Why was the National Bank necessary?

Chief Justice John Marshall, writing for the Court, found the Necessary and Proper Clause gave Congress the flexibility to create the bank as an aid to carrying out its enumerated borrowing and taxing powers and that Maryland’s taxation of the bank violated the Supremacy Clause.

Hamilton argued that a national bank is “a political machine, of the greatest importance to the state.” He asserted that a national bank would facilitate the payment of taxes, revenue for which the federal government was desperate.

Hamilton countered that the bank was constitutional, since Congress had the right to coin money and regulate money’s value, regulate trade, levy and collect taxes, and borrow money. … Since Congress was controlled by people who shared Hamilton’s views, it passed the bill on February 8, 1791.

Thomas Jefferson was afraid that a national bank would create a financial monopoly that might undermine state banks and adopt policies that favored financiers and merchants, who tended to be creditors, over plantation owners and family farmers, who tended to be debtors.

The Bank would be able to lend the government money and safely hold its deposits, give Americans a uniform currency, and promote business and industry by extending credit. Together with Hamilton’s other financial programs, it would help place the United States on an equal financial footing with the nations of Europe.

Critics argued that a national bank would give too much power to a few rich men in the North. … So he proposed a system of many smaller banks in different parts of the country. He also argued that the idea of a central bank was unconstitutional. No one knew more about the American Constitution than James Madison.

The Democratic-Republicans were led by Thomas Jefferson and James Madison and opposed Hamilton’s proposals. … The Democratic-Republicans argued that the Constitution should be interpreted strictly; it did not specifically grant Congress the right to create a national bank.

The pros of a national bank are a single currency for the entire nation, manage the federal government’s funds, and monitor other banks throughout the country. The cons of a national bank is that if it is taken down, then the whole system of banks goes down.

The federal government has only those powers specified in the Constitution and there’s no provision for a bank in there. … It’s true that there’s no specific mention of a National Bank in the Constitution, but it does say that Congress can do what’s necessary and proper to do its job.

The National Bank Act of 1863 provided for the federal charter and supervision of a system of banks known as national banks; they were to circulate a stable, uniform national currency secured by federal bonds deposited by each bank with the comptroller of the currency (often called the national banking administrator).

Hamilton’s successful bid to charter a national Bank of the United States also brought strong opposition from Jefferson. Their disagreement about the bank stemmed from sharply opposed interpretations of the Constitution. For Jefferson, such action was clearly beyond the powers granted to the federal government.

As president, Jefferson nevertheless allowed the Bank to run its course until Hamilton’s charter expired in 1811. Following the War of 1812, a new generation of Jeffersonian Republicans, led by Congressman Henry Clay, rechartered the Bank for another twenty years.

“I believe that banking institutions are more dangerous to our liberties than standing armies,” Jefferson wrote.

President Andrew Jackson announces that the government will no longer use the Second Bank of the United States, the country’s national bank, on September 10, 1833. He then used his executive power to remove all federal funds from the bank, in the final salvo of what is referred to as the “Bank War.”

Thomas Jefferson opposed this plan. He thought states should charter banks that could issue money. Jefferson also believed that the Constitution did not give the national government the power to establish a bank.