Card: Hamilton proposes that the United States establish a national bank.
Carol Berkin, Historian: "The bank of the United States, which is modeled on the Bank of England, is really brilliant in its simplicity. He says: no individual in American really has enough money to engage in risky, entrepreneurial activities. But if you could find some way to collect a lot of money in one place and make it available to entrepreneurs, that would do the trick.
Hamilton says: this is how England did it. Of course, this must have infuriated Jefferson who didn't want to copy anything England did. And Hamilton says: let's go with what works, I don't care whose idea it was. And he sets it up for America.
Narrator: Today we accept that idea that money and banking are part of the essential workings of an economy. But in the eighteenth century, this is an extremely radical idea. Many people in this still largely rural country views Hamilton's proposal with great suspicion.
David Hosack: The evil of a bank is not at first obvious. It is one of those sly and subtle movements that marches slowly to its goal. One morning, Americans will wake to find not that they own the bank, but that the bank owns them
Henry Lee: I would no more be caught going into a bank, then entering a house of prostitution
Ron Chernow, Historian: Almost all of the other founders were very suspicious of bankers and financiers as kind of parasitic paper pushers. Jefferson, Madison, even Adams saw banks for instance as just scams to fleece the public.
Narrator: Thomas Jefferson is particularly vocal in his opposition.
Jefferson: Hamilton, with his bank stocks and government bonds, has caused our citizens to withdraw from useful industry and busy themselves with gambling in the destruction of morality
Carol Berkin, Historian: Jefferson, you know, believes that the only honest profit it made by the man who tills the soil. And I always think ,of course, he never personally tilled the soil, he had slaves that took care of that for him. But there's some idea that you ought to see what you produce, that you aught to be able to hold it in your hand, or eat it or something. And I always think of Jefferson wanting to bite the money to make sure it's solid. Not a very profound understanding of what in modern times we understand about finances.
Narrator: For Hamilton, banks permit the amassing of money -- capital that is needed to stimulate industry. Hamilton believes that it is industry above all that will create opportunities for ordinary people to succeed, and for the United States to become the meritocracy he envisions.
Hamilton: A nation of mere farmers lacks a spirit of enterprise. A nation of manufacturers and merchants gives energy to a people. The most intelligent minds are wasted if they are confined to menial pursuits. But if a variety of industry is available in the community, men can make use of all their capacities and rise to their proper element.
Narrator: But Jefferson has another, even greater reason to oppose Hamilton's bank. He fears the expansive growth of the Federal government. To stop the bank, he argues that the United States Constitution does not give the administration unlimited powers
Jefferson: The Constitution draws a strict boundary around the powers of congress. It does not allow for the incorporating of a bank. If we take this step, its field of power becomes boundless, without any limits whatsoever
Ron Chernow, Historian: Jefferson and Madison believe in state's rights and strict construction, so they believe that unless powers were specifically enumerated in the Constitution that the federal government was not allowed to do them, and there was not a word in there about having a central bank, therefore we could not have a central bank, there could never be a federal reserve system later on.
Card: Hamilton came up with an ingenious argument called "Implied Powers."
Hamilton: The Constitution gives the federal government implied powers, essential to the progress of the country. There is no specific clause in the document forbidding the means to establish the bank. Therefore, these means are constitutional.
Ron Chernow, Historian: Hamilton came up with this very flexible and expansive interpretation of the Constitution. He said: indeed, there is nothing in the Constitution about having a central bank. But the Constitution does say that the federal government can borrow money; the Constitution does say that the federal government can collect revenues. And wouldn't it be very, very helpful to have a central bank in order to accomplish those ends spelled out in the Constitution? That doctrine of implied powers actually converted the Constitution into this living, breathing document. So it was very, very important in terms of liberating the federal government from the straight jacket that the Constitution could have become.
Narrator: President George Washington is convinced by Hamilton's arguments and permits the Bank of the United States to be established. Private investors are eager to buy shares in the new bank. It is an instant success.
Hamilton has succeeded in creating a huge capital market. Before long, the businessmen, merchants and craftsmen of the cities are prospering. In creating a pool of capital Hamilton has given the underdeveloped United States what it needs most: the ability to grow.
Card: Hamilton is the first American to use the term "capitalist."
Ron Chernow, Historian: In many ways Hamilton is the one who defines that nexus of democracy and capitalism as kind of quintessentially American, that is the combination of democracy and capitalism really come to define the United States to this day. The fact that the economy boomed under Washington and Hamilton made people feel good about the whole political experiment that had been undertaken.