In the 1790s, the new American government faced a big question: how should it manage the nation’s money? The country had debt from the Revolutionary War, and there was no system in place for collecting or storing government funds. Alexander Hamilton, the Secretary of the Treasury, had a plan: create a National Bank. But not everyone agreed. Thomas Jefferson and others believed the plan gave the government too much power. This disagreement became one of the first major political debates in U.S. history.

Hamilton’s Plan and Argument

Hamilton believed that the federal government needed a strong financial system. His plan included paying off state debts, creating a national currency, and building credit with other countries. A central bank, he argued, would help the government collect taxes, hold money, and make loans to grow the economy.

Hamilton said that the Constitution gave the federal government the implied power to create the bank. He pointed to the “necessary and proper” clause in Article I, Section 8, which allows Congress to pass laws needed to carry out its duties. He believed a national bank was necessary to manage the country’s finances.

Hamilton also thought the bank would help wealthy citizens and investors feel confident in the government. This, he argued, would help the nation grow and support business and industry.

Jefferson’s Opposition

Jefferson strongly disagreed. He believed in a limited federal government and more power for the states. He argued that the Constitution did not specifically say the federal government could create a bank—and that meant it wasn’t allowed.

Jefferson feared that a powerful national bank would benefit the rich and hurt farmers and everyday workers. He believed that giving the federal government too much power would go against the values of the American Revolution. He wanted the U.S. to be a country built on farming and local control—not big banks and national industry.

This debate was about more than money—it was about how to read and apply the Constitution.

A Divided Government

President George Washington had to choose between the two arguments. After hearing both sides, he agreed with Hamilton and signed the law to create the First Bank of the United States in 1791.

But the disagreement didn’t go away. It helped lead to the formation of the country’s first political parties. Hamilton’s supporters became known as Federalists, who believed in a strong central government. Jefferson’s supporters became Democratic-Republicans, who wanted more power for the states and individuals.

The National Bank debate set the stage for future political arguments—and showed how different interpretations of the Constitution could shape U.S. government policy.

Source: The National Bank Debate – Hamilton vs. Jefferson
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