1. Introducing Alexander Hamilton
Alexander Hamilton and George Washington

2. Financial Conflicts

3. Financial Problems
American national debt was growing after the Revolutionary War and the Articles of Confederation
National Debt – The amount of money the government owes.

4. How much Debt was the U.S. in?

5. Financial Problems Who is Alexander Hamilton?
As Secretary of the Treasury Alexander Hamilton was looking for a way to improve financial situation while still strengthening the American government.

6. Hamilton’s Plan
Hamilton believed the government needed the ability to borrow money
1790: asked Congress to fully pay all federal and state debts
What do you think was the reasoning behind Hamilton’s plan to accept the debts of the Continental Congress?

7. Hamilton's Plan
Wealthy creditors, bankers, and merchants who owned the bonds would have a stake in the federal government’s success and enough confidence in its financial stability to loan money in the future.
Federal payment of state debts would give states a strong interest in the success of the national government.

8. Hamilton's Bond Plan
American government had issued bonds at the time of the Revolutionary War.
Bonds – paper notes promising to repay the money in a certain length of time.
Hamilton said government should repay these bonds.

9. Opposition To Bonds
Original Bond owners had sold the bonds for a lesser value because they feared that the government would never pay them back.
Unfair to those who sold their bonds to speculators (people willing to take a risk in hopes of financial gain) since speculators will make more money at the expense of the original owner
Northerners owned most of the bonds and much of the tax money that would be used to pay off the bonds would come from the south (larger states)
Southern states paid off their wartime debt on their own… so should everybody else
Creditors could dominate society and endanger liberty

10. Compromise
Capital agreed to be moved to the South in a special land plot between Virginia And Maryland that became known as Washington DC
What did you read about Friday about the creation of Washington DC?
South supported plan to pay of state debts.

11. Hamilton’s National Bank
Needed to manage debts and interest payments
Issue bank notes – paper money
used as a national currency to promote trade, encourage investment, stimulate economic growth

12. Opposition to The National Bank
Southerners: Northern merchants would own most of the bank’s stock
Maddison and Jefferson opposed National Bank – only benefit the wealthy
Argued that it was not an enumerated/delegated power of the federal government as outlined in the Constitution
Saw bank as unconstitutional - inconsistent with constitution.

14. The Elastic Clause
Constitution does not specifically say that government could not create a bank.
The Elastic Clause - Article I, Section 8, Clause 18
Congress has the power “To make all Laws which shall be necessary and proper for carrying into Execution” its powers
Hamilton thought:
If Congress has the power to:
Collect taxes
Regulate trade
Provide for common defense
Then it makes sense to have a bank so we should have a bank.

15. National Bank Is Created
Bill passes Congress
Washington signs it into law, contingent on a 20-year contract

16. Hamilton’s Tariff Tariff – a tax on imports
Purpose was to raise money and protect American manufactures from foreign competition
Tariff of Law required importers to pay a percentage of the value of their cargo when they landed it in the United States
Congress passed lower tariff for revenue not to protect industry

17. A Higher Tariff? Hamilton thinks a higher tariff is needed
South opposed because they had little industry
Angered many southern planters: would have to pay higher prices on imported good.
The only part of Hamilton’s Financial Plan that was not passed by Congress.

18. Outcome
Problem: Government needed additional funds to operate and pay national debt.
Solution: Hamilton requested, Congress passes new taxes
Effect: Hamilton’s economic programs gave new government financial powers