1. Banks and Money - REoverVIEW Hamilton and the Bank of the US Jackson and the Bank War Paper Money and the Question of Coining Silver The Federal Reserve Monetary Policy v. Fiscal Policy

2. The Bank of the US Started by A Hamilton Modeled on bank in UK First test of “elastic clause” Opposed by Jefferson Protected by McCulloch case Goal = Create stability in econ Private corporation – not elected Leant money to fed gov, set interest rates 2 x 20 year charters – Despite initial controversy it was left alone till….

3. Jackson and the Bank War Jackson hated banks in general Saw Bank of US as particularly undemocratic / unAmerican Bank Head = N. Biddle Vetoes bank charter renewal Congress passes over his veto Kills bank by withdrawing federal deposits Creates “pet banks” – eventual crash (Panic of 1837) After this there is no centralized banking system

4. Greenbacks and the Civil War “On demand” notes = first significant use of paper money printed by federal government Civil War expenses outpaced amount of hard currency Previous paper money was “bank notes” issued by individual banks Question at end of the war to keep using them or return to gold standard Government adopts policy to contract existing greenbacks (contract the money supply) This coincides with a push by westerners to expand the money supply Question of expanding or contracting the money supply was major political issue – Republicans + Eastern Financiers + Big Business say NO – Democrats + Westerners + Farmers say YES By the time they could, there was no need to and so the greenbacks stayed in circulation By 1907 the prevailing wisdom is that there must be some elasticity in the money supply to keep up with economic swings This leads to creation of the Federal Reserve, which took over responsibility for paper money

5. The Federal Reserve 1913 – Sets up central banking system First central bank since Jacksonian times Sets monetary policy of the US government Has authority to print money + make emergency loans to other banks Pushed for / passed by Woodrow Wilson Collection of private banks presided over by Federal Reserve Board – Appointed by Prez Controversy – Did Fed worsen Great Depression? Still in place today

6. Monetary Policy v. Fiscal Policy Monetary Policy = the money supply – interest rates, inflation, printing of money, ease of borrowing etc. Monetary Policy = Set by Central Bank Fiscal Policy = revenue / spending – tax policies, budget creation, increase / reduction of programs Fiscal Policy – set by national government