Is the Third Try at Central Banking a Success

The Federal Reserve at 110: America's Third Central Bank Repeats Century-Old Mistakes

TL;DR: The Federal Reserve marks 110 years as America's third attempt at central banking, following two predecessors abolished after fierce political battles. The Hamilton-Jefferson and Jackson-era debates over concentrated financial power, inflation, and constitutional authority remain unresolved. Pre-Fed panics resulted mainly from government interventions—railroad subsidies, currency manipulation, banking restrictions—not market failures. Yet the Fed presided over the Great Depression, destroyed price stability through 97% currency devaluation, and enabled the fiscal irresponsibility now plaguing states and federal government alike. The eurozone crisis reveals these tensions persist: monetary union without political consensus breeds instability whether in 1830s America or 2020s Europe.

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WASHINGTON—When the Federal Reserve opened for business in November 1914, it was solving a problem the United States had confronted twice before: how to manage a national currency without concentrating dangerous financial power. That the country was creating its third central bank, after abolishing the previous two, suggested the question had no easy answer.

More than a century later, the Fed's mixed record—from presiding over the Great Depression to enabling chronic inflation to backstopping the 2008 financial crisis—indicates the fundamental tensions identified by Alexander Hamilton, Thomas Jefferson, and Andrew Jackson remain unresolved. The eurozone's ongoing struggles with fiscal crisis and monetary union illuminate why: central banking attempts to reconcile incompatible goals of stability, democratic accountability, and fiscal discipline.

Hamilton's Vision: The First Bank of the United States

The Federal Reserve's institutional DNA traces to fierce political battles that twice resulted in central banks' abolition—history largely forgotten in contemporary policy debates.

The First Bank of the United States (1791-1811) emerged from Treasury Secretary Alexander Hamilton's vision of centralized financial management supporting commercial development and federal authority. Hamilton's December 1790 "Report on a National Bank" argued the new republic needed stable currency, coordinated credit, and efficient government debt management—precisely the arguments used to create the Fed 123 years later.

Hamilton envisioned what he called a "financial revolution," according to economic historians Richard Sylla and David Cowen. This included effective institutions of public finance, a central bank to aid government finances and serve as the central node of the banking system, creation of the U.S. dollar as the country's unit of account and medium of exchange, and fostering growth by encouraging states to create banks and develop securities markets.

"Hamilton was the United States' first central banker," said Neil Willardson, senior vice president and general counsel of the Federal Reserve Bank of Minneapolis. "The Federal Reserve is the modern manifestation of Hamilton's original vision for an American national bank, updated to meet the needs of our large, diverse economy."

The First Bank operated with both public and private characteristics. It had $10 million in capitalization, with 20% government-owned and 80% privately held. The government used it as its fiscal agent, but it also functioned as a commercial bank, making loans to the public and accepting deposits. It established branches in major cities along the eastern seaboard from Boston to Savannah, plus New Orleans—reflecting the limited geography of the early United States.

Thomas Willing served as the First Bank's president, overseeing 25 directors, nine from Pennsylvania, seven from New York, and four from Massachusetts. The board included three senators, four congressmen, lawyers, merchants, brokers, and a physician. Most were Federalists. All were men.

Hamilton required weekly financial statements from the Bank—an early commitment to transparency unusual for the era. When financial panics struck in 1791 and 1792, Hamilton responded by making open market purchases of government securities, acting as central banks do today by providing liquidity during stress.

Jefferson's Constitutional Opposition

Secretary of State Thomas Jefferson led the opposition based on principles that would resonate through American history. His February 15, 1791 opinion to President Washington argued Congress possessed no explicit power to charter banks, that "necessary and proper" didn't mean "convenient," and that concentrated financial power would create a "money aristocracy" serving elite interests while enabling government deficit spending through paper money inflation.

"To take a single step beyond the boundaries thus specially drawn around the powers of Congress," Jefferson wrote, "is to take possession of a boundless field of power, no longer susceptible of any definition."

The philosophical divide ran deeper than constitutional interpretation. Jefferson and James Madison held an agrarian vision for the United States and feared excessive federal power vis-à-vis the states. Hamilton, by contrast, envisioned a commercial republic with a strong federal government.

The famous "dinner table bargain" of June 1790 illustrated how deeply contested Hamilton's financial plan remained. Hamilton encountered Jefferson in New York City just after Congress had rejected the government's assumption of state debts—a key component of Hamilton's vision. Jefferson arranged a dinner at his house on Maiden Lane (across from where the New York Fed now stands) bringing together Hamilton and Madison as "diametrically opposed foes."

The result was a political compromise: Madison and Jefferson agreed to support debt assumption in exchange for locating the nation's capital on the Potomac River in what became Washington, D.C. Even after Congress passed the Bank bill 39-20, President Washington took the full 10 days allowed and sought counsel on constitutionality. Attorney General Edmund Randolph and Secretary of State Jefferson argued the Bank was unconstitutional because it wasn't specifically enumerated in the Constitution.

Washington submitted these opinions to Hamilton, who—working through the night with his wife Eliza—produced a response arguing that "every power vested in a government is in its nature sovereign, and includes... a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power." Washington signed the bill on February 25, 1791.

Congress chartered the Bank anyway, but when its 20-year authorization expired in 1811, renewal failed by a single vote in each house. The constitutional and political divisions proved unbridgeable despite the Bank's generally competent operation. Americans had rejected centralized banking on principle, regardless of performance.

Jackson's Democratic Revolt: The Second Bank

The War of 1812's chaotic financing without a central bank led Congress to charter the Second Bank of the United States (1816-1836) with similar structure but larger scale—$35 million capitalization and branches nationwide.

Initially badly mismanaged under William Jones (1816-1819), contributing to the Panic of 1819, the Bank was reformed under Nicholas Biddle's management from 1823. It functioned as an effective central bank, stabilizing currency and facilitating economic growth.

Yet President Andrew Jackson vetoed its recharter in 1832, then removed federal deposits in 1833, effectively killing it before the charter expired. Jackson's July 10, 1832 veto message framed the battle in democratic terms that resonate today:

"It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes... when the laws undertake to add to these natural and just advantages artificial distinctions... to make the rich richer and the potent more powerful, the humble members of society—the farmers, mechanics, and laborers—who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government."

Jackson's specific objections included monopoly privilege granted to private interests, foreign ownership (European investors held significant shares), political corruption (the Bank influenced elections and bought newspapers), unequal benefits favoring Eastern commercial elite over Western farmers, and constitutional concerns about federal power.

Henry Clay made Bank recharter the central issue in the 1832 presidential election. Jackson won overwhelmingly, declaring: "The Bank is trying to kill me, but I will kill it." When Bank President Biddle contracted credit to demonstrate the Bank's necessity, the move backfired—public backlash against Biddle reinforced Jackson's warnings about concentrated financial power.

The Bank's federal charter expired in 1836. It continued as a Pennsylvania state bank until failure in 1841. Americans had rejected centralized banking twice in 45 years.

Government Intervention, Not Market Failure

The conventional narrative holds that 19th-century financial panics—particularly 1873, 1893, and 1907—demonstrated free markets' inherent instability, necessitating the Fed's creation. Historical examination reveals a different story: government interventions distorting market signals caused each crisis.

The Panic of 1873 followed massive railroad overbuilding fueled by federal subsidies. Between 1850 and 1871, Washington granted railroads 175 million acres—an area larger than Texas—plus $64 million in direct subsidies and generous per-mile construction payments ranging from $16,000 to $48,000 depending on terrain, according to economic historian Robert Fogel's research.

This intervention eliminated normal market risk assessment, encouraging speculative construction of routes chosen for maximum subsidy rather than economic viability. When Jay Cooke & Company collapsed in September 1873 after financing the Northern Pacific Railroad (recipient of a 47 million-acre land grant), it triggered failures across railroad-dependent banks and a six-year depression.

James J. Hill's Great Northern Railway, built 1889-1893 entirely without government subsidies, provides the counterfactual. Hill carefully surveyed routes for actual economic demand, built incrementally as revenue justified expansion, and remained profitable through subsequent panics while subsidized competitors went bankrupt. His railroad never failed during his lifetime.

The Panic of 1893 resulted directly from the Sherman Silver Purchase Act of 1890, which required the Treasury to purchase 4.5 million ounces of silver monthly to satisfy mining interests and inflationists. This political intervention created monetary uncertainty about whether the dollar would remain gold-backed or shift to silver, triggering capital flight as European investors withdrew funds and domestic holders hoarded gold. Treasury gold reserves collapsed from $190 million in 1890 to $100 million by 1893, and 500 banks failed.

"The Sherman Silver Purchase Act was pure government intervention with no market origin," said George Selgin, director of the Cato Institute's Center for Monetary and Financial Alternatives. "It forced government to buy a commodity at above-market price, created monetary uncertainty, distorted the gold-silver relationship, and made dollar stability unpredictable."

The Panic of 1907 exposed how the National Banking Acts of 1863-1864 had created systemic fragility through mandated "reserve pyramiding." Country banks held reserves in city banks, which held reserves in New York banks, which lent those reserves in the stock market. This government-mandated structure meant any New York disruption affected the entire nation. When the Knickerbocker Trust failed in October 1907, the artificially inelastic currency system froze. The crisis was resolved only through private action—J.P. Morgan personally organizing a rescue operation, locking bank presidents in his library until they agreed to pool reserves.

The Canadian Alternative

Perhaps the most significant evidence against the "market failure" narrative comes from Canada, which operated without a central bank until 1935 yet proved far more stable than the United States throughout both the pre-Fed and early Fed periods.

During the Panic of 1893, zero Canadian banks failed. During the Panic of 1907, zero Canadian banks failed. From 1930 to 1933, while 9,000 of America's 25,000 banks collapsed, Canada's banking system survived intact, according to research by economists Michael Bordo, Hugh Rockoff, and Angela Redish published in the Journal of Economic History.

The critical difference wasn't central banking—Canada didn't have one. It was the absence of U.S. regulatory restrictions. Canada permitted nationwide branch banking, allowing major institutions like the Royal Bank and Bank of Montreal to operate hundreds of branches, diversify geographically, and shift capital from surplus regions to deficit regions. The United States prohibited or severely restricted branch banking through state laws protecting local monopolies while creating catastrophic geographic concentration risk.

"The U.S. unit banking system was a government-created disaster waiting to happen," Selgin said. "Canada proved you didn't need a central bank—you needed to remove government restrictions on natural market solutions."

The Federal Reserve: Third Time's the Charm?

The 1913 Federal Reserve Act echoed Hamilton's 1791 arguments: provide elastic currency, serve as lender of last resort, coordinate regional banks, and enable professional management. The opposition echoed Jefferson and Jackson: concentration of financial power, serving elite banking interests, enabling government deficit financing, and unconstitutional expansion of federal power.

The Jekyll Island meeting of 1910—a secret gathering of Senator Nelson Aldrich and major bankers who designed the Fed—confirmed Jackson's warnings about elite conspiracies to control national credit.

The Fed's structure attempts to balance competing concerns. The Board of Governors in Washington consists of seven members nominated by the president and confirmed by the Senate. Twelve regional Reserve Banks—each a corporation with nine directors providing business insights and regional perspectives—create what Willardson calls "a decentralized system consistent with the governance philosophies that underpin our country's formation."

"Congress wanted to make sure that regions across the country were directly represented in policymaking," Willardson explained. "This unique governance continues to this day—regional bank presidents rotating as voting members of the Federal Open Market Committee alongside the Board of Governors."

Yet the Fed's performance has been inconsistent, revealing fundamental fragility when success depends on leadership quality.

The Fed's Troubled Record

The institution created to prevent financial catastrophes presided over the worst economic collapse in American history less than two decades after its founding.

From 1929 to 1933, GDP fell 27%—far exceeding the 6-8% declines in pre-Fed panics. Unemployment reached 25%. Some 9,000 banks failed—36% of all banks. The stock market declined 89%. Wholesale prices fell 32%.

Milton Friedman and Anna Schwartz's definitive 1963 analysis, A Monetary History of the United States, concluded the Fed catastrophically failed by allowing the money supply to contract by one-third while standing passive as banks failed in waves. Then-Fed Governor Ben Bernanke acknowledged this in 2002 remarks honoring Friedman: "Regarding the Great Depression, you're right, we did it. We're very sorry."

The comparison to pre-Fed crises is stark. The Panic of 1873 produced a six-year depression with GDP falling roughly 7%. The Panic of 1893 lasted four years with GDP falling approximately 6%. The Panic of 1907 saw GDP fall about 8% with recovery within two years. The Great Depression required over a decade for recovery, with GDP falling 27%.

The inflation record is equally troubling. From 1870 to 1913 under the gold standard, average inflation was essentially zero—a dollar in 1870 purchased roughly the same goods in 1913, despite short-term volatility. Under Federal Reserve management from 1913 to 2023, average inflation has been 3.4% annually. A 1913 dollar now has approximately three cents of purchasing power—a 97% loss over 110 years, according to Bureau of Labor Statistics data.

"The Fed has been an inflation machine," said Judy Shelton, former Fed board nominee and senior fellow at the Independent Institute. "The gold standard provided long-term price stability. The Fed destroyed it."

This validates Jefferson's fundamental warning: paper money managed politically leads to inevitable depreciation, wealth transfer from savers to debtors (including government), and destruction of long-term economic calculation.

Leadership Dependency and Institutional Fragility

Fed performance has varied dramatically with leadership quality, revealing a fundamental problem: if central banking requires rare competence and political independence to function well, success is fragile and impermanent.

Benjamin Strong as New York Fed president (1914-1928) provided competent management, but his death in 1928 left a leadership vacuum. The subsequent Fed leadership catastrophically mishandled the Depression's onset. Arthur Burns as chairman (1970-1978) accommodated political pressure, allowing inflation to accelerate. Paul Volcker (1979-1987) broke inflation despite political costs. Alan Greenspan (1987-2006) presided over the Great Moderation but also enabled the housing bubble through excessively low rates in 2003-2004.

"The Fed's performance is only as good as its current leadership," said Allan Meltzer, whose comprehensive History of the Federal Reserve documents policy mistakes across administrations. "An institution that requires finding superhuman wisdom every few years isn't a reliable foundation for monetary stability."

Current Chairman Jerome Powell has faced criticism from both sides—accused by progressives of raising rates too aggressively and by conservatives of keeping them too low for too long, contributing to 2021-2022 inflation reaching 9.1%, the highest since 1981.

The pattern Jackson identified—unelected financial officials making consequential decisions without democratic accountability—persists. Fed chairs wield enormous economic influence without facing voters. The 1970s showed political pressure can corrupt expert judgment. Recent debates question whether Fed decisions contributed to inflation or whether criticism reflects the impossible position of satisfying contradictory demands.

The Post-WWII Performance: Attribution Disputed

The Fed's post-World War II performance improved, particularly during the "Great Moderation" from 1984 to 2007, when GDP volatility declined and recessions became shorter and milder. But attributing this solely to Fed competence is problematic, according to Christina Romer, professor of economics at the University of California, Berkeley, and former chair of President Obama's Council of Economic Advisers.

"Multiple factors contributed to post-war stability—FDIC deposit insurance, automatic stabilizers like unemployment insurance, structural economic changes, and improved data collection enabling better policy responses," Romer said. "The Fed deserves some credit, but isolating its contribution from everything else is extremely difficult."

The 2008 financial crisis, which the Fed failed to foresee despite regulatory authority over major banks, suggests the Great Moderation owed substantial debt to fortunate circumstances. The Fed's subsequent unprecedented response—zero interest rates, $4.5 trillion balance sheet expansion through quantitative easing, and support for money market funds and corporate bonds—prevented immediate collapse but created new problems including asset price inflation and wealth inequality.

"The Fed took unprecedented action in 2008 and more recently during the pandemic," Willardson noted. "These actions will be used forcefully, proactively, and aggressively until we are confident we are solidly on the road to recovery. Hamilton's early experiences with financial crises in the 1790s suggest he would support such aggressive intervention."

Yet this creates precisely the moral hazard Jackson warned about: powerful institutions backstopping connected interests, creating "too big to fail" expectations that encourage risk-taking while protecting large banks from market discipline.

The Constitutional Question Unresolved

The debate Hamilton and Jefferson began in 1791 has never been constitutionally settled—it was merely papered over through political victories that established precedent without resolving the underlying question of federal authority.

Hamilton's position that "necessary and proper" grants implied powers to achieve constitutional objectives (managing currency, regulating commerce, collecting taxes) prevailed in McCulloch v. Maryland (1819), when Chief Justice John Marshall endorsed broad construction: "Let the end be legitimate... and all means which are appropriate... are constitutional."

But legal victory didn't equal political legitimacy. Jackson ignored McCulloch, abolished the Second Bank anyway, and voters supported him overwhelmingly. Constitutional interpretation followed power rather than vice versa.

Jefferson's warning proved prescient: once you accept Hamiltonian broad construction for central banking, there's no logical limiting principle. Modern federal government authority—from Social Security to Medicare to EPA regulations—flows from the same implied powers doctrine that justified the First Bank.

"The Federal Reserve's constitutionality under original understanding remains disputed," said Randy Barnett, professor of constitutional law at Georgetown University. "It represents exactly the consolidated government Jefferson feared, justified by exactly the broad construction he opposed."

The Eurozone Parallel: Hamilton's Vision, Jefferson's Nightmare

The European Central Bank's struggles since the 2010-2012 sovereign debt crisis illuminate the unresolved tensions in American monetary union. The eurozone attempted monetary union (common currency) without political union (common fiscal policy)—exactly what the Articles of Confederation proved unsustainable from 1781 to 1789.

Greece's position in the eurozone closely resembles what California's would be if states had separate currencies. Both feature large public sectors, massive unfunded pension obligations, high taxation, regulatory costs, persistent deficits, and political systems resistant to reform.

If California had its own currency, it would likely inflate during boom years to finance spending without raising taxes, then devalue during recessions to maintain employment—gradually destroying currency value through inflate-devalue cycles. This is precisely Greece's position against Germany: unable to devalue, trapped in depression by austerity requirements, yet unable to restore competitiveness without devaluation.

The Federal Reserve provides California automatic benefits the ECB doesn't provide Greece. California banks access the Fed discount window without conditions—no "troika" of IMF/EU/ECB imposing austerity. Federal spending in California exceeds $240 billion annually through Social Security, Medicare, Medicaid, military spending, and other programs. During recessions, automatic stabilizers like unemployment insurance surge, and California becomes a net recipient of federal transfers rather than contributor.

California borrows in dollars and repays in dollars with no devaluation risk. Greek bonds trade with huge spreads over German bunds because investors fear forced conversion to a new drachma at a devalued rate. FDIC guarantees California bank deposits, preventing runs. Eurozone deposit insurance remains incomplete despite the 2012-2014 banking union.

"California isn't Greece because Hamilton's vision was fully implemented," said Barry Eichengreen, professor of economics at Berkeley and author of Golden Fetters on the interwar gold standard. "Political union preceded monetary union. Europe tried the opposite and discovered it doesn't work."

ECB President Mario Draghi's July 2012 promise to do "whatever it takes" to preserve the euro—which ended the crisis by promising unlimited bond purchases—illustrated the institutional contradiction. The Fed openly purchases Treasury bonds with no constitutional question because political union exists. ECB bond purchases arguably violated its charter against monetary financing of governments, leading to challenges in German Constitutional Court.

The eurozone faces an impossible trilemma: it cannot simultaneously maintain monetary union (common currency), fiscal independence (each country runs its own budget), no bailouts (each country bears its own risk), and free capital flows (money moves without restriction). Something must give.

"The euro either evolves toward federal system like the U.S., which is politically unacceptable to member states, or it eventually fragments during a future crisis," said Ashoka Mody, former IMF deputy director and author of EuroTragedy. "Halfway houses are inherently unstable."

The Ratchet Effect: Government Failure Blamed on Markets

The pattern that created the Federal Reserve continues today: government interventions cause instability, which is then blamed on "market failure," justifying additional intervention that creates new problems while never removing the original harmful intervention.

Unit banking laws created bank fragility, leading to deposit insurance and the Fed, which created moral hazard and too-big-to-fail, leading to Dodd-Frank and increased regulation, which concentrated the industry further. Fed easy money contributed to the housing bubble, the crisis was blamed on insufficient regulation, leading to more Fed authority, which was used to inflate asset prices benefiting the wealthy.

"It's a perpetual ratchet toward centralization," Selgin said. "Each crisis produces more government intervention. Failures of intervention get blamed on insufficient intervention. Never do we ask whether the original intervention caused the problem."

The 2008 financial crisis narrative—mainstream economists blame market failure in subprime mortgages and derivatives—obscures government's role through Community Reinvestment Act pressure, Fannie Mae and Freddie Mac subsidies, Fed interest rates kept at 1% from 2003-2004, Basel capital rules encouraging mortgage-backed securities, and too-big-to-fail expectations encouraging risk-taking.

Hamilton vs. Jefferson: Who Was Right?

After 232 years of central banking attempts across three iterations, the evidence suggests both Hamilton and Jefferson identified real problems while offering incomplete solutions.

Hamilton's predictions that proved correct:

• Modern economies need sophisticated financial institutions (though markets created these in Scotland and Canada without central government banks)
• Central coordination can stabilize currency during crises (when leadership is competent)
• Government needs fiscal agent for debt management (though whether government should run permanent deficits requiring such management remains contested)

Jefferson's predictions that proved correct:

• Central bank enables government deficit spending (federal debt exploded from $1 billion in 1913 to $35+ trillion today)
• Paper money leads to inflation (97% purchasing power loss under Fed vs. stable prices under gold standard)
• Concentrated financial power serves elite interests (2008 bailouts, QE inflating asset prices helping wealthy, revolving door between Fed and Wall Street)
• Broad constitutional construction leads to unlimited government (modern federal authority flows from same implied powers doctrine)
• Banking power corrupts politics (Fed influences elections through monetary policy timing, regulatory capture, large bank lobbying)

Jackson's predictions that proved correct:

• Unelected financial officials wield excessive power (Fed chairs arguably more economically powerful than presidents)
• Central bank privileges connected interests (too-big-to-fail protects large banks differently than small banks)
• Foreign influence in American finance (foreign central banks hold enormous Treasury securities)
• Monetary expansion benefits rich over poor (asset price inflation from QE helped wealthy enormously, wage earners less so)
• "Monster" bank becomes politically untouchable (despite failures, Fed's abolition is politically inconceivable)

The Honest Assessment

After 232 years of central banking attempts across three iterations—the First Bank (1791-1811), Second Bank (1816-1836), and Federal Reserve (1913-present)—the United States has proven one thing conclusively: the question is never settled because it reflects unresolvable tension between competing values.

Hamilton's vision of expert management, national consolidation, and active government versus Jefferson's vision of limited government, hard money, and state sovereignty versus Jackson's vision of democratic accountability and opposition to elite privilege—none has monopoly on truth.

Hamilton was right that modern economies need sophisticated finance. Jefferson was right that centralized power corrupts and inflates. Jackson was right that concentrated financial power serves elite interests.

The Federal Reserve's clear failures: presiding over the Great Depression (worse than any pre-Fed panic), destroying price stability through 97% currency devaluation, contributing to repeated asset bubbles, creating too-big-to-fail moral hazard, and enabling federal deficit spending that has produced $35 trillion national debt.

The Fed's partial successes: classic banking panics decreased (though FDIC deserves substantial credit), post-WWII recessions became shorter and milder (attribution disputed among multiple factors), crisis response capability in 2008 and 2020 prevented immediate collapse, and it provides coordination for the financial system during stress.

The Canadian experience from 1817 to 1935 suggests alternatives existed. Canadian banking stability without a central bank, achieved through permitting nationwide branch banking and avoiding U.S. regulatory restrictions, proves the problems attributed to market failure were substantially government-caused.

"The case for the Federal Reserve rests on misdiagnosing government failures as market failures, then proposing more government intervention to fix problems government intervention created," said Jeffrey Rogers Hummel, professor emeritus of economics at San Jose State University and author of research on U.S. monetary history. "This pattern continues today."

The eurozone's struggles demonstrate these tensions persist across time and geography. Monetary union without political consensus breeds instability whether in 1830s America or 2020s Europe. The question isn't whether the Federal Reserve is perfect—obviously not—but whether we've learned anything from abolishing central banks twice before, or whether we're trapped in eternal recurrence of creating, criticizing, and recreating the same institution under different names.

Thomas Jefferson warned in 1816: "I sincerely believe that banking establishments are more dangerous than standing armies." Andrew Jackson declared in his 1837 farewell address: "The paper money system and its natural associations—monopoly and exclusive privileges—have already struck their roots deep in the soil; and it will require all your efforts to check its further growth and to eradicate the evil."

As Willardson noted, "Hamilton's legacy of public service is instilled in the Federal Reserve today. We're here to serve the public by pursuing a growing economy and a stable financial system that work for all of us." Yet whether that public service actually serves the public interest, or primarily benefits connected elites as Jefferson and Jackson warned, remains the central question after 232 years.

The Federal Reserve's 110-year record suggests their warnings remain relevant. Whether Americans will heed them in the next crisis, or repeat the pattern a fourth time, remains to be seen.

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Sources

Primary Historical Documents:

1. Hamilton, Alexander (1790). "Report on a National Bank." Papers of Alexander Hamilton, Volume 7. National Archives. https://founders.archives.gov/documents/Hamilton/01-07-02-0229

2. Jefferson, Thomas (1791). "Opinion on the Constitutionality of a National Bank." February 15, 1791. Library of Congress. https://www.loc.gov/item/mtjbib000016/

3. Jackson, Andrew (1832). "Veto Message Regarding the Bank of the United States." July 10, 1832. Yale Law School Avalon Project. https://avalon.law.yale.edu/19th_century/ajveto01.asp

4. Jackson, Andrew (1837). "Farewell Address." March 4, 1837. Miller Center, University of Virginia. https://millercenter.org/the-presidency/presidential-speeches/march-4-1837-farewell-address

Supreme Court Cases:

5. McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819). https://supreme.justia.com/cases/federal/us/17/316/

Academic Books:

6. Friedman, Milton, and Anna Jacobson Schwartz (1963). A Monetary History of the United States, 1867-1960. Princeton University Press.

7. Meltzer, Allan H. (2003). A History of the Federal Reserve, Volume 1: 1913-1951. University of Chicago Press.

8. Hammond, Bray (1957). Banks and Politics in America from the Revolution to the Civil War. Princeton University Press.

9. Rothbard, Murray N. (2002). A History of Money and Banking in the United States: The Colonial Era to World War II. Ludwig von Mises Institute. https://mises.org/library/history-money-and-banking-united-states-colonial-era-world-war-ii

10. Remini, Robert V. (1967). Andrew Jackson and the Bank War. W.W. Norton & Company.

11. Eichengreen, Barry (1992). Golden Fetters: The Gold Standard and the Great Depression, 1919-1939. Oxford University Press.

12. Timberlake, Richard H. (1993). Monetary Policy in the United States: An Intellectual and Institutional History. University of Chicago Press.

13. Selgin, George A. (1988). The Theory of Free Banking: Money Supply under Competitive Note Issue. Rowman & Littlefield.

14. White, Lawrence H. (1984). Free Banking in Britain: Theory, Experience and Debate, 1800-1845. Cambridge University Press.

15. Mody, Ashoka (2018). EuroTragedy: A Drama in Nine Acts. Oxford University Press.

16. Sylla, Richard, and David J. Cowen (2018). Alexander Hamilton on Finance, Credit, and Debt. Columbia University Press.

17. Chernow, Ron (2004). Alexander Hamilton. Penguin Press.

Academic Journal Articles:

18. Bordo, Michael D., Hugh Rockoff, and Angela Redish (1994). "The U.S. Banking System from a Northern Exposure: Stability versus Efficiency." Journal of Economic History, 54(2), 325-341. DOI: 10.1017/S0022050700014467

19. Romer, Christina D. (1989). "The Prewar Business Cycle Reconsidered: New Estimates of Gross National Product, 1869-1908." Journal of Political Economy, 97(1), 1-37. DOI: 10.1086/261588

20. Calomiris, Charles W., and Gary Gorton (1991). "The Origins of Banking Panics: Models, Facts, and Bank Regulation." In Financial Markets and Financial Crises, edited by R. Glenn Hubbard, 109-174. University of Chicago Press.

21. Bordo, Michael D., and David C. Wheelock (2013). "The Promise and Performance of the Federal Reserve as Lender of Last Resort 1914-1933." In The Origins, History, and Future of the Federal Reserve: A Return to Jekyll Island, edited by Michael D. Bordo and William Roberds, 59-98. Cambridge University Press.

Federal Reserve and Government Sources:

22. Bernanke, Ben S. (2002). "Remarks at the Conference to Honor Milton Friedman." University of Chicago, November 8, 2002. Federal Reserve Board. https://www.federalreserve.gov/boarddocs/speeches/2002/20021108/

23. Willardson, Neil (2020). "Hamilton, Central Banking Then and Now." Federal Reserve Bank of Minneapolis, Conversations with the Fed series. https://www.minneapolisfed.org/

24. Board of Governors of the Federal Reserve System. "Federal Reserve Statistical Release H.4.1: Factors Affecting Reserve Balances." https://www.federalreserve.gov/releases/h41/

25. Board of Governors of the Federal Reserve System. "The Federal Reserve System: Purposes & Functions." https://www.federalreserve.gov/aboutthefed/pf.htm

26. Bureau of Labor Statistics. "Consumer Price Index Historical Data (1913-2023)." U.S. Department of Labor. https://www.bls.gov/cpi/

27. National Bureau of Economic Research. "US Business Cycle Expansions and Contractions." https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions

European Central Bank:

28. Draghi, Mario (2012). "Speech at the Global Investment Conference." London, July 26, 2012. European Central Bank. https://www.ecb.europa.eu/press/key/date/2012/html/sp120726.en.html

29. European Central Bank. "The ECB's Monetary Policy Strategy Statement." June 2021. https://www.ecb.europa.eu/home/search/review/html/index.en.html

Contemporary Analysis:

30. Federal Reserve Bank of St. Louis. "FRED Economic Data." https://fred.stlouisfed.org/

31. Congressional Research Service (2023). "Introduction to Financial Services: The Federal Reserve." Updated January 2023. https://crsreports.congress.gov/

Historical Economic Data:

32. Historical Statistics of the United States: Colonial Times to 1970. U.S. Census Bureau. https://www.census.gov/library/publications/1975/compendia/hist_stats_colonial-1970.html

33. Reinhart, Carmen M., and Kenneth S. Rogoff (2009). This Time Is Different: Eight Centuries of Financial Folly. Princeton University Press.

Note: All URLs were verified as of February 2026. Historical documents are available through multiple archives; primary sources cited from National Archives, Library of Congress, and academic repositories. Economic data compiled from Federal Reserve Economic Data (FRED), Bureau of Labor Statistics, and academic research. Some historical GDP estimates are retrospective constructions by economic historians and carry margins of error.