The U.S. Central Banking Debate: Lessons Learned from 1791 to Guide Today's Discourse
Aarthun, Stefanie Jane
Yonkers, Charles E.
Various laws, customs, dialogues, and values have shaped the development of financial and banking institutions in the United States in a unique way; however, none have done so more than the fierce debates between Thomas Jefferson and Alexander Hamilton over the creation of a central bank in 1791. As the U.S. looks toward banking reform following the 2008 economic collapse, it is critical to understand how these original debates have become institutionalized into our political fabric.The Federalist and anti-Federalist debate about the creation of a central bank and the regulation of financial institutions created a "yes/no" and "either/or" framework that still dominates our national political debate and rests on the assumption that if one solution is wrong, then the opposite must be right. This type of dialogue distracts us from the complexities of our current economic reality by narrowly concentrating the debate around an all-government regulation or all-market regulation approach. Both solutions are flawed. We must change this overly simplistic dialogue to find real solutions to a complex problem.To preserve financial stability, government, bankers, and the public must make a deliberate effort to identify and understand the complexities that exist in guiding fiscal policy. These three key stakeholders must take ownership of the issue and achieve an unprecedented level of transparency. In the process, we must reframe the debate around a middle ground that acknowledges the central bank's relationship to the broader political, social, and administrative environment. Only then can we define an appropriate role for government in the marketplace and find solutions to solve current central banking problems.
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