Tuesday, October 29, 2019

The Origins of Banking's Unholy Alliance With the Federal Government

In reality, the rescue was merely one symptom of a protracted alliance between banks and the federal government.

Since nobody alive today can recall a time before the alliance was operative, a review of banking theory will help illuminate its flaws.

Banking evolved among merchants in the mid-17th century.

They were especially popular after the 1863 National Banking Act, which permitted the bonds to be used as monetary reserves by nationally chartered banks.

In order to motivate state-chartered banks to convert to national charters, the federal government put a tax on state banknotes.

The longterm result has been an unholy alliance between the U.S. Treasury and the national banks that nearly collapsed during the 2008 financial crisis.

Banks still eagerly buy every new issue of federal bonds.

https://spectator.org/the-origins-of-bankings-unholy-alliance-with-the-federal-government/

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