The First National Bank Hamilton’s Shaping of the American Financial and Economic System and America’s Response

The First National Bank The First National Bank Hamilton’s Shaping of the Hamilton’s Shaping of the

American Financial and Economic American Financial and Economic System and America’s ResponseSystem and America’s Response

What’s a What’s a ??

What is the purpose of a bank? Why do What is the purpose of a bank? Why do we have them? How many of you have we have them? How many of you have bank accounts of some sort (checking or bank accounts of some sort (checking or savings)?savings)?

Financial ProgramsFinancial Programs

James Madison’s Plan: The Tariff of 1789James Madison’s Plan: The Tariff of 1789Raise money by taxing importsRaise money by taxing importsTonnage Tonnage tax based on how much cargo a tax based on how much cargo a

ship carriedship carriedForeign nations increased the prices of their goods Foreign nations increased the prices of their goods

to compensate for the new tariff and tonnage taxto compensate for the new tariff and tonnage taxSoutherners would also pay tonnage for the cotton Southerners would also pay tonnage for the cotton

and tobacco they sent to Europeand tobacco they sent to Europe Southern states felt government was biased against Southern states felt government was biased against

themthem


Alexander HamiltonAlexander HamiltonThe Report on Public Credit (1790)The Report on Public Credit (1790)

Hamilton believed the Federal Government should Hamilton believed the Federal Government should assume the debt of all statesassume the debt of all states

States owed $40 million to its citizensStates owed $40 million to its citizens States owed nearly $12 million to foreign countries States owed nearly $12 million to foreign countries South again upset since most southern states had South again upset since most southern states had

already paid off their debtsalready paid off their debts

Hamilton believed the Federal Government should Hamilton believed the Federal Government should borrow money to pay off the original $62 million borrow money to pay off the original $62 million debtdebt


How does a government borrow money?How does a government borrow money?Bonds Bonds paper notes promising to repay paper notes promising to repay

money after a set period of time with interestmoney after a set period of time with interestWho buys bonds?Who buys bonds?

Wealthy merchants and speculatorsWealthy merchants and speculators

Who would oppose this?Who would oppose this? Veterans, farmers, anti-federalists, southerners Veterans, farmers, anti-federalists, southerners


The House rejected Hamilton’s plan, while the The House rejected Hamilton’s plan, while the Senate adopted itSenate adopted it

The CompromiseThe Compromise Hamilton and Jefferson have dinnerHamilton and Jefferson have dinner Jefferson assured Hamilton his assumption bill would be Jefferson assured Hamilton his assumption bill would be

adopted by both houses if the national capital was moved adopted by both houses if the national capital was moved from New York to a plot of land on the Potomac River, which from New York to a plot of land on the Potomac River, which becomes the District of Columbia becomes the District of Columbia

The First National BankThe First National Bank

Hamilton had the idea to create a national Hamilton had the idea to create a national bankbank It could manage the government’s debtsIt could manage the government’s debtsPay out interestPay out interestLend money to the governmentLend money to the governmentProvide a national currencyProvide a national currencyGive the U.S. economy credibility in the world Give the U.S. economy credibility in the world

marketmarket


OppositionOppositionConstitution does not delegate the power to Constitution does not delegate the power to

create a bank to the federal governmentcreate a bank to the federal governmentIn fact such an enumerated power was rejected In fact such an enumerated power was rejected

during the Constitutional Convention during the Constitutional Convention

80% of the bank would be funded by private 80% of the bank would be funded by private investors (only 20% by the government).investors (only 20% by the government).


Hamilton responded that the elastic clause Hamilton responded that the elastic clause (Article I, Section 8 of the Constitution) (Article I, Section 8 of the Constitution) gave the federal government the power “to gave the federal government the power “to make all laws which shall be necessary make all laws which shall be necessary and proper.”and proper.”

Jefferson claimed the elastic clause was Jefferson claimed the elastic clause was meant for absolute necessities and the meant for absolute necessities and the bank did not fall under the clause.bank did not fall under the clause.


Washington’s DecisionWashington’s Decision Washington has to decide whether or not to veto Washington has to decide whether or not to veto

the legislation creating the national bankthe legislation creating the national bank His cabinet says it is unconstitutional, but…His cabinet says it is unconstitutional, but… Hamilton’s Defense of the Constitutionality of the Hamilton’s Defense of the Constitutionality of the

Bank convinces Washington to sign the bill into Bank convinces Washington to sign the bill into lawlaw

Jefferson resigns as secretary of stateJefferson resigns as secretary of state Hamilton and Jefferson become political rivalsHamilton and Jefferson become political rivals

Leads to the development of political partiesLeads to the development of political parties

The Whiskey RebellionThe Whiskey Rebellion

In the 1794 the average American drank 5 In the 1794 the average American drank 5 gallons of whiskey per yeargallons of whiskey per year

Hamilton proposes an excise tax on Hamilton proposes an excise tax on whiskey to raise additional revenuewhiskey to raise additional revenue

Riots break out in PA, VA, & MDRiots break out in PA, VA, & MDAttack tax collectors, federal marshals, and Attack tax collectors, federal marshals, and

plan to burn Pittsburgh to the groundplan to burn Pittsburgh to the ground


Washington sends 13,000 militia to put down Washington sends 13,000 militia to put down the rebellionthe rebellion

Did not want another Shay’s RebellionDid not want another Shay’s Rebellion Washington often led the troops as they marched to Washington often led the troops as they marched to

Pennsylvania Pennsylvania Riots ceaseRiots cease Two non-prominent leaders of the rebellion were arrested, Two non-prominent leaders of the rebellion were arrested,

convicted of treason, but later pardoned by Washingtonconvicted of treason, but later pardoned by Washington Why would Washington do that?Why would Washington do that?


Importance of the Whiskey RebellionImportance of the Whiskey RebellionFederal government would not allow violent Federal government would not allow violent

resistance to its lawsresistance to its lawsCitizens would have to protest peacefully to Citizens would have to protest peacefully to

change lawschange lawsThe federal government would enforce federal The federal government would enforce federal

lawslaws

HomeworkHomework

Read the mock article “To Bank, or Not to Read the mock article “To Bank, or Not to Bank?” Then write a letter to the editor of the Bank?” Then write a letter to the editor of the New York PostNew York Post explaining whether or not you explaining whether or not you support the creation of a national bank. Your support the creation of a national bank. Your explanation should included whether or not you explanation should included whether or not you believe the creation of such a bank is believe the creation of such a bank is constitutional or unconstitutional. Use constitutional or unconstitutional. Use arguments from the article and class. Letter arguments from the article and class. Letter should be roughly 1 page written or 2/3 page should be roughly 1 page written or 2/3 page typed.typed.

Documents

The First National Bank Hamilton’s Shaping of the American Financial and Economic System and America’s Response