Our guest blogger is John Halpin, a senior fellow at the Center for American Progress Action Fund and co-author of “The Power of Progress: How Progressives Can (Once Again) Save Our Economy, Our Climate, and Our Country.”
Anyone who thinks that the Fed’s rescuing of AIG and Treasury Secretary Paulson’s unconditional, blank-check bailout plan somehow validate the beliefs of FDR needs a serious tutorial in the history of the Democratic Party.
Democrats, since the days of Thomas Jefferson, have always stood on principle against the predatory instincts of Wall Street, speculators, and bankers.
As political theorist Michael Sandel has noted, the fight between Jefferson and Alexander Hamilton over the First Bank of the United States (and Hamilton’s larger government-sponsored economic agenda) was a legendary battle about competing visions of the nation. Jefferson, seeking to uphold the civic republican tradition of the nation’s founding, argued that Hamilton’s national bank was unconstitutional and a “treasonous” tool of oppression supported by northern financial interests. Jefferson believed a central bank and national capitalism would undermine the economic independence and civic virtue of farmers and small producers. Hamilton, in turn, thought Jefferson’s economic vision for the country was quaint and would inhibit the nation from becoming a world leader in manufacturing and finance. He viewed the national bank as an essential engine of the American economy.
Hamilton won that debate but the Jeffersonian skepticism of a national bank and government-sponsored capitalism lived on. Sounding similar themes, President Andrew Jackson accused the Second Bank of the United States of supporting an economic elite that controlled Congress and was neglectful of southern and western agrarian interests. Three-time Democratic presidential candidate, William Jennings Bryan, picked up this strand of thought in his attacks on the early plans for the Federal Reserve system put forth by Republican Senator Nelson Aldrich, the Hamiltonian-inspired nemesis of progressives at the turn of the twentieth century. Aldrich, a close associate of J.P. Morgan, devised a plan to create a system of regional reserve banks with a central authority run by private bankers. The thought of turning the nation’s finances over to the “money trust” set the hair on fire of progressives like Bryan and Republican Senator Robert La Follette of Wisconsin who wanted full public control of the nation’s money supply and credit. After fierce congressional wrangling, President Wilson heeded Bryan’s warnings and eventually negotiated the hybrid Federal Reserve system we have today that preserves privately owned banks with a publicly controlled central board.
Which brings us to Franklin Roosevelt. Read more