U.S. government's manhandling of GM and Chrysler bondholders will ripple outward, striking not only companies and their creditors but the very basis for U.S. power and prosperity
Historians pinpoint the beginnings of U.S. power at 1811, with the liquidation of the First Bank of the United States, founded by Alexander Hamilton. Amid the winds of the War of 1812, First Bank ignored political pressure and insisted that even British bondholders, from the nation the U.S. was preparing to fight, be paid in full. The debt was paid because that was the law.
This single act reverberated for years. Word got back to Europe that the word of this fledgling country was good, even with enemies. As a result, European capital to finance the great steamships, railroads and other engines of American growth flowed.
"The return of their funds became an important chapter in American finance because it showed that the government was willing to do business on an impartial basis, and that would influence future British investments for decades to come," wrote Charles R. Geisst in his 1979 "Wall Street: A History."
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