Alexander Hamilton: “Opinion as to the Constitutionality of the Bank of the United States”

Impact

Historians have typically sided with Hamilton in regard to the national bank, either because they agree with his interpretation of the Constitution or owing to the perceived benefits of stabilizing the currency and funding the national debt. Hamilton's proposals were far from radical, as the British had a national bank, and a similar institution had been created under the Articles of Confederation. Nonetheless, many Americans considered these policies to be “un-American,” and some politicians insisted that Hamilton was overly fascinated with British forms because he was an Anglophile.

The passage of the bank bill affected American politics in two ways. First, it provided a forum in which manners of constitutional interpretation were widely discussed. Neither Hamilton nor Jefferson conceded his argument, and their political descendants continued to defend their positions for decades to come. More significantly, the debate on the bank bill polarized national politics and proved instrumental to the creation of the first party system. Newspapers were formed, rallies were held, and myriad local movements—some of which were organized against the national bank—slowly coalesced into a formal structure of political activity.

Once under operation, the Bank of the United States further fueled the party system when its inflationary activity quickly brought about depression centered in New York City in 1792. Pamphleteers pilloried the bank as a sign of corruption, whereby “monied” interests used the federal government to enrich themselves at the public's expense. This characterization carried over to Republican rhetoric, which portrayed the Federalists as a commercial elite who had warped the Constitution to suit their purposes. Federalists responded by attacking the Republicans as inept farmers who would wreck the economy.

The elections of 1800 seemed to settle the matter, with the Republicans taking office. In fact, even though they changed the policies of the Bank of the United States to reflect their insistence on founding currency on hard money rather than allowing inflation, the Republicans did not suspend the bank's operation. In effect, the Republicans used Hamiltonian means to secure Jeffersonian ends. They kept a national bank but used it to extinguish the national debt as quickly as possible. The bank's charter expired in 1811.