Second Report on Public Credit
Encyclopedia
The Second Report on Public Credit was the second report of three major reports on economic policy issued by Founding Father of the United States and first United States Treasury Secretary Alexander Hamilton
on the request of Congress for consideration on establishing a national banking system with the creation of the Bank of the United States; privately operated but owned in part by the government.
could achieve the following purposes:
to be stretched too far, causing all the state divisions to be subsumed under a single, powerful national government.
Jefferson specifically could find no enabling principle in the Constitution
for a bank, but Hamilton said there were "implied powers
" in the document which were needed to make the system work. The bank, a public corporation funded by private capital, would serve as the depository of government funds and the fiscal agent of the Treasury.
President Washington
disagreed but Hamilton won support as with his first reports proposals, and in 1791 the First Bank of the United States
was given a 20 year charter, and immediately provided services to government, merchants, and financiers that helped create a national market. Hamilton won another round in 1791 when the Congress imposed excise taxes on distilled liquor
. The bank went into operation in 1791.
", Hamilton's program had strong positive effects on the economy. The creation of paper securities created liquid wealth that could be moved by entrepreneurs to the areas of fastest growth; they also attracted much needed European investment. The securities provided collateral
for loans which were used to invest in new turnpikes, bridges, canals, steamboats, mines, mills, factories and international trade. The economy flourished in the 1790s; exports, for example, tripled in value from 1791 ($19 million) to 1796 ($67 million), with most carried in American ships. However, after Hamilton left office in 1995, his successor, Oliver Wolcott Jr.
, informed congress that the federal government needed more funding and recommended selling the government's share in the stock of the First Bank. Congress agreed and divested from the bank. A few years later the United States suffered a depression following the collapse of a real estate bubble in 1796-1797. Thousands of Americans went bankrupt and many of them, including Robert Morris, the "Financier of the Revolution", were punished with years in debtors' prison. Congress refused to renew the First Bank's charter in 1811 and the bank was subsequently purchased by Stephen Girard
.
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...
on the request of Congress for consideration on establishing a national banking system with the creation of the Bank of the United States; privately operated but owned in part by the government.
Plan's proposals
Hamilton believed that a national bankNational bank
In banking, the term national bank carries several meanings:* especially in developing countries, a bank owned by the state* an ordinary private bank which operates nationally...
could achieve the following purposes:
- make loans
- handle government funds
- issue financial notes
- provide national currencyCurrencyIn economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
- help the national government regulate finance efficiently
Plan's support
Thomas Jefferson, together with James Madison believed that creating such a power as the Bank of the United States, if not now, then soon enough would cause the elastic clauseArticle One of the United States Constitution
Article One of the United States Constitution describes the powers of Congress, the legislative branch of the federal government. The Article establishes the powers of and limitations on the Congress, consisting of a House of Representatives composed of Representatives, with each state gaining or...
to be stretched too far, causing all the state divisions to be subsumed under a single, powerful national government.
Jefferson specifically could find no enabling principle in the Constitution
Constitution
A constitution is a set of fundamental principles or established precedents according to which a state or other organization is governed. These rules together make up, i.e. constitute, what the entity is...
for a bank, but Hamilton said there were "implied powers
Implied powers
Implied powers, in the United States, are those powers authorized by a legal document which, while not stated, seem to be implied by powers expressly stated...
" in the document which were needed to make the system work. The bank, a public corporation funded by private capital, would serve as the depository of government funds and the fiscal agent of the Treasury.
President Washington
George Washington
George Washington was the dominant military and political leader of the new United States of America from 1775 to 1799. He led the American victory over Great Britain in the American Revolutionary War as commander-in-chief of the Continental Army from 1775 to 1783, and presided over the writing of...
disagreed but Hamilton won support as with his first reports proposals, and in 1791 the First Bank of the United States
First Bank of the United States
The First Bank of the United States is a National Historic Landmark located in Philadelphia, Pennsylvania within Independence National Historical Park.-Banking History:...
was given a 20 year charter, and immediately provided services to government, merchants, and financiers that helped create a national market. Hamilton won another round in 1791 when the Congress imposed excise taxes on distilled liquor
Alcoholic beverage
An alcoholic beverage is a drink containing ethanol, commonly known as alcohol. Alcoholic beverages are divided into three general classes: beers, wines, and spirits. They are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption...
. The bank went into operation in 1791.
Plan's results
Although the democratic-republicans denounced "speculationSpeculation
In finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...
", Hamilton's program had strong positive effects on the economy. The creation of paper securities created liquid wealth that could be moved by entrepreneurs to the areas of fastest growth; they also attracted much needed European investment. The securities provided collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...
for loans which were used to invest in new turnpikes, bridges, canals, steamboats, mines, mills, factories and international trade. The economy flourished in the 1790s; exports, for example, tripled in value from 1791 ($19 million) to 1796 ($67 million), with most carried in American ships. However, after Hamilton left office in 1995, his successor, Oliver Wolcott Jr.
Oliver Wolcott, Jr.
Oliver Wolcott, Jr. was United States Secretary of the Treasury from 1795 to 1800 and the 24th Governor of Connecticut from 1817 to 1827.-Youth and education:...
, informed congress that the federal government needed more funding and recommended selling the government's share in the stock of the First Bank. Congress agreed and divested from the bank. A few years later the United States suffered a depression following the collapse of a real estate bubble in 1796-1797. Thousands of Americans went bankrupt and many of them, including Robert Morris, the "Financier of the Revolution", were punished with years in debtors' prison. Congress refused to renew the First Bank's charter in 1811 and the bank was subsequently purchased by Stephen Girard
Stephen Girard
Stephen Girard was a French-born, naturalized American, philanthropist and banker. He personally saved the U.S. government from financial collapse during the War of 1812, and became one of the wealthiest men in America, estimated to have been the fourth richest American of all time, based on the...
.
See also
- First Report on the Public CreditFirst Report on the Public CreditThe First Report on Public Credit was the first of three major reports on economic policy issued by American Founding Father and first United States Treasury Secretary Alexander Hamilton on the request of Congress. The report analyzed the financial standing of the United States of America and made...
- Hamiton's report on public finance. - Report on ManufacturesReport on ManufacturesThe Report on Manufactures is the third report, and magnum opus, of American Founding Father and 1st U.S. Treasury Secretary Alexander Hamilton...
-Hamilton's report on encouraging manufacturing. - Federalist PartyFederalist Party (United States)The Federalist Party was the first American political party, from the early 1790s to 1816, the era of the First Party System, with remnants lasting into the 1820s. The Federalists controlled the federal government until 1801...
- Hamilton's political party. - Political economyPolitical economyPolitical economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
- Overview of economic theory research.