Lecture on Alexander Hamilton and the National Bank

Core Issues from the Revolutionary War

• Hamilton's experience in the Revolutionary War highlighted the Continental Congress's inability to fund and feed the army.
• Both Hamilton and Washington wanted a strong central government with taxing powers.

Constitutional Convention and National Bank Debate

• Initial rejection of a government-run national bank at the Constitutional Convention.
• Hamilton, as Treasury Secretary, revives the idea of a national bank.

Hamilton's Vision and Arguments for a National Bank

• Became Secretary of the Treasury on September 11, 1789.
• Produced several significant state papers, including the Bank Report.
  • Advocated for a national bank to:
    • Serve as a depository for tax revenues.
    • Eliminate intermediaries (private banks) in handling government funds.
    • Allow the government to make selective loans.
• Cited European examples of quasi-national banks aiding government operations.
• Emphasized benefits for both government and private commerce.
• Prepared for opposition from anti-bank forces.

Opposition to the National Bank

• Jeffersonians' concerns:
  • Potential for government corruption and favoritism in business.
  • Risk of inflation and economic cycles from the ability to print paper money.
  • Fear of economic destabilization (recessions, depressions).

Hamilton's Perspective on a National Bank

• Viewed the bank as the foundation of a capitalist system.
• Saw it as essential for:
  • Bringing together capital savers and users.
  • Providing a ready source of loans.
  • Ensuring the credit stability of the U.S.

Legislative Process and Constitutional Debate

• The bank bill passes the Senate quickly, faces resistance in the House, but eventually passes (39-20).
• President Washington seeks opinions from:
  • Secretary of State Thomas Jefferson.
  • Attorney General Edmund Randolph.
  • Both argue the bank is unconstitutional (not in Article 1, Section 8).

Hamilton's Constitutional Argument

• Utilizes the "necessary and proper clause" of Article I, Section 8.
• Argues for implied powers allowing a national bank.
• Stays up all night to prepare his opinion for Washington.

Decision and Legacy

• Washington decides to enact the legislation for the national bank.
• Central debate on centralized vs. decentralized power.
• Hamilton criticized by both political spectrums:
  • Left: too pro-business.
  • Right: too big government.
• Hamilton likely best understands modern America's economic success.