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THE SAFETY FUND BUBBLE - William Leggett, Democratick Editorials: Essays in Jacksonian Political Economy 
Democratic Editorials: Essays in Jacksonian Political Economy, Foreword by Lawrence H. White (Indianapolis: Liberty Fund, 1984).
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THE SAFETY FUND BUBBLE
—Help me, Cassius, or I sink!
May 20, 1837.
The prayer of the insolvent Banks has been granted by our monopoly legislature, and they are permitted, in the teeth of their own confession of inability to perform their contracts, to continue to issue their worthless and lying promises, which the community are virtually obliged to receive as real money. Was there ever a piece of grosser legislative fraud than this? Here have been merchants failing by scores for months past. Many of them show, to the entire satisfaction of their creditors, that their property far overbalances their debts. The difficulty of obtaining ready money has obliged them to suspend their payments; but it is rendered manifest, by a full exposition of their affairs, that not a dollar will ultimately be lost by those having claims upon them. The immediate cause which compelled these persons to suspend their business was the impossibility of obtaining money on any kind of securities. But that impossibility was itself the effect of another cause: and if we trace the connexion of cause and effect to the beginning, we shall find that the whole evil grew out of the monstrous expansion of bank credit, which provoked a most inordinate thirst of speculation, and stimulated men to undertake the wildest enterprises. These enterprises were of a nature to require a continually increasing expansion of bank credit. But there was a limit which the banks did not dare to overpass. When that limit was reached, the demand for money to sustain the mad projects which had been undertaken led to the freely giving of the most exorbitant rates of interest to private money dealers. These rates of interest soon consumed the actual means of speculators, and they were forced to sacrifice their property to meet the further demands upon them. Capitalists, seeing that the financial revulsion had commenced, withdrew from the field in alarm. The banks, fearful of a demand for specie, began to retrench as rapidly as they had expanded; and the merchant, in the meanwhile, who had pursued the even tenor of his way, neither enlarging nor diminishing his business, but keeping within those bounds which all former experience told him were compatible with safety, now began to experience the bitter consequences of folly in which he had had no share. In vain he offered triple and quadruple securities for the sums necessary for the transaction of his business. The extravagance and rapacity of the banks had produced, as their natural fruit, a general prostration of commercial confidence. Individuals were afraid to lend; for in the midst of the fictitious values which speculation had given to every thing, they could not decide whether the proffered security was real or illusory, whether substantial or a mere phantom of property, which would melt to nothing in their grasp. The banks could not lend, for they were involved in the meshes of their own wide-spread net; and to extricate themselves, as the result has shown, was a task beyond their strength. They had been potent instruments in producing the general derangement, but were utterly powerless to remedy it. The consequence was, that many a sound and solvent merchant was arrested by inevitable necessity, in the midst of a prosperous career, and obliged to trust his affairs entirely to the mercy of his creditors, and to the sport of accident.
While these deplorable bankruptcies were taking place, we heard of no proposition of relief from our legislature; but the instant that the banks, those prolific fountains from which the streams of mischief flowed, became insolvent, all other business of the state was laid aside, and the sole question deemed worthy of consideration was what means should be devised for propping up the worthless monopoly institutions. As the result of legislative wisdom, employed on this commendable object, we have the following law.
. . .
To discuss the particular provisions of the law which we have submitted to our readers would be a waste of their time and our own. It is enough that it is the law. The measure, which the exigency of the times could not but suggest to every mind at all imbued with the true principles of economic freedom, has not been accomplished; but in its stead, a measure has been adopted, by an overwhelming majority, to continue the privileges of an affiliated league of monopolies, after the condition on which those privileges were originally granted has been violated, and the object they were designed to effect has utterly failed. The chartered banks should have been left to their fate. If they are solvent, no loss could occur to any connected with them, nearly or remotely, by such a course; and if they are insolvent, on what principle of justice are they permitted to continue their depredations on the community? The repeal of all the restraints on the trade in money would open the field of banking to universal enterprise and competition; and enterprise and competition, in that branch of business, as in every other, would lead to the happiest results.
It was once feared that religion could not flourish, if separated from the supervision of government; but the success of the voluntary principle in this country has refuted the theories of hierarchists. The success of the voluntary principle in banking would be not less exemplary. The day is coming, we are convinced, when men will universally deprecate all connexion between Bank and State, with as much abhorrent earnestness as they now deprecate a connexion between Church and State. We have no established religion; why need we have an established bank? One of two things is absolutely certain: either we must utterly dissolve the affairs of politics from those of trade; or we must go back to the system of federal supervision. We must either have no chartered bank, or we must have a national bank. We must either leave trade wholly free, or place it under effectual control. Bad as is the scheme of a federal bank, worse evils are to be dreaded from the fraud and folly of state monopolies. The only true system—the system which has been proved to be good in every thing to which its principles have been applied—the system in entire accordance with the fundamental maxims of liberty—is to confine politics to the affairs of government, and leave trade to its own laws. When our federal Government and our State governments separate themselves entirely from banking and credit, recognizing nothing as money but money, keeping their own revenues in their own custody, and leaving men to form their own system of currency and credit, without intervention, further than to enforce the obligation of contracts, or exact the penalty of violating them—then, and not till then, shall we be a happy and a prosperous people.