An excerpt from America’s Bank by Roger Lowenstein:
When America last had a central bank, in 1836 (the year before J.P. Morgan Sr.’s birth), the country was a financial innocent. Its credit was borrowed in Europe; its stock market barely existed; its most common mode of transportation was the horse. The United States of 1913 was entirely different. The frontier had vanished; industrialization was a fact. Ford’s was churning out 170,000 Model Ts a year. The New York Stock Exchange listed more than three hundred companies, and corporate news was disseminated on glass-domed stock tickers. The banking industry had mushroomed, thanks in large part to the greater willingness of people to deposit their savings. The heady progress of finance was, however, an unfulfilled promise to the great wash of industrial workers. Capital in its formative stage was undemocratic. Workers’ pensions and other forms of savings were practically nonexistent. Leisure time was the province of the wealthy. America had far more banks than ever, but banks existed to serve business.
What struck me the most reading about “the struggle to create America’s bank,” was the similarities to the issues being debated today. In many cases the exact same questions are still being asked: what role does government have in business? Is Wall Street too powerful? Should we consider a gold standard or use fiat money? The excerpt from the book could practically be taken from the news today:
When America first established the Federal Reserve, in 1913, the country was a financial innocent. The Great Depression had not yet occurred; its stock market barely existed; airplanes were yet to become an accessible mode of transportation. The United States of 2016 is entirely different. The frontier has vanished; Silicon Valley is a fact. Musk is hoping to churn out some 300,000 Model 3s next year. The New York Stock Exchange lists more than two thousand companies, and corporate news is disseminated almost instantaneously via the internet. The banking industry has mushroomed, thanks in large part to a decrease in barriers of entry and a proliferation in financial technology. The heady progress of finance is, however, an unfulfilled promise to a great wash of workers. Capital is somewhat undemocratic. Workers’ pensions, 401ks, and other forms of savings are practically nonexistent. America has far more banks than ever, but banks exist to serve business.
Nothing is new, and everything is different. Frank Vanderlip is now Jamie Dimon. President Woodrow Wilson is President Barack Obama. Charles Hamlin is Janet Yellen. While we have all heard some version of “past performance is not indicative of future results,” it is important to read about financial history in order to gain some perspective. With the Federal Reserve garnering the attention of the financial industry with their every move, America’s Bank: The Epic Struggle to Create the Federal Reserve by Roger Lowenstein is a one place to start.