Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
I
Related Topics
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Introduction
Talking Points
1. The First Bank of the United States was needed because the government had a debt from the Revolutionary War, and each state had a different form of currency. It was built while Philadelphia was still the
nation's capital. Alexander Hamilton conceived of the bank to handle the colossal war debt — and to create a standard form of currency.
2. Up to the time of the bank's charter, coins and bills issued by state banks served as the currency of the
young country. The First Bank's charter was drafted in 1791 by the Congress and signed by George
Washington. In 1811, Congress voted to abandon the bank and its charter. The bank was originally
housed in Carpenters' Hall from 1791 to 1795. The neo-classical design of the bank was intended to recall the democracy and splendor of ancient Greece. When you're there, note the eagle which crowns the
two-story portico. At the time of the bank's creation the eagle had been our national symbol for only 14
years. The bank building was restored for the Bicentennial in 1976.
3. Nowhere in the Constitution is there a reference to a national bank, so Hamilton used a loose constructionist interpretation to create his bank, saying that Congress had the right to use whatever methods necessary to implement its proceedings. The bank was part of the compromise struck by Hamilton and Jefferson that moved the national capital from Philadelphia to the banks of the Potomac. This, Hamilton
hoped, would help get southern states to assume their part of the war debt. Jefferson was suspicious of a
National Banking system and National currency, and when the charter was not renewed after twenty
years, the First Bank was sold to Stephan Girard, who established the Girard Bank.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Related Topics
Chapter Information ~ Ch 9; 3 sections; 21 pages
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Key Connections - 10 Major (Common) Themes
Key Ideas
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Talking Points
4. Hamilton was in favor of a large federal bureaucracy, claiming that the more citizens must depend on the
Federal government, the more loyalty they will show towards it. He had the largest staff of any secretary,
over 300+ workers in Philadelphia, plus more in regional offices acting as tax collectors. At the same time,
President John Adams had trouble keeping a secretary. Hamilton admired the British government, and
said that a level of patronage and corruption helps the government run better, again because more people
would depend on it.
5. Unlike Thomas Jefferson, Hamilton supported a manufacturing-based economy, saying that manufacturing takes its resources not just from the surface, but from the bowels of the earth as well. He also was a
strong supporter of federal involvement in the economy, and was the first to try to manipulate the stock
market, establish interest rates, and create government subsidies for American companies so that they
could compete with their European counterparts.
6.
7. One of the most important of Alexander Hamilton's many contributions to the emerging American economy was his successful advocacy for the creation of a national bank. But the Bank of the United States, like
many of Hamilton's other projects, would generate controversy.
II
The Need for Financial Stability
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
Hamilton had long believed in the need for banks to provide credit and stimulate the economy. As early as
1780, he wrote a letter describing central banks in Europe and wondered, "And why cannot we have an American bank?" Hamilton helped found the Bank of New York in 1784. Soon after he became the nation's first
Treasury Secretary, he was already proposing a national equivalent. On December 15, 1790, Hamilton submitted a report to Congress making the case. He proposed a Bank of the United States with a $10 million capital (then five times more than all other American banks combined) and the ability to issue paper money. It
would be based in Philadelphia and chartered for 20 years. The federal government would have a minority
stake in the Bank, but its board of directors would be private individuals, thus ensuring a mix of public oversight and private enterprise. The Bank would be able to lend the government money and safely hold its deposits, give Americans a uniform currency, and promote business and industry by extending credit. Together
with Hamilton's other financial programs, it would help place the United States on an equal financial footing
with the nations of Europe.
III
Opposition from the South
In contrast to Hamilton's plan for the federal government to assume state debts, Hamilton's bank plan had a
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
relative easy time in Congress. The Senate passed it handily on January 20, 1791, and the House followed in
early February. But support for the Bank fell largely along sectional lines, with Northern endorsement and
Southern opposition. Among those Southern opponents was James Madison, who worried that the Bank's
placement in Philadelphia, the nation's temporary capital, might thwart the decision to put the permanent seat
of government further south on the banks of the Potomac River. Madison also noted that the Constitution conferred no power to establish a national bank or any other corporation; and if a power was not in the text, by
what authority could it be done? When the Bank bill reached George Washington, Thomas Jefferson, who
termed the banking industry "an infinity of successive felonious larcenies," also weighed in against it on constitutional grounds, urging a veto. So did Attorney General Edmund Randolph. It seemed as if the Bank might
yet go down to defeat.
IV
George Washington
Hamilton would not give up without a fight. Asked by his patron Washington to answer the opinions of Jefferson and Randolph, Hamilton swiftly penned an opinion of almost 15,000 words presenting his case. Hamilton's central point was that the Constitution must confer implied powers along with those actually enumerated;
the vehicle for this was the clause enabling Congress "to make all laws which shall be necessary and proper"
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
to put expressly granted powers into effect. In Hamilton's view, later echoed by Chief Justice John Marshall in
the landmark McCulloch v. Maryland case upholding the Bank's constitutionality, "necessary" did not mean
absolutely essential so much as useful and appropriate, and the Bank certainly met that looser standard -- it
would be a great help in enabling the government to carry out a number of powers explicitly granted it by the
Constitution, including collecting taxes, regulating trade and creating a military. Persuaded by Hamilton's arguments, on February 25 Washington signed the Bank bill into law.
V
Expired Charters
When stock in the Bank became publicly available in July 1791, the resulting frenzy and rocketing share price
seemed to confirm its value. But criticism of Hamilton's policies and the man himself was growing, and the
Bank was a key factor in the creation of America's first organized opposition party, the Republicans, that same
year. Republican capture of the White House in 1800 and continued control did not bode well for the Bank,
and when its first charter expired in 1811, the Senate rejected a bid to renew it. President Madison felt the
consequences during the War of 1812, when there was no central bank to fund the military effort, and as a
result he endorsed renewal in 1816. But the charter of this Second Bank of the United States expired under
President Andrew Jackson, another Bank foe, and Jackson let it lapse. In a curious irony, Jackson's acting
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
secretary of state, James Alexander Hamilton, opposed the very Bank his father had created. And this time
there would be no quick renewal; although Congress allowed certain nationally charted banks during the Civil
War, the modern Federal Reserve system did not come into being until 1914
VI
Alexander Hamilton and the First national Bank
1. Alexander Hamilton helped to establish the First Bank of the United States which was a model for the
American financial markets and monetary policy that endures to this day. On December 12, 1791 a bank
unlike any previously seen in America opened for business in Carpenters’ Hall in Philadelphia, then the
seat of the federal government. The new bank was a national bank, authorized by Congress to hold $10
million in capital—an astronomical sum at the time—and operate across state borders. And it was a quasipublic institution, owned mostly by businessmen and lawyers motivated by profit, but also intended to
serve the public interest by improving the financial standing of the federal government and fostering economic growth.
2. Businessmen and investors across the nation had anticipated the opening of the Bank of the United
States with mounting excitement for almost a year. In July 1791, a public offering of bank stock sold out in
less than an hour, setting off frenzied speculation in bank shares. Stockholders had chosen directors hail-
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
ing from eight states to run the bank. By December, it was ready to begin accepting deposits, making
loans, selling U.S. Treasury bonds and issuing paper currency backed by gold and silver coin stored in its
vaults. The following year, bank branches would be established in Boston, New York, Baltimore and
Charleston, S.C., to facilitate the flow of money and credit to various regions of the country; four more
branches would follow by 1805.
3. The intellectual architect of the bank—known today as the First Bank of the United States—was Alexander Hamilton, the founding father who most profoundly influenced the economic development of this country. As the Republic’s first Treasury secretary, Hamilton championed the idea of a national bank, proposing its establishment to Congress and convincing President George Washington—over the strenuous objections of Thomas Jefferson—that the bank would not violate the Constitution.
4. It has been written about Hamilton, the man on the $10 bill, that the new nation needed a national bank if
it was to prosper. After the Revolutionary War, the economy was in tatters: Crushing war debt weighed
down the federal government, and a shortage of sound currency and bank credit stifled commercial
growth. Hamilton designed the First Bank to help the government get on its financial feet and to galvanize
American commerce by providing currency and loans to businesses and individuals. The bank was a vital
part of a national financial infrastructure that Hamilton created during his short but prodigious career, the
template for today’s monetary economy based on a stable currency and access to credit.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
5. A statesman with a natural genius for economics, Hamilton was far ahead of his contemporaries in perceiving how the country’s fortunes and those of free markets were intertwined, says Thomas M. Humphrey, a former senior economist with the Federal Reserve Bank of Richmond who has written extensively
about the history of economic thought. “Hamilton saw a system of sound, secure and resilient financial
institutions as being necessary for the real economy to function efficiently,” Humphrey said in a telephone
interview. “He also had this vision that America would one day become a huge, thriving economic success
around the world, and he thought of these institutions as being necessary to promote that vision.”
6. The First Bank worked in consort with Hamilton’s other financial reforms—paying off war debt and establishing a stable monetary standard—to put the government’s finances in order and stoke the fires of enterprise at the beginning of the industrial revolution. By aiding in revenue collection, lending to the Treasury
and marketing government debt to private investors, the bank served as a financial bulwark for the federal
government. And its operations invigorated markets by providing a sizable, trustworthy currency and extending credit to businesses.
7. Hamilton’s bank was destined not to endure; constitutional challenges and opposition from state banks
forced it to close after 20 years of operation. But the institution he created laid the foundation for a second
national bank and, almost a century later, for the establishment of the Federal Reserve System. Although
the First Bank was not a true central bank—the concept of centralized monetary control didn’t develop
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
until the 20th century—its powers and operational scope presage the Fed’s stabilizing influence on the
nation’s money supply.
8. The economic ideas that sprang from Hamilton’s fertile, industrious mind have informed financial practice
and monetary policy in this country for more than two centuries. This article examines how those ideas
became manifest in the First Bank of the United States—and transcended the death of the bank and
Hamilton himself.
VII
War and Peace
1. The plan for the First Bank wasn’t cut from whole cloth, the product of an individual flash of inspiration or a
snuff-fueled brainstorming session in Washington’s cabinet room. Hamilton mulled over the notion of a
national bank for more than a decade before making his formal proposal in 1790.
2. During the Revolutionary War, as an aide-de-camp to General Washington, Hamilton saw firsthand how
financial disorder undermined the patriotic cause. Because the Continental Congress had little power to
tax, it was forced to finance the war by borrowing and issuing paper money, known as “continentals.”
However, without collateral to back them, millions of dollars in this currency had become nearly worthless.
Government debt was mounting by the day.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
3. The cure for these ills, Hamilton believed, was a national bank. In a 1779 letter to a congressional delegate, Hamilton described a large banking and trading corporation owned by wealthy individuals, but partly
controlled by the government. The institution would invest in war debt, converting deflated continentals
into new currency and credit that would promote industry and trade.
4. Colonel Hamilton was just 24, but versed far beyond his years in matters of political economy. As a teenager, he had received a crash course in international commerce as a clerk for a trading firm on the island
of St. Croix in the British West Indies. While studying at King’s College (now Columbia University) in New
York and during the war years, Hamilton read extensively on economics and finance, absorbing the mercantilist theories as well as the classical, free-market teachings “Hamilton was just a genius,” Humphrey
says, “and he somehow managed to put it all together, although his style was not completely pro–free
market, like the classical economists.”
5. In 1781, Hamilton again broached the idea of a national bank, outlining his vision in a letter to Robert Morris, superintendent of finance for Congress. The bank would issue pound notes backed in part by real estate, redeem the government’s outstanding paper money obligations and lend to both government and
private businesses. Such an institution would furnish the needed capital to win the war and “be a source
of national strength and wealth,”2 Hamilton wrote. Morris may have incorporated some of Hamilton’s ideas into his plan for the Bank of North America, the first independent bank in the country. (Domestic banks
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
were banned under Colonial rule.) Incorporated in 1781, the Philadelphia bank was conceived as a national bank but devolved into a regional bank focused on private lending.
6. If a national bank was needed to defeat the British, an even stronger argument for establishing such an
institution could be made after the war. The infant nation’s economy was depressed, hobbled by staggering war debt and a scarcity of specie (gold and silver coin) with which to pay taxes and trade goods and
services.
7. Currency was so scarce in some cities that farmers, unable to sell their produce in the market, returned
home at the end of the day with full wagons. Besides the Bank of North America, only a handful of statechartered banks were in operation in the entire country, each issuing its own notes in a limited geographic
area. The Constitution outlawed the issue of paper money by state governments.
8. In 1789, Washington appointed Hamilton his secretary of the Treasury. Finally, Hamilton was in a position
to put his long-standing plan for a national bank into action. The 34-year-old secretary made his pitch to
the first Congress in December 1790, in his Report on a National Bank. Like Hamilton’s three other major
reports to Congress, on public credit, the Mint and manufacturing, it was lengthy, meticulously researched
and highly persuasive. Hamilton’s 1910 report on the First Bank was undoubtedly the most informing and
illuminating presentation of banking principles and practice known to American literature up to that time.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
9. Noting that banks had proven their value to government and business in the world’s leading economies,
Hamilton argued in the report that the country needed a national bank to help it shake off its financial malaise and join the company of modern commercial nations. A Bank of the United States would not only
enhance the federal government’s creditworthiness by issuing a currency suitable for the payment of taxes, investing in war debt and lending to the Treasury in emergencies, it would also expand the money
supply and provide credit to merchants and other businesses to foster trade, both within the country and
across the sea.
10. Hamilton echoed Smith’s The Wealth of Nations in describing banks as “nurseries of national wealth” that
transformed the “dead stock” of gold and silver into active and productive capital that rippled through the
economy, creating wealth and increasing welfare.4 Deposits and stock investments in a national bank
would support increased currency circulation, relieving farmers and merchants of the need to resort to
barter.
11. To avoid the inflation caused by the wartime continentals, Hamilton proposed that the bank issue notes
redeemable on demand for specie. The bank and all other banks in the country would operate under a
mixed-money system, cutting-edge monetary practice in the age of the gold standard. Paper currency issued by the national bank and state-chartered banks would be a close substitute for gold and silver coin in
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
financial transactions; thus the nation’s currency would be stable, anchored to a bimetallic monetary
standard, and portable, expediting the transport of funds and speeding circulation.
12. As in his earlier proposals, Hamilton stressed the importance of a quasi-public structure for the bank. It
would serve the national interest, but under the control of private individuals, not government officials. In
studying other great banks of issue, such as the Bank of England and Bank of Amsterdam, he had concluded that a national bank must be shielded from political interference: “To attach full confidence to an
institution of this nature, it appears to be an essential ingredient in its structure that it shall be under a private not a public direction, under the guidance of individual interest, not of public policy.”5
13. The federal government would be a minority stockholder in the bank, authorized to hold up to one-fifth of
its capital and vote for directors. But the remaining $8 million in stock would be held by private investors—
merchants, landowners, speculators or anyone else who could pony up the required funds.
14. One of Hamilton’s primary goals in establishing the bank was financing the country’s war debt, which included the debts of individual states assumed by Congress. His plan for the bank provided for this by requiring that 75 percent of its privately held shares be bought with “government stock”—Treasury bonds
paying 6 percent interest. (The balance was to be paid in specie.) Like the Bank of England, which had
invested heavily in British government debt, the Bank of the United States would unite the interests of private enterprise in support of public credit. Bank shareholders would profit as the government paid off its
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
debts over time. Meanwhile, the bank’s government debt—as good as gold in Hamilton’s calculus—would
serve as collateral for increased currency circulation, stimulating commercial development.
15. In hindsight, Hamilton’s bold, financially creative proposal was more than a plan for a national bank; it was
the springboard for a future U.S. economy based on private capital and the creative use of various forms
of bank credit, including government debt.
16. This grand plan for economic unity and progress under the aegis of a national bank was not universally
embraced. Hamilton had to summon all his analytical and rhetorical gifts to overcome the objections of
men who received his proposal coolly, if not with disdain. Congressional debates in early 1791 over the
constitutionality of the bank had political as well as monetary consequences; Hamilton’s proposal alienated him from founders Jefferson and James Madison, and helped to open a permanent schism in the halls
of power.
17. Many politicians of the period, especially those from the agricultural South, scorned banks as corporate
monopolies that profited merchants and financiers, but defrauded farmers and other ordinary people. Jefferson, secretary of state in the Washington administration, saw banks, credit and stock markets subverting his ideal of America as a self-reliant, agrarian utopia with limited industry. Vice President John Adams
abjured debt and dismissed bankers as “swindlers and thieves.”6 Much of the debate turned on the interpretation of a clause in the Constitution that allows the federal government to enact “all laws which shall
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
be necessary and proper” for the carrying out of explicit powers such as borrowing money and collecting
taxes. Jefferson argued in a written opinion to Washington that a national bank may be convenient, but
not truly necessary or indispensable for the execution of the government’s enumerated powers. Therefore, Hamilton’s bank was unconstitutional.
18. James Madison of Virginia, co-author with Hamilton of the Federalist Papers, agreed with Jefferson. He
added that a national bank would conflict with state interests under the Constitution by interfering with the
right of states to charter and oversee their own banks of issue.
19. Hamilton and allies, such as Congressman Fisher Ames of Massachusetts, countered that a national bank
was indeed necessary for the reasons laid out in the proposal before Congress. If it was necessary, then it
was proper under the Constitution and did not pose a conflict with states’ rights. Furthermore, the bank
would energize state economies in the agricultural South as well as the mercantile North.
20. The bitter skirmish between Hamilton’s and Jefferson’s followers over the First Bank was the first clash in
what would become an endless war of words in America—partisan politics. The dispute led to the emergence of “those distinct and visible parties which in their long and dubious conflict for power have … shaken the United States to their center.”7 For the next 30 years, Hamilton’s Federalists vied with Jeffersonian
(or Democratic-Republicans) for mastery of the government. Although the parties’ names and constituen-
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
cies have morphed over the intervening 200 years, the lineage of today’s Republicans and Democrats
extends back to these original foes.
21. After Congress passed a bill adopting Hamilton’s proposal, its fate lay on Washington’s desk; the president had been swayed by Jefferson’s arguments and was considering vetoing the measure. Hamilton defended it in a 15,000-word manifesto that articulated what would come to be known as the implied powers
doctrine; that is, the government has the right to employ any means necessary to execute its express
powers under the Constitution. In ringing phrases, Hamilton asserted that “every power vested in a government is in its nature sovereign and includes, by force of the term, a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power.”8 This doctrine became embedded
in constitutional law, giving the federal government broad scope to exercise its authority.
22. Washington was convinced. On Feb. 25, 1791, he signed the act incorporating the Bank of the United
States, clearing the way for the sale of stock (the government borrowed $2 million from money lenders in
Amsterdam to purchase its stake) and the start of operations.
VIII
The Nation’s Bank
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Related Topics
Chapter Information ~ Ch 9; 3 sections; 21 pages
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Key Connections - 10 Major (Common) Themes
Key Ideas
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Talking Points
1. Little is known about those operations; virtually all the bank’s records were destroyed in the early 1800s.
But what evidence exists shows that the bank largely succeeded in accomplishing Hamilton’s aims—jump
-starting the economy and building public confidence in the Treasury and financial markets. By virtue of
the sheer volume of transactions flowing through its Philadelphia office and regional branches, the bank
was by far the single largest financial entity in the country. The economic changes it wrought were pervasive and arguably long-lasting.
2. By converting war debt into bank stock, the bank relieved the government of that financial burden and
sent a message to investors at home and abroad that the United States would honor its debts. (To this
day, the Treasury has never defaulted on a bill, note or bond.) In an era when the government could not
count on a steady income—there was no income tax; import duties and public land sales made up the
bulk of federal revenue—the bank sustained daily operations with short-term loans. By the end of 1795,
the Treasury, now led by Hamilton’s successor, Oliver Wolcott, had borrowed a total of $6.2 million from
the bank, more than 60 percent of its capital.9
3. A robust currency circulation and lending to other banks and businesses stimulated the economy, leading
to increased domestic and foreign trade that generated income and job growth. Unlike paper issued by
state banks, the First Bank’s widely circulated notes were accepted by the federal government for the payment of duties. Although the United States would not have a true uniform currency until after the Civil War,
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
“it is certain that the notes of no state bank possessed to anything like the same degree the quality of universality” of the national bank’s notes.
4. In its organization and many of its functions, the First Bank foreshadowed the Federal Reserve System.
Like the Fed, the First Bank was quasi-public in nature; as Hamilton intended, it served a public purpose,
but independently from the administration and under the direction of private interests. (Nominally, each
regional Federal Reserve Bank is owned by its member banks.) Also like the Fed, the First Bank acted as
the government’s fiscal agent and held its bank balances. And just as the Fed’s 12-bank network does
today, the First Bank’s eight branches extended its influence throughout the country. “I think there are
enough parallels, enough elements there that you could say that Hamilton’s bank was the progenitor for at
least some functions of the modern Fed,” Humphrey says.
5. Neither Hamilton nor Congress intended the First Bank to control the size of the money stock—a defining
function of the Fed and other modern central banks. Nevertheless, over the course of several years the
bank took on that role, leveraging its large transaction volume and reserve balances to expand or constrain the money supply. To rein in credit, the bank promptly presented the state banknotes that passed
through its offices for redemption in specie, reducing the lending capacity of the issuers. To ease credit,
the bank lent more to businesses and banks and treated state banknotes with “forbearance.”11 Timber-
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
lake sees this activity as an early form of open market operations—resented by many state banks—that
acted as a check on inflation.
6. The parallels with the Federal Reserve go only so far, however. The Fed neither lends to government nor
operates as a commercial bank, accepting deposits from and making loans to businesses and individuals.
Also, the Fed enforces reserve requirements, examines accounts and exercises other regulatory authority
over banks—powers not contemplated by the creators of the First Bank.
IX
Political Defeat, Economic Victory
1. For all its successes, Hamilton’s bank could not overcome its political liabilities. When its charter came up
for renewal in 1811, the Federalists were out of power; the Democratic-Republicans, who had remained
hostile to the bank, now held the majority. Renewing Jefferson’s attack of 20 years earlier, they charged
that the bank was unconstitutional, a perversion of the necessary-and-proper clause.12 Hamilton’s enemies had allies at many state banks, whose ranks had swelled to 90 since the First Bank’s founding. Coveting the bank’s federal government deposits, the directors of these banks—along with the representatives of state governments that owned bank stock—lobbied against re-charter. The bank’s opponents also
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
Talking Points
accused many of its directors of being Tories or monarchists, noting darkly that British investors held a
large amount of its capital.
2. This time there was no Hamilton to mount a passionate and brilliant defense; Aaron Burr had killed him in
a pistol duel seven years earlier. Despite support from President James Madison and Treasury Secretary
Albert Gallatin, Congress let the charter expire, and the bank closed its doors on March 3, 1811.
3. The Hamiltonian model of banking and monetary policy did not die with the First Bank, however. Out of
the financial chaos that followed the War of 1812 rose a Second Bank of the United States. This federally
chartered, well-capitalized institution was not as well managed as its predecessor, but in time it too exerted central-bank-like influence over the economy. During the war the number of state banks exploded, and
they stopped redeeming their notes for specie, contributing to high inflation. Leveraging its large currency
reserves, the Second Bank encouraged the redemption of those bank-notes for gold and silver, helping to
shrink the money supply and stabilize prices.
4. The Second Bank’s life was also cut short; irked by its burgeoning monetary and political power, President
Andrew Jackson refused to renew its charter, and the bank ceased operations in 1836. But even in the
absence of a central bank, the ideas that Hamilton expounded and put into practice endured. In the 19th
century, bank lending supported in part by state and federal credit spurred business growth, planting the
seeds for the nation’s flowering into an economic power after the Civil War.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw
Discussion 9-2
US History ~ Chapter 9 Topic Discussions
E Lundberg
Topic of Discussion – The United States National Bank
Chapter Information ~ Ch 9; 3 sections; 21 pages
Launching a New Republic (1789-1800)
Section 1 ~ Washington's Presidency
Section 2 ~ Challenges to the New Government
Section 3 ~ The Federalists in Charge
Pages 312-317
Pages 318-325
Pages 326-332
Related Topics
Federalists
Alexander Hamilton v. Thomas Jefferson
Democratic Republicans
Strict v. loose interpretation of the Constitution
Key Connections - 10 Major (Common) Themes
Key Ideas
1. How cultures change through the blending of different ethnic groups.
2. Taking the land.
3. The individual versus the state.
4. The quest for equity - slavery and it’s end, women’s suffrage etc.
5. Sectionalism.
6. Immigration and Americanization.
7. The change in social class.
8. Technology developments and the environment.
9. Relations with other nations.
10. Historiography, how we know things.
A National Bank was needed to stabilize the country’s
finances.
There was immediate concerns brought up by Jefferson.
Since the idea of a National Bank was so new, what influence would private citizens have?
Talking Points
5. After a financial panic in the early 1900s, Congress revived Hamilton’s notion of a centralized, quasigovernmental bank exerting a positive influence on the monetary system and the overall economy. The
Federal Reserve Act of 1913 created the system of Reserve Banks that has provided a backstop for commercial banks and shaped monetary conditions ever since.
6. In ensuring the demise of the First Bank, the Democratic-Republicans may have won their political battle
with Hamilton, impugned by Jefferson as “the servile copyist”13 of British Prime Minister William Pitt. But
history has given economic victory to Hamilton. The economy that developed in this country would not
realize the Jeffersonian ideal of yeoman farmers and artisans producing goods from their own resources,
unassisted by banks and financial markets. Instead, it would embrace Hamilton’s capitalist vision—
7.
sophisticated, multifarious commerce thriving on a sound currency and ready access to credit.
Successive generations of Americans have reaped the rewards of the economic revolution that began
with the opening of the First Bank of the United States.
Questions to Think About
Was a National Ban legal under the Constitution?
Who was responsible to establish the parameters for
the Bank?
Did the Bank have the power to set taxes and tariffs?
Who was the priority to pay off first?
Supporting Materials
Jefferson v. Hamilton: Confrontations that Shaped a Nation by NC
Jefferson v. Hamilton, The Rivalry that Forged a Nation by
Ferling
The Founders and Finance, How Hamilton Forged a New Economy
by McCaw