By now we are all aware of the $700 billion bailout to the financial institutions by the United States Government.  However, what most of us are completely unaware of is that this isn’t the first time that banks have been bailed out.  In 2008 JP Morgan Chase received billions of dollars of federal money to purchase Bear Stearns and an additional $25 billion because of the financial trouble they had encountered.  Ironically, it was JP Morgan himself that had orchestrated the bailouts of old.  Even more ironically is that JP Morgan had led a group of private Wall Street bankers in bailing out the United States Treasury.

In 1895 the United States was in the grip of the Panic of 1893.  The Treasury was nearly out of gold to back the money it had been issuing and it needed help.  Who better to turn to than the private market?  The United States government approached JP Morgan and requested his help in lending gold the United States.  Morgan organized a group of Wall Street financiers to purchase $65 million (1895 dollars) worth of gold and lend it to the Treasury.  The group was successful and everything worked itself out in the free market, leading to further American prosperity.

In 1907 the free market was left with a new challenge, rescuing failing banks.  Some large banks had begun failing, including the Knickerbocker Trust.  Eventually, these banks and the United States government turned to the market for help.  Naturally, they turned to JP Morgan.  Mr. Morgan and his associates again organized a “bailout,” but this time it would be for the banks.  Morgan arranged for his companies and numerous other entities including companies and wealthy individuals to lend the struggling banks their money.  One of those banks included what is today Citi.  Numerous companies and individuals, most notably John D. Rockefellar, the richest man of the time, agreed to lend their hard earned money to failing banks in an effort to stabilize the banking system.  It worked beautifully.  The entire banking system recovered and the free market flourished.

Then came 1929.  The Federal Reserve had been established in 1913 and control of the stability of banks was left in their hands, not in the hands of the free market.  After the panic of 1929 there were runs on banks and the Federal Reserve did not know how to adequately help them the way JP Morgan and his associates had in the past.  Banks failed left and right and this began the Great Depression.  As a result the free market was dealt a heavy blow by FDR and his New Deal policies that restricted freedom.  These policies greatly extended the Great Depression and left the free market hampered in a way that would not allow it to return to the valor and greatness that it had seen prior to 1913 and later the FDR administration.

The free market works and government does not.  There is a reason that the Panic of 1907 is not called the Great Depression.  Likewise, there is a reason that there is fear that today’s recession will snowball into a second Great Depression.  We must not rely on big brother to help us.  Rather, we should rely on ourselves to escape the economic problems we see today for we will collectively do a far better job than the government could ever do.

Rely on yourselves, not your government.