Creature From Jekyll Island by G. Edward

is to take possession of a boundless field of power, no longer susceptible of any definition.'1 Furthermore, he said, even if the Constitution had granted such power, it would be an extremely unwise thing to do, because allowing banks to create money could only lead to national ruin.

Hamilton, on the other hand, argued that debt was a good

thing, if kept within reason, and that the nation needed more money in circulation to keep up with expanding commerce. Only the Bank, he said, would be able to provide that. Furthermore, while it is true the Constitution did not specifically grant the power to create such a bank, it was, nevertheless, an implied power, because it was needed to accomplish other functions which were granted in the Constitution.

That was the end run.

Nothing could be more polarized than the opposing ideas of these two men:

JEFFERSON: 'A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army.'

' W e must not let our rulers load us with perpetual debt.'

HAMILTON: 'No society could succeed which did not unite^ the interest and credit of rich individuals with those of the state.' 'A national debt, if it is not excessive, will be to us a national blessing.'

AMERICA'S SECOND CENTRAL BANK IS CREATED

After a year of intense debate, Hamilton's views prevailed and, in 1791, Congress granted a twenty-year charter to the Bank of the 1. 'Opinion of Thomas Jefferson, Secretary of State,' February 15,1791, quoted by Krooss, pp. 147-48.

2. The comparison between private banks and standing armies can be found m many of Jefferson's letters and public utterances. For example, see The Writings of Thomas Jefferson (New York: G.P. Putnam & Sons, 1899), Vol. X, p. 31.

3. The Basic Writings of Thomas Jefferson (Willey Book Company, 1944), p. 749.

4. Quoted by Arthur M. Schlesinger, Jr., The Age of Jackson (New York: Mentor Books, 1945), pp. 6-7. ^ , , , . „

5. Written on April 30, 1781, to his mentor, Robert Morris. Quoted by John H.

Makin, The Global Debt Crisis: America's Growing Involvement (New York: Basic Books, 1984), p. 246.

330

THE CREATURE FROM JEKYLL ISLAND

United States. It was modelled closely after the Bank of England, which means it was almost an exact replica of the previous Bank of North America. In fact, as evidence of continuity with the past, the president of the new bank was Thomas Willing, the same man who had been a partner of Robert Morris and president of the old bank.1

As before, the new Bank was given a monopoly in the issuance of bank notes. Once again, these notes were not forced on the people as legal tender for private debts and contracts, but they/aw legal tender at face value for all debts to the government in the form of taxes and duties, which made them attractive for use as common money. And once again, the Bank was made the official depository of all federal funds.

The charter specified that the Bank was required at all times to redeem its notes in gold or silver specie upon demand by the depositor. That was an admirable provision but, since the Bank was not also required to keep specie in its vaults in the full amount of its note obligations, it was a mathematical impossibility to uphold.

As with the old Bank of North America, the new Bank of the United States was to have eighty per cent of its capital provided by private investors with the federal government putting up only twenty per cent. That was a mere bookkeeping sleight-of-hand, however, because it had been prearranged for the Bank to immediately loan back to the federal government exactly that same amount. Reminiscent of the Morris scheme in capitalizing the Bank of North America, this federal 'investment' was essentially a means whereby federal funds could be used to make up the

short-fall of the private investors. 'Call it by what name you please,' said Jefferson, this was not a loan or an investment but an outright gift. And he was certainly right. The Bank was able to open its doors with less than nine per cent of the private capital required by its charter. The total capitalization was specified at $10 million, which means that $8 million was to come from private stockholders. However, as John Kenneth Galbraith wryly observed: 'Numerous thrifty participants confined themselves to a modest down payment, and the bank began operations on around $675,000 in hard cash.'2

1. It is interesting to note that, as a member of the Continental Congress, Willing had been one of those who voted against the Declaration of Independence.

2. Galbraith, p. 72

THE CREATURE COMES TO AMERICA 331

THE CREATURE COMES FROM EUROPE

Who were these private investors? Their names do not appear in the published literature, but we can be certain they included the Congressmen and Senators—and their associates—who engineered the charter. But there is an interesting line in Galbraith's text that hints at another dimension to the composition of this group. On page 72 of Money: Whence It Came, Where It Went, he states matter-of-factly: 'Foreigners could own shares but not vote them.'

What a story is hidden behind that innocuous statement. The blunt reality is that the Rothschild banking dynasty in Europe was the dominant force, both financially and politically, in the formation of the Bank of the United States. Biographer, Derek Wilson, explains: