Chapter 7: Section 2

Alexander Hamilton had a good head for economics.

Worked in the British West Indies as a book keeper as a teen.

Moved to America and married into a wealthy New York family.

Became a lawyer and an advisor to George Washington.

national debt: money owed by the United States - from the Revolutionary War.

United states owed $11.7 million to foreign countries and about $40.4 million to U.S. citizens.

Bonds: certificates of debt that carry a promise to buy back the bands at a higher price.

The new government could not afford to buy back the bonds.

Speculators: people who buy items at low prices in hope the value will rise and they can sell the item for profit.

Hamilton worked to pay foreign debt than gradually pay the total value of the bonds.

Thomas Jefferson disagreed with this approach, he thought the speculators should not profit and the original bondholders were cheated.

The states owed $25 million for Revolutionary War expenses, Hamilton wanted the federal government to pay $21.5 million of this debt.

Paying debts would help the national economy.

The south did not want to pay the debts of other states (they did not have as much debt as the north).

Hamilton faced great odds, he needed southern support.

It was not believed that the constitution gave Congress the power to pay state debts.

Hamilton knew he need the help of southern representatives to get his plan approved.

Hamilton's bargain... southern officials wanted to change the location of the nation's capital.

Hamilton, Jefferson and Madison met and compromised to move the capital to Philadelphia for 10 years then to the closer to the Potomac River which wold eventually become Washington D.C.

Hamilton believed in a strong federal government.

Jefferson wanted to protects the powers of the states.

Hamilton: strong central government that balanced power between the "mass of people" and the wealthier citizens.

He wanted to protect everyone's liberties but not give the people too much power.

Jefferson believed citizen's have the ability to make decisions for the country.

Jefferson believed it is the right of the people to rule the country.

20 year charter was suggested, Congress could decide whether to extend the charter.

Hamilton also asked each state to start its own bank so the national bank would not have a monopoly.

Jefferson and Madison thought Hamilton's plan gave too much power to the federal government.

The U.S. constitution did not grant Congress the power to create a bank.

Loose Construction: the federal government can take reasonable actions that the Constitution does not specifically forbid.

strict construction: the federal government should do only what the Constitutions specifically says it can do.

Washington and Congress agrees with Hamilton.

February 1791: Congress enacted the charter for the Bank of the United States - the country's first national bank.

The national bank helps stabilize the U.S. economy and help us stand on the same financial footing as European countries.