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December 14, 1790
Alexander Hamilton proposes a Bank of the United States.
December 16, 1790
Patrick Henry opposes the National bank because it is unconstitutional.
February 25, 1791
President Washington asks his cabinet members for opinions on the
National Bank. Thomas Jefferson submitted that such a Bank was unconstitutional and would also violate the yet to be ratified 10th Amendment.
Thomas Jefferson: The incorporation of a bank, and the powers assumed
by this bill, has not, in my opinion, been delegated to the United States by
the Constitution.
I. They are not among the powers specially enumerated...
II. Nor are they within either of the general phrases, which are the two
following:
1. "To lay taxes to provide for the general welfare of the United States.”...
The [Congress] are not to do anything they please, to provide for the general welfare, but only to lay taxes for that purpose... It was intended to
lace them up straightly within the enumerated powers, and those without
which, as means, these powers could not be carried into effect...
2. The second general phase is, "to make all laws necessary and proper
for carrying into execution the enumerated powers." But they can all be
carried into execution without a bank. A bank, therefore, is not necessary,
and consequently not authorized by this phrase.
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It has been much urged that a bank will give great facility or convenience
in the collection of taxes. Suppose this was true; yet the Constitution
allows only the means which are "necessary" not those which are merely
"convenient," for affecting the enumerated power.
Alexander Hamilton submitted that Congress's power to collect taxes was
also power to create a national bank. Not convinced by either side,
Washington sided with Hamilton as it was Hamilton's job as Secretary of
the Treasury to know what he was doing.
December 12, 1791
The Bank of the United States opens its doors in Philadelphia.
January 21, 1793
Hamilton and the National Bank are accused of corruption and
mismanagement. Opponents to the National Bank call for the demise of
the unconstitutional Bank. Congress fails to act.
Alexander Hamilton: During the winter of 1792-93, Congress was
investigating financial dealings of Alexander Hamilton, the first Secretary
of the Treasury.
Hamilton had made secret payments to James Reynolds, a convicted
swindler whose release from prison had been allowed by the Treasury
Department. Hamilton was forced to admit to members of Congress that
he had made the payments, but characterized them as bribes to prevent
public disclosure of adultery Hamilton had committed with Reynolds’s
wife, Maria. Those encounters occurred in Reynolds’s bed while he was
away and in Hamilton's bed while his wife was away.
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Paying for Reynolds' silence was only part of the cover-up. Hamilton had
Mrs. Reynolds burn incriminating correspondence and promised to pay for
the Reynolds' travel costs if they would get out of town. When the
members of Congress, including future president James Monroe, heard
the confession, they decided the matter was private, not public, and no
impeachable offense had occurred. They conspired with Hamilton and
among themselves to keep it all a secret. President Washington, Secretary
of State Thomas Jefferson (who hated Hamilton) and House minority
leader James Madison was all aware of the confession but did not make it
public.
In 1797, a disgruntled former clerk of the House leaked the story to a
muckraking journalist, and the whole nation heard about it. What was the
result? In 1798, then-President Adams and former President Washington
nominated Hamilton to be inspector general of the new U.S. Army, second
in command to Washington himself. The other founding fathers still
remained their respectful silence, and Hamilton was confirmed by the
Senate.
Note: Some historians believe that Alexander Hamilton fabricated the
affair and bribes to cover-up his illegal activities of selling insider
information to a select number of friends. A sex scandal was easier to
cover-up than a national banking scandal.
February 20, 1811
Congress refuses to let the National Bank renew its Charter on the
grounds that the Bank is unconstitutional.
March 4, 1811
The Bank of the United States is dissolved.
January 20, 1815
President Madison vetoes a bill that would create a second National Bank.
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January 8, 1816
Faced with financial hardship from the War of 1812, Congress proposes a
2nd National Bank. The Bill also allows the President to suspend hard
currency.
March 14, 1816
The 2nd National Bank gets Congressional approval.
January 1, 1817
The 2nd National Bank opens for business.
January 9, 1832
The 2nd National Bank applies for its Charter renewal 4 years early.
July 10, 1832
President Jackson vetoes the Bank's re-charter on the grounds that the
Bank is unconstitutional.
Andrew Jackson: On the advice of Senators Clay and Webster, Nicholas
Biddle, the president of the Bank of the United States, applied to Congress
for a recharter bill in 1832, four years in advance of the expiration date of
the old bill. The recharter bill passed, but Jackson vetoed it and the
supporters of the bill were unable to gather enough votes to override the
veto.
In this message, drafted by Amos Kendall, a member of Jackson's
"Kitchen Cabinet," the President attacks the bank as undemocratic,
monopolistic, parasitical, and, because it was controlled by foreigners, a
danger to the future of the republic itself.
Andrew Jackson, Bank Veto Message, July 10, 1832
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The present corporate body, denominated the president, directors, and
company of the Bank of the United States, will have existed at the time
this act is intended to take effect twenty years. It enjoys an exclusive
privilege of banking under the authority of the General Government, a
monopoly of its favor and support, and, as a necessary consequence,
almost a monopoly of the foreign and domestic exchange. The powers,
privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of
many millions to the stockholders....
The act before me proposes another gratuity to the holders of the same
stock, and in many cases to the same men, of at least seven millions
more....It is not our own citizens only who are to receive the bounty of our
Government. More than eight millions of the stocks of this bank are held
by foreigners. By this act the American Republic proposes virtually to
make them a present of some millions of dollars.
Every monopoly and all exclusive privileges are granted at the expense of
the public, which ought to receive a fair equivalent. The many millions
which this act proposes to bestow on the stockholders of the existing
bank must come directly or indirectly out of the earnings of the American
people....
It appears that more than a fourth part of the stock is held by foreigners
and the residue is held by a few hundred of our own citizens, chiefly of the
richest class.
Is there no danger to our liberty and independence in a bank that in its
nature has so little to bind it to our country? The president of the bank
has told us that most of the State banks exist by its forbearance. Should
its influence become concentered, as it may under the operation of such
an act as this, in the hands of a self-elected directory whose interests are
identified with those of the foreign stockholders, will there not be cause
to tremble for the purity of our elections in peace and for the
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independence of our country in war? Their power would be great
whenever they might choose to exert it; but if this monopoly were
regularly renewed every fifteen or twenty years on terms proposed by
themselves, they might seldom in peace put forth their strength to influence elections or control the affairs of the nation. But if any private citizen
or public functionary should interpose to curtail its powers or prevent a
renewal of its privileges, it can not be doubted that he would be made to
feel its influence.
It is to be regretted that the rich and powerful too often bend the acts of
government to their selfish purposes. Distinctions in society will always
exist under every just government. Equality of talents, of education, or of
wealth can not be produced by human institutions. In the full enjoyment
of the gifts of Heaven and the fruits of superior industry, economy, and
virtue, every man is equally entitled to protection by law; but when the
laws undertake to add to these natural and just advantages artificial
distinctions, to grant titles, gratuities, and exclusive privileges, to make
the rich richer and the potent more powerful, the humble members of
society the farmers, mechanics, and laborers who have neither the time
nor the means of securing like favors to themselves, have a right to
complain of the injustice of their Government. There are no necessary
evils in government. Its evils exist only in its abuses. If it would confine
itself to equal protection, and, as Heaven does its rains, shower its favors
alike on the high and the low, the rich and the poor, it would be an
unqualified blessing. In the act before me there seems to be a wide and
unnecessary departure from these just principles.
Nor is our Government to be maintained or our Union preserved by
invasions of the rights and powers of the several States. In thus attempting to make our General Government strong we make it weak. Its true
strength consists in leaving individuals and States as much as possible to
themselves in making itself felt, not in its power, but in its beneficence;
not in its control, but in its protection; not in binding the States more
closely to the center, but leaving each to move unobstructed in its proper
orbit.
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Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our
Union have sprung from an abandonment of the legitimate objects of
Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been
content with equal protection and equal benefits, but have besought us to
make them richer by act of Congress. By attempting to gratify their
desires we have in the results of our legislation arrayed section against
section, interest against interest, and man against man, in a fearful
commotion which threatens to shake the foundations of our Union. It is
time to pause in our career to review our principles, and if possible revive
that devoted patriotism and spirit of compromise which distinguished the
sages of the Revolution and the fathers of our Union. If we can not at
once, in justice to interests vested under improvident legislation, make
our Government what it ought to be, we can at least take a stand against
all new grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense
of the many, and in favor of compromise and gradual reform in our code
of laws and system of political economy....
1835: Jackson withdrawals government's money from the National Bank.
(Federal Reserve)
1836: Jackson pays off national debt by using real money instead of
reserve type notes.
January 1835
With the National Bank powerless, Jackson successfully pays off the
nation’s debt leaving the U.S. with a surplus of $5,000.
July 11, 1836
Paper money results in tremendous inflation in property value. President
Jackson issues a Specie Circular mandating that land payments be made
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with gold and silver.
July 4, 1840
President Van Buren approves the Independent Treasury which allows the
Federal government to control its own money.
June 7, 1841
Henry Clay, on behalf of the Whig party, introduces legislation to abolish
the Independent Treasury in hopes to replace the national banking
system with a Federal Bank.
July 28, 1841
The Senate passes a bill, sponsored by the Whig party, to revive the 2nd
National Bank by creating a Federal Bank that would be called The Fiscal
Bank of the United States. (A State chartered Bank for the District of
Columbia that would be used by the U.S. Government.) President Tyler
vetoes the bill as unconstitutional.
August 13, 1841
The Independent Treasury Act is repealed leaving the National government without a Banking system for the next 5 years. The Secretary of the
Treasury deposits the government's money into State Banks.
September 3, 1841
Congress again tries to create a Federal Bank. This time, they set it up to
be run by State office holders. Again, President Tyler vetoes it as
unconstitutional.
September 18, 1873
A flood of paper money snowballs the Nation into a depression that lasts 5
years.
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January 14, 1875
The Specie Resumption Act allows legal tender to be exchanged for gold.
When the Act goes into affect in 1879, the nation starts to revive from the
1873 depression.
1907: The Nation again goes into a Depression because of paper currency,
but J.P. Morgan saves the Nation from a major crisis by providing the
government with $100 million dollars in gold.
December 23, 1913
In response to the National Depression in 1907, President Wilson gets
Congress to pass the Owen-Glass Federal Reserve Act. The Act is intended
to better regulate paper money.