First Bank of the United States Establishes Financial Elite Capture Pattern

President George Washington signs legislation creating the First Bank of the United States, establishing a national bank chartered for twenty years despite fierce constitutional opposition from Thomas Jefferson and James Madison. Treasury Secretary Alexander Hamilton’s proposal creates an institution that concentrates financial power among urban elites and foreign investors, sparking the fundamental debate over concentrated economic power that continues throughout American history. Jefferson denounces Hamilton’s financial system as having “two objects; 1st, like a puzzle, to exclude popular understanding and inquiry; 2nd, as a machine for the corruption of the legislature.”

The bank’s establishment represents the largest initial public offering in the nation to date, with many initial investors being foreigners who cannot vote but can profit from government debt repayment. Senator William Maclay warns against creating “a machine for the purposes of bad ministers,” while Senator Pierce Butler calls it “an aristocratick influence subversive of the spirit of the free, equal government.” Vice President John Adams dismisses bankers as “swindlers and thieves.” The constitutional debate centers on whether the federal government possesses authority to create corporations, with Jefferson arguing the Constitution grants no such power and that a national bank unfairly favors wealthy urban businessmen over rural farmers.

Hamilton’s defense persuades Washington to sign the legislation, establishing the doctrine of implied constitutional powers through a broad interpretation that Jefferson’s strict constructionist faction opposes. The bank successfully provides financial stability for the new nation while simultaneously creating the template for financial elite capture of democratic institutions. This foundational conflict between Hamiltonian finance capitalism serving moneyed interests and Jeffersonian agrarian democracy becomes a recurring pattern in American institutional development, presaging later battles over the Second Bank of the United States (1816-1836), Federal Reserve creation (1913), and continuing debates over financial regulation versus concentrated banking power.