By Allen Guelzo, Ph.D., Gettysburg College
Alexander Hamilton’s proposals for a financial future of the United States were politically daring and financially risky. Hamilton had to deal with the combined opposition of Thomas Jefferson in the cabinet, and most of the southern agriculturists in Congress.
Thomas Jefferson’s Objection to Manufacturing
When Alexander Hamilton outlined his plans for the financial future of the United States, Thomas Jefferson saw that it was heavily biased in favor of urban financial interests. This roused in Jefferson’s mind the specter of the republic soiling its hands in merchandising and shuffling paper bank notes. The taxation scheme that Hamilton asked for was seen by Jefferson as a threat to the security and independence of the republican agriculturist.
Jefferson imagined that the manufacturers would quickly turn their economic power in the direction of bribery and political corruption. Jefferson announced that banks existed only to enrich swindlers at the expense of the honest and industrious.
Jefferson further argued that even if banks didn’t do those terrible things, the Constitution had still given Congress no authority to create a national bank. Under the provisions of the Bill of Rights, the entire proposal for the establishment of a national bank was unconstitutional from the start.
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John Randolph’s View of the Manufacturers
Regarding encouraging domestic manufacturing, the acerbic John Randolph of Roanoke, like Jefferson, stated angrily that agriculture—and not manufacturing—was what made the republic what it was. Randolph wrote, “The agriculturists bear the whole brunt of taxation and remain poor, while the others run in the ring of pleasure and fatten upon them. The manufacturer is the citizen of no place or anyplace,” and, therefore, is not to be trusted.
Randolph further declared: “The agriculturist has his property, his land, his all, while the commercial speculators live in opulence, whirling in coaches and indulging in palaces. Alert, vigilant, enterprising, and active, the manufacturing interests are collected in masses and ready to associate at a moment’s warning for the many purposes of general interest to their body.”
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Negotiating a Deal with Jefferson
Despite the opposition in both the cabinet and in Congress, Hamilton eventually negotiated the recommendations of all three reports through Congress, largely on the basis of two important assets.
One of these assets was a large group of Congressmen in both the House and the Senate who had made substantial investments in government securities during and after the Revolution. These people stood to lose badly if Hamilton’s funding and assumption proposals were not endorsed. As a result, even though the assumption proposals went down in defeat in April of 1790, the funding proposals passed through Congress in June.
Then, over the summer, Hamilton swung a remarkably un-virtuous and un-republican deal with Thomas Jefferson. Hamilton offered his support for Jefferson’s scheme to relocate the national Capitol from Philadelphia to a site on the Virginia-Maryland border, if Jefferson supported the assumption proposal. A month later, a resurrected assumption bill glided through the Senate.
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Tiptoeing Around the Bill of Rights
Hamilton’s major asset in this process was George Washington, who had learned to trust Hamilton as a staff officer during the Revolution and who trusted him now. That trust was tested in February of 1791 when a 20-year charter for the Bank of the United States was passed by the House and sent to Washington for his signature.
Within the cabinet, Jefferson and Attorney General Edmund Randolph appealed to Washington to veto the bank charter, on the grounds that Congress had no authority under the Constitution to charter corporations of any sort. Therefore, the bank’s charter would violate the Bill of Rights.
Hamilton argued back that the Bill of Rights did not mean to do away with certain implied powers that were simply by common sense necessary to normal government. The Constitution, clearly, unambiguously, granted the federal government the right to regulate commerce.
Hamilton argued that though Congress had no express power to charter a national bank, it did have a constitutional responsibility to regulate currency and bankruptcy. He argued that when the Constitution designates the end, it also implies the means to achieve that end. Hence, the authority to charter a national bank was implied in the Constitution.
Washington signed the bank bill on February 25, 1791. In frustration, Jefferson waited until the end of 1793 and then resigned from Washington’s cabinet.
The Success of Hamilton’s Plan for the Republic
Hamilton did not stay in the cabinet for much longer. He stepped down as Secretary of the Treasury at the end of January 1795, but by then, his work was really done. In 1791 and in 1792, 40 new corporations were chartered in the United States—nine of them for banks and the rest for public works, canals, and turnpikes, and all of them were capitalized in large measure by the bank notes and the securities issued through the Bank of the United States.
Soon, the value of American bonds and American securities received the highest ratings on the Amsterdam financial markets. As a result, European silver and gold specie now began to flow into the vaults of the Bank of the United States because American securities were now worth owning.
Thus, the 1790s, the first decade of the new American Constitution, clearly belonged to Alexander Hamilton and his financial policies.
Common Questions about Alexander Hamilton’s Three Reports
Thomas Jefferson imagined that the manufacturers would quickly turn their economic power in the direction of bribery and political corruption. Jefferson announced that banks existed only to enrich swindlers at the expense of the honest and industrious.
John Randolph stated that the agriculturist has his property, his land, his all, while the commercial speculators live in opulence, whirling in coaches and indulging in palaces.
Hamilton offered his support for Jefferson’s scheme to relocate the national Capitol from Philadelphia to a site on the Virginia-Maryland border, if Jefferson supported the assumption proposal.
Hamilton argued that though Congress had no express power to charter a national bank, it did have a constitutional responsibility to regulate currency and bankruptcy. He argued that when the Constitution designates the end, it also implies the means to achieve that end. Hence, the authority to charter a national bank was implied in the Constitution.
