The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar

Published by EH.NET (October 2007)

H.W. Brands, The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar. New York: W.W. Norton, 2006. 239 pp. $24 (hardcover), ISBN: 978-0-393-06184-0.

Reviewed for EH.NET by David J. Cowen, Quasar Capital Partners.

The previous twenty-one works of H.W. Brands, the Dickson Allen Anderson Centennial Professor of History at the University of Texas, have covered a wide range of topics and eras. His books have spanned the gamut of American history, from the eighteenth century and a biography of Benjamin Franklin to the nineteenth century and a history of the California Gold Rush, and then on to the twentieth century and a discourse on the United States in the Middle East. He is a comfortable storyteller and this extends to biography, with tomes to his credit about Andrew Jackson and Woodrow Wilson. In his most recent work, The Money Men: Capitalism, Democracy, and the Hundred Years’ War over the American Dollar, Brands combines his skill sets of biography and history to render a flowing work about early American finance, a period covering roughly the beginning of the finance system under the stewardship of Alexander Hamilton to the 1907 financial panic and its aftermath.

The opening chapter logically starts with Hamilton and is called “The Aristocracy of Capital.” It moves quickly through his early years on Nevis and days as a young officer in the continental army. The theme that remains constant is that Hamilton “contended that economics ruled the world, eventually if not at once” (p. 21). The resourceful Hamilton is followed as he seizes the opportunity where others might see failure; for instance Brands describes Hamilton’s leadership after the conclusion of the Revolutionary War at the Annapolis Convention, which laid the groundwork for the Constitutional Convention; and the subsequent creation of the National Government, when his appointment as Secretary of the Treasury led to his promotion of funding and bank legislation. Brands does not break any new ground on these topics and is simply retelling the story. He reminds us that Hamilton’s funding and banking plans were an all-or-nothing proposition for “wound one limb and the whole tree shrinks and decays” (p. 46). Given Brands’ writing style, which is telling a broader story, it is inevitable that some matters will be marginalized or forgotten. For instance, he has omitted any mention of the creation of the Mint, which defined the dollar as the measure of money.

In the second chapter called “The Bank War,” we are introduced to the two warring factions: the capitalists championed by Hamilton and the democrats led by Thomas Jefferson. Brands opts to gloss over the stormy closure of the First Bank, simply rolls the discussion forward quickly to the Second Bank, and focuses on the autocratic President, Nicholas Biddle, representing capitalism, versus President Andrew Jackson, representative of the democrats. The fabled Bank War moves quickly and is an enjoyable read. In some parts of the book Brands leans too heavily on quotes, some of which fill over half a page, but here the quotes add to the action in what is history articulated in an enjoyable fashion. As Brands explains, it became personal between the two as Jackson thundered that “The Bank … is trying to kill me, but I will kill it!” (p. 91). With Jackson’s victory “the lesson seemed clear … when democracy and capitalism collided at the ballot box, democracy won” (p. 85). When Jackson gave the order to withdraw federal deposits and redeploy them to state banks, Biddle, to his eternal shame, exacerbated tensions by constricting bank loans and curtailing money. Brands labels Biddle the bad apple, devoting much space pinning the blame on him, and hence championing democracy rather than capitalism. But here is where we need clarification, for there is another way to look at the aftermath of the Bank War: it was not democracy vs. capitalism, but rather with the reshuffling of the Federal deposits it was simply the State Banks winning at the expense of the Federal Bank, or one brand of capitalism versus another brand of capitalism. Furthermore, he has lumped both Bank Wars together; however, recall that the First Bank was a Federalist institution destroyed by the Jeffersonian Republicans, and yet these were the same Republicans who pushed for and chartered the Second Bank when in the wake of the War of 1812 the nation’s finances were asunder.

The third chapter, entitled “The Bonds of the Union,” discusses the strong growth and revolutions in transportation, industry and markets seen in the years roughly between 1825 and 1850. It was about connectivity, brought about by canals and then the railroads, bringing together distant locales to the eastern seaboard, and the wealth that was subsequently produced for the few. Brand next presents the California Gold Rush and that precious metal is introduced, which provides segue into our third ‘money man,’ financier Jay Cooke. He became synonymous with the selling of war bonds at a time when the cost of the war to the Union was $1 million per day. Cooke’s ingenious plan to sidestep the banks and sell bonds directly to the public exceeded all expectations and Brands tell us “Cooke may have become the person most vital to the Union war effort, after Lincoln” (p. 121). By the final tally, Cooke & Company placed a staggering $1 billion plus in U.S. Government Bonds.

The fourth chapter is called “The Great Gold Conspiracy” and is the shortest chapter in the book. We meet again Jay Cooke, who in concert with Jim Fisk, Jr. and Jay Gould, attempted to corner the market in gold in 1869. The plan ended in disaster when the government stepped in to sell to the bulls, but Gould escaped ruin when he surreptitiously switched allegiances and himself became a seller. We learn more about the mechanics of the market in this chapter: and not just the gold market but also how the equity market functioned in this age of railroad wars, with various consortiums and individual operators looking for personal gains at the expense of any level of morality and legislation. But capitalism is a loser in this chapter for we learn about its seamier side as the standards of insider trading and stock manipulation are revealed.

The fifth chapter is entitled the “Transit of Jupiter” and we are left guessing as to why it is called that (unfortunately it is never answered). The chapter encompasses much ground, from the gold scandal introduced in Chapter Four all the way through the aftermath of the Panic of 1907, all covered in a fleeting forty pages. We see more scandal and rapidly move from financial panic in 1873 to financial crisis in 1893. J.P. Morgan emerges as a financier, amasser of capital, savior of the financial system, and enigmatic greedy capitalist all rolled into one. Morgan reorganizes the railroads and insists on seats on the boards of the companies he invests in. He hosts summit meetings in various industries, leading one to believe that he alone is pulling the purse strings on the capitalist system. Because this is top down history, we do not first hand see or feel the pain and difficulty of the man on the street or farm impacted by this money interest.

Brands does try to bring this struggle to the fore in the great gold and silver debate, whereby the capitalists and hard money men line up in favor of gold and the western farm interest and debtors prefer silver. In short, silver was perceived as the money of the people and gold the money of the wealthy. For Brands then “gold and silver were simply the latest proxies in the historic contest between capitalism and democracy, between wealth and commonwealth” (p. 175). There is a juxtaposition between Morgan on one side, stepping in to rescue the financial system time and again when it hiccups, and William Jennings Bryan on the other, champion of the people, with his famous indictment against the gold standard: “you shall not press down upon the brow of labor this crown of thorns! You shall not crucify mankind upon a cross of gold!” (p. 184).

The Money Trust, led by Morgan, became too pervasive and too powerful not to escape notice. By the early twentieth century and with Theodore Roosevelt in the White House, the handwriting was on the wall for Morgan and the Money Men. But not before one final climatic incident, when in 1907 a financial panic caused Morgan to ride in again on his proverbial white horse to stem the tide. But this play has been seen before, a system on the brink of financial ruin only to be rescued by the same Money Men some believe caused the convulsions in the first place. The Senate convened a committee in 1912 to look into the ‘money trust’ question, hauling Morgan and others in front of their committee. Morgan died in the next year, many believe from the stress of being embarrassed in front of the committee.

The “Epilogue” argues how the money question concluded with the creation of the Federal Reserve System, a central bank that could set the interest rate level and bear ultimate responsibility for the fiscal system. The Fed was in reality the Third Central Bank of the United States, having birthed 77 years after the Biddle/Jackson fight shuttered the Second Bank of the United States. Brands concludes that in spite of the Federal Reserve’s missteps in the aftermath of the 1929 Great Crash, the central bankers have done a credible job and therefore the money question, once so central to the politics of the United States, has been resolved and is out of the main of the political debate.

There are only a few illustrations in the book, but the cover is interesting, as the faces of the main subjects are in a similar vein to the portraits of the luminaries on our currency. Of course Hamilton is the only one of the Money Men described who is actually on our legal tender as he graces the $10 bill, and his picture on the cover is top billing along with Morgan. The faces of Biddle, Gould and Cooke are smaller and relegated to the lower portion of the cover.

Brands should be applauded for writing about the money question, which has often been overlooked in U.S. history. He tackles head-on the intrinsic strain between democracy and capitalism for “the driving force of democracy is equality, of capitalism inequality” (p. 16). In short, we can ask the question does capitalism have a conscience? We are left after reading this saying that if it does, it certainly takes a lot of turns to achieve it.

Brands’ style is to liberally intersperse quotes into the text. These quotes are cited in the end notes, which has the benefit of making the book much easier to read. Of course, the shortcoming is for the serious scholar who sees a quote about Hamilton such as “that power which holds the purse strings absolutely, must rule” (p.25) and will wonder exactly when he said this ? when he was a soldier pointing fingers at a feckless Congress, or later when he was Secretary of the Treasury? Turning to the end notes we see that it can come from any part of thirteen pages in Joanne Freeman’s Writings of Alexander Hamilton (2001), and as a secondary source that question is not easily answered. A second drawback to this style is that he can overuse quotes and therefore they lose their impact. For instance, Brands so liberally uses quotes from a lecturer from the University of Chicago under the nom de plume “Coin,” that most of the pages 167-173 feel like a string of quotes.

This is history seen through the leadership’s eyes and that makes sense if one is writing to a general audience. This is introductory history that is story telling, and as a result big omissions occur, like the First Bank scrip bubble 1792 or the First Bank War conclusion of 1811, or the irony that many Republicans liked banks, especially if they could receive the loans of those banks for themselves. Brands is trying to sell the point as democracy vs. capitalism, as if one has to win. But isn’t the winner the system itself? Our democratic capitalism has produced a system of government that has produced an amazing relative standard of living for its citizens, and if there is a winner that is where the gold medal lies.

But these flaws are minor for the audience that Brands is trying to reach. This book is an easy read and contains a lot of enjoyable prose. It is a likeable and painless read for just about anyone with an interest in American History.

David J. Cowen is an independent scholar in the New York City area. He is the Managing Partner of Quasar Capital Partners, a macro hedge fund. He is co-author (with Robert E. Wright) of Financial Founding Fathers: The Men Who Made America Rich, published by the University of Chicago in 2006 and of “The First Bank of the United States and the Securities Market Crash of 1792,” Journal of Economic History 60 (December 2000).