Financial History Issue 113 (Spring 2015) - Page 20

a crucial way to concentrate a nation’s economic strength. During the darkest years of the Revolution, 1780–81, when the nation’s currency collapsed and the Continental Army faced starvation, Philadelphia’s Bank of North America had issued notes which retained their face value and were used to purchase vital supplies and equipment for the Army. The Bank of the United States was a great deal more complex than the Bank of North America, or the Bank of New York, which Hamilton had helped to found in his home city. In his proposal to Congress, the Secretary of the Treasury called it “a great engine of state.” President Washington’s tacit approval was well known, and this may have had much to do with the way the proposal passed the Senate almost casually, with a voice vote. In the House of Representatives, a very different scene transpired. James Madison, still the acknowledged leader of this branch of the legislature, took the floor and shocked President Washington and Secretary Hamilton by opposing — and then denouncing — the idea. For a whole day, Madison lectured his fellow congressmen on what was wrong with the proposal. In essence, he argued that the absence of any mention of a bank in the Constitution meant that the framers of the national charter never intended to give the federal government the right to create such an entity. No one was more astonished by this denunciation than Alexander Hamilton. During the Constitutional Convention, Madison had proposed giving Congress the power to charter banks and other corporations. The delegates had rejected the proposal. Now he cited this rejection but coolly neglected to mention that he had been the author of the proposal. In his Federalist Papers essays, Madison had ignored this earlier disapproval and repeatedly insisted there were implied powers in the Constitution that gave Congress the ability to deal with many aspects of federal governance. Congressman Elias Boudinot of New Jersey was among a number of listeners who did not hesitate to remind Madison of his previous stance. Boudinot read aloud the words from Madison’s essay, Federalist number 44: “There must necessarily be admitted powers by implication unless the Constitution descended to every minutia… No axiom is more clearly established in law or in reason that whenever the end is required, the means are authorized; whenever a general power to do a thing is given, every particular power for doing it is included.” Thus the Constitution gave Congress the power to regulate the nation’s commerce. Secretary Hamilton saw the Bank of the United States as an essential tool in this crucial task. The House of Representatives agreed with Boudinot and Madison’s other critics, who openly mocked his sudden transformation to a “strict” or literal interpreter of the Constitution he had done so much to create. The bill chartering the Bank of the United States passed the House by almost a two-to-one margin: 39 to 20. But this victory, immensely pleasing to Hamilton, soon became only the first act in a drama that would alter America’s history. President Washington, with his acute concern for the nation’s unity, was alarmed to note that almost all the congressmen from states north of the Potomac Rive