Battle Over a Bank: Defining the Limits of Federal Power Under a New Constitution

In late February, 1791, Treasury Secretary Alexander Hamilton submitted a report to President Washington defending his recent proposal for a national bank, which he hoped would bolster the American economy and assist the federal government in managing its finances. Congress had approved the plan, but some of the President's advisers warned that the federal government lacked the authority to establish a bank because the Constitution did not grant it the power to charter corporations. In his rebuttal, Hamilton argued that Congress had "implied powers," not specifically listed in the Constitution, which lawmakers could use when necessary to achieve legitimate goals. Because the proposed bank would assist Congress in executing its fiscal responsibilities, Hamilton believed that incorporating the bank fell well within Congress's constitutional authority. As President Washington considered these arguments, he knew that his decision to sign or veto Hamilton's bank bill would extend far beyond the issue of the bank itself. If he approved, his assent would potentially encourage the broad exercise of implied powers in the future. A veto, on the other hand, would send the message that Congress had no authority beyond the powers explicitly listed in the Constitution. Either way, President Washington would be lending his considerable weight and prestige to one side of this seminal constitutional debate, and he was well aware that much was riding on his decision.

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