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Wisconsin's bank wars

Written by Joseph A. Ranney, Attorney at Law
Phone: (608) 283-5612

Up to 1836 Wisconsin was part of Michigan Territory. In 1836, Michigan became a state and Congress made Wisconsin a separate territory. During the territorial period Wisconsin's population and economy grew rapidly, and the territory's growing pains gave birth to a number of political and legal battles. The loudest dispute by far was over what seems today a highly unlikely subject: whether Wisconsin should have banks.

Americans have taken banks for granted for many years, but in the 1830s that was not at all the case. Wisconsin was dominated by supporters of President Andrew Jackson. Jackson believed the United States did not need a banking system and that powerful, centralized banks would be a threat to democracy and individual freedom. Most settlers were farmers; they supplied most of their own needs. They did not have much contact with merchants and did not really need currency to conduct their business. Many early Wisconsin banks failed, in some cases due to theft and corruption by their employees, and this only increased banks' unpopularity in Wisconsin.

The most powerful and successful bank was Alexander Mitchell's Wisconsin Marine & Fire Insurance Company. The Legislature gave Marine a charter in 1839 authorizing it to operate in Wisconsin. Marine started by selling insurance only, but it soon branched out: it took money on deposit from customers and gave them notes -- IOUs -- for their deposits. Marine was virtually the only Wisconsin company which always paid its IOUs on demand. As a result, Marine's notes became widely used as currency and Marine became a financial and political power in Wisconsin.

Jacksonians in the territorial Legislature were alarmed by Marine's rise to power. They tried several times to revoke Marine's charter, but Mitchell convinced the Legislature that if revoked the charter it would break a binding contract with Marine in violation of the U.S. Constitution.

When Wisconsin became a state in 1848 the frustrated Jacksonians, led by Edward Ryan of Racine (who later became chief justice of the state Supreme Court) almost succeeded in putting in place a constitution which would have abolished all banking. But Ryan's proposal was too "inflamed and revolutionary" even for some of his fellow Jacksonians. They recognized that as Wisconsin moved from an agricultural to a more complex commercial economy, banking might become vital to the state's prosperity. One delegate protested:

Let the old and rotten hulks of special charters and exclusive privileges be exploded. Assert the anti-bank doctrine in this respect to its fullest extent; but if the time should arrive in the progress of free trade ... when a system of general banking ... shall be deemed advisable for the well-being of the state, let not the avenue of escape be sealed.

Ryan and his colleagues did succeed in putting a provision in the Constitution overturning Mitchell's argument that a corporate charter was a binding, unchangeable contract. The 1848 Constitution made clear that at least in Wisconsin, the Legislature would have absolute authority to dictate the terms on which banks and other corporations could do business in Wisconsin and it could change those terms at any time.

In 1852 the dispute between Jacksonians and Marine was settled when Marine agreed to submit to a new statewide banking law and give up its special charter and the Jacksonians in return gave up their quest to destroy it.

Note: The views expressed in this article are the author's alone. Distributed as a public service by the Wisconsin Supreme Court in honor of the state's sesquicentennial.

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