Early United States: 1791–1815

First Bank of the United States

The creation of the First Bank of the United States caused heated debate between Federalists and Anti-Federalists. Alexander Hamilton, the leading proponent of the bank, argued it was critical to help pay the nation's debts.

By 1789 the United States was under the burden of enormous debt. Alexander Hamilton, the nation's first secretary of the Treasury, put together a plan for stabilizing the nation's finances. First, he proposed having the federal government assume the debts of the individual states. The debt was left over from when the states were colonies fighting for independence against Britain. This move was intended to strengthen the states' bond with the federal government and to make treating - or negotiating - with the United States (as one entity) easier. To pay off the nearly $25 million debt, Hamilton needed to generate revenue, or the source of income for a nation. To do this, he imposed tariffs on imports, goods brought in from other countries, and excise taxes, or taxes levied on the sale, manufacture, or consumption of domestic goods. Next, Hamilton proposed the creation of the First Bank of the United States, a national bank that would collect taxes, print money, and pay the government's bills. It would also help stimulate economic growth by providing loans to businesses and farmers.

This proposal led to heated debate between two groups, the Federalists led by Hamilton and the Anti-Federalists led by Secretary of State Thomas Jefferson. Jefferson argued a national bank was unconstitutional because it was not explicitly outlined in the Constitution. He cited the 10th Amendment, which declared any power not granted to the government belonged to the states. A central bank, he argued, would undermine the rights of the states to create their own banks.

Hamilton took the opposite approach to the question of constitutionality. He argued anything not expressly forbidden by the Constitution was implicitly allowed. He noted that Congress had the power to pass "necessary and proper laws" for the government to fulfill its duties. The collection of taxes and the regulation of trade were among those duties. The Bank of the United States, he argued, was an institution that could do those things. Hamilton's argument ultimately prevailed, and the bill to create the First Bank of the United States passed the House and Senate in 1791.

The debate over the bank revealed a philosophical divide that would eventually lead to the formation of the nation's first two political parties. The Federalists would stand for commerce, banking, and a strong central government. The Anti-Federalists, who would eventually become the Democratic-Republicans, promoted states' rights and an agriculture-based economy.
Construction on the First Bank of the United States was completed in 1797. Still standing in Philadelphia today, it is the oldest bank building in the United States.
Credit: NPS Photo