[Sidenote: Assumption proposed.]
Now came a fourth part of Hamilton's scheme, upon which he laid great stress: he proposed that the outstanding State debts should likewise be taken over by the general government. The argument was that the States had incurred their debts for the common purpose of supporting the Revolution. There was strong opposition, particularly from States like Virginia, which had extinguished the greater part of their own debt. The House showed a bare majority in favor of the assumption project; on the appearance of members from North Carolina, which had just entered the Union, that majority was, on April 12, 1790, reversed.
[Sidenote: The seat of government.]
[Sidenote: Compromise.]
Meanwhile the old question of the permanent seat of the federal government had been revived, and, as in the days of the Confederation, it seemed impossible to agree. It was expected that the capital would lie somewhere in the Northern States; at one time Germantown was all but selected. The Virginia members suddenly took fire, and Lee declared that "he was averse to sound alarms or introduce terror into the House, but if they were well founded he thought it his duty;" and Jackson of Georgia declared that "this will blow the coals of sedition and injure the Union." The matter was laid over until the middle of 1790. It was evident that the friends of assumption were in a small minority, and the friends of a Northern capital in a small majority. Hamilton worked upon Jefferson to secure a compromise. The matter was adjusted at Jefferson's table: a few Northern votes were obtained for a Southern capital, and two Virginia members agreed to vote for assumption. By very narrow majorities it was therefore agreed that the national capital should be placed on the Potomac River, and that State debts amounting to $21,500,000 should be assumed. A few months later the President selected the site of the present national capital, and in due time the debts were taken up.
78. UNITED STATES BANK (1791, 1792).
[Sidenote: A bank proposed.]
Having thus reorganized the finances of the country, Hamilton now proposed the fifth part of his scheme,—the establishment of a national bank. In a report of Dec. 14, 1790, he presented the subject to the attention of Congress. He urged that it would benefit the public by offering an investment, that it would aid the government in making loans and by collecting taxes, and that its notes would be a useful currency. Hamilton drafted a bill, which was an adaptation of the charter of the Bank of England. The capital of $10,000,000, and the management of the bank, were to be private; but the government was to be a stockholder, and to have the right of requiring periodical statements of the bank's condition.
The Senate passed the bill without a division, substantially as drawn by Hamilton. Apparently it was on the point of going through the House, when Smith of South Carolina objected, and Jackson of Georgia declared that he had never seen a bank bill in the State of Georgia; "nor will they ever benefit the farmers of that State or of New York;" and he called it an unconstitutional monopoly.
[Sidenote: The question of implied powers.]
After a week's debate on the question whether the bank was authorized by the Constitution, it passed the House by a vote of 39 to 20, and was sent to the President. He called for the opinions of the members of his cabinet in writing, and the answers submitted by Hamilton and Jefferson are still among the most important documents on the construction of the Constitution. Jefferson's standpoint was simply that, since the Constitution nowhere expressly authorized the creation of a bank, Congress had gone beyond its powers. Hamilton asserted that if the bank were "necessary and proper to carry out any of the specific powers, such as taxation and the borrowing of money, then Congress might create a bank, or any other public institution, to serve its ends." The President accepted Hamilton's view, and the act was signed. The capital of the bank was speedily subscribed, and it immediately entered on a prosperous and useful career.