#AI #ChatGPT #Grok: Would the Founding Fathers have agreed with current bank capital/equity requirements?

I asked "Yes, or No"

"The Founding Fathers who drafted the Constitution of the United States, would they have agreed with current bank capital/equity requirements that are higher against loans to America’s small businesses and entrepreneurs, than against Federal Debt?"

ChatGPT answered:

No

The Founding Fathers emphasized limited government, individual enterprise, and the importance of private initiative. They would likely have seen higher capital requirements against loans to small businesses and entrepreneurs than against Federal Debt as a distortion favoring centralized power over decentralized economic opportunity.

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Grok answered:

No

In less than 400 words, why?

The Founding Fathers, who drafted the U.S. Constitution, prioritized economic liberty, individual initiative, and limited government intervention, values reflected in their debates and writings. They would likely have opposed higher bank capital/equity requirements for loans to small businesses and entrepreneurs compared to federal debt, as such policies could stifle the entrepreneurial spirit and economic growth they championed.

Figures like Thomas Jefferson and Benjamin Franklin emphasized the importance of small enterprises and independent producers in fostering a free society. Jefferson, in particular, distrusted centralized financial power, as seen in his skepticism of Alexander Hamilton’s national bank. Higher capital requirements on small business loans increase borrowing costs and restrict credit access, disproportionately harming the very individuals—farmers, artisans, and small merchants—the Founders saw as the backbone of the republic. This could be viewed as an artificial barrier to economic freedom, akin to the mercantilist restrictions they rebelled against.

Conversely, lower requirements for federal debt incentivize banks to favor government securities over private lending. The Founders, wary of public debt from their Revolutionary War experience, would likely see this as prioritizing government largesse over productive enterprise. Hamilton, though more favorable to public credit, argued in his First Report on Public Credit (1790) that debt should support commerce, not crowd out private investment. A system that tilts banks toward federal debt could echo the centralized financial systems the Founders criticized in Britain.

The Constitution itself, in Article I, Section 8, grants Congress powers to regulate commerce and borrowing, but the Founders intended these to promote general welfare, not to favor government over citizens. Higher capital requirements on small business loans could be seen as a regulatory overreach, clashing with their preference for minimal government interference in markets.

While modern banking regulations address systemic risk, the Founders would likely argue that penalizing loans to small businesses—key drivers of innovation and employment—undermines the economic dynamism they sought to protect. They would favor policies ensuring equitable access to credit, aligning with their vision of a republic where individual effort, not government preference, drives prosperity.

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You're welcome!

Note: The answers are copied exactly from those given to me by ChatGPT and Grok

Here my many other questions to ChatGPT – Grok on bank regulations.

2013: Have the risk weights of current bank capital requirements been approved by the US Congress in accordance to the Constitution?

2023: Should US bank regulators take an oath to support and defend the US Constitution?