Hamilton's financial plan and the debate over a national bank

Grade 11 Social Studies Worksheet - Building Confidence

Circle the best answer.

1. Read this first

   Use this

   Two opinions on the Bank bill, February 1791 (cards in date order). Card A: February 15, 1791: source card "Jefferson's opinion on the Bank". Who made it: Thomas Jefferson, Secretary of State. When: February 15, 1791. Where: Philadelphia. For whom: President George Washington. Why: Washington had asked for written opinions on whether the Bank bill was constitutional. Excerpt (Jefferson, Opinion on the Constitutionality of a National Bank, February 15, 1791; Paul Leicester Ford, ed., The Writings of Thomas Jefferson, vol. 5, G. P. Putnam's Sons, New York, 1895, p. 285; checked against H. A. Washington, ed., The Writings of Thomas Jefferson, vol. 7, Taylor and Maury, Washington, 1854, p. 556): "I consider the foundation of the Constitution as laid on this ground: That "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [XIIth amendment.] [in 1791 still a proposed amendment; ratified in December 1791 as the Tenth Amendment] To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition. The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution." Card B: February 23, 1791: source card "Hamilton's opinion on the Bank". Who made it: Alexander Hamilton, Secretary of the Treasury, who had planned the Bank. When: February 23, 1791. Where: Philadelphia. For whom: President George Washington. Why: Washington asked him to answer the objections of Jefferson and the Attorney General. Excerpt (Hamilton, Opinion on the Constitutionality of the Bank, February 23, 1791; Henry Cabot Lodge, ed., The Works of Alexander Hamilton, Federal Edition, vol. 3, G. P. Putnam's Sons, New York, 1904, p. 448; checked against John C. Hamilton, ed., The Works of Alexander Hamilton, vol. 4, John F. Trow, New York, 1850, p. 106): "The power which can create the supreme law of the land in any case, is doubtless sovereign as to such case. This general and indisputable principle puts at once an end to the abstract question, whether the United States have power to erect a corporation; that is to say, to give a legal or artificial capacity to one or more persons, distinct from the natural. For it is unquestionably incident to sovereign power to erect corporations, and consequently to that of the United States, in relation to the objects intrusted to the management of the government."

2. 1.

   Ari reads card A. Which question would Jefferson ask first about any new law Congress passes?

   • Did the Constitution give Congress this power, or reserve it to others?
   • Would the law help the Treasury collect revenue more easily than the older methods did?
   • Does a majority in Congress support the law strongly enough to settle its power?
   • Does the law fall within an object the government already manages, such as taxes?
3. 2.

   In card B, Hamilton calls the power that makes supreme law sovereign. What does Bo see that idea settling first?

   • Whether Congress may create a corporation only for the objects the Constitution lists by name.
   • Whether a bank would be useful enough to the Treasury to justify creating it in the first place.
   • Whether the United States has power to create a corporation at all, wise or not.
   • Whether the supreme law of the land is the Constitution alone or also acts of Congress.
4. 3.

   Esme puts cards A and B side by side. Which statement fits both of them?

   • Jefferson argues from the Constitution and Hamilton from the Treasury's needs, and neither cites the other's ground.
   • Both treat the Bank as a question of how useful it would be to the nation and differ on how useful.
   • Both start from how the Constitution divides power, and they reach opposite answers about the Bank.
   • Jefferson wrote first and Hamilton answered, so Hamilton's card is the weaker of the two.
5. 4.

   Washington asked for written opinions on the Bank bill. What does that let Jun say about card A?

   • It is a neutral summary, since an officer of the government wrote it for the President.
   • It is one side's case, written for the President in a live dispute.
   • It is of limited use, since Jefferson held office and an official opinion mainly serves his department.
   • It shows what most Americans in 1791 believed about banks.
6. 5.

   Hamilton planned the Bank that card B defends. How should Kira treat that fact?

   • As the weaker of the two sources, since a person with a stake gives worse reasoning than one without.
   • Treat card B as an official Treasury finding that binds the President.
   • As a reason to expect a strong defense, then test his reasoning against card A.
   • As an honest legal argument that needs no check, since Hamilton's office required him to give frank advice.

7. Use this

   Hamilton's plan, 1790 and 1791 (cards in date order). Card A: January 9, 1790: Hamilton's First Report on the Public Credit asks Congress to pay the federal debt in full and to have the Union assume (take over) the states' war debts. Card B: August 4, 1790: The Funding Act: new federal bonds replace the old federal debt, and up to $21.5 million of state debts is assumed. Who gained: people holding old war-debt certificates, who are to be paid in new federal bonds. Who paid: those who pay federal duties and taxes, which cover the interest. Card C: August 10, 1790: Congress raises tariffs (duties, which are taxes on goods brought in from other countries). Who gained: the Treasury, which collects the money. Who paid: importers of goods from other countries. Card D: March 3, 1791: Congress lays an excise (a tax on goods made at home) on distilled spirits. Who gained: the Treasury, which collects the money. Who paid: makers of distilled spirits in the United States. Card E: December 12, 1791: The First Bank of the United States opens in Philadelphia under a 20-year charter (a legal grant to do business). Below the strip: Hamilton was the first Secretary of the Treasury. His plan paid the debt with customs duties and excise taxes.

8. 6.

   Milo checks the cards. Card B is the Funding Act of 1790. Who gains most directly from it, and who is left to pay?

   • Holders of old war-debt certificates gain; people who pay duties and taxes cover the interest.
   • The Treasury gains, since it replaces old debt with new bonds, and ordinary taxpayers gain from lower taxes.
   • Importers gain from the new bonds, and certificate holders pay the interest.
   • Holders of old certificates gain, but the states that owed the debts pay the interest from their own taxes.
9. 7.

   Noah reads closely. Cards C and D both raise money. How do they differ in who pays?

   • The tariff falls on importers and the excise on buyers of spirits, since the cost passes on to consumers.
   • Both fall on makers and importers alike, since both are taxes on goods and the Treasury collects them.
   • The tariff falls on home makers of spirits and the excise on importers of foreign goods.
   • The tariff falls on importers of foreign goods; the excise on home makers of spirits.
10. 8.

    Pia reads the whole strip. Which statement does the strip support, and no more?

    • The plan reduced the size of the debt itself by 1791, as the Funding Act shows.
    • Congress passed the excise to pay interest on the new bonds, since the Funding Act and the excise are linked.
    • People who paid taxes under the plan also gained from the Bank when it opened.
    • The plan paid the debt with customs duties and excise taxes, and ended with a Bank.

11. Use this

    The First Bank at a glance (cards in date order). Card A: 1791: The law sets the Bank's stock at $10 million, in 25,000 shares of $400 each. Card B: 1791: The United States government buys $2 million of the stock, and private buyers take the other $8 million. Card C: December 12, 1791: The main office opens in Philadelphia under a 20-year charter. Card D: 1792: Branches open in Boston, New York, Charleston and Baltimore. Below the strip: The Bank kept government money, collected taxes and made loans.

12. 9.

    Tala reads closely. The stock was 25,000 shares of $400 each, and the government bought $2 million. How many shares did private buyers hold?

    • 8,000 shares, because private buyers paid $8 million.
    • 5,000 shares, the number the government bought.
    • 20,000 shares, which means private owners controlled the Bank's decisions.
    • 20,000 shares, four fifths of the stock; the cards do not show how votes counted.
13. 10.

    Zee reads the strip. Which question about the Bank can the strip answer?

    • Whether the Bank lowered what farmers paid for loans in its first years.
    • Why Congress let the Bank's charter end in 1811 after twenty years.
    • When the main office opened and which cities got branches the next year.
    • Which branch city had the most depositors by the end of 1792.