Hamilton v. Jefferson: The Central Bank Debate [POLICYbrief]
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Hamilton v. Jefferson: The Central Bank Debate [POLICYbrief]


One of the core problems that Hamilton realized
having lived through the Revolutionary War with George Washington on the battlefield
was the inability of the Continental Congress to raise the requisite amount of funds to
help feed and fund the army in battle, and he never wanted to go back to that. And so, Washington as well realized that and
so they wanted a central government that will at least be able to have taxing power and
the power to do those very things. The Constitutional Convention debated whether
or not there should be a national bank, a bank run by the government, and they rejected
the idea. But Hamilton as treasury secretary under George
Washington, uh, wanted to revive the idea and his nemesis Jefferson thought that was
a horrible idea because he thought it would create too much centralized governmental power. Alexander Hamilton becomes secretary of the
treasury on September 11th, 1789 with a strong vision of where the nation should go, and
he produced several monumental state papers of which the Bank Report is just one of four. He basically made the case that, uh, it would
be convenient, uh, to have a national bank as a depository of tax revenues, eliminate
the middleman of a private bank in doing that, and he wanted the, uh, the government to be
able to make selective loans. He spends a lot of time explaining how the
great European powers all have access to a quasi-national or a state bank for operations
that enhance the government. He points out many advantages that banks have
for governments, and also for regulating trade and commerce for private individuals. And he spends a lot of time also getting ready,
’cause he anticipates that there’s going to be a lot of blow back and a lot of anti-bank
forces. And so he spends a lot of time in the Bank
Report trying to address these. The Jeffersonians warned that it could be
corrupting of politics because there would be the incentive of the government to use
this bank as a way of subsidizing politically favored businesses and other special interest
groups, and his followers warned that a bank that could print paper money was a danger
and it could create not only inflation, but also could create, uh, what we today call
boom and bust cycles in the economy. It makes us think we can get something for
nothing, but of course, the chickens always come home to roost in the form of price inflation,
economic destabilization, recessions, depressions, et cetera. Hamilton knew that a national bank would be
the heartbeat of a free enterprise capitalist system. It would be where savers of capital and users
of capital would come together. It would be of primary importance to the government. It would be a ready source of loans. It would be a place where they could deposit
their money. And imperatively, what he really cared about
was the credit of the United States. The Bank Bill is gonna pass fairly quickly
in the Senate, but it’s gonna meet resistance in the House of Representatives. But it will eventually be passed there by
a vote of 39 to 20 and then submitted to President George Washington who’s going to have to decide
whether or not to sign this bill to create a national bank. He turns to two cabinet members, Secretary
of State Thomas Jefferson and Attorney General Edmund Randolph to offer opinions, and they
both say that the bank is unconstitutional. Jefferson, uh, made the obvious case that
it was not a part of the delegated powers in the Constitution in Article 1, Section
8, and therefore it’s blatantly unconstitutional. If Jefferson and Randolph argued that it was
unconstitutional because it was not explicitly written or allowed by the US Constitution,
Hamilton turned that argument on its head. This is Article 1, Section 8 of the US Constitution,
which has enumerated many powers to the government. The power to raise an army and a navy, the
power to declare war. But at the end is something known as the Sweeping
Clause, and that is that the government can create whatever is necessary and proper to
achieve its ends. He said, “Because of the necessary and proper
clause, uh, there is an implied power to have a national bank,” and once you get on that
road, then, uh, the Constitution is no longer, uh, a limit on any governmental power. Hamilton with his wife assisting stays up
all night to copy out his opinion on the constitutionality of a bank and is submitted the next morning
to George Washington, who then ponders it and decides to enact this legislation. So at the heart of it is really the great
debate over centralized governmental power versus decentralized power. Often the left looks at Hamilton and say,
“He’s too pro-business.” And the right will look at Hamilton and be
against him because they say he’s too big government. If any of the founding fathers came back and
stood at the corner of Wall and Broad Street in New York and looked at the economic miracle
that America has turned into, it would be Alexander Hamilton who would understand it
better than all of them.

6 Comments

  • Shane Lackey

    " Informed Consent "
    It's the Law .

    Meaning Willing participants or Bust .

    " You must use this currency to the exclusion of everything else "

    Is not a binding contract .

    A monopoly over the issue of Currency is Unlawful .

  • Mike Gustafson

    Sure, banks are fine, but Hamilton's great legacy was acting to establish in 1790 what today exists as the U.S. Coast Guard! Semper Paratus

  • Jason T Stevens

    Jefferson all the way… And I am a former employee of the federal reserve. πŸ‘πŸ’ͺπŸ‘Œβ˜οΈπŸ‡ΊπŸ‡Έ

  • Merle Patterson

    However valid the claim for a private national bank may be, it doesn't eliminate the human condition to engage in corrupt acts. Whether a government or private national bank exists, the checks and balances for accountability to the population need to be widely agreed upon and then strictly enforced to keep the balance of monetary and political powers against society at bay. The general public has absolutely no idea who owns the Federal Reserve Bank or what specific financial transaction details are on its books. At least with a government ran central bank, there would be a level of scrutiny and accountability to the general public for where the tax dollars are going. "No taxation without representation" means that people should be able to chose what their money is spent on and their ROI in detail.

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