hand over £10 at a Liverpool shipping counter and go aboard. The ship provided him with water,
nothing else, and of course it might go down with all hands. But if it reached New York he could
go ashore without anyone asking him his business, and then vanish into the entrails of the new
society. It was not even necessary to have £10, as the British provided free travel to Canada,
whence the emigrants could bum rides on coastal boats to Massachusetts or New York. There
was no control and no resentment. One of them, James Flint from Scotland, recorded in 1818: `I
have never heard of another feeling than good wishes to them.' In the five years up to 1820, some
100,000 people arrived in America without having to show a single bit of paper.
The first check of this inflow-the end of innocence if you like-came with the catastrophic bank
crash of 1819, the first financial crisis in America's history. Such a disaster was inevitable,
granted the rate at which the country was expanding. In the years 1816-21 alone, six new states
were created; in size and potential power it was like adding six new European countries. The
United States was already creating for itself a reputation for massive borrowing against its
limitless future. That meant a need for large numbers of banks, and they duly sprang up, good,
bad, and indifferent (mostly the last two). The Jeffersonians hated banks, as we have seen, and in
1811when the First Bank of the United States' charter expired, they controlled Congress and
refused to renew it. That was foolish, because the states stepped into the vacuum thus created and
happily chartered banks, whose numbers thus rose from 88 in 1811 to 208 two years later. Each
state bank was allowed by the state legislature to issue bills up to three times its capital. But in
practice there was no check on these issues. Hence, in good times at least, to get a charter to
found a state bank was literally a license to print money. As critics like Jefferson and John
Taylor claimed, a new kind of money power was coming into existence in America, which ran
directly counter to the Founding Fathers' concept of an idyllic rural society based on landed
property. During the War of 1812 America was awash with suspect $2 and $5 bills printed by
these mushroom banks. Such gold as there was flowed straight into Boston, whose state banks
were the most secure. By 1813 Boston notes were at a 9-10 percent premium in Philadelphia.
The New England banks refused to take paper notes from the South and West at all. In 1814,
with the burning of Washington and the virtual collapse of federal government, every bank
outside New England was forced to suspend payment.
The remedy of Congress proved worse than the disease. It created (April 10, 1826) the Second
Bank of the United States, bought 20 percent of its stock, and stipulated that the federal
government appoint five of its twenty-five directors, but made little provision for supervising its
operations. Moreover, its first president, William Jones (1760-1831), a former congressman and
Madison's Navy Secretary, knew little about banking; his speciality was having dubious friends.
He fitted beautifully into Taylor's demonology. Indeed, he managed to create a fragile boom
which was a miniature foretaste of the Wall Street boom of the 1920s leading to the crash of
- Jones' boom was in land. From 1815 the price of American cotton rose rapidly and that in
turn fed the land boom. At that time public land was sold primarily to raise revenue rather than to
encourage settlers, who needed no encouragement anyway. Each was charged $2 an acre in
minimum blocks of 160 acres. But they only had to put 20 percent down, borrowing the rest
from the banks on the security of the property. The $2 was a minimum; in the South potential
cotton land was sold at $100 an acre in the boom years. The SBUS, fueling the boom by easy
credit, allowed purchasers to pay even the second installment on credit, again raised on the
security of the land, like a second mortgage. Jones, whose only concern seems to have been to
pay high dividends, based on the total lent by his bank, ran this federal central bank like a
bucket-shop. He actually allowed the SBUS to deal in `racers,' short for Race Horse Bills. These