The Alchemists: Three Central Bankers and a World on Fire by Neil Irwin Read Free Book Online Page B

expired six years later, Hamilton had died in a duel of his own, Madison was in the White House, and private banking interests had begun to view the national bank as competition. The Bank of the United States closed down.
    In 1812, though, that came to seem like a mistake. The United States found itself at war with Britain—Madison’s time in the White House would even be interrupted by the British burning it down. If there is one thing central banks have proved themselves very good at over their three and a half centuries of history, it is financing wars. And without a central bank to issue government debt, the United States faced financial challenges that would have been unimaginable for its Bank of England–backed opponent. Madison, who had a few years earlier judged a central bank to be unconstitutional, reluctantly supported starting up the Bank of the United States all over again.
    The Second Bank of the United States was founded in 1816 and run most prominently by Nicholas Biddle , a brilliant young man of a literary bent who had finished first in his class at Princeton at age fifteen and helped negotiate the Louisiana Purchase. He did a lot of things that a modern central banker would applaud. He worked to eliminate the tendency for the dollar to have different values in different parts of the country, with western-issued banknotes generally being viewed as less valuable than eastern ones. He figured out that he could either tighten or loosen credit conditions —thus either fighting inflation or boosting economic growth—by buying and selling banknotes to influence the availability of credit across the nation. And at first, Biddle tried to keep himself away from partisan politics. Referring to Jonathan Swift’s assertion that “Money is neither Whig nor Tory,” he told a correspondent that “ the Bank is neither a Jackson man nor an Adams man, it is only a Bank.”
    But once the continued existence of the national bank came into question, Biddle became not just political, but positively Machiavellian.
    When rural southerner Andrew Jackson was elected president in 1828, it was on the strength of a vigorously populist campaign. Jackson was anti-urban, anti-intellectual, anti–big business—and very much anti–Bank of the United States. “ Both the constitutionality and the expediency of the law creating this bank are well questioned by a large portion of our fellow citizens, and it must be admitted by all that it has failed in the great end of establishing a uniform and sound currency,” Jackson said in his first message to Congress. He would, he said, veto any extension of the bank’s charter, which was set to expire in 1836.
    With the help of powerful pro-bank senator Henry Clay, Biddle in 1832 pushed for an early renewal of the charter. The advice was more than a little self-serving: Clay hoped to be elected president himself, and he knew the bank issue was divisive enough to build a campaign around. The debate in Congress was furious. The existence of a national bank, Missouri senator Thomas Hart Benton argued, would lay the groundwork for “ the titles and estates of our future nobility —Duke of Cincinnati! Earl of Lexington! Marquis of Nashville! Count of St. Louis! Prince of New Orleans! . . . When the renewed charter is brought in for us to vote upon, I shall consider myself as voting upon a bill for the establishment of lords and commons in this America, and for the eventual establishment of a king!”
    “Czar Nicholas,” as Biddle became known among his opponents, resorted to dirty tricks to try to save the bank. He put politicians on the bank’s payroll. He offered newspaper editors the then vast sum of $1,000 to publish his own articles in favor of the institution—and to keep their authorship secret. He even contracted credit in the West, where antibank fervor was strongest, a thuggish use of the power of the national bank to punish his enemies.
    The rechartering of the Second Bank