The Battle over the Bank

Learning Target: I can use primary and secondary sources to investigate an economic policy debate.

Do Now: “If New York’s in debt— Why should Virginia bear it?”

“The $10 Founding Father without a father.”

Born out of wedlock, raised in poverty in St. Croix, abandoned by his father, and orphaned by his mother as a child, Hamilton transplanted himself as an adolescent to a New York City filled with revolutionary fervor. An eloquent and prolific writer, he was the author of two-thirds of the Federalist Papers; after serving as George Washington’s aide during the Revolutionary War, he became America’s first Treasury Secretary.

Later, Hamilton achieved the dubious distinction of being at the center of the nation’s first political sex scandal, after an extramarital affair became public. He never again held office, and before reaching the age of fifty he was dead, killed in a duel by Aaron Burr, the Vice-President, after a personal dispute escalated beyond remediation.

"My Ambition is so prevalent...I wish there was a war"

The Battle over the Bank

After months of battling and compromises, the US Constitution was finally adopted on September 17, 1787. Still, America was embroiled in heated arguments over exactly how the government would work and what powers it could really exercise. Political parties soon developed as groups argued about the direction of the country. Alexander Hamilton became a leading voice of the Federalists who believed that the federal government needed to be strong. On the other side, Thomas Jefferson, a Republican, argued that too much power in the hands of the federal government would lead to tyranny.

The necessary and proper clause part of Article I of the Constitution allowed for Congress to make laws and provisions that were not part of the enumerated powers. Hamilton and Jefferson debated many times over what was meant by “necessary and proper.” Hamilton took a more liberal reading of the clause and said that Congress should do anything it felt was necessary to carry out national responsibilities. Jefferson held that the clause meant that Congress should only take actions that were absolutely necessary, and no more.

What does the Constitution say?

U.S. Constitution - Article 1 Section 8 (The Necessary and Proper Clause)

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States

To borrow Money on the credit of the United States

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States

To establish Post Offices and post Roads

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries

To constitute Tribunals inferior to the supreme Court

To define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years

To provide and maintain a Navy

To make Rules for the Government and Regulation of the land and naval Forces

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings;—An

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.


Questions

  • What are the powers explicitly

    1. explicitly: stated clearly. ↩

    given to Congress?
  • What are the benefits to having enumerated

    1. enumerated: listed one-by-one. ↩

    powers?
  • What are some of the drawbacks to having enumerated powers?
  • Why do you think the Founding Fathers included the “necessary and proper” clause in the Constitution?
  • Why might someone be nervous about the necessary and proper clause?

    • In 1791, Hamilton proposed that the United States charter a national bank in order to take care of Revolutionary War debt, create a single national currency, and stimulate the economy. Jefferson argued that the creation of a national bank was not a power granted under the enumerated powers, nor was it necessary and proper. Both gentlemen presented their arguments to President Washington...

    Thomas Jefferson

    “I consider the foundation of the Constitution as laid on this ground: That "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." 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.”

    “The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution.”

    “To "regulate commerce with foreign nations, and among the States, and with the Indian tribes." To erect a bank, and to regulate commerce, are very different acts.”

    “It would reduce the whole instrument to a single phrase, that of instituting a Congress with power to do whatever would be for the good of the United States; and, as they would be the sole judges of the good or evil, it would be also a power to do whatever evil they please.”

    “The second general phrase 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.”

    Alexander Hamilton

    “This restrictive interpretation of the word necessary is also contrary to this sound maxim of construction; namely, that the powers contained in a constitution of government, especially those which concern the general administration of the affairs of a country, its finances, trade, defence etc. ought to be construed liberally, in advancement of the public good.”

    “It is not denied that there are implied well as express powers, and that the former are as effectually delegated as the latter.”

    “The proposed bank is to consist of an association of persons, for the purpose of creating a joint capital, to be employed, chiefly and essentially, in loans. So far, the object is not only lawful, but it is the mere exercise of a right which the law allows to every individual.”

    “Accordingly, it is affirmed, that it [the bank] has a relation, more or less direct, to the power of collecting taxes; to that of borrowing money; to that of regulating trade between the States...”

    “And in the last place, it will be argued, that it is clearly within the provision which authorizes the making of all needful rules and regulations concerning the property of the United States, as the same has been practised upon by the Government.”

    “To deny the power of the Government to add this ingredient to the plan, would be to refine away all government.”



    Is the bank legal?