Precedence is an enormous factor in guiding the actions of American politicians. George Washington arguably changed the course of American history by nobly declining a third term and making foreign disentanglement an integral part of his agenda. It was with this emphasis on precedence that the founding of the First Bank of the United States by Alexander Hamilton would have such a profound effect on America’s view of the powers of the federal government endowed by the constitution.
Alexander Hamilton was a strong supporter of the notion that banks were essential for sustaining a nation’s credit as well as maintaining its economic stimulation. Promptly after being appointed by George Washington as the nation’s first Secretary of the Treasury, Hamilton submitted a proposal for the formation of a Bank of the United States to Congress on December 15th, 1790. Congresses investment was on the order of $10 million; an enormous investment for that time. Among many of the bank’s functionalities was the ability to issue paper money.
A unique quality of the bank was its integration of public oversight and private enterprise; providing an interesting and perhaps precedent setting amalgam of capitalism and government. This entwinement of government and private business men was due to the simultaneous existence of the public funding and a board of directors consisting of private individuals. The bank also assisted in the unification of the states as it provided uniform currency for all of the states.
Although the bank’s plan was not excruciatingly difficult to pass through the Senate or the House, there existed some opposition to its establishment. Among the many Southerners who opposed the plan was James Madison. Madison worried that the bank’s establishment in Philadelphia may cause some neglect of the Southern states. It’s interesting and important to note some of these early splits in general opinion between the northern and southern states despite George Washington’s discouragement and impugnment of sectionalism.
The most crucial controversy that encircled the establishment of the bank was whether its establishment would be overstepping constitutional bounds. Madison questioned the authority of Hamilton’s actions on constitutional grounds. When the bill finally reached George Washington, Thomas Jefferson, a proclaimed strict constructionist (which, in subsequent years, was found to not be so “strict”), who termed the banking industry “an infinity of successive felonious larcenies,” supported Madison’s argument against Hamilton’s proposals. Ultimately, Jefferson urged Washington for a veto.
Hamilton was motivated not to concede easily; he refuted Jefferson’s arguments as requested by Washington. Hamilton’s “central point was that the Constitution must confer implied powers along with those actually enumerated; the vehicle for this was the clause enabling Congress ‘to make all laws which shall be necessary and proper’ to put expressly granted powers into effect.”
The argument escalated into what became the landmark McCulloch v. Maryland case in which the court, led by Chief Justice John Marshall, upheld the Bank’s constitutionality. It was claimed that "‘necessary’ did not mean absolutely essential so much as useful and appropriate.” The evolution of the conflict is important as it can be pointed to as one of the many instances of sectionalism extant in the early United States which was primary cause of major subsequent conflicts. The ruling and the precedent of this interpretation of what is sometimes referred to as the “elastic clause” has had consequential effects as it has entrusted the government with what may be considered as more power than the founding fathers intended.