‘The People’s Monetary System’: Banking Reform and Banker Bashing in Post-Civil War America

Last week we witnessed the Co-Operative Group lose its controlling share in its banking division to two US hedge funds, placing doubt in the future ethical stance the bank was committed to. We also recently watched JP Morgan, the US’s biggest bank, issued the largest bank fine ever at $920 million for malpractice and ‘unsafe and unsound practices’, whilst Barclays was faced with £150 million of fines for ‘reckless behaviour.’ 

Five years after the collapse of Lehmann Brothers (or for Despicable Me fans, The Bank of Evil), whose failure brought the world economy crashing to its knees, these events have rightfully led to questions in the media over the lack of banking reform – legislation appears to have stagnated and banks seem to have maintained the same levels of financial freedom globally as before the crash. So begin fresh rounds of ‘Banker Bashing’. 

Yet from the Occupy movement to endless tirades on BBC’s Question Time, ‘Banker Bashing’ is far from a new phenomenon. ‘Picture the lamp-posts of Wall Street’, William Sylvis warned Americans in 1868, ‘ornamented with the bloated carcasses of the money shavers, gold gamblers, and land-sharks, who are robbing the government and the people.’ The ‘fraud’, ‘persecution’ and ‘robbery’ of the existing financial system must end, he argued, or else a bloody ‘spirit of vindictiveness’ would meet the bankers and ‘blood letting’ would begin.[1] 

Sylvis (1828 – 1869), an Iron Moulder from Philadelphia and the leader of the first national organisation of workingmen and women in the United States, the National Labor Union (1866-72), echoes the overwhelming resentment that ordinary citizens felt towards the financial establishment and its perceived corruption. Indeed whilst reading his speeches and writings this year it struck me, as it may have to readers just now, how similar such antagonism still exists amongst the Western world. 

These recent debates, however, are far from original. Plans to separate retail and investment banking stretch back over 80 years to Franklin D. Roosevelt’s Glass-Steagall legislation, and the quest to instrument a fairer ‘moral’ form of international banking reaches well into the nineteenth century.[2] But if we are to look back further in history, beyond the usual parameters of the twentieth-century to the emergence of corporate capitalism in the mid-19th-century ‘Age of Capital’, are we presented with a fresh perspective? Can it offer us an alternative to the triumphant rise of the financier, and indeed capitalism itself?[3] 

The case for significant changes in the financial sector was forcefully made by Sylvis, who denounced Wall Street and its ‘idolatrous’ ‘false monetary system’ that ‘robbed the many for the benefit of the few.’[4] The interest rates determined by the ‘money-lenders and financial gamblers’, he claimed, amounted to ‘a system of legal robbery’ that degraded ‘employer and employee’ alike.[5] 

Acting in response to the emergence of industrial capitalism and the subsequent deskilling, loss of status and commodification of their labour, American workingmen began to compare their dependency on wages to a form of slavery; the abolition of ‘wage slavery’ was sought just as chattel slavery had been abolished during the American Civil War (1861-65). A ‘new centre of slave power […] Wall Street’ had emerged and placed citizens into the bondage of financial dependency and exploitation; the nation ‘had become subservient […] to a moneyed aristocracy.’[6] The power of capital, it was argued, threatened to enslave government and citizen alike. 

In response the National Labor Union, an estimated 400-600,000 strong organisation, proposed a social and monetary ‘revolution’ that aimed to replace the ‘public thieves’ and ‘idle drones who fatten upon what they steal’ with ‘the true American or peoples’ monetary system.’[7] The plan was simple: the power to loan capital would simply be removed from banks and placed instead in the hands of the federal government, which would become the sole lender, offering loans at a nominal 1.5% irrespective of colour, race or gender but based on real estate equity. The capital would allow workers to establish cooperatives and challenge the emerging wage system. [8] 

The ‘Greenback’ economic plan, however, was not merely evidence of American Socialism. Although international in scope and developed alongside key intellectuals of the European left the state would play no role in running cooperatives: they simply provided the capital. [9] Similarly the sanctity of property was never violated. Unlike European workers’ movements, which actively planned to confiscate property, the NLU assured ‘that the protection of life, liberty, and property are the three cardinal principles of government’ and at no point attempted to violate this doctrine.[10] 

The plan was never acted upon, but it demonstrates that the laws that govern banking and financial markets, even in the (supposedly) triumphantly capitalist USA, have at times been challenged by citizens that sought a more equitable society. My point is not that we should adopt Sylvis’ system, but that we sometimes underestimate the level of contingency in the history of finance and the power of ordinary citizens to challenge the status quo. 

Despite Sylvis and the NLU’s relative anonymity with historians, their aim to create a ‘People’s Monetary System’ internationally continues today through similar movements such as Occupy. Historians, the media and politicians that want to place this struggle into a historical perspective need only look slightly beyond the Great Depression to reveal a long history of citizens also attempting to transform banking for the better.