Few people would quarrel with the Treasury’s decision Thursday to honor a distinguished woman with a spot on one of the most commonly used bills of America’s currency.
But by pushing aside Alexander Hamilton’s image to make room for a woman on the $10 bill – instead of replacing Andrew Jackson’s image on the $20 bill – the Obama administration has committed a grave historical injustice.
Hamilton – who will remain on the bill in a presumably diminished role—was a founding father, co-author of the Federalist Papers, Revolutionary War staff aide to George Washington, first Treasury Secretary and architect of the early American economy.
He established the nation’s first national bank, a very rough forerunner of the Federal Reserve that would spur industry, lend the government money and hold its deposits. Hamilton also advocated a national currency instead of relying on multiple ones issued by various state governments.
Jackson didn’t even like paper money and he pursued wrong-headed and disastrous economic policies. Yet the Tennessee frontiersman, land speculator, lawyer, slave-owner, war hero and seventh president – will continue to gaze out from the $20 bill.
What did Jackson do wrong when it came to the economy? Lots. Among other things, Jackson dismantled the second Bank of the United States (which he called a “monster institution”) and -- ironically given his spot on the $20 bill – restricted the use of paper money. This lay down the conditions for the Panic of 1837, one of the most severe depressions in U.S. history.
A self-made man, Jackson long harbored a deep mistrust of banks. At the time, there was no Federal Reserve, nor federal bank notes like those we have today. Most Americans at the time paid for goods and services with gold or silver coins or paper notes issued by private firms or state-chartered banks. The value of those paper notes fluctuated wildly.
The Bank of the United States at the time imposed an element of stability. The authoritative history textbook “The Great Republic” says that “the BUS performed many of the functions of a truly national bank,” even though it was largely privately owned. It issued its own notes, but in limited amounts so that their value remained stable. Thus its notes, unlike those issued by hundreds of state-chartered banks, were accepted by the federal government as legal payment for any money owed.
The BUS also served as a regulatory agency, “refusing to accept notes [from smaller banks] that were not backed by sufficient reserves of specie,” the book says.
Finally, the bank’s widely accepted and circulated notes eased the challenge of conducting business over long distances.
But when he ran for president in 1832, Jackson waged war on the private Bank of the United States, calling it monopoly and saying it made “the rich richer and the potent more powerful.” It was a message that appealed to widely different interest groups – such as indebted farmers and land speculators pushing the young country westward and eastern banks jealous of the power of the Bank of the United States.
Once elected, Jackson took the federal government’s surplus revenues (yes, the federal government was actually running a surplus!) away from the national bank. Instead he spread them around several dozen state-chartered banks, dubbed “pet” banks, which issued new paper notes and loans, feeding a speculative boom and inflation.
But later in his presidency, Jackson slammed on the brakes by insisting on the use of hard money, or coins, rather than paper notes. In 1836, he issued a Specie Circular, requiring payment in coins by purchasers of public lands, sharply curtailing inflation. In 1836, when the bank’s charter needed to be renewed, Jackson also vetoed the bill approved by Congress, saying he was taking a stand “against any prostitution of our Government to the advancement of the few at the expense of the many.” The head of the bank called Jackson’s veto message “a manifesto of anarchy.”
Jackson’s new contractionary policies coincided with a drop in investment and a sale of American securities by hard-pressed British firms.
The result? Catastrophe. It would be known as the Panic of 1837 by which time Martin van Buren had become president, but investment and employment began to plunge in 1836. A mob of nearly a thousand people sacked warehouses in New York City. Businessmen in Boston protested against requirements to make payments in hard currency. And banks started refusing to redeem paper notes for hard currency.
The downturn lasted about four years, throwing people out of work, ruining many farmers, and forcing the closure of many banks.
(Jackson’s influence didn’t end there. He appointed his Treasury Secretary, Roger B. Taney, to the Supreme Court. As chief justice, Taney later wrote the infamous majority opinion in the Dred Scott case holding that even free African Americans could not be considered U.S. citizens.)
We’ve had a lot of panics, depressions and recessions since Jackson’s terrible economic policies. No one has quite solved the boom and bust cycle. Yet government and economists know more than Jackson did 175 years ago. Maybe it’s time to let “Old Hickory,” as he was known, retire from the field and give the $20 bill a makeover.