Putting a Central Bank Across: Manipulating a Movement, 1897-1902

Around 1900, two mighty financial-industrial groups, each consisting of investment banks, commercial banks, and industrial resources, confronted each other, usually with hostility, in the financial, and more importantly, the political arena. These coalitions were (1) the interests grouped around the Morgan bank; and (2) an alliance of Rockefeller-Harriman and Kuhn, Loeb interests. It became far easier for these financial elites to influence and control politicians and political affairs after 1900 than before. For the "Third Party System," which had existed in America from 1856 to 1896, was comprised of political parties, each of which was highly ideological and in intense conflict with the opposing party. While each political party, in this case the Democratic, the Republican, and various minor parties, consisted of a coalition of interests and forces, each was dominated by a firm ideology to which it was strongly committed. As a result, citizens often felt lifelong party loyalties, were socialized into a party when growing up, were educated in party principles, and then rode herd on any party candidates who waffled or betrayed the cause. For various reasons, the Democratic and Republican parties after 1900, in the Fourth and later Party Systems, were largely non-ideological, differed very little from each other, and as a result commanded little party loyalty. In particular, the Democratic Party no longer existed, after the Bryan takeover of 1896, as a committed laissez-faire, hard-money party. From then on, both parties rapidly became Progressive and moderately statist.

Since the importance of political parties dwindled after 1900, and ideological laissez-faire restraints on government intervention were gravely weakened, the power of financiers in government increased markedly. Furthermore, Congress—the arena of political parties—became less important. A power vacuum developed for the intellectuals and technocratic experts to fill the executive bureaucracy, and to run and plan national economic life relatively unchecked.

--Murray N. Rothbard, The Case Against the Fed (Auburn, AL: Ludwig von Mises Institute, 2007), 90-91.