Image courtesy of the Library of Congress
During his service in the House, Representative James Madison of Virginia championed the Bill of Rights to the Constitution.
On this date, the House of Representatives passed a bill establishing the first Bank of the United States. In both the House and the Senate, Secretary of the Treasury Alexander Hamilton
of New York lobbied support for the bank legislation. Hamilton argued that a national bank is “a political machine, of the greatest importance to the state.” He asserted that a national bank would facilitate the payment of taxes, revenue for which the federal government was desperate. The federal government had recently assumed the states’ Revolutionary War debts as a part of the Permanent Seat of Government Act
. Southern states, which carried far less war debt than their northern counterparts, agreed to the plan in exchange for the relocation of the capital city to a more southern locale – the newly created District of Columbia. However, debt assumption alone did not secure the establishment of the bank. There were important Constitutional considerations to take into account. Hamilton believed that Article I Section 8 of the Constitution
, permitting the Congress to make laws that are necessary and proper for the government, empowered lawmakers to create a national bank. Secretary of State Thomas Jefferson
and Representative James Madison
of Virginia disagreed, countering that powers not expressly granted to Congress in the Constitution belonged to the states. Nervertheless, the bank bill passed the House easily, by a vote of 39 to 20, and President George Washington
signed it into law on February 25, 1791. Two decades later, Congress let the bank's charter lapse. A second bank of the United States was chartered in 1816 and it, too was allowed to expire after 20 years during the Andrew Jackson administration. A central banking system did not emerge in the U.S. until passing the Federal Reserve Act in 1913.