Second Report on Public Credit
The Second Report on Public Credit was the second report of three major reports on economic policy issued by
Founding Father of the United Statesand first United States Treasury Secretary Alexander Hamiltonon 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.
Hamilton believed that a
national bankcould achieve the following purposes:
*handle government funds
*issue financial notes
*help the national government regulate finance efficiently
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 clause 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
Constitutionfor 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. [Faragher, p.218.]
However, President Washington disagreed and Hamilton won support as with his first reports proposals, and in 1791 the
First Bank of the United Stateswas 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.
Although the republicans denounced "
speculation" as evil incarnate, 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.
First Report on the Public Credit- Hamiton's report on public finance.
Report on Manufactures-Hamilton's report on encouraging manufacturing.
*Federalist Party - Hamilton's political party.
Political economy- Overview of economic theory research.
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