Who believed a national bank would lead to corruption?
Bank opponents like Thomas Jefferson and James Madison countered that a national bank represented an abuse of power by Congress and a corrupt bargain between political and economic elites. Congress established the First Bank of United States in 1791, but it let its charter expire in 1811.
Thomas Jefferson believed this national bank was unconstitutional. In contrast to Hamilton, Jefferson believed that states should charter their own banks and that a national bank unfairly favored wealthy businessmen in urban areas over farmers in the country.
Thomas Jefferson was afraid that a national bank would create a financial monopoly that might undermine state banks and adopt policies that favored financiers and merchants, who tended to be creditors, over plantation owners and family farmers, who tended to be debtors.
Federalists, like Alexander Hamilton, believed that a strong, central bank was essential for the new nation. A strong, central bank could prevent abuses in banking. Anti-federalists, like Patrick Henry, believed that a strong, central bank would have too much power.
Hamilton had long believed in the need for banks to provide credit and stimulate the economy. As early as 1780, he wrote a letter describing central banks in Europe and wondered, "And why cannot we have an American bank?" Hamilton helped found the Bank of New York in 1784.
The creation of a national bank required an act of incorporation from Congress. Its critics, led by Virginia congressman James Madison, could legitimately object that Congress had no constitutional power to issue charters of incorporation.
In April 1814, President James Madison, who had opposed the creation of the first Bank of the United States in 1791, reluctantly admitted to the need for another national bank. He believed a bank was necessary to finance the war with Britain.
Nicholas Biddle, the third and last president of the Second Bank of the United States, became President Andrew Jackson's nemesis during the “Bank War.” During the election campaign of 1832, Jackson's opponents organized a new political party, the National Republicans, under Henry Clay.
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.
The bank was also opposed on constitutional grounds. Adopting a position known as "strict constructionism," Thomas Jefferson and James Madison charged that a national bank was unconstitutional since the Constitution did not specifically give Congress the power to create a bank.
Why did Republicans not like the national bank?
Supporters also claimed that a national bank would promote monetary stability by regulating private banks. Opposition to a national bank came largely from private banking interests and traditional Jeffersonians, who considered a national bank to be unconstitutional and a threat to republican government.
During the 1790s, the party strongly opposed Federalist programs, including the national bank. After the War of 1812, Madison and many other party leaders came to accept the need for a national bank and federally funded infrastructure projects.
Such a bank could create a uniform currency circulating through all the states and provide a place for the national government to deposit its money or borrow money when needed. Thomas Jefferson opposed this plan. He thought states should charter banks that could issue money.
This bill passed Congress, but Jackson vetoed it, declaring that the Bank was "unauthorized by the Constitution, subversive to the rights of States, and dangerous to the liberties of the people." After his reelection, Jackson announced that the Government would no longer deposit Federal funds with the Bank and would ...
The Compromise of 1790 was a compromise among Alexander Hamilton, Thomas Jefferson, and James Madison, where Hamilton won the decision for the national government to take over and pay the state debts, and Jefferson and Madison obtained the national capital, called the District of Columbia, for the South.
Hamilton believed a national bank would strengthen the new Federal Government by facilitating tax collections, accepting deposits from the government, and even lending money to it when necessary. More importantly, he believed it would facilitate trade, economic development, and expansion in the economy of the country.
Jackson—like Jefferson and Madison before him—thought that the Bank of the United States was unconstitutional. When Congress voted to extend the Second Bank's charter in 1832, Jackson vetoed the bill. To explain his decision to the nation, Jackson issued this veto message on July 10, 1832.
After the Revolutionary War, the United States faced overwhelming debt and an uncertain commercial future. As a response, Secretary of the Treasury Alexander Hamilton stepped forward with a plan to establish a national bank, which would give the federal government more authority to handle the fiscal situation.
“In April 1814, President James Madison, who had opposed the creation of the first Bank of the United States in 1791, reluctantly admitted to the need for another national bank. He believed a bank was necessary to finance the war with Britain.
In the case of the bill to establish a national bank, the debates reflected a concern over northern financiers having too much power. For some Bank opponents, attacking the constitutionality of the Bank appeared to be a more promising angle in a Federalist-dominated Congress.
How did Madison feel about the national bank?
Mr. MADISON did not oppose all the banking systems, but did not approve of the plan now under consideration. Upon the general view of banks, he recapitulated the several advantages which may be derived from them. The public credit; he granted, might be raised for a time, but only partially.
Championing this view was Senator Henry Clay of Kentucky, Jackson's opponent in the election. Clay's support for the Bank of the United States was almost entirely predicated on the success of his presidential campaign.
Thomas Jefferson was afraid that a national bank would create a financial monopoly that might undermine state banks and adopt policies that favored financiers and merchants, who tended to be creditors, over plantation owners and family farmers, who tended to be debtors.
Jefferson argued that the creation of a national bank was not a power granted under the enumerated powers, nor was it necessary and proper.
The Democratic-Republicans argued that, even if a national bank would be of benefit to the country, nowhere in the Constitution does it specify that the federal government is allowed to be in the banking business. But the Constitution does say that any power not specified in the Constitution is delegated to the states.
