State vs. National: A Brief History of America's Bank Chartering System

• Summary: A satire on Andrew Jackson's campaign to destroy the Bank of the United States and its support among state banks. The largest of the heads is president of the BUS Nicholas Biddle's, which wears a top hat labeled "Penn" (i.e. Pennsylvania) and "$35,000,000." This refers to the rechartering of the BUS by the Pennsylvania legislature in defiance of the administration's efforts to destroy it. From LOC.gov

Today most of us outside the banking industry don't know the difference between a national and a state bank charter, or why some banks have national in their name, others state. Our forefathers knew this difference very well.

On Presidents Day we commemorate the birth of two of our nation's great leaders, George Washington (born on February 22) and Abraham Lincoln (born on February 12). The years between their presidencies (1791-1865) were marked by a battle to define America; where the sovereignty of states ends, and the power of the federal government begins.  This battle was also waged in the arena of banking.

America's experiment with a national bank began with the first Administration. In 1791, Secretary of the Treasury Alexander Hamilton (who founded the Bank of New York in 1784) successfully argued before Congress and the President, that even though the Constitution did not expressly permit the federal government to form a corporation such as a national bank, it provided for the federal government to administer laws that were "necessary and proper" to the functioning of the nation.

His political rival, Thomas Jefferson, staunchly disagreed arguing a national bank was convenient but not necessary, and characterizing the banking industry as "an infinity of successive felonious larcenies." Jefferson, and later the Democratic-Republican party he founded, feared a national bank would lead to an encroachment on states rights.

Jefferson won the White House in 1800, and his party kept it through 1825. They let the charter for the Bank of the United States lapse in 1811. (They destroyed support for a national banking in more ways than this. In July 1804, Jefferson's Vice President Aaron Burr killed Alexander Hamilton in a duel.)

National banking was revived when President James Monroe signed the charter for a Second Bank of the United States, in 1816, in an effort to fund the War of 1812.

In 1817, the Second Bank opened a branch in Baltimore. The state of Maryland promptly passed a "tax on all banks, or branches thereof, in the State of Maryland, not chartered by the legislature." James William McCulloch, head of the Baltimore branch, refused to pay the tax. McCulloch and the Second Bank were sued, and eventually the case went to the Supreme Court where Maryland argued not only that the tax was legal, but that the Second Bank was unconstitutional, since the constitution itself never mentions banking.

The Supreme Court, lead by Chief Justice John Marshall, unanimously found in favor of Hamilton's original argument, and in the constitutionality of a national bank (and the unconstitutionality of a state taxing a federal entity). In so doing, "John Marshall established the reality and vitality of the Federal Government," said the Judicial Conference of the United States in a 1977 film about the case.

When the Supreme Court decision came down, Southern papers wasted little in expressing their deep discontent. (The battle for banking tended to fall on sectional lines, with the slave-holding South preferring state banks, and the abolitionist North national.) The Richmond Enquirer ran an exposition "of the alarming errors of the Supreme Court of the United States in their late interpretation of the Constitution...Wherever states rights are threatened or invaded, Virginia will not be the last to sound the tocsin."

Just twelve years later, national banking was again on the chopping block, when President Andrew Jackson (a Jeffersonian Democrat), vetoed the charter for the Second Bank of the United States. His justification for so doing was again steeped in states rights, writing "the powers and privileges possessed by the existing bank are unauthorized by the Constitution, subversive of the rights of the States, and dangerous to the liberties of the people."

John Marshall, a soldier at the Valley Forge encampment during the Revolutionary War, was a passionate advocate for federal authority, as he experienced first-hand the limits of state fidelity. With the McCulloch vs. Maryland decision, the Supreme Court had "made certain that the whole would never again be endangered by a lack of cooperation from its parts," wrote the Judicial Conference of the United States.

Not even the Supreme Court, however, could stem the tide of states succession, and the parts did indeed endanger the whole again in 1861.

Included in President Lincoln's efforts to heal the country from its Civil War, was the 1863 National Bank Act, a re-instatement of a national banking system. He went so far as to try to eliminate state banks altogether, by imposing a 10% tax on their bank notes. "That the Government and the people will derive great benefit from this change in the banking systems of the country can hardly be questioned," Lincoln said in his 1864 State of the Union.

Through sheer force of will--and the invention of demand deposits to replace bank notes as a source of bank funding--state-charted banks survived this tax, and continue to this day. As of September 30, 2013 (the latest data available) the FDIC lists 1,699 national banks and 5,192 state banks.

America the Binary? Chang and Eng and the Election of 1824

"Siamese Twins," Brothers Chang and Eng Bunker, a symbol of America?

At protests, we often hear the phrase "the people united will never be defeated." But in America, we are wise to remember another phrase: "never say never."

Take the election of 1824. While first thought to unify the country, America's brief experiment with a one party system (1818-1824) led to a un-popular conclusion in 1824. With all four candidates representing the same party, the Democratic-Republicans, none received a majority of the electoral votes, and the US House of Representatives was left to decide.

Despite receiving a plurality of both the popular (43%) and electoral votes (99), General Andrew Jackson was defeated by his runner up, John Quincy Adams. Under what Jackson supporters later dubbed the "corrupt bargain," Congress elected Adams to be the sixth President of the United States on February 9, 1824.

Jacksonians were furious, and within months had nominated him to be the1828 presidential candidate (Hilary, what's the hold-up?).

During JQA's one-term Presidency--which was mostly marred with malevolence--the Chang and Eng Bunker Brothers, "Siamese Twins" born in Taiwan, first came to the United States in 1827. These conjoined twins would later reside in Mt. Airy, North Carolina, own slaves, and father 11 and 12 children respectively (with two different wives). In many ways, they were also a sign of the times, of America's unfolding, interdependent duality.

The controversial 1824 election paved the way for our two party system, with the Jacksonian faction becoming the modern Democratic Party, and the Adams faction absorbed by the National Republicans (aka Whig Party).

Culturally, the Adams/Jackson rematch in 1828 was a battle between America's emerging extremes. Adams hailed from the North (Massachusetts) Jackson from the South (Tennessee). Adams was from a long line of aristocrats, Jackson was born in poverty.

Jackson was charismatic, Adams dull. The son of the second President, John Adams' detractors called him "a chip off the old iceberg."

Adams was academic, Jackson a man of action. “J. Q. Adams can write” one slogan read, “Andy Jackson can fight”.

Adams was stately, Jackson characterized as a brute. Henry Clay once quipped "killing 2500 (?!) Englishman at the Battle of New Orleans" did not qualify Jackson for "the various difficult and complicated duties of the chief magistrate."

Adams was a deeply religious man, Jackson prone to vice. During the 1828 election, Adams supporters discredited Jackson for living with his wife before she was legally divorced from her first husband.

And where Adams favored a National Bank, Jackson pushed for independent state banks. Jackson won the election of 1828 by a landslide, and the dream of national banking was buried until the Republican, President Abraham Lincoln, signed the National Bank Act in 1863. (Today America is the only major economy that has a dual banking system, one that charters both state and national banks.)

Many of the Jackson and Adams' battles are echoed in today's cultural conversations. But today we have a new way to describe our binary nature: Red vs Blue.

Listen to a campaign song, "Hunters of Kentucky, or Half Horse and Half Alligator (another beautiful binary!)," sung by Jackson supporters in the 1824 election. It glorifies Andrew Jackson at the Battle of New Orleans.

Good Intentions, Bad Results: Lessons from the Panic of 1826

They say the road to hell is paved with good intentions. In 1825, to deal with the "Indian Problem," the US Congress formed a region known as "Indian Country," lands West of the Mississippi (today Oklahoma). Their intentions were good.

"The removal of the tribes from the territory which they now inhabit would not only shield them from impending ruin, but promote their welfare and happiness," President James Monroe told Congress on January 27. He went so far as to say that without a defined Indian country "their degradation and extermination will be inevitable."

It's heartening to know that at least some of the President's contemporaries could see through his good intentions. New York County District Attorney Hugh Maxwell and twelve other prominent New Yorkers wrote in a pamphlet published in1825 that "the American Indians, now living upon lands derived from their ancestors and never alienated or surrendered, have a perfect right to the continued and undisturbed possession of these lands," and the "removal of any nation of Indians from their country by force would be an instance of gross and cruel oppression."

History was not on Mr. Maxwell's side, nor with his attempts to reform the financial industry a few years later. His prosecution of the Life & Fire Insurance Company, whose owners Jacob Barker, et al perpetuated a fraud that led to the Panic of 1826, resulted in a hung jury. (Eventually, Mr. Maxwell's efforts did lead to comprehensive reform, including: financial reporting requirements, accounting standards, and defined roles & responsibilities for directors, according to Professor Eric Hilt in a paper about the Panic of 1826.)

Mr. Maxwell's rationality was no match for his era's good intentions. For what lead Life & Fire's directors to commit fraud in the first place was in part driven by a desire (so they claimed) to extend credit to high-risk borrowers being ignored by traditional banks. When those borrowers started to default en masse, fraud appeared to be the only way to repay their investors, but unfortunately, even that didn't work.

Why was an insurance company doing a bank's work? In the 19th century, banking was the most profitably industry in America, and incumbent banks fought hard to protect their profits. To open a new one involved special-act charters and bitter legislative battles. Would-be owners required both political and financial capital, which few had in equal measure.

Enterprising merchants like Mr. Barker started circumventing these laws by forming insurance companies whose charter empowered them to lend their capital. In so doing, they created a new financial product called a post note. A typical post note transaction went as follows: a borrower approached an insurance company and requested a six-month IOU of $1000, minus a discount of say 3%. The borrower would then sell the discounted $970 post note on the money market, also paying a discount to the post note purchaser of say $30, receiving $940 in cash.

After six months, the borrower would repay the insurance company's IOU of $1000. The insurance company would repay the money market investor's post note of $970, yielding a $30 profit for both the insurance company and the investor.

While rates and terms varied, it was not unusual for post notes to trade at yields of 2 percent per month or more, compared to banks that were lending at yields of five percent per year, Professor Hilt's research found. Needless to say, these products were very profitable as long as default rates were low.

But higher yield meant higher risk, since borrowers who sought out post notes did so because they did not qualify for the less expensive credit from traditional banks. Despite their dubious quality, the corporate guaranty by the insurance company created a sense that the investments were safe. This combination of high yield and seemingly low risk sparked a credit boom.

"The judge the lawyer the doctor the clergy the widow the trustee of orphans all fell into the common vortex of investing in these bonds," Life and Fire Insurance Company director Jacob Barker wrote in a letter in 1827.

Like post notes, what made sub-prime mortgage-backed securities (MBS) so attractive to investors during the boom years was their high yield and perceived low risk. Unlike 1826, where the secondary market was created by the private sector, our government in many ways created the secondary market that gave sub-prime loans both the cash and perceived safety they needed to expand.

This was all done with good intentions. Looking to increase the homeownership rate and "foster affordable housing," the Housing and Urban Development (HUD) department issued regulations that required 55% of all government sponsored entities (GSEs) to purchase "affordable" loans from banks, either directly or through packaged MBS.

Most of these "affordable" loans were in fact sub-prime, "for persons with blemished or limited credit histories," and "carry a higher rate of interest than prime loans to compensate for increased credit risk," according to HUD.gov. In 2009, forty percent of mortgages were sub-prime according to Forbes.com.

By WTBrooks via Wikimedia Commons

By 2007, Fannie Mae and Freddie Max held $227 billion (one in six loans) in nonprime (aka subprime) pools, and approximately $1.6 trillion in low-quality loans altogether, according to Forbes.com and the Congressional Budget Office (CBO).

Value of mortgage-backed security issuances in $USD trillions, 1990-2009.
source: Congressional Budget Office (CBO)

"That was a huge, huge mistake," said Patricia McCoy, who teaches securities law at the University of Connecticut. "That just pumped more capital into a very unregulated market that has turned out to be a disaster."

Nonetheless, when the crisis hit in the Fall 2008, the financial world seemed to be blind-sided. "It's a new financial world on the verge of a complete reorganization," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.

But was it a new financial world? In many ways, looking back to the Panic of 1826, we see ourselves looking back at us. Both were defined by financial innovations that seemed to defy the natural law of risk and reward, by promising a high yield and low risk. Both crises fooled investors into believing that transferring risk is the same thing as removing it. Both crises were made worse by the good intention that lending money to people who can't pay it back is good for society. Both crises proved it's not.

In our time, the implosion of the subprime lending market "has left a scar on the finances of black Americans," the Washington Post reported in 2012, "that not only wiped out a generation of economic progress but could leave them at a financial disadvantage for decades." (HUD.gov studies reveal that African-Americans are one-and-a-half times more likely to have a subprime loan than persons in white neighborhoods.)

Like the comprehensive financial reforms made after the 1826 panic, we can be reasonably sure that the numerous reforms issued after our own will fail to avert another crisis. This is because financial regulation cannot address the cause of financial crises that lives in our mirror. As long as there are borrowers who can't see through good intentions, and take on more debt then they can repay, there will be financial crises.

Real financial reform means living within our means, and abiding by the natural law of risk and reward. With the rising default rate on student loans, the increasing popularity of sub-prime auto loans, I fear that we have not yet learned our lesson. I'm confident we will eventually, but like our predecessors, it may have to be the hard way.

*

"Daddy Warbucks," the Treaty of Versailles and Forming the Federal Reserve

PAUL M. WARBURG at the 1ST PAN AMERICAN FINANCIAL CONFERENCE, WASHINGTON, D.C., MAY 1915. 

On January 19, 1920, newspapers around the country were chronicling the US Senate's debate--for the second time--on whether to officially end war with Germany, ratify the Treaty of Versailles and join the League of Nations. In favor of ratification was a German emigre-turned-American-banker, Paul M. Warburg.

Echoing some of today's debates on Iraq, Warburg argued that by playing a part in the war, we had a moral responsibility in ensuring the peace. "There are many who, disgusted and disheartened, believe that we should wash our hands of Europe, and leave her to iron out her own affairs. It is too late for that. Europe relies on us," wrote Warburg in 1919.

And we relied on Europe, at least when it came to designing our modern banking system. Before advocating for world peace, Mr. Warburg was an advocate for centralized banking in the US. A descendant of a prominent German banking family, Mr. Warburg moved across the pond in 1895 after marrying into a prominent American banking family. Having an intimate view into both systems, he found the US uncharacteristically behind the times.

In a 1907 article printed in the New York Times, Warburg wrote that the American system was "in fact at about the same point that had been reached by Europe at the time of the Medicis, and by Asia, in all likelihood, at the time of Hammurabi." (Ouch!)

The European and Asian systems facilitated an elastic currency, Warburg said, "that follows the requirements of commerce." The United States' decentralized system, on the other hand, maintained an inelastic currency based on 6500 banks. "Under present conditions, instead of sending an army we send a soldier in to fight alone."

In passing the Federal Reserve Act of 1913, we heeded Warburg's advice and joined the league of centralized banking.  When it came to joining the League of Nations, however, we ignored the ex-German and soldiered it alone.

The purported inspiration for the "Daddy Warbucks" character in the Little Orphan Annie story, one could say Mr. Warburg was the father of our modern banking system. And in the hard-knocked world of finance, Warburg taught us that we shouldn't have to reinvent the wheel.

"I think that we are greatly mistaken if we believe that our country is so entirely different from all others that we should continue to do the opposite of what is done by them, while the system of all other important nations has proved to be excellent, and ours has proved to be defective."

I wonder what Mr. Warburg would think of today's healthcare system...

Banker's Notes cannot resist the convergence of banking and music, so let's enjoy Hard Knocked Life from the 1982 movie Annie, shall we?  At YouTube here >> http://youtu.be/-0bOH8ABpco



PS: In refusing to join the League of Nations, Senate Republicans used for the first time the "cloture," a procedural tool originally advocated by President Woodrow Wilson that allows Senators to place a time limit on the debate of a bill. Senate Republicans used the cloture against President Wilson to end debate on the Treaty, which eventually lead to its first rejection, on November 19, 1919.

In today's bipartisan bitterness, the cloture is still a favorite tool used by Republicans. Rachel Maddow found that the113th Congress is on track to be the most "do nothing" Congress in history in part because of Republican's frequent deployment of the tool. Of 2013's 64 roll call votes, the cloture was invoked more than the combined total of 1917 to 1978.

Banker's Notes 2013: Top 10 Best, Worst and Lessons Learned

In its inaugural year, Banker's Notes experienced the bliss of briefly going viral as well as the bust of boring posts. Below is the Banker's Notes Top 10 Best, Worst and Lesson Learned from 2013.

1) Most Insightful Commentary: Thank you +David Rider! 

BNer David Rider blessed Banker's Notes this year by not only reading the posts, but thoughtfully commenting, as in this one after the Panic of 1907 article:

2) Most Fun Email Received in Response to a Post: +Julie Kinloch and JP Morgan Jr Fights for his Life with the Help of His Powerful Wife, posted Sep 8

This post, detailing the failed assassination attempt on banker JP Morgan Jr, inspired the most interesting emails, such as this one from Julie Kinloch: "that one was fuckin fabulous and i love how he was wielding a pistol and a PhD from Cornell."


3) Most Supportive Parents: +Bill and Julie Wick

I want to give a shout out to my parents who not only signed up to receive (and consistently read!) Banker's Notes, but also recruited several of you to join as well. Thank you Mom and Dad!

4) Oldest Friend Reconnection: +Christine Cadrecha

Through Banker's Notes, I was able to reconnect with perhaps my oldest friend in the world, my one-time neighbor Christine Cadrecha. When we lived down the street from each other in Burlington, Vermont, we used to play pool in her basement and then swim in the pool in her backyard. Now we wade in the pool of the healthcare debate, thanks to the Banker's Notes post about the birthday of economist Kenneth Arrow, who said "There's really no logical relation whatever between employment and health care..."

5) Most Corrected Post: Federal Credit Union Act is Passed, posted Jun 25

In this post, I think I let my personal feeling that credit unions should be taxed just like banks cloud my reporting. Thankfully, I received this corrective comment from a careful reader who randomly found Banker's Notes. Our exchange is below:

6) Most Google+ Recommendations: Panic of 1907 vs. Crisis of 2008, posted Nov 18

This essay was inspired by a speech by +Ben Bernanke, and it not only received the most recommendations, it was also re-posted on the website StrategyDriven.com. One of the longer BN posts, it showed me that telling how we got to where we are, even on the dry topic of central banking, can be interesting and not just to me!

This post also benefited from a retweet from New Jersey banker +Jeff Marsico.

7) Most Community Building: Wilmington Coup D'Etat, posted Nov 10

While this post did not receive many pageviews, it demonstrated the power of the internet to build community. Through it, I was introduced to Wilmington filmmaker Chris Everett who is creating a documentary on the Wilmington Coup D'Etat. You can learn more about his film "Wilmington on Fire" and his kickstarter campaign here.

8) The Best: The Alaska Appropriations Affair, posted Oct 20

This story about the House of Representatives' refusal in the 1860s to pay Russia for our purchase of Alaska (even after we celebrated its inclusion as a US territory) received the most pageviews.

I think what made this post the most popular was the strong link between historical and current events. When it posted, our government had just shutdown because Congress had similarly refused to pay for ObamaCare even after the law's blessing by the Supreme Court.

This post also benefited from a retweet from +Alex Tabarrok, an economics professor at George Mason University and founder of the blog Marginal Revolution.

9) The Worst: Ad Man Bell Bernach: "The truth isn't the truth until people believe you", posted Aug 17

With three piddly pageviews (most likely all from me!), this story commemorating the birth of the inventor of the "Mikey" Life Cereal commercials was the least popular post. From this experience, I came to appreciate the wisdom of the ancient adage "embedded video does not an interesting post make." There are no shortcuts in blogging!

10) My Favorite Banker's Notes Post of 2013: Ship of Gold, posted Aug 24

I think my most favorite post of 2013 was the "Ship of Gold." This story delighted because when it came to a choice between life and money, survivors of this sinking ship chose life.

Did you have a favorite post this year?

If you have any thoughts on Banker's Notes--what worked well and especially what could work better in 2014--I hope that you will comment on this post, or email me!  Cara@bankersnotes.com

As always thanks for reading!

Banker's Notes will be back Sunday Jan 12 (I'm on a 10-day meditation retreat Dec 27-Jan 7). Until then, Happy New Year to you!

Love,
Cara

'Tis the Season for Opinons: Jefferson's Embargo Act of 1807

President Jefferson addressing a group of disgruntled men, as he defends the policy of his Embargo which, combined with the Non-Intercourse Act, was intended to bring about a suspension of foreign commerce. Circa 1808, from LOC.gov

In a December 20 op-ed posted on Forbes.com, commentators Mieke Eoyang and Gabriel Horwitz proclaimed our founding fathers would be "horrified" by the NSA's collection efforts. Specifically, that our third President would be "dismayed" that our government "was doing things that could hurt our competitiveness and our ability to set the terms of global trade."

Perhaps in hindsight, yes. But with the Embargo Act, signed into law on December 22, 1807, Thomas Jefferson did his part to both expand government and limit our global competitiveness.

A ban on trade between the United Kingdom and France was intended as a diplomatic response to these militarily-superior nation's flagrant refusal to honor US neutrality during the Napoleonic Wars. Instead of economic harm to our enemies, however, the policy inflicted a devastating burden on the U.S. economy, while managing only to postpone the war until 1812.

According to historian Leonard Levy, Jefferson's doctrinaire approach to enforcing the embargo violated his own commitment to limited government. It also had the pernicious effect of undermining American citizens' faith that their government could execute its own laws fairly, and strengthened the conviction among America's dissenters that her republican form of government was inept and ineffectual.

After just 15 months, the embargo was revoked on March 1, 1809, in the last days of Jefferson's presidency.

An opinion piece from the time, taken from the Library of Congress, reveals that expanded government--even when enacted by a cherished founding father!--is an idea whose unpopularity stands the test of time. Below one citizen expressed his frustration in an aa bb rhyming pattern. (Oh that all op-eds could be written in verse.)

A Poem about General Washington with Some Remarks on Jeffersonian Policy
Reprinted by Nathaniel Coverly, Boston 1807

But we must all forbear to sigh
Since WASHINGTON was born to die,
He ever was his country's friend
But Washington must have an end
And must it be since he is dead,
That all our happiness is fled;
Behold the dismal change of late,
See JEFFERSON in chair of state.

He took to presidential chair,
And then soon after we did hear,
Of his great doings, and his fame
He sent to France and fetch'd Tom Paine,
To give him counsel and advice
To buy Louisiana with great price,
For want of money sold our ships
I'm sure we all know how he nips

Gunboats--he then went and built
To save men's blood from being spilt
Poor things indeed we all do know,
That ne'er defend us from the foe,
He then exerted all his wits
And laid an embargo on our ships,
And for fear that we should trade
'Gainst Canada embargoes laid.

Great Washington our friend is dead
And Jefferson reigns in his stead,
Much reason then to mourn and sigh,
But Jefferson must die
A man he is a frail one too
At sad experience now doth shew
Then will forsake out present head
And chase a better in his stead.

Banker's Notes would like to wish all of you a very Happy Holidays, and say a big THANK YOU for blessing me by joining the Banker's Notes family this year.

With gratitude,
Cara

John Lennon Shot Outside The Dakota: Howard Cosell Reminds us "Football is just a game"

The Dakota, circa 1890

In the music world, December 8, 1980 is a truly infamous day. Beatles founder and writer of "Imagine," John Lennon was fatally shot by Mark David Chapman in front of Lennon's New York City apartment complex known as the The Dakota.

A born-again Christian, and former Beatles devotee,  Chapman came to view Lennon as a "phony" for imagining a world without possessions, but still having them. "There he was with millions of dollars and yachts and farms and country estates, [who] laughed at people like me who had believed the lies and bought the records and built a big part of their lives around his music," Chapman told his biographer Jack Jones.

Most people who live in the Dakota, however, have possessions. Completed in 1884, the Dakota was the first high-end apartment complex in the city. Its name was derived from its location, at the time a rural north west corner of Manhattan, "bound on the north and south by humble cottagers," considered as remote as the Dakota territory.

In the second half of the twentieth century, it was a haven for famous artists. Lately, though, they've let in a banker or two like Morgan Stanley CFO Ruth Porat.

Earlier this year, President Barack Obama considered nominating Porat as the next Deputy Secretary of the Treasury. It could be said that her possessions killed her nomination.

In March, the New York Times reported that Porat withdrew because she did not want to face questions about her finances, and suffer the kind of acrimonious confirmation process inflicted upon then Treasury Secretary-nominee Jack Lew. (Lew was scrutinized for receiving a bonus from Citigroup at the time the bank was receiving government bailout funds, according to Bloomberg news).

In July, Obama nominated Federal Reserve Board Governor Sarah Bloom Raskin to the deputy post.

Back on December 8, 1980, in breaking the Lennon news, Monday Night Football announcers Howard Cosell and Frank Gifford reminded us things are just things, football just a game.

Gifford: (whistle blows) John Smith is on the line. And I don't care what's on the line, Howard, you have got to say what we know in the booth.

Cosell: Yes, we have to say it. Football is just a game, no matter who wins or loses. An unspeakable tragedy confirmed to us by ABC News in New York City: John Lennon, outside of his apartment building on the West Side of New York City, the most famous perhaps, of all of The Beatles, shot twice in the back, rushed to Roosevelt Hospital, dead on arrival. Hard to go back to the game after that news flash, which, in duty bound, we have to take. Frank?

Gifford: (after a pause) Indeed, it is.

Kennedy and Lincoln, Oswald and Booth

Washington, D.C., May 1865. Spectators at side of the Capitol, which is hung with mourning crepe and has flag at half-mast.
From LOC.gov

In commemoration of the Kennedy assassination, the New York Times put together a wonderful interactive spread of their coverage following the events of November 22, 1963. It included remembrances of past assassinations (four total) including another time a slain President was replaced by a Johnson, on April 15, 1865.

The first President assassinated in office, Lincoln's murder was part of a conspiracy to depose all the leaders of the US government. There were six conspirators, but only two fulfilled their duties, and only two were killed as a result: Lincoln and Frederick William Seward, the son of the Secretary of State.

The country was devastated by the news. Headlines ran "The Great Calamity!" The New York Tribune reported, "every city was draped in mourning, every hotel and almost every house displaying crepe from the doors and windows."

While Lincoln was killed in a theater, Kennedy's assassin, Lee Harvey Oswald, was captured in one just hours after the act. It took eleven days, however, to capture Lincoln's assassin, John Wilkes Booth, who escaped on horseback.

Relying on word of mouth sitings, primarily from disbanded rebels, Booth was eventually tracked down on April 26, 1865 in Bowling Green, VA.

As the New York Daily Tribune reported, Booth was with his accomplice David C. Herold when they were surrounded in a barn.  Ordered to surrender, Booth declared that we would not be taken alive. So, the police decided to burn down the barn.

Once the first match was lit, Herold came out hands raised (he would later be hung for his crimes). Booth remained in the barn "for some time" but when he finally did exit, he was shot in the neck by a police sergeant.

According to the Tribune's recounting, Booth stayed alive for a couple of hours "whispering blasphemies about the government and messages to his mother desiring her to be informed that he died for his country."

Oswald appears to have been similarly motivated. Studying Marxist economic theories, "I could see the impoverishment of the masses in my own mother,"  Oswald told a United Press International correspondent in an interview. His fervor for Marxist ideology was so strong that he attempted to exchange his US citizenship for a Soviet one, spending two years in Russia, and marrying a Russian woman (the USSR denied his citizenship request).

But if Oswald's actions were designed to help his mother, his plan backfired. Upon learning that her son assassinated Kennedy, she told the Star-Telegram that his defection to the Soviet Union made her life lonely, "and now they will turn their backs on me again."

Only Booth admitted to his crime. After firing the fatal shoot he leaped onto the stage and declared with a dramatic flair "sic semper tyrannis" ("thus, always, to tyrants"). On the afternoon of November 22, despite vast evidence to the contrary, Oswald told reporters "I haven't shot anybody."

Fifty years after Lincoln's death, on April 15, 1915, President Wilson declared a national holiday (the Federal Reserve Bank, however, remained open). To honor the Great Emancipator, flags across the country and the world flew at half-mast. The New York Tribune reprinted a poem written for Lincoln by Vermonter and federal judge Wendell Phillips Stafford. Excerpted below.

Look back upon thy people now! 
Behold the world thy hands have wrought--
The conquest of thy bleeding brow, 
The harvest of thy sleepless thought

From sea to sea from palm to pine
The day of lord and slave is done.
The wind will float no flag but thine
The long divided house is one.

Panic of 1907 vs. Great Recession of 2008

• Caption: Why should Uncle Sam create a central bank when Uncle Pierpont is already on the job?

This year, 2013, marks the 100th anniversary of the Federal Reserve System, and central bankers are taking a historical perspective. That is "good advice in general," Fed Chairman Ben Bernanke told attendees at the Fourteenth Jacques Polak Annual Research Conference, in Washington, D.C earlier this month.

"An appreciation of the parallels between recent and historical events greatly influenced how I and many of my colleagues around the world responded to the crisis," Mr. Bernanke said.

He went on to describe the similarities between the banking crisis of 1907--the one that inspired the formation of the Federal Reserve--and the more recent 2008 financial crisis.

Both fit the archetype of a classic financial panic, Bernanke said. Both crises started in an economy in recession and both suffered from a sudden lack of liquidity.

In 1907, money was tight in part due to the rebuilding of San Francisco. After the Bank of England raised its discount rate, causing more gold to flow out of the US, New York was left with unusually low monetary reserves just as it entered the cash-intensive harvest season, explained Ellis Tallman and Jon Moen in a 1990 article about the Panic in the Atlanta Fed's Economic Review.

In the more recent crises, Bernanke explained, liquidity started to dry up when housing prices declined, and subprime mortgage defaults rose in 2007. As the underwriting weaknesses of subprime portfolios became known, banks stopped lending to each other, paralyzing credit markets. By 2008, losses from these portfolios were causing banks to fail.

In both crises, a tinder-dry credit environment made them vulnerable to sparks. In 1907, the fire started when F. Augustus Heinze and C.F. Morse tried and failed to corner the stock of the United Copper Company. The investigation into the scam revealed an intricate web of corrupt bankers and brokers. (Heinze was president of Mercantile National Bank, and Morse served on seven New York City bank boards.) When the president of the second largest trust in the country was implicated in the copper cornering con, depositors started a run on Knickerbocker Trust.

Without a central bank, the availability of liquidity depended on the discretion of firms and private individuals, Bernanke explained. The Lehman Brothers moment of 1907 came when New York's financiers, led by J.P. Morgan, were unable to value the trusts, and refused to "bail out" Knickerbocker.  (Unregulated and a relatively new innovation, trusts were the "toxic assets" of the 1907 crises.)

Their refusal prevented other institutions from offering aid, and depositors started a massive run on banks and trusts, exacerbating the liquidity crises. (In 2008 a loss of confidence in the banking system did not turn into a consumer run on banks primarily because of FDIC deposit insurance.)

Morgan et al realized that a failure of the trusts could spread to the entire financial system, and they ultimately convinced John D. Rockefeller and others to pony up enough cash to stabilize the markets.

Similarly, American lawmakers eventually agreed that failure of the nation's largest financial institutions was not an option, and passed the $700 billion Trouble Asset Relief Program in October 2008 (reduced to $475 billion by the Dodd-Frank Act). This program was designed "to strengthen market stability, improve the strength of financial institutions, and enhance market liquidity," according to the Federal Reserve.

A major difference between the two crises, that I can see, is the popular perception of these liquidity liberators. In 1907, Senator Nelson Aldrich called the actions of JP Morgan and crew heroic. In his arguments for centralized banking reprinted in the New York Tribune, he warned that without it "men may not be found in another emergency with the patriotism, courage and capacity of those who in this crisis rendered such inconspicuous and invaluable service to the financial interests of this country."

But in the 2008 crisis, when taxpayers rendered this very same "invaluable service," people stormed the streets in protest. From the tea party conservative to the Wall Street occupier, hatred of the bailouts was met with bipartisan vehemence.

So why is it that when a handful of wealthy individuals restore liquidity to a broken system they are courageous patriots, but when it's taxpayer's, lawmakers are voted out of office? Perhaps the vehemence comes from how the money was used. In 1907, it was to save consumer's retail deposits, in 2008 corporate wholesale funds.

As Bernanke explains in his speech, seeking to stem the panic in wholesale funding markets, in 2008 the Fed "extended its lender-of-last-resort facilities to support nonbank institutions such as investment banks." This had little direct impact on consumers. As Fed governor Daniel Tarullo recently said "the savings of most U.S. households are generally not directly at risk in short-term wholesale funding arrangements."

In 1907, on the other hand, ending bank runs meant "widows on the corner" could cash their checks, shop-owners could feed their families.

Another problem with the 2008 solution, from the popular perspective, was the moral hazard it created.

Senator Aldrich worried that courageous individuals might be hard to find in a financial emergency, and it appears he was right to worry. Senior executives in 2008 were not interested in rendering an inconspicuous service to the financial interests of the country. They didn't even want to forego their bonuses. But in trying to account for the rarity of courage, lawmakers in 1913 may have created a system that prevents it from emerging.

A July 2013 Congressional research report articulates a challenge for today's central bankers. "Although 'too big to fail' (TBTF) has been a perennial policy issue, it was highlighted by the near-collapse of several large financial firms in 2008...If a TBTF firm believes that the government will protect them from losses, they have less incentive to monitor the firm’s riskiness because they are shielded from the negative consequences of those risks."

In 1907, the wealthy elite pooled their resources to prevent the failure of banks and trusts, saving millions in consumer deposits. In so doing they bore the brunt of the consequences of their risks, and Americans considered them heroes for it.

The Wilmington Riots and Coup D'Etat

Coup d'etat leader, A.M. Waddell

The "Fighting Editor" and bank-owner John Mitchell, Jr.

These days there's a lot going on in North Carolina politics. The Republican-dominated legislature has enacted a far-right agenda, "tearing down years of progress in public education, tax policy, racial equality in the courtroom and access to the ballot," wrote the New York Times in July 2013.

This is not the first time in North Carolina history that a regressive agenda has wiped out years of progressive reform.

In 1898, Wilmington was the largest city in North Carolina, with a population that was majority African-American. Black businessmen dominated the restaurant and barbershop trade, owned tailor shops and drug stores, and served as firemen, policemen, and civil servants. "A good feeling between the races existed as long as white Democrats controlled the state politically," according to PBS.org.

That started to changed in the early 1890s, when the Republican party formed a coalition with progressive Democrats and started to win on election day. Fusionists, as they were called, were committed to re-writing the state's election laws and increasing black participation in state and local politics. Fusionists elected Republican Daniel Lindsay Russell in 1896. (North Carolina wouldn't see another Republican governor until 1973.)

Overcoming widespread voter intimidation, in 1898 voters elected a biracial fusionist government to office in Wilmington. Though the mayor and two-thirds of the aldermen were white, calls of "negro domination" permeated the media. A violent mob, led by the former gubernatorial candidate Alfred Moore Wadell (who lost to Mr. Russell), swarmed the streets.

On November 10, Waddell and his mob indiscriminately killed dozens of unarmed black citizens, and forced the white Republican Mayor Silas P. Wright and other members of the city government (both black and white) to resign. They installed a new city council that elected Waddell to take over as mayor by 4 p.m. that day. Appeals to President William McKinley to intervene were ignored, letting stand the only successful coup d'etat in United States history.

Further north in Virginia, newspaperman and bank-owner John Mitchell Jr. -- aka "The Fighting Editor" -- was appalled by the the events in Wilmington. Born a slave in 1863, Mitchell was editor of the Richmond Planet for over 40 years, served on the Richmond City Council, and in 1902 founded the Merchant Savings Bank.

In an editorial in his paper after the Wilmington riots, Mitchell reminds us that not all perspectives deserve to be heard, but those standing for justice and peace must not be silent.

The outrageous happenings at Wilmington, NC almost surpasses comprehension. Never in the history of this country have we seen or heard anything like it before. A mob takes possession of the city, and without due cause murders twenty-five inoffensive and unarmed colored people, drives hundreds to the woods to starve and die, forces the city officials to leave the city and then duly installs themselves in their place without the shadow of an excuse of the sanction of the law.

A.M. Wadell has by treasonable practices declared himself mayor and this too in the face of the laws of the state of North Carolina. Who made him mayor? From whom did he secure his authority? Was it from the hands of the white lawyers, the doctors, the merchants and preachers, who while inciting the mobs to deeds of murderous violence, under our laws particep criminals--became murderers themselves?

This is the logical result of compromising with wrong. It is an object lesson to the thoughtful. All of the good white people are not dead, but in the neighborhood of Wilmington they are painfully silent.

It's comforting to know that in refusing to remain silent, today's Moral Mondays protesters have heeded the lessons of history. Like them on Facebook! https://www.facebook.com/MoralMondays :).

Further Reading:

Melton McLauren, UNC Wilmington professor, "Commemorating Wilmington's Racial Violence of 1898: From Individual to Collective Memory 

Ann Field Alexander's excellent biography of John Mitchell Jr. is available at Amazon! Race Man: The Rise and Fall of the Fighting Editor

Read PBS.org's recounting of the Wilmington Riots as part of their Jim Crow series.

The Greensboro Massacre

Did you know this November is social justice month? "We live in a dangerous time," says the Revolutionary Poetry Brigade, the group that founded the event. The organizers hope to make November "an annual international event exposing the world’s injustices and pointing the way to a transformative future."

In the spirit of social justice month, let us remember the events of November 3, 1979, known today as the Greensboro Massacre. Five protesters from the Communist Workers Party were shot and killed by members of the Ku Klux Klan. Several of the KKK were charged with the murders, but then acquitted by an all white jury in 1981. Jurors agreed with the defense that the suspects shot in self-defense, according to a Frontline documentary aired in 1983.

The protest was the culmination of attempts by the Communist Workers Party to organize black industrial workers, and bring awareness to rising incidences of brown lung disease and other workplace injuries.

Several of the movement leaders were doctors who left their practices to fight for worker's rights in the textile mills. After failed attempts to dialogue with management, the Community Workers Party sought a new tactic, one that could unite black and white workers. To capitalize on growing animosity toward the Klan in Greensboro, they put out a poster announcing a "Death to the Klan" march on November 3.

"I think the Klan, historically, are cowards," said Nelson Johnson, the poster designer.

They're also cheap, according to former Klan-member turned FBI-informant Edward Dawson, who decided to help the FBI in retribution. Dawson was angry at the Klan for refusing to pay a fine he received in the course of performing Klan-related duties.

"We got five years, one year suspended for five and a $1,000 fine," Dawson told Frontline's James Reston. "And that's what helped irritate me something furious. They refused to pay the fine. We had to pay that out of our pocket."

As a double agent, Dawson made his own posters for the march, ones that had a vision of a lynching and read: "Notice to traitors, Communists, race mixers and Black rioters: Traitors beware! Even now the cross hairs are on the backs of your necks. It's time for old-time justice -- American justice."

Despite the violent nature of these posters, and the information that Dawson provided to law enforcement that the Klan intended to bring guns to the march, local police were absent.  Frontline reported that with the start of the march only a half an hour away, the two tactical squads assigned to the march were given permission to take their lunch break.

"I think that medicine and politics really start from the same place," Dr. Paul Bermazohn, who survived a bullet in his brain on November 3, told Frontline. "If you're concerned about people, it will lead you often into the fields like medicine. Brown lung is really not a disease caused by cotton dust. It's a disease caused by an economic system that puts a priority on profit over people."

The Orchestral Maneuvers in the Dark wrote a fabulous '80s-style song about the Greensboro Massacre entitled "88 Seconds." Hear it here!