Bank Chartering and Political Corruption in Antebellum New York: Free Banking as Reform

Abstract

One traditional and oft-repeated explanation of the political impetus behind free banking connects the rise of Jacksonian populism and a rejection of the privileges associated with corporate chartering. A second views free banking as an ill-informed inflationist, pro business response to the financial panic of 1837. This chapter argues that both explanations are lacking. Free banking was the progeny of the corruption associated with bank chartering and reflected social, political and economic backlashes against corruption dating to the late-1810s. Three strands of political thought -- Antimasonic egalitarianism, Jacksonian pragmatism, and pro-business American Whiggism -- converged in the 1830s and led to economic reform. Equality of treatment was the political watchword of the 1830s and free banking was but one manifestation of this broader impulse.