the demise of the first bank and the federalist party -- 8/13/18
Today's selection -- from A Nation of Deadbeats by Scott Reynolds Nelson. During the first years of the existence of the United States, its economy had been boosted by supplying the combatants in the Napoleonic Wars in Europe, supported by credit made available by the First Bank of the United States. That bank's charter ran from 1791 to 1811 and was not renewed because of opposition from Democrats. But in the waning years of that bank's life, its services had favored New England shipping merchants, who were largely Federalists, and those merchants were tied closely to British interests. In part because of those ties, they had opposed the coming War of 1812 with England. It was that divided loyalty that helped doom the Federalists as a viable political force:
"Dissolving the Bank of the United States in 1811 was a crucial step toward war. Congress destroyed an efficient financial machine but also -- most assuredly -- a political one. Some Democrats believed that dissolution of the bank would finally prevent Britain from corrupting the American legislature. Federalists worried that the bank could no longer quiet the rumblings of a war with England. Whatever it meant, the destruction of the bank can be seen as the first shot in what Americans would call the War of 1812.
"Yet during the war, even while British and American men-of-war exchanged hot lead and chain shot over Lake Erie, even as American frigates captured English merchantmen in the Atlantic, even as soldiers tussled over Washington City and New Orleans, many Yankee ships and British shippers continued their trading as if nothing had happened. While American soldiers suffered for food, New England merchants were shipping flour to British soldiers and sailors in Portugal and Spain.
|First Bank of the United States|
"By the end of the war New England, whose merchants had traded with the enemy, had a very bad reputation in the rest of the country. Many Democratic newspapers recalled the night in 1813 when merchants in New London, Connecticut, flashed blue lights to the British ships blockading their port, warning them of American warships trying to escape the English blockade. Republicans called the Federalist politicians who favored the Bank of the United States 'blue lights.' Those blue lights were all that was left of [Alexander] Hamilton's dream, the ghostly reflection of Hamilton's promise of saltwater trade, of triumphant American commerce, and of an American bank that had controlled a nation.
"For a while the bank had triumphed. The Napoleonic Wars had provided an opening for the bank and an ambitious plan to turn a new nation into what one historian has called a reexport republic, a republic built on forged papers and fraudulent voyages. This illicit trade, combined with the magical attraction of American bank stocks, built American fortunes and funded American banks. That trade helped the new American republic avoid the fate of so many newly independent nations in the eighteenth, nineteenth, and twentieth centuries. America avoided the receivership, default, and balance-of-payments crises that plagued Latin America, the Caribbean, the princely kingdoms of South Asia, postcolonial South Asia, and much of southern Africa. The fiscal and military state that Hamilton helped create with the Constitution was no accident; his model was to emulate the fiscal and military might of Great Britain. But the bank's capacity went beyond creating a public debt to fight wars and police its orders. This bank would also provide funding for East Coast merchants in a time of international war."