American Civil War, Part 3: From "Our Country, Then and Now"

"National Banking Act of 1863" and "Assassination"

Serialization of selections from my book Our Country, Then and Now continues with the cooperation of my publisher, Clarity Press.

When the Lincoln Administration began to issue Greenbacks in 1862 to finance the war, it was a return to the direct issuance of currency by the government akin to the practices of several colonial legislatures prior to the American Revolution. Unfortunately, when Alexander Hamilton later set up the First Bank of the United States under the first Washington administration in 1791, the US adopted the Bank of England method of capitalizing the monetary system on government debt.

This is the system the US practices today under the Federal Reserve. It assures that the federal government will always be a debt-ridden pauper, while the private banking system enjoys the privilege of printing an unlimited amount of money “out of thin air” and collecting all the interest payments the market will bear—and then some.

Soon after Congress authorized the Greenbacks, the nation’s financiers were able to lobby the legislators in Washington to give them a consolation prize. This was the National Banking Act of 1863, which mandated that any approved bank must purchase a given amount of Treasury bonds as its capital base—i.e., more government debt. This would eventually prove catastrophic to the nation’s financial integrity once the Federal Reserve appeared on the scene in 1913.

Unfortunately, scarcely one American in a million understands how all this came to pass. Certainly no one in the Trump administration does, nor anyone in Congress.

Meanwhile, Lincoln’s issuance of the Greenbacks saved the Union but made him anathema to the international financial elite in London.

Our Country, Then and Now may be ordered directly from the publisher here.

National Banking Act of 1863

In February 1863 Congress passed a National Banking Act to create a uniform currency of national bank notes and to require major banks to invest in government bonds.

With no central national bank, Congress sought to prevent the banking system from becoming an independent center of political power. But the system paved the way for eventual creation of the Federal Reserve System, which largely ceded Congress’s Constitutional power of money-creation to the world of big finance.

By 1864 there were 508 national banks in the system. The fractional reserve ratio of deposits to loans varied from fifteen to twenty-five percent, which still allowed a substantial amount of money to be created out of thin air and lent at compound interest. The new law also taxed notes created by state banks at two to ten percent, which would eventually drive many of them out of business. By October 1866 there were 1,644 national banks.

Reflecting later on his support of the creation of a national banking system, Salmon P. Chase, who would become chief justice of the United States in 1864, had this to say:

“My agency, in promoting the passage of the National Bank Act, was the greatest mistake in my life. It has built up a monopoly which affects every interest in the country. It should be repealed, but before that can be accomplished, the people should be arrayed on one side, and the banks on the other, in a contest such as we have never seen before in this country.”

Horace Greeley (1811-1872), founder and editor of the New York Tribune, and co-founder of the Republican Party, said:

“While boasting of our noble deeds, we are careful to control the ugly fact that by an iniquitous money system, we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.”

Assassination

Nevertheless, the actions taken by the US federal government were far from allowing the bankers and financiers to take over completely, often to their anger and chagrin. For this reason, a statement reputedly published in the London Times in 1865 has often been cited as relevant to understanding the American Civil War. Speaking of the Greenbacks, the London Times reportedly wrote:

“If that mischievous financial policy, which had its origin in the North American Republic should become indurated down to a fixture, then that government will furnish its own money without cost. It will pay off its debts and be without a debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”[i]

1865, when the London Times evidently called for the US government to be destroyed, was the year President Abraham Lincoln was assassinated. His murderer, John Wilkes Booth, had recently returned from a trip to Montreal, the Canadian headquarters of the British intelligence service where Confederate spy agencies were also based.

When soldiers cornered and killed John Wilkes Booth in a Virginia barn two weeks after Lincoln’s death, he was carrying a bill of exchange from Montreal’s Ontario Bank dated Oct. 27, 1864. A bank book from the same institution, stamped with the same date, was also discovered among his belongings. Booth’s account at the Ontario Bank, an institution acquired by the Bank of Montreal in 1906, stayed open with a balance of $455 for an undetermined length of time following his death.[ii]

Who then paid for Lincoln’s death? It was a question that was never answered or even investigated. But it was a great loss. In the prophetic words of German Chancellor Otto von Bismarck (1815-1898):

“The death of Lincoln was a disaster for Christendom. There was no man in the United States great enough to wear his boots and the bankers went anew to grab the riches. I fear that foreign bankers with their craftiness and tortuous tricks will entirely control the exuberant riches of America and use it to systematically corrupt modern civilization.”[iii]

Lincoln was the most famous of the many remarkable figures the Civil War brought to prominence. Others I might mention were Frederick Douglass, born in slavery of black and Native American ancestry, who became a noted abolitionist and journalist; Harriet Tubman, who led multiple rescue missions on the Underground Railroad; and Walt Whitman, the poet of the ordinary man.

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[i] Apparently this famous statement, if it ever existed, has been removed by the Times from its archives.

[ii] Andy Blatchford, “Lincoln Assassin John Wilkes Booth’s Canadian Connection,” The Canadian Press, October 13, 2014, reprinted in <www.globalnews.ca>

[iii] Bismarck’s government followed the “American System” in making large government investments in the development of infrastructure. It was these investments, particularly in railroads, that made the modern unified German state possible.