When money went rogue: banking in 19th-century frontier America

0:00They would just come up with a plausible sounding name, create a banknote that was beautiful, and start issuing notes. And people would accept them. I mean, you know, what are you going to do? Check every single note that comes across the store counter? I mean, people tried, but it's kind of a fool's errand.

0:23Today on the story of money. Why can't we just print or issue our own money? Well, in fact, people are. Just think about cryptocurrencies. But there was a point in history where actually pretty much anybody with a state banking license could in fact go out and print a note in America and call it money. And many did. We're talking about the 19th century in America when the Federal Reserve, as we know it today, simply did not exist. In fact, there wasn't even really a dollar. And as a result, it was complete monetary chaos. And there was also a time when people were creating money all over the place in a way that's got a lot of lessons for what we're seeing today with digital currencies.

1:07Yes, because amid all that 19th century monetary chaos, once upon a time in America, there was this charismatic con man called James Brown. And he was the hardest working man in counterfeiting. And we're going to be focused on him this episode because his story really kind of embodies what happens when anyone and everyone starts printing notes and calling it money. A slice of financial history that maybe also asks some profound questions along the lines of, well, what even is money? So, welcome to the story of money from the Financial Times. A history show for finance geeks and a finance show for history nerds.

1:49And if you neither, well, we're going to try and make you one. And I'm Robin Wigglesworth. And I'm Gillian Tett.

2:00in 1898 john newveen had a vision to underwrite municipal bonds that would propel american infrastructure into the 20th century more than 125 years later that vision lives on today newveen has grown into a leading global asset manager with expertise spanning public and private markets still investing with a future in mind. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.

2:37With us today to tell the story of this mastermind 19th century con man, James Brown, is Stephen Min, a professor of history at the University of Georgia, a columnist for Bloomberg, and most pertinently for our purposes today, the author of A Nation of Counterfeiters, Capitalists, Conman, and the Making of the United States, which is a cracking title. Great to have you here with us today, Stephen. Thanks for having me. So your book focuses heavily on the era between the American Revolution and the Civil War. So that's the mid or late 1700s to the mid 1800s and chronicles the exploits of these amazing counterfeiters during a time when the United States lacked a modern central banking system like we have today, and when the nation's money supply was just incredibly decentralized and chaotic, if I can say so.

3:28And James Brown really stands out among all these counterfeiters, not just because of how he came onto the stage, because I love this passage from your book. You introduce him. I'm going to actually read it up here for people because it's so vivid. I really love this bit so it's a hot summer's day in 1829 boston ohio which is not the boston on the east coast but boston in ohio close to cleveland in fact uh there are dark storm clouds gathering in the distance jay brown steps out on the porch of the general story owns and then he's and i quote now interrupted when a bolt of lightning comes coursing down out of the sky enveloping him in flame the force of the blast rips his black suit into tatters through his body off the porch and onto the ground and as one eyewitness recalled tore his boots off his feet hurling them over the roof of a neighboring sawmill and as the thunder from the strike reverberated up and down the valley the man's half naked body laid sprawled on the ground steaming from the blast of the smell of sulfur fill the sky which wow that is like that's an entry scene i wish i had something like that on this podcast right and he survives it too obviously good thing for our story really otherwise because it'd be a very short episode it'd be a very short episode so yes this is james brown's kind of entry into into lore but also into reality there's a an enormous amount that we know about him and unlike many kind of tall tales that are associated with the frontier Everything that you've just read is actually quite correct and true.

5:09He acquired a reputation for things like this for being unstoppable, because not only did he eventually come to and go on to great exploits as a counterfeiter, but he acquired a legend for himself for many other exploits as well. So he's very representative, if you will, of the counterfeiter as a public figure and as a mythical figure. in America. So why was counterfeiting or fake money, to use a vernacular, such a big issue back then? Because today we hear stories about the police doing busts on, you know, fake money and counterfeiting. But back then, it was a lot more than just a few headlines in the newspapers, wasn't it?

5:57Absolutely. So counterfeiting for Americans between the revolution and the Civil War was a fact of life, quasi-acceptable in some places, including, for example, the region where James Brown operated. And we'll get to that. The reason it's so common and so ubiquitous is that money creation, the act of making money, is decentralized in private hands and is relatively easy to do, meaning that all you needed to do was basically get a charter from a state, which increasingly became very easy to do. In other words, barriers to entry went lower and lower as time went on. And that charter as a bank or a banking institution would enable you to print your own money.

6:46So instead of today, for example, banks giving loans in the form of creating deposits, a checking account, for example, Banks would create money that would then effectively circulate as IOUs and would be distributed out in the form of typically as loans. A historian of this era once said that it was about as difficult to become a banker as it was to become a bricklayer. In other words, these are roughly comparable barriers to entry to a profession. This was the free banking era. Is that what it's called? It's eventually called the free banking area because not because it's free, but because it's it's basically you fill out a form and you get a charter.

7:29So all the things that happen to happen now, and I've got a kid going to this right now is, you know, doing their SIE exam, security exams, getting an MBA, getting a flashy economics degree from whatever. None of that was required in those days. Absolutely not. In fact, it might have been a bit of a drawback for you. This idea that people could make their own money was tied up in a larger kind of democratic impulse, that things were accessible and should be accessible to a wide range of people or wide range of entrepreneurs. And so imagine then a system in which you have thousands of banks, each of them making their own money that looks completely different from the other money in denominations of their choosing.

8:12$3 bills were quite common and were not necessarily fake, but there were also$7 bills,$1.25 bills, you name it. Imagine working and living in that monetary system and imagine having that in your pocket. And then imagine what a counterfeiter would do with that. That's basically why someone like James Brown thrived. Because if it's hard enough to remember what the genuine currency looks like, it's very easy to pass counterfeits. So what I find fascinating is that we're living in an age today where everyone's worrying about what's fake and what's real because of AI, ironically. And of course, we've just seen this cryptocurrency boom where lots of people are creating money.

8:53And again, this all sounds very familiar. But tell a bit more about James Brown. Why did he get into the counterpending game in the first place? Yeah. What's his genesis story beyond getting struck by lightning? So what's interesting is that James Brown is living in an area that at this period, 1820s, 1830s, is very different than what it is today. When you think of Ohio, you don't think Wild West. But in the 1820s and 1830s, it was the Wild West. It was the edge of the frontier. It was the place where Western settlement had reached. It was an area where institutions, particularly legal institutions, weren't well developed.

9:33James Brown worked in an area known as the Cuyahoga River Valley, which was known for its very sort of complex geography, full of hiding places, which is a really good setup for being a criminal counterfeiter. We don't know why he got into it, but we do know something about him. We know that he was astonishingly charismatic. He was someone who could probably talk his way out of almost any scrape and did repeatedly. And people who met him described him in this kind of invariably, I mean, it doesn't matter whether it was a prison warden, the local newspaper editor, his confederates, they all described him with this kind of odd man crush language as being like the most, you know, handsome, articulate, smooth operator you can imagine.

10:26These are all skills that play well if you're going to be a criminal, and particularly if you're going to be a counterfeiter. And I think he probably found his vocation early on. But what's especially interesting, goes to your point, Jillian, is in this area, money is actually scarce. And by that, I mean something very specific, not that people don't have like wealth, but they actually don't have cash to transact business. Why is that? Why was specie, I guess, the coins and notes, why was that scarce at the time? Because there were very few banks actually originally in this area issuing the money.

11:03Money tended to flow from west to east just because of the way the economic forces worked. And things like specie tended to disappear into people's private stashes and hoards. Colonial America was somewhat similar. It was the periphery of the British Empire. It had very little actual cash. And so counterfeiters flourished then too. Well, this was kind of the 1820s and 1830s variation of it. And so James Brown decided, apparently, along with a lot of others, to fix that. And fixing that meant counterfeiting the notes of legitimate banks and circulating them because people needed the money. And more often than not, they were happy to accept something fake as long as it did the work that money is supposed to do.

11:51Hang on. They knew it was fake or suspected it was fake, but they still used it because it was just useful. That's right. Especially when counterfeiters are tried or they attempt to try them and convict them. You know, locals will say things and sort of shrug and be like, well, you know, you know, that we it's sort of helpful in some cases. And also, and this is absolutely critical, the banks that were around in this era, many of them had a very dubious reputation. I'm talking about the legitimate banks. And that helps explain why someone like James Brown and many others were able to apply their trade with such impunity.

12:36And one of the ways of saying that is the line between a criminal and a banker was pretty blurred. It wasn't clicked up at all. Absolutely. It's even more fascinating than that. And James Brown did this as well. Let's say you're a counterfeit at this time and there's a thousand banks out there and they have names like the Farmers and Mechanics Bank of Lawrenceville or the Drovers Bank of Gallipolis or whatever. Why should you go to the bother of imitating another bank? Why not just create a bank out of whole cloth? And that's exactly what Brown did on more than one occasion where they would just come up with a plausible sounding name, create a banknote that was beautiful and start issuing notes and people would accept them.

13:24I mean, you know, what are you going to do? Check every single note that comes across, you know, the store counter. I mean, people tried, but it's kind of a fool's errand. But what did they look like? Yeah, these notes, because they assume they must have looked kind of the business, right? Absolutely. So whether it's genuine or counterfeit or completely fictitious, meaning an institution that never even existed, these are beautiful pieces of money. They're collector's items. You can easily spend a million dollars buying up collections of these. These are worth an enormous amount of money, ironically today, including the counterfeits.

14:00The counterfeits are actually worth a lot. Oh, wow. Yeah. So they would have been a good investment in the 1820s if you'd held on to them. That really is creating money out of thin air. Exactly. There's another kind of like echo effect of this whole interesting economy. But the notes themselves typically had portraits of beautiful women or safes containing gold coin or just local scenes and vignettes. They also oftentimes contained pictures from Greek mythology, interestingly. Wow. Women, safes with gold coins and Greek mythology. And basically everything else you can imagine. I'm talking now legitimate bankers would put pictures of their kids on them.

14:44I don't know. If I had a bank of Wigglesworth, I'd probably put my kids on there as well. Yeah. Oh, that's a good dad. The ultimate good dad test is whether you create a bunch of banknotes with your kids on them or not. But that must have made him fantastically wealthy, didn't it? It did. So imagine this man. He was extremely tall, very handsome. This was his reputation. He amassed a fairly sizable fortune, built a Greek revival mansion, basically overlooking this canal that connected Cleveland to the Mississippi River via some rivers. It's basically a critical canal conduit that linked the Great Lakes with the Mississippi and the Gulf of Mexico.

15:25It still stands today. Great place to visit. Not one that most tourists know about coming to the United States, but definitely worth a visit. And, you know, all accounts suggest that he had amassed fairly significant land holdings, fairly significant portable goods, meaning luxury items, things like that. He was married, had a son who was also a counterfeiter. It's lovely to see children following the family trade, isn't it? Yeah. And he was a very accomplished one as well. His son pulled off some truly remarkable exploits as well. The thing to emphasize about this, about these sorts of individuals, you know, aside from the fact that they're playing in the boundary between legitimate and fake, you know, that's generated by this banking system is that their operations were not actually local, even if they were based in a locality.

16:16They had criminal networks that span the entire country and even beyond the United States. So this was kind of roughly analogous to the drug trade, maybe, in terms of its operation, without the violence. I mean, there would be threats occasionally, but in all my research, I never found a case of someone being murdered in connection with counterfeit money. So, obviously, one of the reasons why this counterfeiting happened was there wasn't actually a dollar in existence back then. And there wasn't really a Federal Reserve or a central bank who could create the kind of money that people needed to transact and do their everyday life, was there?

16:58Right. Everyone in the world now knows about Alexander Hamilton and what he did for the United States, thanks to a musical. But he did create actually a central bank, the Bank of the United States. But what happens to the Bank of the United States is that it never requires the level of control and importance that the Federal Reserve would eventually get beginning in the early 20th century. And in addition, the Bank of the United States is allowed to expire in the 1830s. So for this long period, especially the 1830s through the 1860s, the United States has no central bank at all, none, zero. And this goes in tandem with the proliferation of note issuing banks.

17:45Basically, state charter banking explodes after the demise of the Bank of the United States. Today, this world is unthinkable. It is very hard to wrap your mind around. It's also very hard to wrap your mind around that the dollar itself was not the super currency that it is today. I mean, this is just a very different time. So it's the ultimate libertarian dream in a way. It kind of is, actually. And oftentimes when I talk about this era, the people who get most exercised about defending it are folks who are libertarians, because this is the golden age, right? Yeah, no state monopoly on currency.

18:24It's a free for all, yes. The marketplace. No, and the crypto enthusiasts today are in many ways the kind of latter day incarnations of a lot of the spirit. So what was James Brown's golden age? What was like when he was at in his absolute heyday, as it were? Right. So it's really from the 1820s to the 1840s that James Brown goes from being a kind of secondary player in the counterfeit economy. We know that he was involved very early on because he surfaces in court documents as far away as Canada, New York City, Philadelphia. You know, these guys all knew each other. These were these were elaborate criminal networks.

19:07But in the 1820s and 1827, he's living in this area of Ohio that's kind of a remote backwater. This canal opens that connects the Great Lakes to the Mississippi. That suddenly puts him right on like one of the principal, you know, commercial conduits of this emerging Western economy. So he's there and suddenly there's a lot of traffic moving through, you know, very close to his house. And he begins to form a criminal syndicate that goes by the name the Boston Bankers. Ah, great name. Yeah, it's nice. It's the local town. Boston, by the way, was the center of the most conservative. Boston, Massachusetts was the center of the most conservative banking establishment in the nation.

19:54So this was a nice sort of way to poke fun at that. It's the ultimate brand leverage, isn't it? Absolutely. And so this is a wonderful place to do business as a criminal because it has limited legal institutions. He's well liked by his neighbors. He's elected justice of the peace. So which is a great position to hold if you're doing things that are nefarious and you don't want to be bothered. And the geography of the area, it makes it very easy to hide the implements of counterfeiting. Counterfeiting is actually kind of a capital intensive operation involving printing presses and, you know, plate engraving.

20:39And you need to be, you need to have a place where you can do that where no one is bothering you. And when you say geography, do you mean like there were mountains and caves and that kind of stuff? Caves, gullies, ravines. It's a sort of place you can get lost in. It's a heavily densely forested place with a lot of topographical changes that allow you to hide. So right place, right time. Absolutely. And he now is sort of at the center of a lot of transportation and movement of goods that are going from the Mississippi to the east, from north to south. So he's actually right in the emerging center of the national economy.

21:16And so this is a, you know, he couldn't have picked a better area. And so from the 1820s through the 1840s, he and his family, his brother was also counterfeiter, his wife seems to have been involved, although we know a lot less about her and, of course, his son. So what could possibly go wrong? Well, many things go wrong for him in the sense that he's arrested many times. But that is a small obstacle for someone of his caliber. The thing about Brown and many of these individuals is, you know, one, their ability to kind of corrupt local institutions was pretty legendary. So they would be arrested and they would post bail and then they would vanish for a while.

22:05And eventually what ended up happening, and it happened in Ohio where he was living, happened elsewhere. Many counties actually just sort of turned this into a kind of informal tax where you would never actually be prosecuted for your crimes, but you would pay a bail and then you would abscond for a while, come back, and life would continue as it had previously. And can I ask a quick question? How much counterfeit money was there compared to the real thing? Are we talking like 50-50? Are we talking like counterfeit was 10 % of what was being used? This is a great question. I think it really depends on where you are in the nation, in the United States at this time.

22:48A place in a frontier area, you might see a significant plurality of it being counterfeit. Yes. more established centers of commerce on the East, where there'd be a lot more familiarity with banknotes, the numbers would be much lower. But having said that, Jillian, the fear of counterfeit money, of the awareness of counterfeit money is pervasive. I mean, there's an entire class of magazines or periodicals that are issued weekly in the United States at this time, dozens of them called counterfeit detectors that are exclusively dedicated to helping people find counterfeits. So the economy was haunted by fear of fake, essentially.

23:26That's right. That's right. I'm curious, did James Brown consider himself a proper criminal or was he sort of an enterprising businessman taking advantage of a chaotic area and supplying his service for a good that people wanted, which was something that could serve as money? I think he viewed himself as the latter. Absolutely. The way that the counterfeiters so often defended themselves, including, you know, Brown was to invoke that kind of like, how are we any worse than, you know, bankers operating, you know, with insufficient specie reserves, you know, metallic currency reserves? How is that any different?

24:08It's all about confidence. And if people have confidence in my money, then what's the big deal? That sounds awfully familiar in lot of ways. So give us a sense of what his greatest hits were in terms of his most audacious efforts at fakery. The one that really kind of sealed his reputation was a plan that never came to fruition, but is sufficiently crazy and audacious that it sort of speaks to his ambitions. He and his brother got out the idea that they would counterfeit the bank notes of the Bank of the United States. Okay. So this is the quote, national bank, central bank, such as it was before it expires.

24:51They're going to go down to New Orleans, down the Mississippi River, and they're going to outfit a ship and they're going to go overseas, potentially all the way to China and basically, you know, go on a huge shopping trip using counterfeit American bank notes, because this would have been the only kind of note that the United States would have been recognized outside the borders of the united states this is frankly an insane idea and um it's like the ocean's 11 of counterfeiting it is it is and it's and and it ends terribly like what ends up like they get drunk and they get they start passing counterfeit money before they leave port they get arrested and they're thrown in prison in in new orleans and his brother who's part of this a guy named dan brown dies in prison i mean it's it's kind of a tragic thing but james Brown manages to get out of this scrape by turning the tables on an accomplice who was trying to screw them.

25:50And so basically, he gets him back and turns state evidence and gets off. And when, you know, returns home to Ohio, and this story of him attempting this is so over the top that, that, you know, people begin to kind of embroider his reputation. And, you know, This goes back to the lightning strike. He's someone who's already kind of gotten himself out of what would normally kill other people. In this case, he even killed his brother. So from there on out, his schemes kind of increase in complexity. At one point, he comes close to getting a very legitimate bank to basically print notes for him of their own bank and hand it off to an accomplice.

26:40So which wouldn't even be counterfeiting, because in that case, it would be an actual legitimate bank issuing its own notes. They just happen to end up in the hands of a counterfeiter. In another case, his son, and I think he was involved in this scheme, gets the brilliant idea to go to California after the gold rush and flip the usual monetary calculus. Because in California, gold is abundant, but paper money is not. But you need paper money because you can't just haul around kilograms of gold everywhere. And so they flood California with paper, counterfeit paper money, buying up gold and then flee the state.

27:25He just has this kind of adroit capacity for schemes that are fairly large, fairly boundary pushing, and then seemingly every single time gets off. Well, one of the things I find fascinating, apart from the fact you had Samuel Lane, who was a local newspaper person who called him the Cuyahoga Valley Syndicate for fabricating and expanding the currency and describes him as the chief of the Bureau of Bogus Banking in the West, if not America. It's a great line. But the thing I love is that at one point, he actually is so audacious, he hires some of the best, most reputable New York engraving firms to print these fake notes.

28:15This goes to this idea, if you're a counterfeiter at a certain point, why not just make your own bank? And that's exactly what he does, is to create a plausible bank and to hire banknote engravers to create it. And really, fundamentally, are those notes counterfeit? It's kind of a metaphysical question, because all they are are genuine notes of a fake institution, which is different than counterfeit notes of a genuine institution. And then you've got him actually elected by villagers in the era that he was living as a justice of peace in 1834. So as you keep saying, the line between a criminal and a banker was completely blurred.

29:02And it was like everyone saying, you go for it, almost in a kind of Robin Hood type way. Right. You know, bankers at this time, I'm talking legitimate bankers, or, you know, enjoyed the same reputation as Wall Street did after 2008. In other words, many people viewed them as con men. And so, as you said, like, if this kind of Robin Hood, the self-styled Robin Hood figure preys on them, people have a hard time being like, oh, that's, you know, they're really, you know, they're doing terrible things. It's like, you know, that's a hard thing. Well, you actually have a quote from, I think it's Hezekiah Niles, that must be a good old biblical name, Hezekiah, I don't know if I'm pronouncing it correctly, who actually said back then, one speculates by law and the other against the law, i.e.

29:57one is a banker and one is a counterfeiter. And there's not much difference in terms of the impact on the economy. Obviously, law enforcement has a different view of this at this time and many respectable middle class people do as well. But this highlights this uncomfortable reality of what is money really. And this is what the career of someone like this really raises, because if money is simply just a piece of paper that we trust and can kind of like hand off because it works, that is a different thing than the idea of money as something and being intrinsically valuable that you can stockpile, hoard, reserve and the like.

30:42And the counterfeiters of this era, this golden age of counterfeiting, were kind of accidental philosophers of money, I guess you could say. That's amazing. Because there's actually a moment, isn't there, in 1838, where he goes to the engraving firm Gurley & Burton. And he says that he is the cashier from the quite legitimate Bank of Kentucky. And he tries to get an enormous amount of money printed. I'll give you a few examples of other things that kind of play up this wild thing. So there's a group, it's actually connected with the Mormons. Joseph Smith and the Mormons have a community near Boston, Ohio.

31:26So they're not far from where James Brown is operating. They could try to get a charter for a bank called the Kirtland Safety Society, I think it's called. Something to that effect. And the state turns them down, probably because they're Mormons, right? And they're like, well, all right, well, then we're going to create an anti-banking bank. And they actually take the notes that they had commissioned, put anti-banking on it instead of banking, and issue the notes. I mean, you know, it's like these are. that's like Elon Musk kind of doing all of his flexes online and trolling people yeah exactly it's like this it's like this like colossal monetary troll act of trolling but in the thing to remember about this era and this is why you know these these counterfeiters had such a field day is that you know when we think of a bank we and particularly god knows a bank that issues its own money it's got to look respectable and have a respectable name right but any corporation broadly defined could have note issuing privileges attached to it.

32:28So there are many cases, especially in these states where it's lightly regulated, where people are like, well, I'm going to found an orphanage to help orphans. I would like to have a note issuing capacity attached to my corporate charter. And then the orphans are left aside and they issue the money. You can see why someone like James Brown was kind of like, well, yeah, he's counterfeiting, but a lot of what's going on is kind of dubious. This is the era in the 1830s that is known as the wildcat banking era. And that it's a specific phrase that refers to the fact that in Western states like Ohio, and especially Michigan, the regulation was so light in the bank charters were so easy to obtain that many people founded banks that were really basically corrupt so so the distinction is that the free banking era is like there were anybody can set up a bank but the wildcat banks were sort of the really dodgy side of things like they they had a charter but they weren't really quite legitimate exactly well the way this the money works here is you issue the notes and then you have to redeem them if they are presented to you right but the way the wildcat banks would operate would be to issue the notes close down the bank and move it like to the to the wilderness and so you couldn't find where you could get them redeemed because they had no intention of redeeming them i can see several movies in this like hijinks and capers and the whole works yes yeah and of course one of the things that could also make a movie is because we do have a hero of sorts who enters the story in the form of samuel lane a newspaper man who begins to take exception to this and say, this is simply wrong.

34:19Every frontier town, it seems, you know, eventually gets someone like Samuel Lane. They're the respectable East Coast transplant who comes in, looks around and realizes that that there's a lot of funny business going on. And they're appalled, right? I mean, they're coming from areas where, you know, like New England, especially, that was very well established and orderly. And so Samuel Lane is someone who sets himself up as Brown's antagonist, but oddly enough, also one of Brown's kind of secret admirers. And by that, I mean, he was the one who contributed in so many ways to the enduring legacy of Brown's reputation in the region.

35:07He tries to basically go after Brown in the pages of his newspaper, writing about him, trying to expose him, pointing out all the ways that locals were corrupt. And, you know, and of course, Brown and his Confederates do not like this. They threaten him. They try to mob him. it's a story you see repeated over and over of like the straight arrow Eagle Scout, you know, on the one hand against the charismatic con man and the two men basically go to not go to war, but are in tense conflict with one another as this region starts to become more respectable and less like a frontier kind of wild west place.

35:51You know, more and more people are moving to the region, more and more people who are moving who are not counterfeiters. And there's growing discomfort with the idea that Brown is operating with such impunity. It's kind of like, you know, when the mafia was finally brought to heel in the United States, kind of like, you know, enjoying this kind of reputation, but then at a certain point, colliding with reality. And so... It's a bit like financial equipment of gentrification, isn't it, in town? Yeah, that's a great way of putting it. It's like, yeah, we need banks, but we need real banks, not people just printing money in caves.

36:32So in this case, Lane starts doing this investigation and calling us out. And Brown then tries to fight back, doesn't he? Yes. Like a mob tries to go after him. There's people packing heat, firearms. Again, nothing ever breaks into open violence. It's like a bribe and a one-way ticket or a temporary one-way ticket to go to another state. Because keep in mind, none of the states had any kind of extradition arrangements with each other. So once you cross state lines, you are free. So it was pretty easy. You could persuade someone to leave. This is straight out of the standard operating procedure for counterfeiters in the 1830s is send your witnesses or your accusers to another state with some money.

37:25Yeah. Yeah. But so how did James Brown get his comeuppance, if anything? What was his downfall? How did his story end? James Brown, by the late 1830s, you know, he's living life, you know, the high life. He has his mansion. He's a successful businessman, if you will. Even those people like Samuel Lane are tormenting him in the pages of the buzzard. That's the local newspaper. That's a great name for a newspaper as well. It is, yes. Feeding on the carrion. So what happens is in 1837, there's a panic, a national panic as a speculative bubble that's in Western land collapses. And with it, the wildcat banks are taken out.

38:10Otherwise, solid banks are taken out. The entire financial system collapses and people don't want to use paper money at all. Paper money becomes like a, like it doesn't matter because no one is able to make good on the promises to pay that are adorn paper money, whether real or counterfeit. When that happens, people are more interested in coin and James Brown recognizing an opportunity moves into counterfeiting coin. Counterfeiting coins are very different kind of operation, although you can do it in the same kind of backwoods, caves, places that you make paper money. but you have to do it somewhere that's not in your own basement.

38:51You have to be somewhere remote since it involves building fires and things like that. He makes coin. He starts trafficking in coin, acquires a reputation in that. But then he's doing something that's different than what he had done previously when it comes to the law. Counterfeiting coin in the United States is a crime that's a federal crime. Counterfeiting banknotes is a state level crime. We've seen that state-level crime counterfeiting, that's pretty easy to navigate. Federal crime, that's a different matter. And one of his accomplices basically rats him out, probably was bribed to do so, and he's arrested.

39:30There's a federal raid on his home in the mid-1840s. and he's actually tried in federal court. And this is a very different venue, as many criminals have found over the years. Once you jump into that arena, it's harder to bribe people and get rid of witnesses and all the rest. He's actually convicted and sent to the state. There's no federal penitentiary at this time. So he's sent to the Ohio State Penitentiary. And this is, again, one of those times where his career has this kind of cinematic flair to it because he's sent there and then a tragedy erupts in the prison. There's a cholera epidemic.

40:19Cholera, I mean, it's a horrible death. I mean, these are people dying left and right. He is, at this point, basically been put in charge of the prison hospital because, again, he has amazing leadership skills. and the prison. It's kind of a funny thing because, you know, I've looked at the prison register when he was admitted to the state prison in Ohio, and just like everyone else who meets him, like the warden of the prison, like writes in like, very handsome, engaging guy. You know what I mean? He was charismatic. I mean, you know, Harvard Business School could do a case study on his management skills.

40:56No, he clearly had a very good way with, yeah, with subordinates. And even the prison warden. Yes, prison warden. So the prison warden puts him in charge of the prison hospital. And he basically nurses all of these inmates, you know, through this horrific epidemic. And, you know, after that, the folks in the governor's office and, you know, fairly high placed officials wrote the president of the United States, Zachary Taylor, was like, we think you should pardon him. Oh, my goodness. I mean, what? So he gets out? Yeah, he gets out. He's pardoned. And he leaves and he says, I'm not going to go back to counterfeiting.

41:36Okay. So this is July 1849. He's been pardoned by literally the president of the United States. He promises never to go back to his whole life of counterfeiting again. Right. What happens then? So sadly, you know, what happens is he moves to Cleveland. and he does get back into counterfeiting, unfortunately. He just doesn't have... James, James. I know. You got so close. Yeah. And he starts to have a drinking problem. His wife leaves him, and he begins a kind of very sad, slow decline. So people who remembered him from the late 1850s, early 1860s, remembered him as like, still had that look, still had that kind of charisma, but was more broken, old, aging.

42:34What looks like cool anti-establishment, Robin Hood-style criminality in his 20s and 30s starts to seem like just old has been corruption. Absolutely. And his last kind of glimmer in the last appearance in the historical record comes at the end of the Civil War. And it's the story of at the end of counterfeiting generally, actually, because in the Civil War, the United States shifts to issuing a national paper currency. OK, so this is the first true government issue national currency and simultaneously begins to tax state banknotes out of existence. So the old monetary system that has sustained this counterfeit economy is eradicated.

43:27And in its place, the federal government now is very interested in protecting its currency from the counterfeiters who understandably now want to move into a national level. And they create an agency in the government that exists today that is known for protecting the president, but was originally founded to protect the currency. That's the Secret Service. So the Secret Service started out as an anti-counterfeiting task force. That's all it was doing. It was marvelously successful at this. Not so good, obviously, at protecting presidents, but that was not its job at this time. Yeah, it took multiple assassinations before the Secret Service took on that.

44:11But to go back to 1865, you have the founder of the Secret Service, a man named William Wood, who was kind of a ruthless law enforcement agent. And he begins to build a national police force to take down the counterfeiters. And James Brown is actually arrested by the Secret Service on like a fairly minor charge. But that's his last kind of appearance in the court records. And then he falls off a canal boat, possibly because he was drinking, knocks himself on the head and is dead not long after. Do they think it was an accident or was it a murder? No, it sounds like it was an accident. It was almost certainly an accident.

44:53The wildcat banker finally ran out of lives. Yeah, exactly. His nine lives had run out. And he's dying at the moment when the entire counterfeit economy is starting to wither under this, what's going to be a decades long campaign to basically protect the currency and a very successful one. And in many ways, as you say, he was a symbol of the whole rise and then the fall of WorldCat banking in a bigger sense. Well, in today's world, he probably would have been a brilliant derivatives trader and constructing all kinds of new financial innovations. Absolutely. Or a politician. Or both, yes. There are many, many individuals like this at this time, and they have many characteristics in common.

45:37they tend to have this skepticism of authority particularly when it comes to banking authority that allowed them to do what they did so our lovable roguish anti-hero james brown is now finally over he his career ended in when he was arrested in 1865 and he sadly passed away in a drunken presumably accident in 1866 but after the break we're going to be discussing the legacy of this wild era of banking and money in America and what it tells us about money today.

46:20The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape, channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.

46:56So we've heard all about how James Brown was this charismatic frontier counterfeiter in 19th century america he amassed immense wealth probably some of it real wealth some of it's made up uh and local political power by operating his own uncharted bank he printed high quality fake notes for for both real and entirely fabricated financial institutions and his this success really demonstrates how cash star the american frontier was and how they relied relied on public confidence in these notes, or at least some sort of confidence in these notes to buttress an entire economy. It kind of blurred the line between being a, what was maybe for the era, not legitimate banking, but semi-legitimate banking, and just being a full-on criminal, essentially.

47:49I mean, Gillian, we've talked about this. We love talking about the nature of money. What kind of perils do you see between this era of wildcat banking and today's cryptocurrencies? Well, what I find truly fascinating is that until 150 years ago, you had this explosion of, if you like, homemade finance, homemade banknotes and coins in different parts of America. And as a result, you had this obsession with people worrying about whether something was real or fake and you couldn't tell. But there was a real sense that anyone could go out and kind of create their own money if they wanted. Then you had the state come in, in the form of central bank and the secret service, or farther the other way around.

48:30And essentially, you took away people's power just to create their own money. But we're back now in an era that has so many echoes of this because of not the frontier mentality geographically, but the digital world west. And the fact we now have a new frontier in cyberspace where people can do whatever they want. So we've had the explosion of meme coins, cryptocurrencies, and now stable coins where people are creating all types of money without central control or regulation much of the time. And once again, that creates questions about what is fake, what is real, and what can we actually trust?

49:13Because, of course, the roots of the word credit come from the Latin quidere, meaning to believe or trust. Mm-hmm. Mm-hmm. I'd love to ask you, Stephen, I mean, how do you see the echoes today? It's a great question and one that, as I've watched the last things unfold since the book was published, you know, some time ago now, crypto has come into its own. And what I find most fascinating about it, well, is two things. One is the one you've already touched upon, which is this kind of like democratization of moneymaking and the fact that it's utterly decentralized, you know, that the barrier to entry effectively is almost entirely collapsed.

49:53collapse. The second, though, is the sentiment that many crypto enthusiasts channel that reminds me of my counterfeiters and bankers, which is that, well, we're doing this because we can't trust fiat currencies issued by governments any longer, right? And I've even seen like crypto bros, you talk about like, well, government is just basically a legal counterfeiter, right? They're just issuing their own money without anything backing it. And I find that that's fascinating to me that the same kind of rhetorical switch is happening here in this kind of skepticism. This time, though, aimed at government-sponsored currencies that's kind of justifying this explosion of private currency.

50:47It illustrates the point that Neil Ferguson, the historian sometimes, makes about what he calls the oscillations between the tower and the square. At some points in history, the tower, in the sense of a king or government or an institution, was in control, just like a tower used to dominate medieval Italian towns. And then in other points of history, the square, as in people power, revolts against the authority of the establishment and creates its own mechanisms for control and freedom. And in a way, the World Banking era was a time of people power when ordinary people were creating what they wanted.

51:25There's a good reason that libertarians look at this earlier era, the free banking era, as a kind of model, because it is this democratization. It's something where there is no state monopoly. And I think that that kind of ebb and flow seems to be with us. And we are clearly, clearly in the square right now, at least when it comes to money creation. And yet one of the lessons from this period is that this kind of pattern of people power driving money is chaotic, uncertain. You don't have trust and trust is an essential ingredient to make markets and commerce actually work as people like Adam Smith wrote all those years ago.

52:07And perhaps the other lesson is that you can have periods of history of people power or democratization, but sooner or later, the government central control tends to come in just to make sure you have a system that that can actually work. One should never, ever underestimate the power of the state to wake up and reassert its authority over something that has been allowed to basically run wild. And I think all it takes is, you know, a kind of political will and also, you know, institutional power. I think what we're waiting for potentially is some kind of watershed event that discredits or so sufficient distrust to go to your point, you know, where credit and believing is no longer possible that, you know, that that's an opening for the state to come in and and put an end to this.

53:12So James Brown, to defend our roguish hero a little bit, at least he was providing a service. As we talked about, you know, there was a demand for this and people kind of knew it was funny money, but they still needed something. Can the stable coins, is there a real need or service that they're providing at all?

53:35Yes. I say that not that I would necessarily embrace personally, but they are a product of the growing unease that has been with us actually for some time since the breakdown of the Bretton Woods system many years ago. So as a historian, I tend to see things in decade or century long chunks. And I sort of view everything from the early 70s to the present as part of a continuum. And I think that we have to understand the stable coins, crypto, a lot of this is emerging out of that collapse. We've never actually fully grappled with what happened when that collapsed. We've been living in a kind of what may ultimately look like an interregnum, a monetary interregnum, you know, before something else comes in.

54:28So we're looking at basically a loss of trust in fiat currency slowly. And we're also, by the way, of course, many people using stable coins would say there's another need in the market that these instruments are fulfilling, which is the fact you need to be able to transfer money across borders cheaply. And it's very expensive right now. and increasingly countries want to do that without having to go through the central hub of the financial system, which is a dollar-based financial system. They don't trust America in particular. Yes. And not to let current events intrude too heavily on us, but let's face it, the centrality of the dollar to the international financial system, I think, is in danger right now.

55:09So two big burning questions. One, has a movie been made about James Brown? And if it hasn't, Who do you want to play it? And then secondly, do you have any of these counterfeited notes hanging by your bed or hanging on the wall in your house? When I wrote this book, I was a graduate student and I could not afford them. They're quite expensive. Counterfeit, absolutely, these bank notes, like the 1830s, it's like$800 ,000, $900 ,000 for a single note. But on the question of a movie, no, no movie has been made. And I've sometimes thought, this is a funny thing to say, I actually watched a sort of forgettable Matthew McConaughey movie on a plane recently.

55:48But I thought like, you know, he kind of looks like James Brown, actually, you know, because there's this portrait of Brown and, and it sort of has that, I don't know, kind of swagger, I guess. Yeah. And then third question, has anyone ever suggested to Elon Musk or anyone else that he create a meme coin based on these counterweight notes, because that really would be history coming full circle. I don't believe anyone has, but it's a great idea. Well, if Elon Musk is listening or any other crypto bros out there, you have your task ahead of you. And it just remains for me to say a huge thank you to you, Professor Mim, for a really fascinating discussion.

56:28I've learned so much I didn't know about, and it just goes to show there's nothing entirely new under the sun. So thank you from me. Thank you. Thanks so much. No, thanks for me as well. Stephen, this was fantastic. And that is all from this episode of the story of money from the Financial Times. I'm Robin Wigglesworth. And I'm Gillian Tett. And we'll see you back here next week.

57:09The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape, channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.