Daily VideoMay 14, 2010
Jefferson-Hamilton Debate Alive in Congress
Throughout America’s history, there has been a push and pull between bankers who wanted to centralize power and wealth, and populist presidents such as Thomas Jefferson, Andrew Jackson and Theodore Roosevelt who wanted to break the financial industry down to a smaller size.
According to economist Simon Johnson, we are at a critical moment in that battle following the government bailout of the biggest banks at the height of the financial crisis in September 2008.
President Obama and lawmakers in Congress are trying to come up with a financial reform bill that would end the “too big to fail” argument – that if the big banks fail, it would shatter the American economy.
During the height of the crisis, the banking industry described doomsday scenarios if the government didn’t lend them billions of dollars: ordinary Americans might not be able to use their credit cards, ATMs would not work and other panic-inducing consequences.
In the early days of the republic, founding fathers Alexander Hamilton and Thomas Jefferson argued over the idea of a central bank.
“There was a big debate between Hamilton and Jefferson at the beginning of the republic on what — how should we organize financing for commerce and for business and for agriculture? Hamilton says, you need to have a big bank, and Jefferson said, no, no, no, that would be dangerous,” explains Simon Johnson.
“Jefferson said, it’s the political power of the financial aristocracy that we’re going to create that we should fear. And he was right on that.”
This video also uses a musical about Andrew Jackson currently on stage in New York City to explore the debate over whether big banks are dangerous or necessary for a successful democracy.
“A vote for reform is a vote to put a stop to taxpayer-funded bailouts. That’s the truth, end of story.” – President Barack Obama
“It’s worse than it was before the crash of September 2008. The biggest banks became bigger. They got these very big bailouts, unconditional bailouts. The Obama administration said it had no alternative, but that, by itself, is an extraordinary admission.” – Simon Johnson, former International Monetary Fund chief economist
“There was a big debate between Hamilton and Jefferson at the beginning of the republic on how should we organize financing for commerce and for business and for agriculture? Hamilton says, you need to have a big bank, and Jefferson said, no, no, no, that would be dangerous.” – Simon Johnson, former International Monetary Fund chief economist
Warm Up Questions
1. Who was Thomas Jefferson? Who was Alexander Hamilton? What did they fight over?
2. What do you know about President Andrew Jackson? What happened during his presidency?
3. What does a bank do? What happens if a bank runs out of money?
1. Which side of the Hamilton – Jefferson debate do you agree with?
2. What happened when Andrew Jackson and Theodore Roosevelt took on the banks? Why do you think they were successful or unsuccessful?
3. Do some more research on the Glass-Steagall banking law that split commercial and investment banking. What is the difference between commercial and investment banking? Why was it repealed in 1999? Do you think that had anything to do with the current crisis?
4. Why is President Obama having so much trouble passing banking reform? What do you think will happen to his proposals?
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