A History of Financial Panics in the U.S.
(Page 6 of 7)
While some parts of this
political story may sound familiar, I’d suggest that financial and political history
is woven together in ways that are difficult to see at first glance. The First
and Second Banks of the United States,
the Suffolk Bank of Massachusetts,
and the New York Clearing House were all central banks, but they were also
political organizations, often covertly intervening in state and federal
elections. Criticism of these institutions by Jefferson, Jackson,
Roosevelt, Wilson, Hoover, FDR, and others was not just paranoid
delusion (though Jackson’s paranoia must never be overlooked). Politicians
and everyday citizens later exposed how these institutions corrupted American politics.
It was not just hyperbole to refer to these banks as political machines. As we
shall see, they often were.
I’ll also examine here the
changes in daily life that panics wrought. For example, controversies
over liquor often increased after economic downturns. In the wake of the 1792
panic, for instance, a new tax on alcohol led the whiskey rebels to take up
arms against the federal government. After 1819, Philadelphia hospitals received so many out-of-work
alcoholics that they learned to plot out the stages of alcohol withdrawal,
giving us the medical term “delirium tremens.” While the Whigs came to power
after 1837 on a campaign of “hard cider,” the 1857 panic saw the collapse of an
anti-liquor party called the Know-Nothings. The fallout from the panic of 1873
led to the rise of new criminal enterprises built on gambling and liquor in Chicago, while after the
1893 panic the federal government implemented a new tax on liquor to recover
lost federal revenue. A constitutional amendment prohibited the sale of alcohol
after World War I, but Democrats overturned it, hoping a beer tax would help
end the financial crisis of the 1930s. We can also credit financial panics with
the creation of the presidential cabinet meeting, the founding of the New York
Stock Exchange, the rise of Mormonism, and the invention of the self-service grocery.
To talk about the history of panic attacks in the Unites States is to talk
about a novel about whales, a guerrilla war over the plains of Kansas, and the
invention of the jukebox.
My father died before this
book was written, but it is nonetheless my side of a thirty-year-long argument
with him. Not surprisingly, he disliked deadbeats, seeing them as the people
whose false promises weakened this country. He probably had a point, and no
doubt the executives of Woolco would agree. But I find much in them to admire, for
defaulters are often dreamers. In viewing America’s financial panics through
the lens of numerous unfulfilled and forgotten debts that even the oldest
banker cannot possibly remember, I hope to provide a perspective my dad would
have appreciated: the view from the front porch, the minute he rang
the doorbell, when both debtor and
creditor prepared their stories.
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