About a week ago, Alex Pollock of AEI wrote a good piece for the Wall Street Journal on Andrew Jackson’s decision to veto the bill to reauthorize the Second Bank of the United States. That piece drew a snippy letter from someone who said that getting rid of the Bank caused the long depression beginning in 1837 and suggesting that getting rid of Fannie Mae and Freddie Mac today would be a similar exercise in free market fundamentalism.
Pollock replies here;
Andrew Jackson and The GSEs: Round Two
When I wrote “Fan and Fred: What Would Andrew Jackson Do?” (op-ed, July 23), I thought somebody would probably bring up the theory that Jackson’s famous veto caused the financial and economic bust of the late 1830s to the early 1840s , and Chris Daly did (Letters, July 27). That bust followed a real estate and debt-financed, canal-building boom which came to the inevitable end of all such over-optimistic credit expansions, interestingly including the default on their debt by several U.S. states.
None of this, in my opinion, at all touches Jackson’s keen insights into the natural shortcomings of GSEs.
Alex J. Pollock
American Enterprise Institute
Washington
Pollock is right. The monetary and credit expansion made possible by the Bank was responsible for the crash in 1837, not the decision to put an end to our first Government Sponsored Enterprise. What people like the letter writer don’t understand is that the causes of recessions and depressions are always found in preceding government economic meddling. Just as hangovers don’t just happen but are the predictable result of behaviors, so too with recessions.
