Notes on Monetary Governance in Nineteenth Century America

“The constant tendency of Banks,” banker Nicholas Biddle observed in April 1828, “is…to lend too much, and to put too many notes in circulation.” The same might easily have been said of governments. As scholars have long recognized, the nineteenth-century United States suffered under a precarious and ill-defined monetary system, composed of varying combinations of commodity monies, state-issued endogenous bank credit monies, and federal? government fiat moneys (to say nothing of counterfeits of all three). Economic historians have made the case both ways: The nation succeeded in spite of its monetary confusion, or perhaps because of it. Other scholars have focused on monetary politics and ideology. Yet, as Stephen Mihm has argued, we still know little about how money actually worked in the nineteenth-century US. This panel takes a material approach to 19th c. monetary governance to ask how the state sought to shape the distribution of credit, circulation of currency, and ameliorate the risks that monetary diversity posed. Together, these three papers demonstrate that forms of 19th c. US federal financial regulation were as shifting and experimental as the currencies it sought to control. Yet taken together, these papers argue, they constituted a robust and continually evolving regulatory state.
Ann Daly’s paper examines the federal bureaucracy which replaced the US’s national bank in the 1830s, the Independent Treasury. Created to hold federal funds, the IT is traditionally understood to have exercised no regulatory power over banking or currency. Using the writings of the IT’s designer and first head, political economist William M. Gouge, it argues that the IT was designed to indirectly regulate the nation’s currency. It used tax policy, specie purchases, and other forms of administrative rule and increase the nation’s supply of high-powered money and disincentivize banks from over issuing paper currency.
David K. Thomson explores the pivotal role of Secretary of the Treasury Salmon Chase during the American Civil War. During a brutal war encompassing many “firsts”, Chase coordinated efforts across the executive and legislative branches to facilitate a triumvirate of financial tools (bonds, a fiat currency, and taxation policy) to enable the North to function and fight its fiscal war. Using the writings of Chase and his allies on and off Capitol Hill, this paper argues how the circumstances of a massive Civil War enabled the Treasury to push through measures that many had aspired for in the late antebellum period and lingered with important consequences into the Reconstruction era.
Finally, Sean H. Vanatta’s paper examines federal government supervision of the National Banking System. Drawing on the early records of the Comptroller, along with examination reports and examiner diaries, it argues that the first Comptroller of the Currency, High McCulloch, made up for his lack of institutional capacity with moral suasion, seeking to inculcate a moral vision of financial management in the first generation of national bankers. Key to this effort were national bank examiners, heretofore overlooked government officials were fraud police, public accountants, corporate advisers, and safe salesmen all at once.