Posted by
Andrews on Friday, October 24, 2008 1:40:19 PM
For almost two centuries the vision of Andrew Jackson had guided American banking, oddly enough, finally falling not to a liberal, but to a conservative president and a supposedly conservative presidential candidate.
If you doubt the influence Jackson, and his fight against the Second Bank of the United States, had on banking policy, ask yourself why we have a semi-private Federal Reserve. Why did we not follow the pattern of Europe and establish a national bank to issue notes and control the money supply.
It is because after Jackson the tradition was established that banking was a private venture, and unlike the more socialized or authoritarian European nations, our government would not involve itself that intrusively in banking. Of course it has been a lie for a century. The Federal Reserve is a central bank in all but name, and is private only in the very loosest definition of that word. But still, the bulk of the banking industry, though heavily regulated, was still private.
No longer. Thanks to a Democrat created crisis blamed on Republicans, and the response of nominally conservative Republicans, our government now holds an ownership interest in our nine largest financial institutions, and, wherever the government has part ownership, total control is soon to follow. Just ask any railroad executive, the government is not a silent partner for long.
Of course many will look at this and ask "so what", and they are right in a way. The banking industry has been heavily controlled for a long time, and as I said, we have long had a national bank in all but name. So where is the harm in confessing this and letting the government go from covert to more overt control?
One problem, and the one I find most troubling, is that it is movement in the wrong direction. So long as we had the pretense of a private banking, there was always hope that we might reintroduce some degree of real freedom into the financial and monetary system. But not now. Having destroyed a segment of the banking industry through meddling, the government used their own failure to justify even greater meddling.
Of course, there is still a remote possibility that someone could reverse this trend, that we could still find freedom in the financial arena. But it is much less likely now. So for all those calling for commodity currency, privately controlled banks, even private issue of currency, I think you better prepare for a lot more disappointment in the years to come.
POSTSCRIPT
And for those who ask "so what", I think one concrete example will help show the problem. The banks have traditionally served as a check on the government. When the government has pushed for too much monetary inflation or tried to intervene in truly destructive ways, the complaints of the largest banks has tended to back down the government, not always, but often enough to make them a valuable restraint on government excess.
Now that the government is their silent partner, do you think they will be quite as vocal in standing in the way of inflation? Of excessive borrowing? And now that the government can effectively lend to itself out of the holdings of these banks, what pressure will there be for financial restraint? Granted, they will soon exhaust the resources of these nine banks (provided they don't exercise restraint, but when have they ever shown any of that trait), but for a time the part-ownership of these banks will serve as a penny in the fuse box, preventing any warning signals form reaching the government when it makes a bad decision.