Transcript The Bank of the US

The Bank of the
United States
A Financial and
Philosophical Crisis
Directions: Create a schematic using the following terms.
Be prepared to deliver a 2-3 minute oral presentation.
Thomas Jefferson
Alexander Hamilton
The First Bank of the United States:
 Hamilton wanted to create a powerful central bank
which would govern the financial activities of the
entire nation.
 This Bank of the United States would be the
depository for all federal funds which it would use to
stimulate business by investing those monies back
into the national economy in the form of loans to
businessmen.
 The government would be the major stockholder of
this bank, but it would be privately run by its own
institutional leadership.
 The Bank would print paper money and govern its
use to insure a stable national currency.
STRICT CONSTRUCTION
INTERPRETATION OF CONSTITUTION:
 Jefferson immediately stood up in opposition to the
Bank of the United States because he feared such
an institution could grow into a powerful threat to
individual rights.
 Champions of states' rights opposed this measure
because they expected that their state-chartered
banks could not survive competition with a national
monster back by the power of a monopoly over
federal funds.
 Jefferson was asked to submit a written opinion by
Washington on the issue of a national bank.
 He argued that there was no specific authorization in
the Constitution for the government to establish a
national bank;
 therefore, since powers not specifically granted to the
federal government were reserved to the states, then
the power to charter banks was a state power.
 Jefferson was arguing for the literal interpretation of
the Constitution - a states' rights position.
IMPLIED POWERS INTERPRETATION:
 Hamilton was also asked to submit a written
opinion on the issue of the Bank for Washington's
consideration.
 Hamilton invoked the clause of the Constitution
which stipulates that Congress may pass any laws
"necessary and proper" to carry out its duties or
authority under the Constitution.
 Since the Constitution empowered the government to
regulate trade and to collect taxes, and since a
national bank would be necessary for these functions,
it was well within the scope of the Constitution
according to Hamilton.
 Hamilton was using the liberal interpretation of the
Constitution - also known as the "implied powers
concept", "loose construction", or the "elastic clause"
of the Constitution.
 This established the precedent for enormous
federal powers.
 Hamilton's logic won the day and Washington
reluctantly signed the bank measure into law
(Congress having already passed it).
 The Bank of the U.S. was charter in 1791 by
Congress for 20 years.
 It was to be located in Philadelphia with capital of $10
million dollars, 1/5th owned by the federal
government.
 Stock in the bank proved so popular that the bank
was oversubscribed by investors within two hours of
the beginning of the public sale.
The First Bank of the United States
Philadelphia, Pennsylvania
 Controversy over the Bank of the U.S. would last for
the next several decades.
 Opposition to the bank was centered generally in the
South and on the western frontier, while support was
principally in urban areas of the North.
The Emergence of Political Parties
Hamiltonians = Federalists
Jeffersonians = Democratic-Republicans
For Reference in the Pageant:
Evolution of Major Parties (pg. 197)
The Two Political Parties, 1793-1800 (pg. 208)