirely from banking, but he started off attacking the bank in his 1829 inaugural message to Congress. And so what does Biddle do? Oh, he bribes everyone Okay, he up till about 1832 He lends a hundred thousand dollars to newspapers to write pro-central banking periodicals He spends fifty to a hundred thousand dollars of the central banks own money Publishing pros that are sponsoring pro-central banking periodicals in various economic outlets such as the American Quarterly Review And he loans a hundred thousand dollars to two hundred thousand dollars of money to various congressmen to vote for the bank Okay, this is the Hydra. It's the tentacles. Okay, they're coming to get everyone and the various Hydra heads But you know, you don't do that against Andrew Jackson. You don't do that against old Hickory All right, he's the bad he won the battle of New Orleans And he wasn't gonna let he wasn't gonna have people try and push them around because Andrew Jackson his supporters They keep fighting. All right, they keep trying to say no, you know what? We're going to get rid of the bank in when Biddle in early 1832 he pushes for an early recharter at the behest of Henry Clay who is running for the presidential election in 1832 He wanted to weaken Andrew Jackson his vice president vice presidential candidate was a former lawyer for the bank Okay, this is clearly a great battle of Liberty versus power a triumphant sort of Clash that was coming up right and Through June 1832 Biddle is able to steer the the bank the recharter bill the early recharter bill through Congress Right and he actually when the bill is chartered He appears before Congress triumphant and he holds a big party for his supporters afterwards and he thinks Jackson is going to meekly Sign the bill and then lose reelection 1832 later in the year, but Jackson doesn't do that. He vetoes the bill All right, he says the veto is without a doubt the greatest presidential document against crony is an American history period Because Jackson said the bank is corrupt it has various privileges And it's benefiting the politically connected rich at the expense of the public at large All right, and when something like this happens, you've got to stop this institution All right, so Jackson vetoed the bank and guess what even though the swamp the great DC establishment of the Whigs Henry Clay and Daniel Webster and etc. They tried to stop Andrew Jackson from winning. He triumphantly won reelection Okay, so the people supported him at this and then in 1833 he removes the deposits from the bank the Charter winds down in 1836 and then his successor Martin Van Buren institutes the independent Treasury in 1840 all right and what it shows is that again The Libertarian victories don't come often a lot in politics But if you fight for what you what you believe in and if you have the right political strategy Particularly the presidential veto in the Jacksonians case and you've got the right muscle and the right tenacity You can actually reform the system and Andrew Jackson and the Jacksonians they were able to do that They were able to reform the system and even though it only lasted for a little bit even though we only had it We didn't have a central bank Or any sort of federal government involvement in the economy in the monetary system until the civil war All right, and we eventually got the federal reserve system again All right, we got to take pride in our victories, right and and hold them high All right because again the the the the history is a battle between liberty versus power And you always have to be rooting for the forces of liberty because when you are able to align the forces of liberty You are able to deal Significant blows to cronyism such as monetary cronyism or the central bank. Okay, and with this I think I'll end here So thank you very much