Hamilton Report on the Bank , 1790  

1. Summarize the U.S.'s major banking/currency problems during the period of the Articles of Confederation (1776-1789)?

2. What is Hamilton's position with regard to a Central Bank, and, in brief, why?

3. How does Hamilton's Report on the Bank fit with his other two reports on Manufactures and Public Credit ?

New York State Legislature (Perils of State Banking), 1818

4. Review (from Eco 12) how a bank's “T” accounts work.

5. Describe one of the abuses by state banks, mentioned in the reading.

6. What accounts for the "banishment of metallic money"?

7. What sorts of legislative “interference” (i.e. legislation or regulation) might be effective against the problems described in the reading?

Jackson's messages, 1829, 1830, 1831, 1832

8. Look up and describe (in your own words) the circumstances of Jackson's election in 1828.  Feel free to give a link or citation to a good summary.

9. What was Jackson's position on internal improvements, as stated in these messages?

10. What was Jackson's opinion of the National Bank?  Why?  Cite specific language from one or more of these messages, which reveals his attitude.

11. In Jackson's view, which branch of government determines the constitutionality of a law (look at the veto message)?

Webster's reply to Jackson

Note: Up to page 1229, Webster is replying to the economic objections to the Bank. From page 1229 on, Webster is addressing the constitutional issues raised by the Bank.  We will focus on the former.

12. List the specific advantages Webster credits to a National Bank.

“Hamilton’s” banking plan for New York State, The Merchants’ Magazine and Commercial Review, September, 1839.  Note that the author, Alexander Hamilton, is not the same Hamilton who wrote the earlier reports we have read.  That Hamilton died in 1804.  This author may be using “Alexander Hamilton” as a pseudonym, because of the earlier man’s reputation for devising commercial policies.

13. What happened to prices immediately after the end of the first Bank of the US in 1811?  Immediately after the end of the second Bank of the US in 1836?  Why did this happen? 

14.  Describe the financial status of the period 1832-1838.  (Cite sources.)

15.  In the introduction to the pamphlet by Hamilton on banking reform, the editor raises one concern with Hamilton’s plan, proposes his own alternative, then raises two problems with that alternative.  (Each of these counts as a different question.)

15a. What is Hamilton’s plan?

15b. What is the editor’s objection?

15c. What is the editor’s alternative?

15d. What are the two objections that the editor sees to his own plan? (See p. 216)

16.  To what does Hamilton blame, at least in part, the suspension of specie payments in 1837? (P. 218)

17.  What is the required reserve ratio of the Bank of England?  What reserve ratio does Hamilton propose for his new bank?  What, in fact, IS a reserve ratio (definition)?

18.  What banking role(s) would the proposed central bank play, and what banking role(s) would be allowed to remain in the hands of existing banks?  How does this compare to the banking system now in place in the US?

19.  How did the number of banks and the amount of paper money in circulation rise from 1830 to 1837?  (Base this on the reading, plus other sources – you could check the Historical Statistics book we used, if you like.)

20. Set up “T” accounts for Hamilton’s proposed Bank of Issue, and for a representative commercial bank.  How do they differ in the types of business they conduct?  (If you have trouble doing this on line, do it on paper and hand it to me.)

21. How does the bank of issue get its notes into circulation.  (Hint:  Think about how the Federal Reserve Bank uses an open market operation to inject new money into the economy.  See also pp. 16-217, 222, 226.)  Show this process using “T” accounts.  You might want to consult an intro textbook and look up “open market operations”.

22.  What is the difference between the existing reporting practices of banks, and the reporting requirements of the newly proposed bank?  (Explain what “reporting requirements” means.)

23.  In what ways would the new bank reduce the likelihood of bank “runs”? (pp. 222-3)  How do we avoid this kind of problem today?

24. What aspects of the current Federal Reserve System are not addressed by Hamilton’s plan?  (This is not in the reading, but you can look up some information in a textbook or online.  Be sure and cite your sources of information.)

The Currency Question

25. What was the issue being addressed in

25a. the Silver Act of 1873, 
            25b. the Bland Alison Act,
            25c. and the Sherman Silver Purchase Act of 1890? 
            25d. Collectively, what was the general result of those Acts?

26. According to Bryan in his “Cross of Gold” speech, what was (and in some ways, still is) the fundamental difference between Democrats and Republicans?

27. What was the “cross of gold”?   Summarize, in your own words, Bryan’s main point in his famous 1896 speech