how privately-issued bank notes could serve precisely the same purpose as printing-press money—with precisely the same disastrous results. That being the case, the monetary and political scientists decided to end run the Constitution. Their plan was to establish a bank, to give that bank the power to create money, to
Thus, the First Bank of the United States was conceived.
The proposal was submitted to Congress in 1790 by Alexander Hamilton who, at that time, was Secretary of the Treasury.
Hamilton, incidentally, was a former aide to Robert Morris, founder of the Bank of North America, so in that sense his role in this matter is not surprising. What is surprising is the fact that Hamilton had been a staunch supporter of a sound currency during the Constitutional Convention. This is hard to reconcile, and one must suspect that, even the most well intentioned of men can become corrupted by the temptations of wealth and power. It is possible that Hamilton, Morris, and other Federalist leaders had hoped to keep the government out of the money-making business, not because it was the constitutional thing to do, but because that would leave the field clear for a central-bank mechanism which, because it was further from public view and political control, could become their own private engine of profit. It would appear that the only other explanation is that these men were fickle in their views and did not really understand the implications of their acts. In view of their brilliance in all other matters, however, it is difficult to muster enthusiasm for that interpretation.
THE HAMILTON-JEFFERSON CONFLICT
Hamilton's proposal was strongly opposed by Thomas
Jefferson, then Secretary of State, and this was the beginning of a heated political debate that would preoccupy Congress for many decades to come. In fact, it was one of the central issues that led to the creation of our first political parties. The Federalists gathered around the ideas of Hamilton. The anti-Federalists, later called the Republicans, were attracted to the ideas of Jefferson.1
1. Curiously, the present Democratic Party traces its origin to Jefferson's Republicans.
THE CREATURE COMES TO AMERICA
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Jefferson pointed out that the Constitution did not grant to Congress the power to create a bank or anything similar. That means such power is reserved to the states or to the people. In a
rebuttal to Hamilton's proposal, he said: "To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition."1 Furthermore, he said, even if the Constitution
Hamilton, on the other hand, argued that debt was a good
thing, if kept within reason, and that the nation needed more money in circulation to keep up with expanding commerce. Only the Bank, he said, would be able to provide that. Furthermore, while it is true the Constitution did not
Nothing could be more polarized than the opposing ideas of these two men:
JEFFERSON: "A private central bank issuing the public currency is a greater menace to the liberties of the people than a standing army."
" W e must not let our rulers load us with perpetual debt."
HAMILTON: "No society could succeed which did not unite^ the interest and credit of rich individuals with those of the state." "A national debt, if it is not excessive, will be to us a national blessing."
AMERICA'S SECOND CENTRAL BANK IS CREATED
After a year of intense debate, Hamilton's views prevailed and, in 1791, Congress granted a twenty-year charter to the Bank of the 1. "Opinion of Thomas Jefferson, Secretary of State," February 15,1791, quoted by Krooss, pp. 147-48.
2. The comparison between private banks and standing armies can be found m many of Jefferson's letters and public utterances. For example, see
3.
4. Quoted by Arthur M. Schlesinger, Jr.,
5. Written on April 30, 1781, to his mentor, Robert Morris. Quoted by John H.
