Friday, April 24, 2009

The First Bank of the United States

As pivotal decisions regarding the fate of a growing number of Industries are frequently being made from the oval office and floor of the Senate, one might immediately perceive the title of this post as an allusion towards the current de-facto nationalization of the American Banking System. Our intention however, is to discuss the First Bank of the United States and the spirited debate which preceded its charter in 1791.

In the aftermath of the Revolutionary War, the United States found itself victorious yet heavily indebted.  To aggravate matters, the former colonies lacked any sort of organized currency, instead relying on a patchwork system of bartering, localized currencies, and foreign coinage that had found its way into circulation. To counter these headwinds, the first Treasury Secretary of the United States, Alexander Hamilton, proposed the creation of a National Bank. This seemingly logical and necessary proposal was met with some resistance, particularly from Thomas Jefferson, who criticized the creation of a national bank on Constitutional grounds. 

Hamilton believed that the Federal Government had the ability to "make all laws which shall be necessary and proper"(US Constitution) in order for the Government to carry out those powers that had been specifically granted to the Federal Government by the Constitution. Jefferson however, held the view that the Federal Government possesses only those powers Specifically Enumerated in the Constitution. Obviously, this Constitutional debate is still occurring today, and because new eras inevitably give rise to new issues, we expect that the debate will never be definitively settled. Instead of arguing in favor of either man's position, we would merely like to provide two excerpts from Thomas Jefferson's statement of opposition to the creation of a national bank. Somehow, Jefferson's statements have managed to remain relevant to modern discourse, despite the fact that they were written over two hundred years ago.

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." (XIIth amendment.)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.
-Thomas Jefferson

Can it be thought that the Constitution intended that for a shade or two of convenience, more or less, Congress should be authorized to break down the most ancient and fundamental laws of the several States;...Nothing but a necessity invincible by any other means, can justify such a prostitution of laws, which constitute the pillars of our whole system of jurisprudence.
-Thomas Jefferson

In the end, Hamilton's line of reasoning won the day, and in 1791 Congress chartered the First Bank of the United States. The repetitous nature of History is strange indeed.
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