Alexander Hamilton And The First Bank Of The United States

1738 words - 7 pages

Alexander Hamilton and the First Bank of the United States

Dr. McCormick
December 3, 2009

Alexander Hamilton and the First Bank of the United States

On December 14, 1790, Secretary of the Treasury Alexander Hamilton conveyed to the House of Representatives one of his most famous public documents, the plan for his national bank. Hamilton’s proposed establishment of a national bank was one of the primary components of his ambitious but controversial fiscal plan to stabilize and stimulate the economy. The plan for a national bank was not Hamilton’s alone, although he was its strongest enthusiast, and he fought the ...view middle of the document...

It was eyed with great suspicion by representatives of the Southern States, whose chief industry was agriculture, did not require centrally concentrated banks, and whose feelings of states’ rights and Northern motives ran strong (Lane 603). Some, including Thomas Jefferson, had objected on the basis that there was no authorization in the Constitution for the establishment of a national bank. Hamilton contended that the Constitution authorized the national government to levy and collect taxes, pay debts and borrow money. Congress, therefore, was entitled, under its implied powers, to create such a bank (u-s-history).
It was unclear whether President George Washington would sign the bill for a national bank into law. Powerful forces led by James Madison, Thomas Jefferson, and the Attorney General, Edmund Randolph, argued to Washington that the Constitution had not granted the government the power to incorporate a Bank, and therefore he should not sign the bill. Also, Hamilton, in his February 1791 speech arguing his side of why the bank will be beneficial, says that Jefferson and Randolph submitted “the reasons which have induced him [Washington] to entertain a different opinion” (EbscoHost). But, President Washington and the Congress accepted Hamilton’s view, and set an important precedent for an expansive interpretation for the federal government’s authority versus states’ rights (Cowen). Therefore, in February 1791, the First Bank of the United States was officially established. The Report on the Bank, one of the papers written by Hamilton, explained that the national bank would be chartered for twenty years, during which time Congress would agree not to establish another national bank. The seed capital would be $10 million: $8 million from private sources and the remaining $2 million would come from the government. The bank would have the right to issue notes or currency up to $10 million. The government would also pledge that the notes of the bank would be unique in that they were valid for payments to the United States. Basically, the notes would be suitable for payments of taxes, a strong feature that would provide the Bank with an enormous advantage over its competitors (Morgan 480). The $8 million of public shares were available in both the United States, and overseas. The chief requirement of these non-government purchases was that one-quarter of the purchase price had to be paid in either gold or silver, and the remaining balance could be paid in bonds (Faragher 70). The national bank would confer many benefits on the government including a ready source of loans, a principle depository for federal monies that were transferable from city to city without charge, and a clearing agent for payments on the national debt (Cowen). The government, as the largest stockholder, would share in the profits, but would have no direct participation in the management of the bank itself.
On July 4, 1791 investors displayed confidence in the new...

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