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

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.