Name: _____________________________________
Date: ______________________
Period: ___________
Hamilton and the National Bank
Essential Question: How does Hamilton’s Financial Plan cause division between the North and South and
political opponents?
Before Reading:
 Describe what a bank does. What is the purpose of a bank? How does it function?
Establishing a National Bank
One of the most important of Alexander Hamilton's many contributions to the
emerging American economy was his successful advocacy for the creation of a national bank.
But the Bank of the United States, like many of Hamilton's other projects, would generate
controversy.
Financial Footing for a New Nation
Hamilton had long believed in the need for banks to provide credit and stimulate
(help it grow) the economy. Once he became the Secretary of Treasury he proposed the idea
of creating a Bank of the United States. The bank would have $10 million capital (savings to
invest) and have the ability to issue paper money. It would be based in Philadelphia and
chartered (contracted) for 20 years. The Bank would be able to lend the government money
and safely hold its deposits, give Americans a uniform currency, and promote business and
industry by extending credit (giving out loans). Together with Hamilton's other financial
programs, it would help place the United States on an equal financial footing with the nations
of Europe.
1.
Why did Hamilton think a National Bank would help the U.S.?
Southern Opposition
In contrast to Hamilton's plan for the federal government to assume state debts,
Hamilton's bank plan had a relative easy time in Congress. The Senate passed it handily on
January 20, 1791, and the House followed in early February. But support for the Bank fell
largely along sectional lines, with Northern approval and Southern opposition. Among those
Southern opponents was James Madison, who worried that the Bank's placement in
Philadelphia, the nation's temporary capital, might prevent future decisions to move the
capital further south. Madison also noted that the Constitution discussed no power to establish
a national bank or any other corporation; and if a power was not in the text, by what
authority could it be done?
2. Who dislikes Hamilton’s plan and why?
Convincing Washington
Hamilton would not give up without a fight. Asked by his supporter Washington to
answer the opinions of Jefferson and his supporters, Hamilton quickly wrote almost 15,000
words presenting his case. Hamilton's central point was that the Constitution must award
implied powers along with those actually enumerated (stated in the Constitution); the support
for this was the elastic clause which enabled Congress "to make all laws which shall be
necessary and proper" to put expressly granted powers into effect. Hamilton believed that
"necessary" did not mean laws had to be absolutely essential but instead useful and
appropriate for the American people. He concluded (determined) that the Bank of the
United States met that looser standard. It would the government to carry out a number of
powers explicitly (stated in the Constitution) granted it by the Constitution, including collecting
taxes, regulating trade and creating a military. Persuaded by Hamilton's arguments, on
February 25 Washington signed the Bank bill into law.
3. Recall: What is the “elastic clause” (hint: it is also sometimes called the “necessary and
proper clause”?
4. How did Hamilton defend the constitutionality of a national bank? Summarize his
argument.