Second Report On Public Credit - The Debate On The Constitutionality of The Bank

The Debate On The Constitutionality of The Bank

Madison’s misgivings on the bank’s constitutionality raised doubts in President Washington's mind as to the legality of the bank bill. and delayed signing it in order to consult with his cabinet. Secretary of State Thomas Jefferson and Attorney General Edmund Randolph concurred with Madison that the federal government was one of strictly enumerated powers, and bolstered that argument by citing the Tenth Amendment, advancing the position of states' rights and limited federal power.

Secretary Hamilton’s famous rebuttal on the Bank submitted to Washington on February 23, 1791, introduced the doctrine of “implied powers,” based on the principle of broad construction of the Constitution. He argued that the authority to create the First Bank of the United States, though not explicitly mandated in the Constitution, was nevertheless inherent to a central government, and required in order to fulfill its duties prescribed in the founding document. This “broad” or “liberal” interpretation swayed President Washington, who signed the bank bill on February 25, 1791.

Hamilton’s success in advancing his fiscal and financial schemes moved Madison and Jefferson towards establishing the political foundations for a two-party system. Based on a New York-Virginia alliance, their Democratic-Republican Party would defeat the Federalists in the ”Revolution of 1800”.