CHAPTER 3

Hamilton’s Bank Job

[A] national bank…was not essential to the work of the Federal Government…. This was…only a measure for carrying out the…interweaving of the interests of wealthy men with those of the government.

—WILLIAM GRAHAM SUMNER, ALEXANDER HAMILTON

The Reports on Public Credit and the Bank of the United States laid the foundations for Hamilton’s grand design—the centralization of governmental authority and the industrialization of the United States by means of government aid to business.

—JOHN C. MILLER, THE FEDERALIST ERA

The third leg of Hamilton’s mercantilist stool—in addition to national debt and debt assumption—was a nationalized bank that would be managed by politicians in the nation’s capital (even if ostensibly privately owned). He authored another long-winded report on the supposed constitutionality of the bank, a report that Jefferson believed was, like the others, intentionally confusing.¹ As with the national debt, the main purpose of the bank was to centralize and enlarge the state. Private banks were already in existence, and a government bank would only crowd them out and hinder their further growth. But it would also provide infinite patronage opportunities for the politicians who controlled it, just as the Bank of England had done for generations. Indeed, Hamilton’s entire economic plan—of debt, a government bank, corporate welfare, heavy taxation, and a centralized state—was nothing much more than his attempt to clone the British governmental system of centralized governmental power linked to mercantilism.

James Madison was Hamilton’s foremost opponent on the national bank, along with two Jeffersonians, William Giles of Virginia and James Jackson of Georgia. Jackson, like John Taylor, was shocked at the boldness of Hamilton and his party in attempting to adopt the very kind of governmental system the Revolution was fought to discard. Upon observing the corruption of Hamilton’s governmental debt schemes, and hearing of his plan for a monopolistic, government-run bank, he asked, “What was it [that] drove our forefathers to this country? Was it not the ecclesiastical corps and perpetual monopolies of England and Scotland? Shall we suffer the same evils in this country?”²

Aside from opponents like Jackson and Madison, Hamilton faced a major hurdle: nothing in the Constitution gave the government the power to incorporate a national bank. President Washington asked his secretary of state, Jefferson, and his attorney general, Edmund Randolph, for their opinions. Both men judged the bank to be unconstitutional. Jefferson went through all the enumerated powers of Congress in Article I, Section 8, of the Constitution and found no language that would allow such an enterprise. He then examined two general phrases in Article I—the General Welfare Clause and the “Necessary and Proper” Clause. He considered the General Welfare Clause to be, not a license for Congress to do anything it pleased, but only a reason for giving Congress certain powers of taxation. He also pointed out that the Constitutional Convention had considered giving Congress the right to establish a national bank and rejected it (based on information from James Madison, no doubt).³

The “Necessary and Proper” Clause says that Congress is empowered “[t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing [enumerated] Powers.” All of these things can be (and had been) carried out without a nationalized bank, Jefferson argued, so the bank was unnecessary and unconstitutional. Such a bank might be “convenient” as a depository for tax revenues, he said, but it was hardly necessary. Private banks were already performing that and all other banking functions that Hamilton wanted his government-run (and-subsidized) bank to perform.

This was the essence of Jefferson’s strict constructionist view of the Constitution. Madison had earlier been in favor of a more expansive interpretation of the Constitution, but on the question of the bank he accepted Jefferson’s position and used his arguments in Congress to oppose the bank. Apparently Hamilton’s wild and dangerous schemes persuaded Madison that not taking a strict approach to the Constitution had been mistaken.

President Washington asked Hamilton to respond to Randolph and Jefferson. He did—with 15,000 words; this was his Opinion as to the Constitutionality of the Bank of the United States. The crux of his opinion was that Jefferson did not understand the meaning of the word necessary. Although Webster’s Dictionary defines the word as meaning “essential,” “indispensable,” “inevitable,” and “required,” Hamilton argued that it is “a matter of opinion.” The powers enumerated in the Constitution ought to be construed “on principles of liberal construction,” he said, “in advancement of the public good.”⁴ This would require giving politicians like himself “great latitude of discretion” in deciding the limits of federal governmental powers.⁵ In other words, such powers should be made up, even fabricated, on the whims of politicians posing as guardians of “the public good.”

He went on to say that any act of government is to be permitted if it is not expressly prohibited in the Constitution, something that he somehow forgot to mention in The Federalist Papers, and a notion that would have been foreign to James Madison’s ears. It is unimaginable that the Constitution would ever have been adopted had it included this proposition—that the federal government possessed all powers not explicitly prohibited by the document.⁶ Next he passed off his invented notion of the Constitution’s “implied powers,” as discussed in the previous chapter. These are powers of the central government that are not in the Constitution, and that neither the Constitutional Convention nor the state ratifying conventions considered. They are powers of government that were simply made up by politicians and judges who preferred a larger and more intrusive state. Like a national bank, for example.

President Washington signed the legislation creating the First Bank of the United States in 1791 after a compromise was reached that would enlarge the area of the District of Columbia by three miles so that it would be adjacent to his (Washington’s) property along the Potomac River. Federalist senators had blocked Washington’s request until he agreed to sign the bank bill.

The Bank of the United States (BUS) was given a twenty-year renewable charter. It was mostly privately owned, with the government controlling 20 percent of the shares. The bank would be the depository of government funds and would issue paper money that was backed by gold and silver.

Like all government-operated banks, the BUS quickly created inflation by printing excessive amounts of money and facilitating the state’s borrowing and spending. As the economist Murray Rothbard explained in his History of Money and Banking in the United States:

The Bank of the United States promptly fulfilled its inflationary potential by issuing millions of dollars in paper money and demand deposits [i.e., checking accounts], pyramiding on top of $2 million in specie [gold and silver]. The Bank…invested heavily in loans to the United States government. In addition to $2 million invested in the assumption of pre-existing long-term debt assumed by the new federal government, the Bank…engaged in massive temporary lending to the government, which reached $6.2 million by 1796. The result of the outpouring of credit and paper money by the new Bank of the United States was…an increase [in prices] of 72 percent [from 1791 to 1796].⁷

Northern merchants supported the BUS enthusiastically, since it extended cheap credit to many of them. Southern members of Congress were almost unanimously opposed to it, for they saw little or no benefit in it for their region and feared its potentially corrupting influence on politics. And the same class of speculators that benefited from the original national debt issues continued to benefit as the BUS was used to “monetize” even more debt, backed up by the Federalist Party’s growing tax burden on the American public.

JEFFERSON PREVAILS…FOR A WHILE

The bank’s activities brought renewed questions about its constitutionality, and Congress allowed its charter to lapse in 1811. Jefferson must have been smiling. But then the financial chaos caused by the War of 1812 led to its resurrection in the form of the Second Bank of the United States in 1817. President Madison himself supported the bank since he was then among those responsible for paying for the war (and for the rest of the government).

As soon as Hamilton’s bank was revived, it “ran into grave difficulties through mismanagement, speculation, and fraud,” wrote James J. Kilpatrick.⁸ Such problems are, of course, characteristic of all governmental enterprises, especially banks. (The writer P. J. O’Rourke was only half kidding when he once wrote that giving money and power to politicians is like giving whiskey and car keys to teenage boys.) The BUS had created several regional branches, so all of this mismanagement and fraud became close to the people; it wasn’t just a story about governmental antics in the faraway nation’s capital. Consequently, “a wave of hostility toward the Bank of the United States swept the country,” wrote Kilpatrick.⁹ Indiana and Illinois, in 1816 and 1818 respectively, amended their state constitutions to prohibit the BUS from operating there.¹⁰ North Carolina, Georgia, Maryland, Tennessee, and Kentucky imposed heavy taxes on BUS branches ($60,000 per year in Kentucky). Their purpose was to tax the bank out of existence.

The federal government brought suit in Maryland and was confident that Chief Justice John Marshall, a former protégé of Hamilton’s and the keeper of the Hamiltonian flame in legal circles, would rule in its favor. He did, in the case of McCulloch v. Maryland, repeating almost verbatim Hamilton’s arguments about the supposed “implied powers” of the Constitution. “The power to tax involves the power to destroy,” he declared. And the states were attempting to destroy a federal bureaucracy that they believed was unconstitutional, and not acting in their best interest. Marshall declared the bank to be constitutional, using Hamilton’s arguments about implied powers and his fanciful interpretation of the word necessary.

Marshall went further by asserting the false argument that the citizens of the states were never sovereign and that therefore they must always yield to the “supremacy” of the federal government. And if there were questions over how to define that supremacy, said Marshall, the job of resolving them would belong to the Supreme Court—that is, to John Marshall.

But in the early nineteenth century (and beyond, until 1865) the Supreme Court’s opinion was just the Supreme Court’s opinion, nothing more. Justices were not the black-robed deities that they are today. The citizens of the states took notice of Marshall’s opinion and then proceeded to ignore it. Kilpatrick cites the case of Ohio in his book The Sovereign States. The state levied a $50,000-per-year tax on each of the BUS’s two branches in the state. The BUS refused to pay, so Ohio’s state auditor sent a deputy, John L. Harper, “to collect the tax by persuasion if he could, but by violence if he must.”¹¹ When Harper was denied payment by the bank’s management, he “leaped over the counter, strode into the bank vaults, and helped himself to $100,000 in paper and specie. He then turned this over to a deputy…stuffing this considerable hoard into a small trunk, with which he had thoughtfully come equipped.”¹²

The BUS sued the deputies and the state of Ohio, relying on Marshall’s imperious opinion about the federal government’s supposed supremacy. The Ohio state legislature responded by thumbing its nose at the entire federal government with the following declaration:

[We] are aware of the doctrine, that the Federal courts are exclusively vested with jurisdiction to declare, in the last resort, the true interpretation of the Constitution of the United States. To this doctrine…[we] can never give [our] assent.¹³

The Ohio legislature then quoted Jefferson and Madison’s Virginia and Kentucky Resolves of 1798 to remind the central government that it is the people of the states who are sovereign, despite the ruminations of a single government lawyer with lifetime tenure. “The people themselves” are “the true source of all legitimate powers,” the state legislature declared.¹⁴ In the next seven or eight years Kentucky, Tennessee, Connecticut, South Carolina, New York, and New Hampshire all adopted some or all of Ohio’s tactics to harass the BUS, despite Marshall’s opinion in McCulloch v. Maryland. Yes, such a thing as “judicial review” of the constitutionality of federal legislation existed. But until the end of the War between the States, it was considered by many Americans to be merely the opinion of the Supreme Court and did not necessarily carry more weight than the opinions of the president, the Congress, or the citizens of the sovereign states.

HAMILTON’S GHOST: THIRTY YEARS OF FINANCIAL CORRUPTION AND INSTABILITY

The BUS immediately gave itself regulatory powers over other state-chartered banks. In an 1810 “memorial” to itself, the bank’s directors praised themselves with a declaration that said the bank had been “a general guardian of commercial credit, and by preventing the balance of trade in the different states from producing a deficiency of money in any, has obviated the mischiefs which would have been thereby produced. It has fostered and protected the banking institutions of the States, and has aided them when unexpectedly pressed.”¹⁵

The BUS did indeed influence the state banks, but its influence was not as benevolent as the self-serving bank directors claimed. Even when the BUS was out of business—from 1811 to 1816—the federal government maintained a regulatory role. It also encouraged the creation of more state banks during the War of 1812, since state banks could print money and purchase the federal government’s war bonds. Dozens of banks became overextended, lending far more than they had in specie reserves.

Just how the BUS came to have a regulatory role over private, commercial banks chartered by the states is explained by the historian Robert Remini:

The BUS had a powerful lever on state banks, which it achieved by acquiring their notes. This acquisition took two principal forms: since the BUS managed…the federal tax revenues deposited with it and since these taxes were frequently offered in the form of state bank notes, the Bank could either accept and hold the notes or it could present them to the issuing banks and demand specie; further, since the BUS had tremendous resources of its own, it could go into the money market and buy state bank notes and then present them for redemption to the issuing banks.¹⁶

The success of the commercial banks depended upon their keeping their banknotes in circulation. The BUS could therefore hurt the banks’ bottom line by demanding specie payment for its notes, effectively orchestrating a run on the banks. Thus, from the very beginning, government-run banking tended to control and displace private banks. While some state-chartered banks did support the BUS, they tended to do so in return for the bank’s favoritism; a state-chartered bank, after all, would benefit if the BUS demanded specie payment for the notes of the state bank’s competitors.

The federal government made a fateful decision in 1814: it allowed the state banks to suspend specie payment. That is, they were no longer required to hold sufficient gold and silver in their vaults to cover their loans, so they could lend even more to the federal government. This went on for two and a half years. The predictable effect was price inflation of as much as 55 percent per year in some cities.¹⁷

The creation of the Second Bank of the United States in January 1817 caused an even further expansion of bank credit (and inflation). By 1818 the BUS had lent $23 million with a specie reserve of only $2.3 million.¹⁸ All of this cheap credit created an economic boom and fostered a great deal of real estate speculation that sharply raised property values around the country. But the BUS soon began to lose credibility, as it often failed to pay depositors in specie when they requested it. People became suspicious and alarmed at holding only pieces of paper with politicians’ pictures on it as opposed to gold and silver. The bank spent huge sums purchasing specie from abroad, but that failed to stem its problems.¹⁹

“Beginning in the summer of 1818,” Rothbard wrote, the BUS “precipitated the Panic of 1819 [the first economic depression in the new country] by a series of deflationary moves [which]…sharply limited and contracted the loans and note issues of the [Bank’s] branches.”²⁰ This in turn forced the state banks to reduce their loans, and the overall monetary contraction “led to a wave of bankruptcies throughout the country.”²¹ The real estate bubble burst, as prices overall fell precipitously. By 1819 the price of agricultural exports was less than half of what it had been a year earlier. Personal bankruptcies abounded, especially among farmers who had accumulated large amounts of debt, merchants whose retail prices fell precipitously, and land speculators.

Money was so scarce that large portions of the population resorted to bartering instead of using money. For the first time, there was large-scale unemployment in the cities. In Philadelphia, for example, manufacturing (mostly handicrafts) employment fell from 9,700 employed persons in 1815 to only 2,100 in 1819.²² The economic depression lasted until 1821.

The Panic of 1819 was the first boom-and-bust cycle of the economy caused by government monetary policy. It was an inevitable consequence, in other words, of the Hamiltonian system of governmental debt accumulation combined with a government-run bank that prints money in order to fund the debt. This, and the growing corruption associated with the BUS, would lead President Andrew Jackson to declare war on Hamilton’s bank, a war that he eventually won.

JACKSON’S WAR ON HAMILTON’S BANK

By the 1820s Hamilton’s bank had proliferated into twenty-nine branches, and its main headquarters in Philadelphia had been designed “to look like a Greek temple,” as many of the monuments in Washington, D.C., today also appear to be.²³ As Robert Remini wrote, the BUS “had earned widespread hatred and fear throughout a substantial part of the nation.”²⁴

Upon taking office in March 1829, President Jackson decried the BUS as “a monster, a hydra-headed monster…equipped with horns, hoofs, and tail so dangerous that it impaired the morals of our people, corrupted our statesmen, and threatened our liberty. It bought up members of Congress by the Dozen…subverted the electoral process, and sought to destroy our republican institutions.”²⁵

Liberal historians (by far the majority of the profession) have long denigrated Jackson and the Jacksonians as ignorant country bumpkins, with their party dominated by hayseed southerners like Jackson himself. But in fact the new Democratic Party of Andrew Jackson was founded primarily due to the efforts of the New Yorker Martin Van Buren, one of the most libertarian statesmen in American history. Van Buren picked up the political mantle in the mid-1820s that Jefferson himself had carried for so long. The party stood for laissez-faire in economics, a drastic reduction in tariffs, paying off the national debt (which it did), and honest money backed by gold. “Far from being the ignorant bumpkins that most historians have depicted,” wrote Murray Rothbard, “the Jacksonians were steeped in the knowledge of sound economics.”²⁶

Rothbard went on to explain that “the Jacksonians were libertarians…. They favored absolutely minimal Government…. They believed that government should be confined to upholding the rights of private property. In the monetary sphere, this meant the separation of government from the banking system.”²⁷ They opposed, in other words, the objective of “energetic government” that Hamilton championed and that generations of Hamilton-worshipping historians have also endorsed—which might help explain why the Jacksonians have been so incorrectly portrayed.

Whereas the Bank’s main supporters, the remnants of the old Hamiltonian political machine, came “particularly from the upper classes,” as Remini wrote, “men from all classes” and from “every section of the country” joined President Jackson in the fight against the BUS.²⁸ Jackson’s treasury secretary, Roger B. Taney, the future chief justice of the United States, publicly condemned the Bank’s “corrupting influence…its patronage greater than that of the Government—its power to embarrass the operations of the Government—and to influence elections.”²⁹

Nicholas Biddle, who managed the bank, did much to prove Jackson’s and Taney’s points. He spent BUS funds to publish dozens of articles in newspapers all across the country defending the bank and attacking the Jackson administration. Biddle was, in Remini’s description, “arrogant. Impossibly arrogant. And vain…There also have been questions about Biddle’s integrity.”³⁰ And Biddle did not hesitate to use the BUS to politicize the economy. “[H]e was not above extending the Bank’s money to its friends and refusing loans to those considered unfriendly. The favoritism he showed toward Daniel Webster and…other privileged Congressmen [including Henry Clay]…exposed the BUS to devastating public criticism.”³¹

Outraged by such behavior, Andrew Jackson also refused to accept John Marshall’s argument that the Supreme Court is necessarily the sole arbiter of questions of constitutionality. Jackson offered his opinion that in addition to being corrupt and a source of economic instability, the Bank was unconstitutional. Yes, the Marshall court had declared the Bank to be constitutional, but, President Jackson intoned:

To this conclusion I cannot assent…. Congress and the President as well as the Court must each for itself be guided by its own opinion of the Constitution. It is as much the duty of the House of Representatives, of the Senate, and of the President to decide upon the constitutionality of any bill or resolution which may be presented…. The opinion of the [Supreme Court] judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both. The authority of the Supreme Court must not, therefore, be permitted to control the Congress or the Executive…but to have only such influence as the force of their reasoning may deserve.³²

This attitude was nearly identical to the opinions of the anti-Bank state legislatures. Despite John Marshall’s attempts to put himself in charge of interpreting the Constitution, there was widespread disagreement over the wisdom of such a judicial dictatorship.

In criticizing the bank, President Jackson also expressed a patently Jeffersonian argument about what the main purpose of government should be. No uneducated country bumpkin could have said this:

It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes. Distinctions in society will always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions [but]…every man is equally entitled to protection by law; but when the laws undertake to add to these natural and just advantages artificial distinctions, to grant titles, gratuities, and exclusive privileges, to make the rich richer and the potent more powerful, the humble members of society…who have neither the time nor the means of securing like favors to themselves, have a right to complain of the injustice of their Government…. If [government] would confine itself to equal protection…it would be an unqualified blessing. In the act before me [to recharter the BUS] there seems to be a wide and unnecessary departure from these just principles.³³

Liberal historians have denounced this classic Jeffersonian statement of the purpose of government as “beneath contempt,” wrote Robert Remini. And indeed they have—and do to this day. But Andrew Jackson prevailed. While Congress voted to reinstate the BUS, he vetoed the bill, and Congress did not have the votes to override the veto. He then withdrew all government funds from the Bank, allowing it to die a quiet death several years later. But Biddle attempted one final act of revenge. He supervised a general curtailment of lending throughout the entire banking system in an attempt to create a depression, which he hoped would somehow force President Jackson to return the tax revenues to the Bank. He created a recession in parts of the country, but his one final act of political monetary manipulation failed to save the Bank. He was forced to vacate his cherished Greek temple in downtown Philadelphia.

HAMILTON’S DISASTROUS MONETARY LEGACY

After the demise of the Second Bank of the United States an alternative monetary system was adopted in which all currency was backed by specie on demand. A number of economic historians consider this so-called Independent Treasury System to have been the most stable monetary system of the nineteenth century. As we will see, however, the Hamiltonian system was revived during the Lincoln administration with the National Currency Acts, and ultimately in 1913 the creation of the Federal Reserve System instituted full-fledged central banking. Thus political control of the money supply is another important element of Hamilton’s legacy.

That legacy can be described, in a nutshell, as inflation, debasement of the currency (i.e., reducing the spending power of the dollar), and perpetual economic instability through politically contrived boom-and-bust cycles in the economy.

Government control of the money supply amounts to legalized counterfeiting. The ability to print paper money is even more of a politician’s dream than the ability to incur government debt, for no direct taxation is involved in the government’s efforts to secure resources from the public. It all seems painless to the taxpayers—as long as they remain ignorant about the effects of inflation.

Politicians benefit from inflation by spending billions of dollars on various constituent groups and effectively buying votes (and campaign contributions). These individuals and groups may benefit from inflation because of their political connections, but as prices rise, year in and year out, most of society loses. This is especially true of anyone whose income is relatively fixed, such as people on salaries that may not keep up with inflation, retired people, and anyone holding cash assets. To all of these people, inflation is indeed a hidden tax.

In addition to being an indirect or hidden tax, inflation interferes with what economists call “economic calculation,” and this harms the entire economy. If general economic growth is subsequently slower, then the entire society is “taxed” again from inflation.

Rothbard gave an example of how this works: “[A]ccounting practice enters the ‘cost’ of an asset [to a business] at the amount the business has paid for it. But if inflation intervenes, the cost of replacing the asset when it wears out will be far greater than that recorded on the books. As a result, business accounting will seriously overstate their profits during inflation.”³⁴ Thus business profits are reduced by inflation. In addition, the uncertainty that is created over the true costs of running a business causes firms to become more hesitant to invest in business expansion. Calculating expected profits from an investment in a new factory or piece of equipment becomes much more difficult, if not impossible, when there is no way of knowing with any certainty what the future prices of the equipment or of the products produced with the equipment (and wages, utility bills, etc.) will be.

Inflation encourages personal debt and discourages savings or thrift, for any amount of money that is lent will be repaid in future dollars that are of reduced value thanks to inflation. Less personal savings means less capital is available to be borrowed by businesses (and/or interest rates are pushed up). Less business investment today means less production and employment tomorrow, along with even higher prices due to the reduced supply of goods.

Inflation is also the chief cause of the boom-and-bust business cycle that is characterized by wide swings, over time, in inflation and unemployment, among other things. Governmental credit expansion increases lending to businesses, and the new money is invested in myriad projects and is paid out to workers and others. But the level of investment will be artificially high. That is, businesses will invest more than they would if their investment were based primarily on the free-market decisions of individuals to save and invest—on consumers’ ability to purchase the products that are eventually produced by all the investment. Eventually, then, many investments are deemed to be wasteful and have to be liquidated. This is what constitutes the “bust” part of the business cycle, otherwise known as a recession or a depression.

It was the “easy money” policies of the late 1920s, for example, that spawned the Great Depression, less than twenty years after the creation of the Federal Reserve System.³⁵ Americans have endured periodic boom-and-bust cycles ever since. To make matters worse, government uses the economic chaos created by government-manufactured boom-and-bust cycles as a justification for adopting even more socialistic central planning of the economy. Such planning inevitably backfires and makes things even worse, thanks to the economic “law of unintended consequences.” Then government uses that as an excuse to give itself even more central planning powers, and on and on the charade goes. The economy becomes more and more disabled while more and more individual liberty disappears.

America’s economic history since Hamilton fought for his centrally planned economy bears all this out. Needless to say, Hamilton never hinted that such problems could result from his plans. But his critics at the time, even without the benefit of a formal economic theory to explain the causes of the boom-and-bust cycle, voiced exactly such concerns. They knew from intuition and experience the dangers that Hamilton’s scheme promised to bring.

POLITICAL CONTROL

It is remarkable that a man like Hamilton, who is considered to have been as politically astute as anyone of his day, could get away with any “public interest” arguments—for a national bank, national debt, or anything else. The reason is simple: The Federalist Papers, of which he was one of the principal authors, had argued repeatedly, and correctly, that politicians can never be trusted to behave “in the public interest,” however it may be defined. They may do so on occasion, but in general they behave in their own self-interests, which are in the public’s best interest only by accident. “If men were angels,” Madison famously announced, there would be no need for government at all. In other words, if politicians really did behave selflessly, and acted only “in the public interest,” they would be more like angels than human beings. That is why government needed to be bound by a constitution, said the founders.

Hamilton endorsed all of this thinking as coauthor of The Federalist Papers. But then he immediately went about repudiating those arguments, day in and day out, as he campaigned for nationalized banking and debt and many other forms of government intervention, all based on the illogical notion that political “angels” (in the form of Federalist politicians) could indeed be found to manage these governmental institutions “in the public interest.”

It is no surprise that the Bank of the United States almost immediately destabilized the economy and made political mischief by, for example, using of Bank funds—taxpayer funds—to attempt to influence elections. As the late Nobel laureate economist Milton Friedman once said, a government institution that is not dominated by politics is as likely as a barking cat.

Hamilton surely must have understood this. He wanted a government-controlled national bank precisely because he favored much more political control of society. The results have not been surprising, but they have nonetheless been devastating.