Ep. 102: What it Takes to be a Bankster

Anthony Comegna: Jacksonian America was a weird place. Can you imagine people getting themselves all worked up over banks and money today? Having that intensely boring issue so thoroughly dominate political life that presidents and parties rise and fall on this one subject alone? No one today knows anything about the Fed and no one wants to know about the Fed, thank you very much—that’s how we like it and that’s how we want to keep it. But these people back in the 1830s and ‘40s, they were in an almost constant state of agitation about it all. And Jacksonians were especially prone to conspiracy theory, which is really saying something for Americans. They saw it everywhere, operating constantly in secret and out in the open. Everywhere and always, it seemed to Jacksonian Americans that the individual pursuit of self interest was as natural and inevitable as the tides of the rotation of the earth. For good democrats like our Locofocos, of course, self interest could easily and cleanly align with the commonwealth, and there is no necessary conflict between what’s good for you personally and what is good for the rest of society. But when an unscrupulous personal ethic, problematic incentives, and institutions isolated from responsibility combined together, Adam Smith’s benevolent invisible hand of the market transfigured into something sinister and conspiratorial: A mysterious series of spiders’ webs strewn across the globe, trapping human flies and draining them of their substance.

Anthony Comenga: We’ve covered a lot of this conspiratorial thought and politics throughout the show, but today we are taking a bit of time to investigate cultural expressions of these views. Recall our Young America movement of artists, intellectuals, and publishers who wanted to form a distinct American national culture which emphasized our points of originality rather than shameless borrowing from or base imitation of Europe. Young Americans knew their country and its culture had a great deal to offer the world, but to really express that greatness, Americans would have to find their own peculiar methods of communicating the idea of democracy. They would have to find their own kind of poetry, their own imagery and purposes, their own inspirations and ideas both because America offered the world something new and because the rest of the world was quite near exhausted of its greatest contributions.

Anthony Comenga: One of the greatest recent European contributions to civilization was, of course, Adam Smith’s Wealth of Nations and the entire Classical School of economics. Smith, Ricardo, Say, Bastiat—the Classical doctrines became gospel in America and we took key features of their system, ramped them up to fit our own dramatic sensitivities, and made it our own. Remember, by the way, that Smith was the man who famously wrote that “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Now, most folks on the left will leave the quote there and use it to show that markets are perversely manipulated by those with material wealth—but Smith went on to explain that these sorts of combinations and conspiracies happen as a matter of course every day and usually they amount to no more than normal enterprise. Introduce government power to the equation (the ability to tax, regulate, or monopolize industries) and suddenly these conspiracies become lobbying outfits, cartels, and political factions. Only the power of government can turn narrow self interest into a weapon for class warfare.

Anthony Comegna: Locofocos and Young American artists and intellectuals understood that at least part of the unique American experience they had to draw upon included the class conflict between mushrooms and men. This was their great story—yes, they had escaped much of Old World feudalism; yes the frontier gave Americans a constant fresh start, an endless source of regeneration and innovation; but from the beginning the mushrooms also took root on this side of the Atlantic. The battle was first joined at Roanoke in the late 1500s, taken up again at Jamestown in 1607, aboard the Mayflower in 1620, and replayed in major and minor events without number for the next two centuries. Both life forms were given fresh starts in America—mushrooms could flourish here like nowhere else on earth, or human beings could use the time and space to transform the world into a better place. By the Jacksonian period, Americans liked to think they had slain the worst tyrants, deposed their king, and they claimed victory in the Mushroom War—but it was up to heroes like Andrew Jackson to mop up the last remaining monsters, who crept the earth in the form of bankers.

Anthony Comegna: And this brings us back around to our topic for the day—a delightful Young American story from John L. O’Sullivan’s Democratic Review. The Review, you may recall, was the most important Jacksonian periodical of its era. It gave voice to canon writers like Whitman and Hawthorne while leading the charge for an American national culture and radical—sometimes downright Locofoco!—politics. In its huge volumes, O’Sullivan published political editorials, poetry, images of recent or relevant artwork, short stories, political biographies, world news, and on location reporting on matters of national significance. Among its many gems are two separate but related accounts of bankers’ lives and schemes…and their lives as schemers! In the first—which I’ll just tell you about—we meet Ferret Snapp Newcraft, whose father has raised him in the new Whig church of bank credit and paper money. In the second (our document for the day), we have the private diary of a bank director who exposes himself as a lifelong conspiracy-​hatcher in the most banal and normalized way imaginable.

Anthony Comegna: So first, Ferrett Snapp Newcraft. We have published both stories before, by the way, so be sure to check the shownotes for the full text of each. The Newcraft story is an autobiography, told at the end of a life well-​lived at the expense of others. Newcraft tells us of his swindler father who traveled the land trying to hatch the perfect pyramid scheme—they would sweep into town, the father would talk up fantastical projects for developing the area, pitch all the local yokels on investing, gather up all their spare funds, and escape town with the loot before ever embarking on the actual project. It’s a lot like the monorail episode of The Simpsons. Newcraft lovingly remembers barely escaping many a town with their lives intact. Above all else, in his youth our author learned that one should never work when it is possible to live on the labor of others. It is better to scheme one’s way to wealth if at all possible, than to degrade oneself with manual servitude.

Anthony Comegna: Newcraft inherits his father’s dreams for a never ending source of money and credit with which to fuel a never ending flow of improvements projects that never seemed to materialize. Why should they have to?—the real point was making the Newcrafts rich, and if no one else bothered to make them follow through on their promises, so much the better! He joins a banking firm, learns the fine art of investing other people’s money in wild speculations, and lives fat and happy by manipulating land values in a place called Ragamuffinville. Among those he schemes is an old friend and fellow banker who for the moment goes unnamed—but as we will find in our document, Newcraft’s dupe was the same bank director who writes the diary we will hear. No honor among thieves, and all that.

Anthony Comegna: So let’s go to the diary, then, published as a follow up or companion piece to the Newcraft story. Our narrator’s name is Mr. Graball, and as the title indicates, he is the director of a certain bank somewhere in America. The diary begins with an entry for Monday in which Graball tries to use a personal friend’s need for credit to his own advantage, vouching for the friend—John Jones—before the bank and proposing that he be given a portion of the note in return for his vouchsafe. Never let a good opportunity go to waste, even if it means lying to both your friends and your business! We pick up with the scene when Graball leaves the board meeting without having secured his friend’s loan.

Speaker: “Extracts from the Private Diary of a Certain Bank Director,” US Magazine & Democratic Review, (July 1838)…As I passed out of the bank door, found Jones waiting on the steps in great anxiety. Told him of my bad luck in as circumspect terms as possible; but the poor fellow was near sinking to the earth. Did all I could to comfort him, but he refused to be comforted. He spoke of his wife and children, and of the loss of all his earnings and savings, the result of many years of toil and trouble. Could not bear to see him so distressed, and therefore told him that, though exceedingly pressed for money myself, I would speak in his behalf to a friend of mine…Referred him accordingly to Mr. Sharpsucker, my private broker, taking care to have first an interview with Sharpsucker to be sure that my benevolent intentions should not be frustrated.

In the afternoon met Jones, and found him very grateful. Was sorry to learn from him, however, that Sharpsucker had himself to borrow the money, and therefore could not let him have it at less than three per cent a month. But this, as Jones himself says, is a trifle in the present condition of his affairs.

Speaker: I have done a good day’s work. I have done my duty to the bank, to myself and family, and to my friend. Saturday. Entered into a combination with a number of friends to depress the price of certain articles by refusing to the holders of them all kind of facilities, and pressing on them for the prompt discharge of their obligations. As the scheme was an extensive one, requiring a number of persons to carry it on, and profound secrecy to bring it to a successful issue, it was several times in danger of miscarrying. But our power was so great, and the necessities of the merchants who held the articles were somehow so urgent, that we bought them all up pretty much at our own price. We have now only to increase our issues, and we shall be able to sell these articles at such rates as we may choose to ask. In that case my two hundred thousand dollars will become four hundred thousand. I prefer going on in this snug way to dashing out as Newcraft did. He always appeared to me to go ahead too fast.

Anthony Comegna: On Tuesday Graball hosts a party at his mansion and among his guests is the ludicrous Reverend Doctor McThwackem, who took a special interest in philology. The Doctor asserted that the word specie was a plebeian bastardization of species, with the same root and meaning as specious. Just so with bullion, which people might think comes from the French word billon, for base metal or base coin, but McThwackem informs us it is really from the Pope’s bulla, the little golden balls or baubles decorating papal edicts. “The bare sound” of specie or bullion, our good Protestant author states, makes him tremble to his boots for fear that so many in America would use hard money to help bring in the reign of Antichrist. Instead, money should be backed speciously by the banker’s good word alone. Moving on to Wednesday, there was a bank run! The entry reads: “Cashier in trouble,—circulation above a million—gold and silver coin in vaults of too small an amount to be mentioned except to particular friends.” All possible lines of credit to the bank were exhausted, including IOUs local banks had been swapping back and forth as the daily state of deposits demanded. One of the bank’s board suggested that if they wrote themselves IOUs, it would really be just as good as specie (specious logic, to be sure) but the clerk refused to accept them. Once Graball explained to him McThwackem’s argument (with help from Webster’s dictionary), the clerk too is convinced and the bank proceeds to bail itself out with paper. The selection concludes with one Mr. Snatchpenny suggesting they write up enough memo-​money to round it off at a cool half million and everyone heartily agrees. Graball writes, “Cashier convinced, and at the same time delighted. Says he shall never more have any difficulty in making up his annual returns. Memorandum checks are the real specie.” Our narrator then reads the autobiography of Ferret Snapp Newcraft in the Democratic Review and chuckles to himself that he has found Newcraft’s never-​ending credit machine after all—and it was in the dictionary! In our next selection, the Reverend McThwackem departs town for a preaching (and drinking) binge which leaves his flock under a very different style of care…

Speaker: Sunday. Brother McThwackem has gone to a watering place, partly to recruit his health, partly to look after some railroad, and other speculations in which he and I are jointly interested—and partly to try if he cannot be of some spiritual benefit to the poor, light-​headed mortals who usually flock to these scenes of gaiety. Through some strange mistake he left to fill his pulpit a stupid country parson, or I should rather say priest, for if his sermon did not savor of popery I know not what popery is. It was all works—works—works! Not one word about the precious doctrines of grace! I doubt if the man be not a Jesuit in disguise, smuggled into the church by the hard-​money men with intentions best known to themselves. His text was “THOU SHALT NOT STEAL;” and, in the course of his remarks, he drew a strongly marked line between what he was pleased to call conventional and essential honesty. There were, he said, many practices which, though strictly compatible with the former, were at utter variance with the latter. Taking advantage of men’s ignorance and necessities in driving a bargain, was, he said, just as bad in the eyes of reason and religion, as taking advantage of their physical weakness and robbing them on the highway. It was no matter whether this was done according to the forms of law or contrary thereunto. What was wrong in itself, mere human enactments could never make right…If a multitude of men were thus treated, it only added to the enormity of the offence…

If I use the power which circumstances or my superior intelligence gives me to increase my wealth, I am only acting according to the dictates of nature. That is morally right which is conformable to the law of the land. It is the law of the land which, in fact, determines what is right in a civil sense, and therefore in a moral sense. If the law is wrong I am not in fault. I did not make the law.

Speaker: Went in the evening to hear Dr. Diddler, and heard a truly great and glorious discourse. It was all gospel and no law—all faith and no works. Monday. An old friend…called on me this morning…and from some of his remarks I fear he is infected with the new-​fangled notions of the day. The doctrines of legal righteousness are making strange havoc among professors…He reminded me that about twenty years ago when I was much embarrassed [i.e. poor], he had not pressed for the payment of a debt of five thousand dollars I then owed him, but suffered the claim to lie over. With some little difficulty I recollected the fact, but I did not think it very Christian-​like in him to call it up at this late day. A favor ceases to be a favor if gratitude is required in payment. He said that he had met with many reverses since that time—an ample estate had been reduced to nothing—and all the efforts he had made in the South and West to retrieve his fortunes had proved unsuccessful. Understanding that I was possessed of boundless wealth—of a tract of three millions of acres of land, and six town plots, in the Western country, besides stocks and various other property in the East, he now ventured to hope I would discharge his claim—the interest he would give in if I would pay the principal.

Speaker: Such effrontery I never before met with. The debt is barred by the statute of limitations, and has been these thirteen or fourteen years. Mr. Downright said law was not every thing—there was such a thing as equity. So there is, I admit, but I have had the misfortune to fail three times in the course of my life, and the aggregate of my old debts (if debts they can be called) is between two and three millions of dollars. It is utterly impossible for me to pay all, and nothing could be more clearly inequitable than for me to pay one of my creditors and not the others.

Speaker: Finding by further conversation that Downright was in great distress I gave him a check for fifty dollars, writing charity on one corner of it, as is my practice when I make donations, in. order that I may keep my accounts square, and know exactly how much I give in each year for benevolent purposes. Downright refused to receive the check unless this word was erased; and so finding him both poor and proud, I took it back, leaving him to suffer the consequences of his folly. People ought to learn to conform to their circumstances.

Speaker: In regard to the three millions of acres of Western land, I must remark that they are not exactly mine, though they will, I hope, nay trust, be mine. It is Newcraft’s tract which he has transferred to me on certain conditions, and which I am to restore to him in certain contingences, which I shall take good care shall never occur. Newcraft thinks himself a man of business. And so he is, but others are men of business as well as he.

Speaker: Tuesday. Beset during the whole day by a crowd of vulgar mechanics, to whom, during the late high prices, I had sold, or let on ground rent, some hundreds of lots in the city and the many new and important towns and villages that were then rising up around us on every side. The company of this class of people is always disagreeable, but I had to endure it. On a great number of these lots they have erected substantial buildings, but owing to the pressure of the times, (produced entirely by the doings of the Government,) these buildings rent at very reduced rates, and such of the lots as remain vacant will sell for but a small part of their original cost. Made the best arrangement with these people that I could, both for themselves and for myself. I cannot enter into particulars. It is enough to say that there is a fair prospect of my getting back one-​half of my lots with good houses upon them, and the mechanics who built them will be rid of all incumbrances—for property is always an incumbrance to this kind of people….

Anthony Comegna: Finally, our author rejoices in the repeal of the Specie Circular which had been causing so much damage to his bank’s deposits and their ability to lend without end. Jackson’s Specie Circular famously ordered government land offices to accept nothing but gold or silver as payment, and since land sales were one of the main channels of revenue, the Circular drained great amounts of money from the common stock, depleting bank reserves and arresting the extension of credit around the country. For many historians and contemporaries, the Circular caused the Panic of 1837–though this isn’t accurate and the Panic has much more to do with the flow of Mexican silver and investments by the Bank of England than it did with Andrew Jackson. In any case, Graball is delighted.

Speaker: Thursday. Good news at last. The odious Specie Circular is repealed! I know not at which most to rejoice, whether at the Governments being compelled to bow to the banks, or to the power now given to us to raise prices as high as we please. One joy is enough for one day, and the prospect of the rise of prices is quite sufficient of itself to make me forget all my past troubles. Now for the sale of the lots and houses that were transferred to me on Tuesday, and for the stocks I bought on Wednesday. And now I shall be able to do something handsome with my three million acres of Western lands and my six town plots. I may as well call them mine, for I have so arranged matters that Newcraft can never get them from me….

[Now we] shall go on increasing in wealth. Some say this will be only in appearance. Let it be so. What is there that is truly real in this world of vanity and show? Every thing depends on our conceptions of things, and if a man can only fix it firmly in his fancy that he is worth six millions of dollars, he may enjoy just as much happiness as if he really possessed this amount of solid wealth. If he had the whole sum in silver dollars he could not eat them or drink them; neither could he eat or drink what they could procure. A man’s personal wants are very few, and easily supplied; but most men have cravings to which it is not easy to set limits. And I will affirm that there is no way in which all men’s cravings, or even the cravings of any great number, can be satisfied, unless it be by banking, or some similar contrivance. It is, in the nature of things, absolutely impossible that all men, or that any great number of men, should be very rich; but by the rise of prices, produced by plentiful issues of paper money, a great many may be brought to believe that they are very rich, and thus enjoy as much satisfaction as if they really abounded in wealth. Happiness resides in the mind. All philosophers agree in this.

Speaker: Friday. Great jubilation at a meeting of our friends to-​day; but Satan came among us in the guise of a Loco-​Foco, and a more appropriate shape he could not have assumed. Loco-​Foco said much about the importance of a fixed standard of value—that it would be as absurd to be always changing the size of the bushel, or the length of the yard stick, as to be always changing the value of the dollar, & c. Talked, also, much about justice, and equity, and honesty, and all that sort of thing. The devil can, you know, quote scripture to serve his purpose. Told Loco that all he had said was very true in the abstract; but he was a mere theorist. I was a practical man. Loco asked me if I knew the meaning of the word “theory.” Told Loco that if I did not, my friend Doctor Diddler did. Loco asked what I meant by “a practical man.” He had never heard of Adam Smith or J. B. Say’s keeping a huckster-​shop. Made no reply to Loco, but thought within myself that “a practical man” is one who has failed in business at least twice, and owes at least twice as much as he can ever pay.

Changed the subject by telling Loco that the “Specie Circular” was “a humbug.” Loco said modestly that perhaps the paper money system was “a humbug…”

Anthony Comegna: So there’s our little peek into the private lives of America’s mushroom aristocracy—and take it for what it is, a piece of fiction published in a political journal. Even so, it is a fantastic representation of the Young American culture our radical thinkers were charting. It draws clear class distinctions between those who either personally manipulated the law to their own benefit when in political power OR manipulated enforcement while out of political power, and those average, common, working people who had few options and little voice but their votes. While the mushroom class can use their political influence to ‘graball the cash’ as it were, and sponge life from the people who labored, those people possessed power of their own and Young Americans tapped into a strong hunger for change. Later generations of libertarians leaned into even Graball’s comparison of Locofocos with Satan, noting that Lucifer was, after all, the “Light-​bearer,” and that those who pretend to superior morals are most often mushrooms trying to hide in the dark.