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Financial Founding Fathers: The Men Who Made America Rich
Robert E. Wright
University Of Chicago Press, 2006
216 pp., $25.00
Banking on It
Every year or two, we are reintroduced by our leading historians to one or more of the nation's founding fathers. One year John Adams and his wife Abigail came as a revelation, another brought a new slant on Thomas Jefferson. Even more than Ben Franklin, who celebrated his 300th birthday last year and was the subject of a bestselling biography, the Founding Father of the moment is Alexander Hamilton. Well served by his star turn in Joseph Ellis' The Founding Brothers, Hamilton took center stage alone in Ron Chernow's superb 2004 biography.
Hamilton's story makes clear that the genius of the founding generation lay not just in the unlikely military success of the Revolution and the political brilliance of the Declaration of Independence and the Constitution (although Hamilton participated in these too, serving as an officer in Washington's army and penning many of the Federalist papers defending the Constitutional experiment). The third leg of the three-legged stool—the least appreciated—was finance. Establishing a credible national currency and a relatively stable banking system enabled the new nation to attract foreign investment and to finance the "nation of shopkeepers" that Tocqueville would discover during his wanderings several decades later.
Just about everything that went right with America's markets and finance can be attributed in one way or another to Hamilton. To refute Jefferson's claim that Congress did not have the power to establish a national bank, Hamilton concocted a theory of implied powers that persuaded President George Washington to sign the Bank of the United States, the first of two national banks, into existence. Hamilton also insisted that the new national government should assume, or repay, all of the old obligations of the states, even the debt owed to foreigners. To achieve this objective, he brokered one of the most remarkable political deals in American history: in return for a promise that the nation would establish its capital ...