Prudent Press


The Dangers of Usury in the Banking System


This article presents several wise-men in the U.S. that opposed  the creation of a banking system the dangerous practice of usury and who would later influence key Canadian officials as well.

Key Events

  • Bank of North America                             1781 – 1785
  • First Bank of The United States                   1791 – 1811
  • Second Bank of The United States             1816 – 1841

Timeline of key personnel in opposition of private banking system

  • William Findley                                           1741 – 1821
  • Thomas Jefferson                                          1801 – 1809
  • James Madison                                             1809 – 1817
  • Andrew Jackson                                            1828 – 1836
  • Abraham Lincoln                                           1861 – 1865


William Findley

Governor of Pennsylvania William Findley was one of the earliest opponents of the banking system.

Findley opposed the creation of the first central bank in America,  referred to as the Bank of North America.

The Bank of North America was established in 1781 by Financial Superintendent Robert Morris at the request of Congress.

The Bank was intended to stabilize the U.S. economy after the revolution.

Several years after the bank’s creation, economic instability continued to plague the U.S. and it was clear that the Bank had failed to serve its original purpose.

Instead of achieving economic stability, the bank perpetuated debt through its system of fractional reserve lending and through the practice of usury.

Usury is the practice of charging interest on money that is lent out to borrowers. It is a form of making money simply by having money, without having to do any real work.

On 1785, Congress refused to re-charter the bank because of its ineffectiveness, thus leading to the bank’s collapse.

6 years later in 1791, Robert Morris – along with Alexander Hamilton and Thomas Wiling – sought to reestablish the bank under the new name: First Bank of the United States.

This new bank was similar to the Bank of North America and met with heavy opposition particularly from the 3rd and 4th U.S. Presidents; Thomas Jefferson and James Madison.


Thomas Jefferson – 3rd President 1801-1809

During George Washington’s first term as president, two members of his cabinet, Secretary of State Thomas Jefferson and Treasury Secretary Alexander Hamilton, fought over the power of Congress to charter the First Bank of the United States.

Alexander Hamilton, the first secretary of the treasury, proposed that Congress charter a national bank which would have branches around the country.

Such a bank, he argued, would assist the federal government by providing a safe place to deposit tax money and other revenue, allowing the government to make payments throughout the country, and to market government bonds.

Hamilton also claimed that the bank would play a central role in the economy by printing banknotes which would serve as currency, encouraging trade among the various regions of the nation, and making loans to small industries to facilitate growth.

Jefferson realized the parallels between the First Bank and the Bank of North America, and like Findley before him; bitterly contested the creation of a private central bank.

And in 1791, when the bill to create the First Bank of the U.S. was put forth in Congress, Jefferson wrote a memo to George Washington, arguing that the Constitution did not grant Congress the power to charter the First Bank.

In his memo Jefferson had said,

The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution.

The bill in question, had given exclusive powers to the First Bank to regulate commerce with foreign nations, states, and Indian tribes.

Jefferson continued on to say,

To erect a bank, and to regulate commerce, are very different acts. He, who erects a bank, creates a subject of commerce in its bills; so does he, who makes a bushel of wheat, or digs a dollar out of the mines; yet neither of these persons, regulates commerce thereby.

Jefferson’s argument was simple; Congress could not allow the bank to regulate commerce any more than it could allow farmers or miners to regulate commerce.

Jefferson also opposed the First Bank because he believed the control of credit and currency in the hands of a banking institution would create a monopoly more dangerous than standing armies.

Jefferson expressed these very concerns in his letter to John Taylor when he said,

And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

Alexander Hamilton had been well aware of Jefferson’s arguments against the creation of the First Bank, and brought forth his own counter arguments to George Washington.

In contrast to Jefferson, Hamilton held the position that the government should delegate its power to create and issue money to a bankers’ private monopoly.

Hamilton’s assertion was included in the book titled: The Works of Alexander Hamilton, (Federal Edition), Vol.3 [1791]. where he wrote,

The stamping of paper is an operation so much easier than the laying of taxes, that a government in the practice of paper emissions would rarely fail in any such emergency to indulge itself too far in the employment of that resource to avoid as much as possible one less auspicious to present popularity.

Hamilton also believed that the government would take the advantage of exploiting the currency by issuing far more currency than the economy could withstand.

And despite Jefferson’s protests, George Washington had enacted the bank bill into law in 1791 and the First Bank of America was established with a 20 year charter.

20 years later when the charter had finally expired in 1811, the current president at the time, James Madison, was faced with the decision on its renewal.


James Madison – 4th President 1809 – 1817

James Madison, like Jefferson before him, had also strongly opposed the banks, and claimed that the establishment of a national bank was unconstitutional.

With the renewal of the charter before him, Madison decided to abandon the re-chartering process and thus led to its’ elimination.

And in the 5 months after his decision took effect, the U.S. had been involved in a war with England, known as the War of 1812.

The war had caused considerable financial strain on the U.S. economy, leading Madison to eventually agree to the creation of a private central bank yet again.

And Madison had overseen the passage of legislation for the Second Bank of the U.S. which had passed in 1816.

Despite his opposition to a private central bank, he had still agreed to the creation of one, due to the war which made him believe that there had been a necessity for a national bank during times of war.

Madison’s approval of the Second Bank would eventually lead to the “bank war”, between bankers and US president Andrew Jackson. Jackson was yet another sworn opponent of the banks, and had been voted  into power in 1828.


Andrew Jackson – 7th President 1828-1836


Jackson opposed the Second Bank of the United States on the grounds that it was a threat to the liberty and independence of all Americans.

However Jackson’s true ambitions would only be realized during his second term when the Second Bank’s charter would be up for renewal. It was at this time, that his quest for monetary reform would be fulfilled.

During the federal elections of 1832,  the bankers financed support for Henry Clay by donating $3 million dollars in financial support. This was due to Clay’s agreement to renew the Second Bank’s charter.

The bankers had also lobbied for renewing the bank charter 4 years earlier than its expiry date, originally set for 1836 due to their hope that Jackson would not want to stir up controversy in his second campaign for presidency.

And surprisingly enough, Jackson won re-election in 1832, besting opposition leader Clay by over 17% despite his opponent’s immense financial backing.

The Second Bank’s president Nicolas Biddle had erroneously believed that Jackson would sign the renewal bill for the bank charter because he believed Jackson would want to avoid political controversies dealing in his reelection campaign.

Contrary to his belief, Jackson immediately vetoed the renewal bill by using special presidential veto powers to destroy the private central bank. This method had not been used by any president before him.

In his veto message regarding the Second Bank, Jackson said the following statement to the Senate:

It is not our own citizens only who are to receive the bounty of our government. More than eight millions of the stock of this bank are held by foreigners…is there no danger to our liberty and independence in a bank that has so little to bind it to our country?…Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence…would be more formidable and dangerous than a military power of the enemy.During his first term Jackson had fired 2000 employees of the federal government as a way to dispel the corruption that he saw had been rampant in government.

After the veto decision, Jackson had ordered his Secretary of State Roger B. Tenny to initiate a process to remove the government’s deposits from the Second Bank and place them in safe banks across the U.S.

In response to Jackson’s actions, Biddle had threatened that he would cause a recession if Jackson did not immediately re-charter the bank.

Much of Biddle’s conversations and messages have been compiled in the book titled: The Correspondence of Nicholas Biddle.

And on January 27 1834,  Biddle’s hostility towards Jackson’s actions were confirmed when he said,

The projectives of this last assault on the Bank regret, and are alarmed at it–but the ties of party allegiance can only be broken by the actual conviction of existing distress in the community. Nothing but the evidence of suffering abroad will produce any effect in Congress… Our only safety is in pursuing a steady course of firm restriction – and I have no doubt that such a course will ultimately lead to the restoration of the currency and the re-charter of the bank.

Shortly after this statement, banks across the United States had reduced the money supply when they called in old loans and refused to grant new loans.

This led to a deep depression in which wages sagged, unemployment soared, and business’s experienced bankruptcy. And it also led to U.S. citizens and business owners placing public pressure on the banks in order to negotiate new loans. Biddle eventually succumbed to the pressure and granted new loans.

Biddle’s act was the very reason Jackson, and many others before him had been opposed the banking system in the first place; the power to control the credit and currency of America could be exploited by the banks to cause shortages in the money supply, which would then lead to economic depressions.

By 1836, the charter of the Second Bank had expired, yet it continued to operate for 5 years as a state bank before it eventually collapsed due to no new money coming in.

Jackson had been so effective in rooting out the private banking system, that the U.S. had been free of a private central bank for 77 years, up until 1913. Part of his success had to due with his decision to remove the government deposits from the Second Bank to other, smaller, regional banks in the U.S. which had facilitated a decentralized form of banking with many competitors

The actions of Jackson and Jefferson would continue to influence future presidents, particularly Abraham Lincoln.


Abraham Lincoln – 16th President 1861 – 1865

By the time Lincoln took power, he had been faced with the American Civil War. In order to finance the war and maintain the union between the North and the South, Lincoln required additional money.

In 1861, Lincoln and his secretary of treasury, Salmon P. Chase, went to New York to apply for the necessary loans in order to finance the Civil War.

Unfortunately, since the banks were charging extremely high rates of interest (24-36%) Lincoln had been forced to pursue alternative means of financing for the war.

In 1862-63, Lincoln passed legislation into Congress that allowed him  to print $450 million dollars’ worth of new bills.

In order to distinguish them from other bank notes in circulation, he printed them in green ink on the back side. Thus the bills were termed “greenbacks”

Due to the Civil War, Lincoln and his Secretary of Treasury Salmon P. Chase eventually allowed the passage of the National Bank Act of 1863. The main goal of this act was to create a single national currency, thereby eradicating the problem of notes from multiple banks circulating all at once.

In response to the National Bank Act that Salmon P. Chase, and Lincoln had agreed upon, Chase later resented his decision when he said,

My agency in promoting the passage of the National Banking Act was the greatest financial mistake in my life. It has built up a monopoly which affects every interest in the country.

President Woodrow Wilson would later issue a similar response of regret, over his actions in establishing the Federal Reserve Act of 1913.

Part 5 looks into the key individuals that would oppose the private banking system into the 20th century.


Part 1 – The Overview of Canada’s Current Financial Position

Part 2 – How the Monetary System Works

Part 3 – The History of the Bank of Canada

Part 5 – The Dangers of Usury in the Banking System Pt 2

Part 6 – The Loss of Canadian Sovereignty

Part 7 – The Decline of Canada’s Economic Environment

Part 8 – The Movement for Monetary Reform

Part 9 – A Review of the Fiat Money System

Part 10 – The Fundamentals of Modern Money Theory

Part 11 – Endogenous Theories on Monetary Reform

Part 12 – Principles of the Islamic Banking System

Part 13 – A Review of the Social Credit Money System

Part 14 – Henry George and the Land Reform Movement

Part 15 – A Review of the Austrian School of Economics and the Gold Standard

Part 16 – Currency Competition and Alternative Money Systems

Part 17 – The Shadow Banking System

Part 18 – Economic Recovery at the End of the Road


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