Cronyism

CHAPTER 5

WALL STREET’S NATIONAL BANKS

In the cardinal area of money and banking, the Republicans excelled in distributing subsidies and restrictive regulations during the Great Barbecue. Under the cloak of wartime emergency the federal government printed irredeemable greenbacks, enlisted a politically connected banker to market the public debt, and devised a quasi-central-banking system of national banks that concentrated bank reserves in New York City. Such shifts in the financial system did not benefit the public; instead, the rewards accrued to increasingly powerful Wall Street banks. After the war Wall Street avariciously defended its crony spoils, blocking attempts to deregulate banking and open competition and solidifying its sway over the monetary expansion process. A new era of vast Wall Street influence, with monetary favors flowing to New York City bankers, emerged. Before long, however, state banks, rival Chicago national banks, and Populists in favor of nonbank forms of monetary expansion—namely, silver coinage—challenged their supremacy.

Nationalizing the Banking Pyramid

Initially, Republicans’ relationship with leading investment bankers was hostile. With the outbreak of the Civil War, the federal government harassed financier W. W. Corcoran because of his prosouthern sympathies. After experiencing a brief arrest and federal troops on his Washington properties, Corcoran cashed in his chips and expatriated his wealth to Paris. August Belmont, for his part, recognized the changing political climate and realized he currently commanded the semitreasonous Democratic Party. He worked assiduously to develop cordial relations with the Lincoln administration by convincing the Rothschilds and foreign governments not to recognize the Confederacy or loan it money.

The sour relations extended to commercial banks on Wall Street. The leader of the resistance was James Gallatin, president of the Gallatin Bank and son of President Thomas Jefferson’s Treasury secretary, Albert Gallatin. Many of New York City’s financial and merchant elites maintained profitable connections with southern cotton interests and did not support an administration that would damage those relationships. Furthermore, they believed that Secretary of the Treasury Salmon P. Chase wanted to sell the public debt at unreasonably high prices to secure artificially low borrowing costs.

By August 1861, Chase convinced bankers to purchase $150 million of government bonds. But Chase, an ex-Jacksonian Democrat, adhered to the Independent Treasury’s requirement to accept revenue only in specie. A commendable hard-money stipulation that restricted fractional-reserve banks’ credit expansion, it ran directly counter to the government’s exploding fiscal demands. When bankers acquiesced, the decrease in their gold reserves made it much harder for them to honor redemptions. After bank runs occurred in December, New York City banks illegally suspended specie payments; other banks and the US Treasury followed suit. With stunning rapidity the nation abandoned the gold standard.

In January 1862 Gallatin and other New York City bankers met with Chase and pleaded for a suspension of the Independent Treasury and more attractive returns on the public debt. But Chase refused, and the meeting ended in a deadlock. The Treasury turned to Congress for help financing the war. As Chase found out, the bankers still got their way: Massachusetts’s Samuel Hooper and Elbridge Spaulding of New York controlled the financial subcommittee of the House Ways and Means Committee. A wealthy merchant, Hooper owned Samuel Hooper & Co. and served as an influential director of, and the largest stockholder in, Boston’s strongest bank, the Merchants Bank. Spaulding served as both the president of the Farmers and Mechanics Bank in Buffalo and the chair of the subcommittee.

The two banker politicians argued that, given the military’s financial needs, Congress should print paper money that would not be redeemable in specie until an unspecified future date but count as legal tender. Significantly, giving the paper money legaltender status would enable commercial banks to pay their depositors with the government’s notes and use them as reserves for loan expansion, in lieu of gold. While Secretary Chase and some bankers, such as Gallatin, distrusted such notes, other Wall Street bankers heartily supported their issuance. Notable examples include John Stevens and John E. Williams, the respective presidents of the Bank of Commerce and the Metropolitan Bank, New York City’s first and third largest banks by assets.

In late February, President Lincoln signed the Legal Tender Act, enabling the issuance of $150 million in notes. The New York Times reported that the law had been supported by a “powerful influence among the banks, private bankers, and great merchants of the country” and emphasized how banks were eager to use the money as a basis for credit expansion.By early March the New York Clearing House, the entity that settled accounts between the city banks, adopted the notes as a settlement medium. The New York City banks were ready to use the government’s paper money for credit creation.

Congress declared that there would be only one issuance of the emergency notes. But as Murray Rothbard reminds, “Printing money is a heady wine.”Regrettably, the wine the government imbibes leaves the public with the hangover and the tab. When the government inflates the money supply, its income increases, enabling officials to demand more goods and drive up prices on those goods. The incomes of select businesses and individuals supplying the goods increase and in turn enable them to pay more for other goods. The government, and the businesses and individuals in fortunate proximity, are the early receivers of the new money. Their incomes increase more than the rise in prices, meaning their real incomes increase too. They gain, while the later recipients of the new money—the broader public—suffer reduced real incomes because their incomes increase less than the rise in prices. In this way, inflation is a hidden tax on the populace that subsidizes the politically and financially connected. An expedient way to finance government expenditures!

In July 1862 Congress authorized another issuance, and by the war’s close the Treasury had churned out $449 million in greenbacks—so called because of the green ink used to print the bills. The banking system did its part, using new greenback reserves to expand notes and deposits 115 percent. In total, from 1860 to 1865 the money supply increased 153 percent. The government and bank inflation resulted in a staggering 96 percent rise in the prices of consumer goods (14.4 percent per year), taxing real income away from workers and redistributing it to the first receivers of the new money. When taking into consideration other war-induced burdens such as tariffs, real wages fell 18 percent.

Congress embarked upon yet another policy of inflationary cronyism, one that revolutionized the country’s fractionalreserve banking system to increase the demand for war bonds. To accomplish this, Chase worked with his benefactor, the investment banker Jay Cooke. The Cooke family maintained very cordial relations with Ohio heavyweights Chase and Congressman John Sherman. Jay’s brother Henry owned the proChase newspaper the Ohio State Journal, and after the 1860 election the Cookes pushed for Chase to become secretary of the Treasury and financed John Sherman’s senate bid. Around this time, in January 1861, Cooke established the Philadelphia investment bank Jay Cooke & Co. With the pieces in place, the Cookes’ father wrote to Jay in March emphasizing that because Henry succeeded “in getting Chase into the Cabinet & Sherman into the Senate . . . now is the time for making money.”

Indeed, Jay Cooke plied Chase for the “natural advantages” that derived from their “personal friendship.” More to the point: “We could not be expected to leave our comfortable homes and positions here without some great inducement” for their patriotic service.The investment banker counseled Secretary Chase, entertained his family, and privately invested his money. Moving in for the kill, in February 1862 Jay Cooke & Co. created a Washington branch managed by the firm’s lobbyist, Henry Cooke. Positioned next to the Treasury Building, Chase and other officials kept accounts at the institution.

Chase responded to the brothers’ lobbying by granting Cooke a near monopoly on selling US securities. Cooke leapt into the role, embracing the novel strategy of appealing to the public directly with patriotic campaigns, newspaper advertisements, and 2,500 traveling agents. Only through Jay Cooke & Co.’s marketing strategy did the Treasury sell Congress’s mounting war obligations, totaling $2.5 billion by 1865. With good reward to boot: Jay Cooke & Co.’s Philadelphia and Washington establishments reaped a combined $1.7 million in profit during the war, and the investment bank then expanded onto Wall Street and to London. Quite the “inducement” from Chase.

During this time Chase hatched a plan: Congress must establish a new national banking system where banks insured the value of their notes by buying federal bonds. These national banks would supplant the commercial banks organized through states’ free-banking laws of the 1840s and 1850s (so called because they allowed banks to freely form under limited state regulation instead of under crony state charters). Though Chase received Lincoln’s imprimatur, by early 1863 the legislation stalled in Congress. Not one to quit, the secretary turned to his ally Cooke, who realized that the plan would “create and make a market for a large amount of our government bonds.”Chase’s national banks could earn Cooke more money.

But the Republicans were wary of quickly ramming through such momentous legislation under the guise of wartime emergency. Jay knew his best shot was to recruit Sherman, a member of the Senate Finance Committee. Henry reported to Jay “in the strictest confidence” that he visited the senator, using “my influence with him” to make sure Sherman took “hold of [Chase’s] bank bill.”The brothers also gave Congress what they called “medicine”—whipping up a propaganda blitz in newspapers— and noted that it was “having its [desired] effect.”Sherman fought mightily in the Senate, and thanks to personal appeals the bill squeaked past the upper chamber 23–21. Once Lincoln signed the act in February, Henry triumphantly wrote to Jay that the bill passed because he “induced Sherman to take hold of it, and we went to work with the newspapers.”Thanks to the Chase-Cooke connection, within a scant two months a new banking system sprouted into existence.

The 1863 National Banking Act created a new commercial banking system of national bank corporations. Most importantly, each national bank had to maintain fractional reserves of 25 percent in specie or greenbacks. As a sop to urban areas, rural banks could keep 60 percent of these reserves as balances in deposit accounts at national banks in New York City and other large cities. These rural bankers’ balances were extremely important for the banking industry. Smaller banks sought to keep some of their reserves in balances at other banks because branching restrictions incentivized them to establish a line of credit with a correspondent bank in a different part of the country and diversify their investments by earning interest on reserves. The larger national banks coveted this business because they could now officially act as quasi-central banks: if they expanded credit, other fractionalreserve banks would not press for redemption of their notes and deposits but keep the money in deposit accounts and expand their own credit on them. Thus, bankers’ balances enabled multiple banks to engage in credit expansion. Every large bank wanted to be in the envious position of a quasi-central bank.

Other features of the law further revolutionized the banking system. It created an Office of the Comptroller of the Currency to grant charters for national banks and enforce restrictive regulations. As examples, the minimum capital requirement of $50,000 for banks in cities with fewer than ten thousand people and $100,000 for banks in larger cities impeded both competition from smaller banks and poorer customers’ ability to access national bank facilities. Federal, and not just state, prohibitions on branch banking now crippled interstate competition and further encouraged pyramiding of bank reserves. The law also stated that national banks could issue legal-tender banknotes up to 90 percent of the face value of federal bonds the bank held, with total notes limited to $300 million. This meant that issuance of banknotes would be heavily concentrated in the national banks that invested in government debt. Lastly, national banks could receive government deposits of federal funds. This de facto killed the Jacksonian Independent Treasury and its separation of the federal government’s monies from banks’ coffers.

As the important head of this new regulatory bureaucracy, the comptroller, Chase appointed Hugh McCulloch, president of the State Bank of Indiana and a strong Cooke ally. Predictably, McCulloch granted the first charters to Cooke and other Chase connections. Cooke controlled the First National Bank of Philadelphia, the Fourth National Bank of New York, and the First National Bank of Washington—the unoriginal naming convention a result of statute. The latter became Cooke’s personal bank and paid profitable gold dividends of 10 percent in 1864 and 1865. Chase’s friend John Thompson organized the First National Bank of New York, a profitable depository that helped sell federal debt. Several years later he established Chase National Bank in honor of the former secretary.

But there was a major problem: very few state banks converted to national charters, hampering the new national system’s ability to finance the war debt. Of the 134 national banks only one was a conversion. The New York City banking oligarchs, including John Williams and John Stevens, vigorously opposed what they considered hostile regulation. Wall Street griped about how the law allowed only rural national banks and not national banks in Boston, Philadelphia, Chicago, and other urban areas to keep reserve balances at New York City banks. As the business of New York City’s largest institutions largely revolved around accumulating bankers’ balances from these cities, this was a serious hitch. Not only would Wall Street national banks be unable to accumulate urban bankers’ balances, but institutions in these other cities could operate as their own quasi-central banks that competed with New York City banks for rural bankers’ balances. Wall Street adamantly opposed the competitive threat.

Initially, Cooke wanted to force the New York City banks to convert by threatening to establish a rival national bank that would have a formal relationship with the Treasury. However, he chose a more conciliatory route, urging New York bankers to “join with others” to protect the National Banking System from its critics.In other words, if you can’t beat them, enlist them. Eager to control the market for bankers’ balances, in early 1864 New York City banking lobbyists descended upon the nation’s capital: Williams met with Comptroller McCulloch, and the manager of the New York Clearing House advised the House Ways and Means Committee. Thanks to Wall Street lobbying, Congress passed another law in the spring of 1864.

The latest National Banking Act delivered a heaping spoonful of cronyism to Wall Street. First, it devised a new pyramiding system that monopolized the quasi-central-banking function in New York City. Country banks in small towns could store 60 percent of their required reserves at reserve city or central reserve city banks. Reserve city banks in large cities outside of New York City—the areas so crucial to Wall Street—could keep 50 percent of their required reserves in central reserve city banks. Central reserve city banks, which the law prohibited everywhere outside of New York City, had to maintain all their required reserves in specie and greenbacks. This pyramiding structure incentivized country and reserve city banks to keep their bankers’ balances in the central reserve city, New York. In effect, it concentrated bank reserves in privileged Wall Street banks and allowed them to cartelize the business. Wall Street had won, and the other urban centers had lost.

The 1864 National Banking Act further restricted banking by raising capital requirements. It required $200,000 for banks in cities with more than fifty thousand people and $100,000 for banks in cities with more than six thousand people. These formidable restrictions on entry further stifled banking competition and created banking deserts that starved poorer regions of financial intermediation services.

As one final blow to the state banking system, in March 1865 Congress instituted a 10 percent annual tax on state banks’ notes. The restriction drastically reduced the supply of state banknotes and encouraged those institutions to become national banks so they could continue to issue notes. The state banks that could not afford the higher capital requirements for national banks were driven out of business. The combined blow of the laws was severe: as national banks soared from 66 to 1,640 by 1868, state banks declined from 1,466 to just 247.

The National Banking System did not maintain its near monopoly on banking for long. State banks, though seemingly down for the count, survived because they could still take in deposits. By 1873 state banks rebounded to 1,330. Even so, the institutions were de facto extensions of the Wall Street pyramiding structure, as many states passed laws incentivizing their banks to use national banknotes as reserves. As a result, state banks pyramided on national banks, which in turn pyramided on Wall Street central reserve city banks—a recipe for widespread instability.

In the end, the large Wall Street banks got their way. John Stevens’s $10 million Bank of Commerce joined the system in January 1865 as the National Bank of Commerce and other Wall Street banks quickly followed. The city’s share of the nation’s total banking assets grew from 19 percent in 1860 to 24 percent in 1870. Its bankers’ balances exploded by 250 percent. Out of the $300 million limitation of national banknotes, $170 million went to the Northeast. This made it much more difficult for large parts of the country to use banknotes in day-to-day transactions.

If Wall Street lorded over the National Banking System, then Jay Cooke sat on the throne. Cooke’s Fourth National Bank turned into the largest New York City bank by assets and the second largest in bankers’ balances. Fitting for a king, Cooke used his profits from selling government debt and establishing national banks to construct the fifty-room Ogontz Estate outside of Philadelphia, one of the nation’s most expensive mansions. No surprise people began saying “as rich as Jay Cooke.”

As with manufacturers and their tariff privileges in the postwar years, Cooke and Wall Street worked hard to defend the National Banking System from its critics, including thwarting attempts to restore the Independent Treasury by shifting government funds from national banks to Treasury vaults. The New York Herald fumed against Cooke, saying, “The national banks are a gigantic monopoly” and “A great moneyed oligarchy has been created, which in the end would make the rich richer and the poor poorer.”In response, Cooke contemplated creating a banking association like the iron and woolen industries’ “to avoid hostile legislation.” His lobbyist, Assistant Secretary of the Treasury William Chandler, warned him that such a public organization “would perhaps do more harm than good.”Instead, Cooke maintained Republicans’ allegiance to the system by making campaign contributions and personal loans to politicians. The tactic worked, and congressmen even came to own shares in national banks. In the 1870s, when Congress failed to relax the requirements for setting up national banks, disgruntled businessmen insinuated it was because “members of Congress have got too much National Bank stock themselves.”

By 1870 the stage was set for credit expansion. The National Banking System had matured as country and reserve city banks stashed away all allowable reserves in New York City central reserve city banks. When the latter started to expand credit, other national banks joined in, and the pyramid grew. Congress made the situation worse by increasing the maximum number of national banknotes from $300 million to $354 million. This caused massive inflation in bank credit because state banks used the new banknotes as reserves for their own credit expansion. The results were striking: from 1867 to 1870 the total money supply, which included deposits at national banks, state banks, and the rapidly emerging mutual savings banks, rose 8.5 percent before jumping 34 percent from 1870 to 1873. Many of the new loans went into the booming railroad industry of the time.

The monetary balloon was expanding, but just as in the 1850s, it and the new railroad investments were fragile. The Panic of 1857 repeated itself, only this time the centralized system made it far more contagious. If rural state and country banks experienced an increased demand for banknotes—which they did during the fall crop harvesting season when farmers needed to pay workers—government laws once again prevented them from issuing their own notes to meet the demand, this time because of the tax on state banknotes and the federal bond-backing requirement. State and country banks had to draw on their reserves at other banks or pay out the reserves in their vaults. Illiquidity would spread to reserve city banks, and then to central reserve city banks, with the convulsion at each bank aggravated by the lack of branch facilities. All it took for the bubble to burst was the failure of a prominent company.

The bubble did indeed burst during the 1873 fall harvesting season, when “a remarkable example of poetic justice struck Jay Cooke.”In September, while he entertained President Grant at Ogontz, Cooke learned that his company, stuffed with unprofitable Northern Pacific Railroad loans, had gone belly up. The House of Cooke collapsed, and the Philadelphia, New York, Washington, and London offices of Jay Cooke & Co., along with the First National Bank of Washington, went bankrupt. A fullblown panic ensued as already-fragile banks from the interior pulled out deposits from central reserve city banks in New York, shaking the overextended banking system. Jay Cooke was no more; the devastation forced him to move into a small cottage. Over the next decade J. P. Morgan replaced Cooke as the nation’s premier banker and titan on Wall Street, a position he would hold past the dawning of the new century.

The Panic of 1873 and the ensuing depression were yet another instance of how the National Banking Acts harmed the public. The public only recovered when federal monetary intervention subsided. Initially, the federal government doubled down. To prop up the banking system, Republicans injected $26 million in greenbacks and removed reserve requirements for national banknotes. This enabled banks to increase credit expansion, and the money supply rose 10 percent through 1875. The refilling of the punch bowl served only to prolong bad investments and prevent prices and production from correcting to more feasible levels. Consequently, after expanding 23 percent during the 1870 to 1873 boom (7.2 percent per year), real gross domestic product (GDP) grew less than 2 percent from 1873 to 1875 (0.8 percent per year).

Recovery picked up only in 1875, when the victory of hard-money Democrats in the midterms caused Republicans to begrudgingly prepare for specie resumption in 1879. Congress contracted the supply of greenbacks, which, in combination with bank failures, caused the money supply to shrink, or deflate, over 9 percent from 1875 to early 1879. The deflationary credit contraction hastened resource reallocation and price and wage cuts, causing real GDP growth to rebound and real GDP to increase by 13 percent between 1875 and 1878 (4.1 percent per year). The reduction in monetary intervention encouraged the market to recover. Paradoxically, contemporaries mistook the short recession followed by the period of strong economic growth for a seven-year depression because nominal incomes were falling. Those experiencing declining nominal wages did not fully realize that because consumer goods prices were also falling, real wages fell by less, and in many cases rose. For example, nominal wage rates in manufacturing industries fell 13.6 percent from 1873 to 1878; adjusted for the 16.7 percent decline in consumer goods prices, they rose 3.7 percent.

Though Congress returned to specie convertibility and reduced the supply of greenbacks, it did not roll back the National Banking System. Instead, the numerous privileges granted to central reserve city banks solidified, along with the regulations that destabilized the banking system. Wall Street had acquired a foothold in the federal government’s distribution of special privileges and looked forward to strengthening it.

Maintaining Monopolistic Restraints

In the aftermath of the Panic of 1873 Wall Street bankers sought to control competition and stop other special interests’ attacks. When it came to competition, Wall Street national banks worked hard defending the restraints they had secured during the Civil War. As for other interests encroaching, Wall Street contrived to keep monetary expansion out of congressional control and in its own hands—what Murray Rothbard calls “the more subtle, and more privileged, big-bank-controlled variety.” Fitting behavior for a principal special-interest group during the Great Barbecue, this portended their future advocacy of more interventionist and restrictionist policies.

In the 1880s the ubiquitous J. P. Morgan of Drexel, Morgan & Co. assumed a formidable presence on Wall Street. Though Morgan and his partnership focused on the investment banking activities of marketing government and railroad securities, the company participated in the deposit-taking business of commercial banks and worked with the leading national banks on Wall Street that accumulated bankers’ balances. Morgan’s major commercial-bank ally was the First National Bank of New York, now led by George Baker, “Mr. Morgan’s Secretary of the Treasury.”Baker’s First National specialized in bankers’ balances and possessed the first or second largest balances in New York City throughout the decade.

As the eighties progressed Morgan, Baker, and Wall Street grew increasingly frustrated with the erosion of the National Banking System’s privileges. The system originally hit state banks with a punitive annual tax on banknotes and concentrated reserves in New York City by designating it as the only central reserve city location. These favors gradually dissipated. State banks did not go away: the increasing use of checkable deposits relative to notes allowed them to make a comeback and operate under state laws with less onerous capital requirements. Thus, from 1880 to 1893 the number of state banks surpassed their pre–National Bank Acts high, surging from 1,279 to 5,685, while national banks increased from 2,076 to only 3,807. More strikingly, state bank money was growing faster than national bank money: state bank deposits increased from 81 percent of all national banknotes and deposits in 1880 to 149 percent of all national bank money in 1893.

Wall Street’s concentration of reserves in central reserve city banks also suffered because midwestern reserve city banks began competing vigorously for the balances of country and state banks. Between 1875 and 1885 bankers’ balances in Chicago rose from $10.3 million to $28.1 million (a 173 percent increase) while those in New York City increased from $94.2 million to $139.8 million (a 48 percent increase). Moreover, the First National Bank of Chicago and other large national banks in that city came to exert considerable influence through a powerful new lobbying front, the American Bankers Association (ABA), established in 1875. Over the next several decades the ABA would champion deregulatory reforms beneficial to the economy, particularly by pushing for the relaxing of federal bond-backing requirements to make it easier for national banks to issue notes. James Forgan, a future leader of the First National Bank of Chicago and the ABA, spent part of his career at banks in Canada and Scotland, two countries with relatively deregulated banks that could freely issue notes and open branches. Experience had shown him that banks operating in these more laissez-faire systems, with policing by competitive firms, were more stable and less susceptible to bank panics.

Chicago bankers scored a massive coup against New York City in 1887 when Congress elevated Chicago and St. Louis to central reserve city status, enabling banks in those cities to act as quasicentral banks. According to Margaret Myers, the “rival cities” were determined to “use this means of wresting from New York the prestige and financial preeminence which caused such envy among the growing towns of the West.”When Congress passed the law, the First National Bank of Chicago leapt at the opportunity and petitioned the comptroller of the currency to begin the formal process of converting to a central reserve city bank. From 1886 to 1897, New York City’s share of central reserve cities’ deposits and bankers’ balances fell from 100 percent to 77 and 73 percent, respectively. The cartel was facing new competition. Henry Clews, a New York banker, noted that Chicago’s emerging influence would check “the growing ascendancy of New York” and its rise to becoming a worldwide financial center.

While the feud between New York and Chicago raged, another powerful interest group, who became known by the early 1890s as the Populists, threatened both cities. The Populists formed out of southern and western small farmers, silver mine owners, shippers, and other interest groups who previously lobbied for their own anti-big-business special privileges. The farmers and silver mine owners had been the factions most concerned with monetary policies. Historical myth holds that after the Panic of 1873 farmers suffered from intense debt burdens that were aggravated by falling prices. However, most did not take out large mortgages, and nominal interest rates on their loans decreased in order to reflect anticipated price decreases. Agrarians’ real incomes in fact increased over the next two decades, but less than manufacturing workers’, owing to lower productivity gains from industrialization in the agricultural sector. Nonetheless, they had reason to be dissatisfied with the financial status quo.

Undoubtedly, the National Banking System’s restrictions hurt agrarians. High capital requirements, combined with provisions that curtailed real estate loans, hampered farmers’ ability to access financial intermediaries. Furthermore, as the Treasury accumulated tariff-induced surpluses, it bought federal bonds at a 29 percent premium from wealthy individuals and large northern national banks to decrease the national debt. To farmers’ dismay, this decrease in bonds limited the notes national banks could issue, and notes in circulation declined an astonishing 60 percent between 1880 and 1890. This made it very difficult for farmers to acquire banknotes for their daily transactions and forced them to rely on greenbacks and specie.

Many agrarians saw the solution in monetary cronyism. First, in the 1870s, the Granger movement favored replacing the National Banking System with a steady stream of greenbacks from Congress. In essence, they wanted to shift money creation away from privileged banks to a profarmer government that would give them the new money first and saddle the yoke of higher prices upon the mercantile and industrial communities.

By the end of the decade, the greenback craze had fizzled out. In its place, Farmers’ Alliance groups (the successors to the Granger movement), and southerners and westerners in the Democratic Party lobbied to increase the money supply through the free coinage of silver. This was an issue years in the making: in 1873, Congress had closed the nation’s mints to silver. The concern was that, because increased silver production and demonetization of silver by leading European nations would reduce its value on the world market, the value of a dollar redeemable in both gold and silver would decline relative to other gold-exclusive currencies. To quiet the clamor against the “Crime of 1873,” Congress passed the Bland-Allison Act in 1878, mandating that the Treasury purchase $2 million to $4 million of silver per month to make coins that had legal-tender status.

This meant that when the country resumed specie payments in 1879, it was technically on a bimetallic standard with the dollar defined in both gold and silver.

Even though many of the silver coins never left the government vaults, the Bland-Allison Act had enormous implications for the dollar because banknotes and greenbacks now represented claims to either gold or silver, which were less valuable than claims to gold alone. Creditors who had previously loaned money to private institutions or the federal government could now be paid back in depreciated silver-backed dollars. Foreign investors whose currencies were no longer tied to silver especially interpreted the shift to bimetallism as a partial default. It was for these reasons that Morgan, Wall Street, and the bankers in the ABA, who sold dollar-denominated securities to domestic and foreign investors, condemned the act. Confidence abroad in the US economy dropped in the early 1880s because of the Bland-Allison Act and the steady shift in Treasury balances from gold to silver. As investors feared that the dollar would no longer be redeemable in gold, they pulled the yellow metal out of an already overextended banking system. The leakage helped precipitate the Panic of 1884.

Bankers expected the hard-money Bourbon Democrat Grover Cleveland to veto any prosilver legislation that southern and western Democrats proposed. They could not say the same about his successor, Benjamin Harrison. His presidency was bad timing for the gold standard. Like many Republican leaders, Harrison remained inconsistent on the silver issue and campaigned on a bimetallic platform in 1888 to curry political favor with agrarians and another constituency: silver mine owners. By the late 1880s silver mine owners jumped on the bandwagon and supported silver coinage to enhance their own profits. Their resolve strengthened when Harrison admitted into the Union six western states with strong silver mining interests (North Dakota, South Dakota, Montana, Washington, Idaho, and Wyoming). Republican senators Henry Teller of Colorado and John Jones and William Stewart of Nevada, longtime owners of silver mining stock, received new allies in the upper chamber. The establishment of the American Bimetallic League in November 1889 symbolized the alliance between agrarians and silver mine owners.

During tariff debates in the Billion Dollar Congress, Senator Stewart bluntly stated that if the trusts wanted a protectionist sweetener the silver interests needed their own largesse: “There will be no tariff legislation this session unless a silver bill is passed.”They received the Sherman Silver Purchase Act of 1890, signed into law before the McKinley Tariff. This quid pro quo reaffirmed the Civil War alliance between Republican protectionists and inflationists. The law required the Treasury to buy 4.5 million ounces of silver per month with new legaltender Treasury notes that could be redeemed in silver or gold. Since the Treasury had only been purchasing $2 million of silver a month under the Bland-Allison legislation, given the price of silver at the time the Treasury would now have to purchase over $4 million a month—more than twice as much as before. The law put in serious jeopardy the US government’s commitment to redeeming the dollar in gold. As the Treasury purchased silver with Treasury notes, domestic citizens and foreigners turned around and redeemed the notes for gold.

The new law greatly worried Morgan and foreign investors. With each passing year the United States teetered closer and closer to not only a bank panic but a default on the dollar, which would ruin Wall Street. From 1890 to 1892 the nation’s monetary gold stock declined over 7 percent as gold left the country. In March 1891 the Treasury imposed a heavy fee on the export of gold bars, and the Senate passed a free coinage bill in July 1892. Although the bill went no further, the Senate’s passage of it, along with the new fee, heightened uncertainty. By the end of the year the Commercial & Financial Chronicle wrote of “the lack of confidence which our policy is causing Europe to feel in our financial stability. . . . As fast as Europeans can dislodge their holdings in America they take the money away.”To make matters worse, the gold drains occurred while the banking system inflated the money supply 53 percent (6.3 percent per year) from 1885 to 1892. The National Banking System groaned under the pressure of an expanding credit structure pyramided upon a depleting base of gold reserves. Monetary conditions tightened in late 1892, and by spring the Philadelphia & Reading Railroad and the National Cordage Company failed. A rash of southern and western bank failures followed, and another panic hit the nation.

Unlike the panics in 1873 and 1884, the Panic of 1893 sparked a double-dip depression that lasted for four years. From 1892 to 1894 GDP declined 10 percent before increasing in 1895 by 11 percent, only to slide by 1.6 percent in 1896. Overall, the economy contracted by 1.7 percent between 1892 and 1896, a clear retrogression. On top of the National Banking System’s usual boom-bust cycle and built-in fragilities (the pyramiding of reserves, limited note issuance, and prohibitions on branch banking), the panic included a severe currency shock caused by the fear that the US might abandon the gold standard. Foreign investors remained very nervous about America’s commitment to gold, and the precious metal continued to flow out of the country through 1895, leaving the nation with 15 percent less gold than in 1888. Intense union strikes and the emergence of a peacetime income tax in the Wilson-Gorman Tariff of 1894 aggravated business uncertainty. Combined, these factors curtailed investment spending and economic growth.

The monetary program pursued during the panic reflected the Wall Street position—a defense of the gold dollar and continued restrictions on smaller bank competitors. Morgan, customarily a Republican, had voted for the Democrat Cleveland in his first administration. His support grew after 1889, when Cleveland worked for Bangs, Stetson, Tracy & MacVeagh, the law firm of one of his campaign advisors and friends, Francis Lynde Stetson. Stetson was known on Wall Street as “Morgan’s attorney general” and received a $50,000 annual retainer from the banker.In other words, Morgan now had a direct line to the former president and repeat presidential contender.

The Democratic Party’s monetary plank in the 1892 election contained two important laissez-faire reforms. First, Cleveland vowed to repeal the Sherman Silver Purchase Act, which appealed to Wall Street. Second, Cleveland pledged to eliminate the tax on state banknotes. This was designed to appeal to southerners, who were increasingly under the influence of Populism. Southern state bankers had been eager to repeal the prohibitory tax on the issuance of state banknotes. Removing the tax would have made it easier for farmers to access currency and would not have been inflationary. If a depositor wanted to convert some of his money into notes, the bank would correspondingly decrease his deposit account. If a state bank engaged in credit expansion by issuing notes to borrowers, other banks would redeem its notes and keep the money supply in check. As a result, the tax repeal received the support of the laissez-faire Sound Currency Committee of the New York Reform Club.

True to his word, Cleveland muscled repeal of the Sherman silver law through Congress in late 1893, reducing uncertainty about the dollar in the short term. Disastrously, Cleveland did not fight for repeal of the state banknote tax. Congressional Republicans and even Bourbon Democrats defended the National Banking System’s special privileges and defeated the measure in June 1894. This betrayal amplified southern Democrats’ wrath against Wall Street, and they increasingly championed Populism and the free coinage of silver as a panacea for their woes.

More fundamental reform of the nation’s banking system was needed, but Wall Street fiercely guarded its privileges. During the panic midwestern banks argued that national banks suffered from note inelasticity. Chicago bankers endorsed the so-called Baltimore Plan, proposed by the president of the Second National Bank of Baltimore at an ABA meeting in 1894. In essence, the Baltimore Plan repealed the federal bond-backing restriction for national banknotes and created a note insurance fund instead, a quasi deregulation. This asset currency reform would have increased the ability of national banks to satisfy depositors’ demands for notes by not restraining their issuance with government debt, thereby improving banking stability and the economy. The proposal received the support of Wall Street banker A. Barton Hepburn. But other Wall Street bankers, particularly George Williams, opposed the plan. Williams’s word carried enormous weight: he served as the president of the Chemical National Bank, the largest New York City commercial bank in terms of assets in 1891. Williams warned that “very many mushroom banks would be started” that would engage in note issuance.Put differently, the plan would lead to new and vigorous competition for Wall Street, and that was unacceptable. The Baltimore Plan never got off the ground.

Poor Grover Cleveland. In his two nonconsecutive terms he tried to practice laissez-faire policies that defended the dollar and improved monetary stability, but his actions undoubtedly acquiesced to Wall Street cronyism. His time was running out: the president had burned a great deal of political capital among soft-money Democrats by pushing for the repeal of the Sherman Silver Purchase Act while letting banking reform slip through his fingers. To Populist Democrats, this was incontrovertible proof that their president valued Wall Street’s monopolistic privileges more than the welfare of the periphery. They would stand for this no more, setting the nation up for one of the most pivotal elections in its history.

The Election of 1896

Wall Street had momentarily achieved its goals of stopping the silver threat to the dollar and blocking meaningful national and state banking reforms. These victories, however, would be pyrrhic indeed, for they seriously fractured the Democrats. This left the party ripe for the taking by smaller crony interests, a scenario that gravely threatened Wall Street and the nation’s economy in general and marked a significant change in the trajectory of special-interest policies.

The party in power nearly always loses an election during the bust phase of the business cycle. The midterms in November 1894 were no exception: the Republicans trounced the Democrats. Significantly, Democratic losses also coincided with a weakening of the Bourbons and a shifting of party control to the Populists. By this time, the fiery evangelist Congressman William Jennings Bryan of Nebraska had become that faction’s standard-bearer. Though he was the subject of many starry-eyed accounts, it is a dirty secret that Bryan relied upon wealthy silver backers, even if they fell short of Wall Street’s munificence.

Marcus Daly, an influential owner of the Anaconda Copper Company in Montana who recognized that the increased coinage of silver would raise the price of silver and increase Anaconda’s profits, was the major donor. In 1893 Daly funded the American Bimetallic League and served as the president of his state’s affiliate level organization while Bryan worked for the league’s Nebraska State Council. Then, after Bryan failed to become one of Nebraska’s senators in the midterms, Daly rescued the Omaha World-Herald from bankruptcy and made Bryan editor-in-chief. He succeeded in getting Bryan to use the position as a platform for the silver cause, which the aspiring presidential candidate increasingly did throughout 1895 and 1896.

It became clear to the financially astute that the stronger Bryan and the Populists became in the Democratic Party, the more likely it was that the US would abrogate the redemption of dollars for gold. As gold flowed out of the Treasury’s vaults in late 1894, Wall Street grew increasingly concerned. Morgan and his top-flight legal counsel Stetson traveled to the White House in early 1895. They arranged a gold loan with Cleveland to prevent the US from defaulting on the dollar and to shore up investor confidence. In total, Morgan assisted with a series of loans totaling $262 million over three years in attempts to secure a gold dollar. The transactions required the House of Morgan to call upon the entire gamut of commercial and investment banking elites, including George Baker’s First National Bank of New York, the Stillman-Rockefeller National City Bank, and investment bank Kuhn, Loeb & Co. Although Populists heavily criticized the action, especially because it involved Jewish bankers, Morgan earned a middling 5 percent return—a modest compensation for the risk involved.

Thanks to Morgan and other big bankers’ efforts, US gold reserves began to recover. But they began to fall again in March 1896 when investors realized that the upcoming presidential election could threaten the gold standard anew. Much to Wall Street’s anxiety, a moderate chance existed that both the Democrats and the Republicans would nominate prosilver candidates. That the Democrats would nominate a Populist seemed likely; it was the Republicans that worried Wall Street more. Morgan wanted the Republicans to choose Levi Morton, his longtime banker friend, a former vice president, and the current governor of New York. It became increasingly certain, however, that Mark Hanna’s maneuvering would secure Ohio governor William McKinley the nomination. A McKinley candidacy was problematic for Wall Street because it could not trust him on the silver question: as a congressman he had voted for the Bland-Allison Act and the Sherman Silver Purchase Act.

Before the Republican convention in June, Ohio banker Myron Herrick asked Morgan to endorse McKinley. Morgan dismissed the request, considering McKinley a man with a “backbone of jelly” due to his silver record.Herrick suggested a sitdown with Hanna, whom Morgan had never met. At that fateful meeting on Morgan’s yacht Corsair, Hanna pledged that McKinley would firmly support the gold standard if Morgan and Wall Street helped fund the campaign. The deal was struck. Later in the month McKinley won the nomination on a protectionist and progold platform. Upon the Republicans’ adoption of the gold standard plank, silver Republicans flocked to the Democrats.

The Democratic convention held the following month ushered in a veritable party revolution. The convention repudiated Cleveland and nominated Bryan for president. It was official: the Populists had wrested control away from the Bourbons, causing Abram Hewitt, a former Democratic mayor of New York City, to remark that “the Democratic party, as we knew it, is dead.” Laissez-faire Democrats either voted for the Republican ticket because of its progold stance or joined the fledgling third-party Gold Democrats. Although Bryan ran largely on a prosilver platform, everyone knew that he embraced Populist interventions, including railroad regulation, stringent antitrust enforcement, income taxation, and abolition of the National Banking System. Wall Street did not want that.

Bryan could count upon silver miners to contribute, especially Marcus Daly of the renamed Anaconda Copper Mining Company (1895). Daly and other mine owners spent $289,000 electing prosilver delegates to the convention. For Bryan’s actual campaign, Daly donated $100,000 and “adopted a rule at the mines that each man contribute a day’s pay to the silver cause”—his workers coughed up $60,000.Altogether, Bryan mustered up $300,000, largely from silver special interests—a paltry sum compared to the $3.5 million swollen hoard Hanna amassed for McKinley from Wall Street and the nation’s big businesses. For example, J. P. Morgan personally provided $250,000, Standard Oil donated $250,000, railroads pitched in $174,000, and the Beef Trust donated $40,000. Unsurprisingly, McKinley smashed Bryan in the November election. Morgan breathed a sigh of relief at the news. Gold began to flow back into the country, and trust in the dollar recovered.

The election of 1896 marked an important change in the course of monetary privileges and government largesse in general. Since its inception the Republican Party had championed a modified version of the Whigs’ American System. During the Civil War, railroads, large manufacturers, and New York City bankers lobbied the party for restrictions and subsidies that provided them benefits while resulting in higher prices, reduced competition, and lower growth, to the detriment of the economy overall. To the frustration of these companies, their gains were gradually whittled away by new competition, labor and smaller businesses eager for their own privileges, downturns spurred by government policy, and the return of laissez-faire Democrats. The railroads were the first group to change their strategy, advocating for a commission that regulated competition and stopped shippers’ proposals to force rates down, and they achieved some of what they wanted through the appointments of President Cleveland. But the railroads and Wall Street had lost the friends they had in the Democratic Party after Populist interests took over and backed their own preferred cronyism for smaller businesses and unions. This forced corporations to postpone calls for new government favors and concentrate on defeating Bryanite Populism.

After business interests, led by the newly organized J. P. Morgan & Co. in the 1890s, safely elected McKinley, they proceeded to double down on the railroad strategy. The new special-interest proposals of New York City banks, large corporations, railroads, and food and medical providers would almost always revolve around establishing regulatory commissions or strengthening existing ones. The goals remained the same: raise prices and institute compliance costs on rival interests, especially smaller firms, to increase their own domestic and foreign market shares. Another desire of big business would be to use the commissions to prevent rivals—like shippers and unions for the railroads or smaller banking interests for national banks—from enacting policies that diminished big business’s control, influence, or bottom lines. For Populism was down but not out for the count, and those in its ranks pressed on for their own special favors.

To win, big business and all those seeking government privilege would have to develop new public relations skills and convince the public that commissions and related legislation were “progressive,” “forward looking,” and “enlightened,” and promoted societal welfare by reining in entrenched big business—when the reality was precisely the reverse. Cronies enlisted members of the intellectual class, including lawyers and accountants, who recognized how government policymaking increased the demand for their legal and bureaucratic services. Interventionist economists and other academics keen for government jobs and consulting work would also prove essential.

Historians have taken the public relations at face value and labeled the early twentieth century the Progressive Era. But the supposedly progressive policies would not progress the public. Instead, they launched the big-business corporatist state in America, a tectonic expansion in the history of cronyism. Under corporatism the government organizes businesses, intellectuals, unions, and other groups into various privileged cartels. This allows the groups to focus less on competing in the marketplace and serving consumers and more on the political and bureaucratic arena, where they can fight over restrictionist rules and commissioner appointments. Corporatism produces a middle-of-the-road and interventionist statism in place of welfare-enhancing laissez-faire capitalism or destructive and confiscatory socialism. The result, however, still injures the public—higher prices, lower quality, reduced product variety, and a persistent inequality between the groups favored by the government and those that are not. This was the system that was about to be thrust upon the American people.

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Janet L. Coryell, “W. W. Corcoran,” in Encyclopedia of American Business History and Biography: Banking and Finance to 1913, ed. Larry Schweikart (New York: Facts on File, 1990), 149; and Irving Katz, August Belmont: A Political Biography (New York: Columbia University Press, 1968), 93–104, 114.

Samuel DeCanio, Democracy and the Origins of the American Regulatory State (New Haven, CT: Yale University Press, 2015), 41; David M. Gische, “The New York City Banks and the Development of the National Banking System, 1860–1870,” American Journal of Legal History 23, no. 1 (January 1979): 31–33; Bray Hammond, Sovereignty and an Empty Purse: Banks and Politics in the Civil War (Princeton, NJ: Princeton University Press, 1970), 157; and Patrick Newman, “The Origins of the National Banking System: The Chase-Cooke Connection and the New York City Banks,” Independent Review 22, no. 3 (Winter 2018): 385–86.

Gische, “Banks,” 33–34; Hammond, Sovereignty, 159–60; Fritz Redlich, The Molding of American Banking, vol. 2, Men and Ideas (New York: Johnson Reprint, 1968), 8, 57, 104, 163; and Robert P. Sharkey, Money, Class, and Party: An Economic Study of Civil War and Reconstruction (Baltimore: Johns Hopkins University Press, 1959), 261.

New York Times, February 27, 1862, 3.

Roberta Sue Alexander, “Salmon P. Chase,” in Schweikart, Encyclopedia, 95; DeCanio, Democracy, 44–48; Gische, “Banks,” 28, 34; Hammond, Sovereignty, 158, 161–62, 185–86, 196, 218–21, 229, 232; Newman, “Origins,” 386; and Irwin Unger, The Greenback Era: A Social and Political History of American Finance, 1865–1879 (Princeton, NJ: Princeton University Press, 1964), 16.

Murray N. Rothbard, “A History of Money and Banking in the United States before the Twentieth Century,” in A History of Money and Banking in the United States: The Colonial Era to World War II, ed. Joseph T. Salerno (Auburn, AL: Ludwig von Mises Institute, 2005), 124.

Alexander, “Chase,” 99; Jeremy Atack and Peter Passel, A New Economic View of American History, 2nd ed. (New York: W. W. Norton, 1994), 365–68; Newman, “Origins,” 386; Gretchen Ritter, Goldbugs and Greenbacks: The Antimonopoly Tradition and the Politics of Finance in America, 1865–1896 (New York: Cambridge University Press, 1997), 30; Rothbard, “History,” 124; and Richard Sutch and Susan B. Carter, eds., Historical Statistics of the United States, vol. 3, Economic Structure and Performance (New York: Cambridge University Press, 2006), 158, 602.

Eleutheros Cooke to Jay Cooke, March 25, 1861, quoted in Henrietta M. Larson, Jay Cooke, Private Banker (Cambridge, MA: Harvard University Press, 1936), 103. Larson, Cooke, 102–3; and Newman, “Origins,” 386–87.

Jay Cooke to Salmon P. Chase, July 12, 1861, quoted in Ellis Paxson Oberholtzer, Jay Cooke: Financier of the Civil War (Philadelphia: George W. Jacobs, 1907), 1:143–44.

Stuart D. Brandes, Warhogs: A History of War Profits in America (Lexington: University of Kentucky Press, 1997), 100; Newman, “Origins,” 387–89, 398–99; and Joseph F. Rishel, “Jay Cooke,” in Schweikart, Encyclopedia, 141.

Jay Cooke, “Memoirs” (unpublished), quoted in Oberholtzer, Cooke, 1:331.

Henry Cooke to Jay Cooke, January 23, 1863, quoted in Oberholtzer, Cooke, 1:332.

Henry Cooke to Jay Cooke, February 11, 1863, quoted in DeCanio, Democracy, 51.

Henry Cooke to Jay Cooke, February 12, 1863, quoted in Oberholtzer, Cooke, 1:333.

Patrick Newman, Cronyism: Liberty versus Power in Early America, 1607–1849 (Auburn, AL: Mises Institute, 2021), 279–84; and Newman, “Origins,” 389–91, 393–94.

Hammond, Sovereignty, 142; Gregory S. Hunter, “Chase/Manhattan Companies,” in Schweikart, Encyclopedia, 107; Michael F. Konig, “George F. Baker,” in Schweikart, Encyclopedia, 26; Newman, “Origins,” 392–95; Rothbard, “History,” 138–41; and Sharkey, Money, 57.

Jay Cooke to George Coe, January 18, 1864, quoted in Oberholtzer, Cooke, 1:351.

Gische, “Banks,” 46; Newman, “Origins,” 393–96; and Redlich, Molding, 2:108–9.

Matthew Jaremski, “State Banks and the National Banking Acts: Measuring the Response to Increased Financial Regulation, 1860–1870,” Journal of Money, Credit and Banking 45, no. 2–3 (March–April 2013): 382–83, 385; Patrick Newman, “The Depression of 1873–1879: An Austrian Perspective,” Quarterly Journal of Austrian Economics 17, no. 4 (Winter 2014): 486–87; Newman, “Origins,” 396–98; Rothbard, “History,” 140–41, 144; Sutch and Carter, Historical, 3:633–34, 641; and Eugene Nelson White, The Regulation and Reform of the American Banking System, 1900–1929 (Princeton, NJ: Princeton University Press, 1983), 32–33.

Quoted in Matthew Josephson, The Robber Barons (New York: Harcourt, Brace, 1962), 57. Newman, “Origins,” 398; and Rishel, “Cooke,” 141.

“Jay Cooke’s Special Plea for the National Banks,” New York Daily Herald, October 24, 1867, 6.

William Chandler to Jay Cooke, December 2, 1867, quoted in Oberholtzer, Cooke, 2:56.

Quoted in Mark Wahlgren Summers, The Era of Good Stealings (New York: Oxford University Press, 1993), 115. Richard Franklin Bensel, The Political Economy of American Industrialization, 1877–1900 (New York: Cambridge University Press, 2000), 448; Matthew Josephson, The Politicos, 1865–1896 (New York: Harcourt, Brace and World, 1966), 58–59; Larson, Cooke, 202; and Oberholtzer, Cooke, 2:33, 53–56.

Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867–1960 (Princeton, NJ: Princeton University Press, 1963), 21, 56–57, 704; Newman, “Depression,” 484, 486, 488–89; and Newman, “Origins,” 399.

Rothbard, “History,” 156.

Dee Brown, Hear That Lonesome Whistle Blow: The Epic Story of the Transcontinental Railroads (New York: First Owl Books, 2001), 216; Robert L. Frey, “Jay Cooke,” in Encyclopedia of American Business History and Biography: Railroads in the Nineteenth Century, ed. Robert L. Frey (New York: Facts on File, 1988), 63; Friedman and Schwartz, Monetary, 704; Louis Johnston and Samuel H. Williamson, “What Was the U.S. GDP Then?” MeasuringWorth (accessed October 7, 2024), https://www.measuringworth.com/datasets/usgdp12/; Newman, “Depression,” 486–97; Newman, “Origins,” 399–400; Rothbard, “History,” 150–53; Murray N. Rothbard, The Progressive Era, ed. Patrick Newman (Auburn, AL: Mises Institute, 2017), 48–49; Richard Sutch and Susan B. Carter, eds., Historical Statistics of the United States, vol. 2, Work and Welfare (New York: Cambridge University Press, 2006), 267; Sutch and Carter, Historical, 3:158; and Margaret Susan Thompson, The “Spider Web”: Congress and Lobbying in the Age of Grant (Ithaca, NY: Cornell University Press, 1985), 183–84, 202–3.

Murray N. Rothbard, “The Origins of the Federal Reserve,” in Rothbard, History, 189.

Sheridan Logan to Vincent Carosso, December 13, 1982, quoted in Vincent P. Carosso, The Morgans: Private International Bankers, 1854–1913 (Cambridge, MA: Harvard University Press, 1987), 453.

Carosso, Morgans, 140–273; Margaret G. Myers, The New York Money Market, vol. 1, Origins and Development (New York: Columbia University Press, 1931), 245–46; Murray N. Rothbard, “The Federal Reserve as a Cartelization Device: The Early Years, 1913–1930,” in Rothbard, Progressive, 465–67; Jean Strouse, Morgan: American Financier (New York: Harper Perennial, 2000), 186; and Sutch and Carter, Historical, 3:634, 641.

Myers, Money, 1:240.

Henry Clews, Fifty Years in Wall Street (New York: Irving, 1908), 2:579. Clews, Fifty, 2:577–80; F. Cyril James, The Growth of Chicago Banks, vol. 1, The Formative Years, 1816–1896 (New York: Harper and Brothers, 1938), 488, 490, 529, 558–59; Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1916 (New York: Free Press, 1963), 141; Richard T. McCulley, Banks and Politics during the Progressive Era: The Origins of the Federal Reserve System, 1897–1913 (New York: Garland, 1992), 50, 92–94; Myers, Money, 1:241–42, 245–49; Ross M. Robertson, “St. Louis: Central Reserve City, 1887–1922,” Federal Reserve Bank of St. Louis Monthly Review 36, no. 8 (August 1954): 89; George Selgin and Lawrence H. White, “Monetary Reform and the Redemption of National Bank Notes, 1863–1913,” in George Selgin, Money: Free and Unfree (Washington, DC: Cato Institute, 2017), 110, 117, 119– 20; and Lawrence H. White, “Free Banking in History and Theory,” in Renewing the Search for a Monetary Constitution, ed. Lawrence White, Viktor Vanberg, and Ekkehard A. Kohler (Washington, DC: Cato Institute, 2015), 194–98.

Jeremy Atack, Fred Bateman, and William Parker, “The Farm, the Farmer, and the Market,” in The Cambridge Economic History of the United States, ed. Stanley L. Engerman and Robert E. Gallman (New York: Cambridge University Press, 2000), 2:275–76, 280, 282; Donald J. Boudreaux and Thomas J. DiLorenzo, “The Protectionist Roots of Antitrust,” Review of Austrian Economics 6, no. 2 (September 1993): 87; Robert Higgs, The Transformation of the American Economy, 1865–1914 (New York: John Wiley and Sons, 1971), 96–102; Susan Previant Lee and Peter Passell, A New Economic View of American History (New York: W. W. Norton, 1979), 292–301; Charles R. Morris, The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supereconomy (New York: Henry Holt, 2005), 116; and Ritter, Goldbugs, 55–57.

Douglas A. Irwin, Clashing over Commerce: A History of US Trade Policy (Chicago: University of Chicago Press, 2017), 255; Josephson, Politicos, 399; Ritter, Goldbugs, 67–69; George Selgin, “New York’s Bank: The National Monetary Commission and the Founding of the Fed,” in Money: Free and Unfree (Washington, DC: Cato Institute, 2017), 127–28; and Sutch and Carter, Historical, 3:641.

Bensel, Political, 447–51; Newman, “Origins,” 399; and Ritter, Goldbugs, 51–52, 129–31.

Quoted in Rothbard, “History,” 158.

Bensel, Political, 377–81, 447; Alan L. Sorkin, “Depression of 1882–1885,” in Business Cycles and Depressions: An Encyclopedia, ed. David Glasner (New York: Garland, 1997), 150; Rothbard, “History,” 157–61; and Strouse, Morgan, 172, 179, 305.

Quoted in H. Wayne Morgan, William McKinley and His America, rev. ed. (Kent, OH: Kent State University Press, 2003), 109.

Bensel, Political, 396–98; Irwin, Clashing, 264; Stanley L. Jones, The Presidential Election of 1896 (Madison: University of Wisconsin Press, 1964), 19–25; Josephson, Politicos, 421, 444, 536, 663–64; Michael P. Malone, The Battle for Butte: Mining and Politics on the Northern Frontier, 1865–1906 (Seattle: University of Washington Press, 1981), 24–31, 41–45, 105–6; Horace Samuel Merrill, Bourbon Leader: Grover Cleveland and the Democratic Party (Boston: Little, Brown, 1957), 109–17; Kirk Porter and Donald Johnson, National Party Platforms: 1840–1960 (Urbana: University of Illinois Press, 1961), 81; Mark Zachary Taylor, “Benjamin Harrison and the Seeds of Economic Crisis, 1889–1893,” Critical Review 33, no. 1 (2021): 114–18, 124; Richard H. Timberlake, “The Panic of 1893,” in Glasner, Business, 517–18; and Allen Weinstein, Prelude to Populism: Origins of the Silver Issue, 1867–1878 (New Haven, CT: Yale University Press, 1970), 70–81, 150–76.

“Gold Shipments,” Commercial & Financial Chronicle, December 17, 1892, 1012.

Friedman and Schwartz, Monetary, 705; Rothbard, “History,” 168–69; Strouse, Morgan, 305, 318–19; Sutch and Carter, Historical, 3:596; and Taylor, “Harrison,” 118–20.

Charles W. Calomiris, “Greenback Resumption and Silver Risk: The Economics and Politics of Monetary Regime Change in the United States, 1862–1900,” in Monetary Regimes in Transition, ed. Michael Bordo and Forrest Capie (New York: Cambridge University Press, 1993), 87–88, 99–101, 110–11, 117; Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (Oakland, CA: Independent Institute, 2012), 77–105; Johnston and Williamson, “GDP”; Newman, “Depression,” 493–97; and Sutch and Carter, Historical, 3:596.

Quoted in Carosso, Morgans, 366.

Jeremiah D. Lambert and Geoffrey S. Stewart, The Anointed: New York’s White-Shoe Law Firms (Guilford, CT: Lyons Press, 2021), 28–33; and Strouse, Morgan, 241, 259.

Bensel, Political, 142–43, 410–14, 450–53; Calomiris, “Greenback,” 117; McCulley, Banks, 84; Merrill, Bourbon, 184; Porter and Johnson, Platforms, 88; Ritter, Goldbugs, 55–58, 173–74; Rothbard, “History,” 169; and Rothbard, Progressive, 166–67.

George Williams, “Testimony,” Banker’s Magazine, January 1895, 280.

James Freeman and Vern McKinley, Borrowed Time: Two Centuries of Booms, Busts, and Bailouts at Citi (New York: Harper Collins, 2018), 59; McCulley, Banks, 91–92; Robert Craig West, Banking Reform and the Federal Reserve, 1863–1923 (Ithaca, NY: Cornell University Press, 1977), 43–44; and Robert H. Wiebe, Businessmen and Reform: A Study of the Progressive Movement (Cambridge, MA: Harvard University Press, 1962), 13, 62.

Richard Franklin Bensel, Passion and Preferences: William Jennings Bryan and the 1896 Democratic National Convention (New York: Cambridge University Press, 2008), 34; Philip H. Burch Jr., Elites in American History, vol. 2, The Civil War to the New Deal (New York: Holmes and Meier, 1981), 184; Richard F. Hamilton, President McKinley, War and Empire, vol. 1, President McKinley and the Coming of War, 1898 (New York: Routledge, 2017), 77; Malone, Butte, 24–31, 41–45, 105–06; Merrill, Bourbon, 197, 204–05; Rothbard, Progressive, 164–65, 182–84, 188–90; Strouse, Morgan, 319; and Charles Morrow Wilson, The Commoner: William Jennings Bryan (Garden City, NY: Doubleday, 1970), 151, 195–202, 204.

Carosso, Morgans, 325–27, 339, 349, 439; Freeman and McKinley, Borrowed, 67; and Strouse, Morgan, 319, 339–54.

J. P. Morgan, quoted in T. Bentley Mott, Myron Herrick—Friend of France (New York: Doubleday, Doran, 1929), 68–69.

Calomiris, “Greenback,” 100; Carosso, Morgans, 289, 292; Hamilton, McKinley, 59, 71; Rothbard, Progressive, 180–82; Strouse, Morgan, 306, 354–55; and R. Hal Williams, Realigning America: McKinley, Bryan, and the Remarkable Election of 1896 (Lawrence: University Press of Kansas, 2010), 60.

Abram Hewitt to Thos Fenlon, December 4, 1900, quoted in Mark D. Hirsch, William C. Whitney: Modern Warwick (Hamden, CT: Archon Books, 1969), 509.

Marcus Daly to M. Donohoe, May 12, 1896, quoted in Dennis L. Swibold, Copper Chorus: Mining, Politics, and the Montana Press, 1889–1959 (Helena: Montana Historical Society Press, 2006), 61.

Bensel, Passion, 155; Carosso, Morgans, 348; Hamilton, McKinley, 77; Malone, Butte, 108–9; Merrill, Bourbon, 132, 204–7; Rothbard, Progressive, 182–86; Strouse, Morgan, 305, 359; Swibold, Copper, 9–10, 61; and Williams, Realigning, 97–98, 136–37.

Rothbard, Progressive, 107, 109, 190–97.