Founding Of The National Bank Essay, Research Paper
Founding of The National Bank
Alexander Hamilton formally served as military aide to Washington during the Revolution. Washington later appointed Hamilton as his secretary of treasury. Congress called on Hamilton to prepare a report on the nations finances. Hamilton had many enemies, but he was a great thinker. He believed that a strong government was essential to the country. He based his belief on that from Great Britain, whose success came from its system of public finance and its supremacy in commerce and manufacturing. He had two goals to achieve. First, he wanted to use federal power to encourage manufacturing and commerce. This he believed would make the United States economically strong and be independent from Europe. Second, he wanted to link the interests of the wealthy with those of the new government.
Hamilton goals could not be achieved until the federal government solved its financial problems of revenue and credit. He believed without revenue it could not be effective and without credit the merchants had no faith on any of the other nations to pay back these debts. They would lack the ability to borrow. This posed a problem so Hamilton proposed that all $52 million of the federal debt be paid in full (or funded). He also wanted the federal government to assume the responsibility for the remaining $25 million that the individual states owed.
He felt like putting these two policies into effect would make the government stronger and boost its power by increasing its need for revenue and making the wealthy depend on the national government instead of the states. Hamilton also proposed a series of excise taxes. There was a 25 percent levy on whiskey, to aide in government expenses.
Congress finally agreed to Hamilton s proposals, but only if there could be a permanent seat of government located in the south. Jefferson and Madison who were from Virginia wanted it to be located on the Potomac River between Virginia and Maryland. With this understanding funding and assumption was passed by Congress. In 1791 Congress approves a 20-year charter for the first Bank of the United States. The bank was responsible for holding government deposits and it would issue banknotes that would be received in payment of all debts owed to the federal government. Congress approved a limited tariff to encourage manufacturing and several excise taxes. The one on whiskey was approved.
Congress was not in favor of the rest of Hamilton s program. When Hamilton s program passed this upset the supporters of the Constitution. Madison who was once allies with Hamilton broke those ties when the funding and assumption passed. Jefferson joined Madison s forces and formed the Republicans. Hamilton and Adams led the Federalists.
Hamilton s plan seemed to some Americans as a threat to establish a monarchy. They felt like it promoted commerce at the expense of the farmer. During and after the Revolution the value of notes issued by the Continental Congress dropped drastically. Speculators had bought the notes for a fraction of their face value from farmers and workers. They felt like if the government redeemed the debt, speculators would profit from this. They also were upset because Congress had been purchasing the notes even before Hamilton s program. It was a known fact that almost half the members of the House owned U.S. securities. Madison wanted the original holders of the debts to be reimbursed in full. Hamilton was opposed to this idea, because speculators were the class of people he wanted to attach to the new government. Speculators snatched up all the shares with and hour of the bank opening. Jefferson was really disturbed by the fact that Hamilton s program had caused the price of a share to increase from $25 to $300 just in two months. In the republicans eyes this was corruptive and was an imitation of the Bank of England. They felt like the poor man got rich by the shuffling of paper, trading notes, and benefiting from the financial legislation that they had passed, instead of hard earned work. Another factor that contributed to the fears of the people was that Americans had no experience in banking when the Bank of the United States was chartered; only three banks existed at that time.
Republicans felt like a certain amount of commerce was necessary, but too much was not a good thing and Hamilton supported banks and commerce. He felt like his program encouraged manufacturing and urbanization. Republicans felt like the tariff favored the manufacturing group at the expense of other groups.
Congress approved the bank bill. Washington hesitated at signing it because Jefferson informed him that the Constitution did not authorize Congress to charter a bank. The Federalist Party led by Jefferson and Madison strongly upheld the Constitution. They felt like the federal government should go by it. This would insure the abuse of power by them. Hamilton on the other hand, said the Constitution contained implied as well as enumerated powers and that the clause that permitted Congress to make all laws necessary and proper to carry out its duties. He concluded, by saying a bank would be useful in carrying out the enumerated powers of regulating commerce and maintaining the public credit; so, Congress had a right to decide whether to establish one. Washington ultimately signed the bank bill, because the Constitution he felt needed to be flexible to meet the countries future developments.
The republican s felt like Hamilton s bank was creating an aristocracy in the United States. In their eyes his program aided the rich and created a group of people who derived from the federal government. Even though Jefferson and Madison feared cities and commerce and the aristocratic ways of Hamilton, his program was successful.
In conclusion, Hamilton realized the United States needed the bank to promote commerce and manufacturing for this country to thrive. This also, changed the way that the country and government looked at the Constitution and realized that flexibility was necessary to promote change during times of crises. Jefferson ultimately took office and reduced the debt by $26 million.
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