# 1301.7c - National Bank and Whiskey Rebellion

**Channel:** Chad Tomaselli
**Source:** https://www.youtube.com/watch?v=eVrGuiJzREw
**Transcript page:** https://www.withtranscript.ai/video/eVrGuiJzREw

## Chapters

- 0:00 — Hamilton's National Bank Proposal
- 4:43 — Reynolds Affair and Political Fallout
- 7:59 — Strict Versus Loose Construction
- 15:00 — Washington, Parties, and Whiskey Rebellion

## Transcript

**[0:00]:** to carry out his plan for funding an assumption Hamilton believed that the government needed to created something to create something to handle its finances what he proposed was the creation of a National Bank the bank of the United States or as we call it now the First Bank of the United States now if we call it now the First Bank of the United States what does that imply there's going to be a second there won't be a third but there'll be two which we'll talk about uh the first one here in unit two and then we'll talk about the third one in unit three uh so he proposed a national bank and what proposal his uh uh for this National Bank uh the powers of this Bank included a few things the bank had the power to issue and regulate currency so that's another tick mark of the problems of the Articles right or the examples of the problems of the Articles the powers of the national government didn't have right we talked about trade regulation and Taxation and that was handled with the

**[1:01]:** Tariff of 1789. now we have currency national government couldn't do anything about that now that's handled under the national bank and we've got one more internal disturbances we'll get to later in the video so issue and regulated currency it's stored government funds you got to put government money and gold somewhere it can make loans to businesses and also estabulate a stabulated established and regulated I guess that's established and regulate together estabulate or that just sounds like someone getting stabbed you've been estabulated uh establish and regulate interest rates for all lower or private Banks so any banks underneath the first bank or any private Banks it can establish the interest rate so the the First Bank could say hey if you're going to give out loans you can't have any higher percentage and interest rate than 30 percent so they could do those things now here's the thing the Constitution does not lay out how the government is supposed

**[1:59]:** to do these things it just says it has the power to do them Constitution says the the the executive branch has the power to deal with currency and and all of these things government money it doesn't say how so Hamilton came up with something he thought was was reasonable necessary and proper to do these things I mean he can't just store the money under his mattress especially with his many many mistresses which pause brings us to the Hamilton Reynolds Affair has nothing to do with the National Bank I just like that segue to talk about um Hamilton's affair we'll come back to the bank this is a fun story after all the economic stuff as well Hamilton was engaged in a fair with Maria Reynolds the one pictured here pictured painted here both of them were married to separate people obviously uh Maria's husband James Reynolds found out and knew of the affair and used

**[2:57]:** it to Blackmail Hamilton and and James Reynolds understood that news of this affair would ruin Hamilton's career by the time these payments ended in 1792 when you see the two dates up there the affair took place in 91-92 and then the consequences of that Affair will come back in 97. but by the time Hamilton stopped the affair and stopped paying the blackmail it was thirteen hundred dollars in the 1790s which is roughly 20 to 30 000 today you may say well that's not that much I mean it's a car you're paying somebody basically the value of a car to sleep with their wife uh James Reynolds separately James Reynolds was arrested in a financial scheme he was committing some kind of Fraud and he leveraged his knowledge of the affair to try to get out of trouble to basically throw all the blame on Hamilton believing that Hamilton would agree to take the blame instead of having his affair made public so James Reynolds was arrested and

**[4:06]:** rather than take responsibility he is trying to throw it all on Hamilton when the government asked Hamilton about this because they were investigating James Reynolds when they asked Hamilton about all this he had to choose between playing along or revealing his affair and he chose to reveal the affair he provided letters with Maria and explained what actually occurred now who he was explaining this to was James Monroe the other name on the slide he's not pictured here he'll be on the next one James Monroe

**[4:43]:** was one of the investigators and also a close Ally of Thomas Jefferson who was political rival now Hamilton was believed and he thought this was all settled and James Reynold was convicted of his crimes however Jefferson was given those letters by Monroe five years go by Jefferson and Hamilton their relationship continued to deteriorate they became even more Rivals hated each other even more and Hamilton was a bit of a hothead Jefferson will publish those letters in 1797 to discredit Hamilton as corrupt while he as as a Secretary of the Treasury so Jefferson straight up printed those letters between Hamilton and Maria Reynolds straight up publish them for everybody to see Hamilton then confronted Monroe and Monroe claimed he had no idea how those letters had leaked out sure you didn't sure you didn't and when Monroe was caught obviously lying Hamilton challenged him to a duel but it was prevented by the uh by the intervention of Aaron Burr

**[5:58]:** a certain irony some of you might recognize ultimately Hamilton publicly admitted his affair and was proved to not be as corrupt as Jefferson claimed but he still lost a lot of respect and a lot of um I don't know Honor's not the right word a lot of esteem like it did damage his reputation he lost uh some of his reputation for the affair so why talk about all this besides the fact that it's not economics it's the first major political sex scandal in American history and of course no politician ever got involved in another sex scandal in American history they wouldn't be dumb enough to do it over and over and over and over and over and still today constantly of course not so the first major political sex scandal in American history so that's why he couldn't keep the money under his mattress because he was having an affair that was costing him blackmail

**[6:54]:** money and nearly ruined his political career I guess if you're going to do something go all the way but not originally intended but let's say it's intended now anyway the National Bank issue kickstarted actually a whole new debate that we still engaged to this very day but real quick the National Bank the the significance of that it created Financial stability and it was based on hamiltonian economics it became the origin of a major new argument over the Constitution so the significance of the National Bank created Financial stability it was based on hamiltonian economics and became the origin of a new major argument over the Constitution that new debate is called strict and loose construction Hamilton on the left James Monroe on the right just the pictures not on the sides of this debate necessarily so strict and loose construction this is an argument over how the government should follow the Constitution

**[7:59]:** oh

**[8:04]:** okay strict construction is that the government must follow the Constitution exactly as written if it's not in the Constitution it should not be done so no National Bank Constitution says nothing about the creation of a National Bank it just says the government has the power to do those things it doesn't say how Constitution does that a lot as we've seen with the cabinet and we'll see with other things lose construction loose construction says that Congress or the government should still follow the Constitution but that Congress and the government have the uh shall do things quote unquote this is a direct quote from the Constitution necessary and proper there's a reason I use that phrase earlier to carry out its powers again that phrase is part of the Constitution itself and called the necessary and proper clause essentially the powers of Congress are laid out in the Constitution but the exact methodology is not the exact

**[9:04]:** way that they do it is not so it's up to the government to figure out how to reasonably use those Powers within the general framework of the Constitution so you still follow the Constitution but with reasonable reasonable flexibility that's loose construction strict follow the law exact or follow the Constitution exactly is written loose reasonable flexibility you still follow it but Congress and the national government have their follow the necessary Proper Clause they can do carry out their powers as long as they're not being crazy with it essentially an interesting to this debate is how people followed these ideas those out of power were often or are because it's still today on the side of strict while those in power were or are more on the loose construction side it's easy to criticize government power when you aren't the one wielding it but it's an entirely different thing when you when you were in the big

**[10:02]:** chair yourself Hamilton was strict overall but he was in power and he knew that loose construction was needed for the creation of the bank people talk strict but walk loose and that usually you see that divide between when they're in and out of power so the significances of this debate it's an argument still seen today especially concerning courts and certain specific issues Annie's court case Supreme Court or lower you can see how justices fall on this debate even if they never specifically say it generally if it's restricting what the government can do their strict construction generally if it's a more broad interpretation it's loose construction

**[10:51]:** so the second significance is that pattern of strict out of power and loose and Power still holds true like I said with the courts you still see that even within the course but even debates between politicians who were in The majority of the party the majority party and government and the and the minority party in government usually the majority party is loose the minority party is strict now it's not Universal but that's a general rule another Factor here not a significance but maybe a significance is that the strict loose debate was also a catalyst for the formation of political parties it was not the only reason but it was a major contributor and this took several years for the parties to actually form so it's not to correct so it's not correct to say debates that the strict loose debate created the parties it was just a push along that path it was one

**[11:51]:** of the early pushes along that path the parties formed around two men and their ideas Hamilton and Jefferson and we're going to look at those parties and what they eventually became the Federalist Party was centered around Alexander Hamilton and his ideas those were the core of the party these are not the same Federalists that we discussed in unit one not the same as soon as the Constitution was passed the Federalists and the Anti-Federalists ceased to exist and you're going to find Federalists and Anti-Federalists on both sides are in in both of these parties so forget Federalists and Anti-Federalists when I'm talking about Federalists from this point on it's a separate political party remember the Federalists in unit one were for the new constitution the Anti-Federalists were against the new constitution obviously everyone involved here is working under the Constitution so it's completely separate group

**[12:54]:** here's is what they wanted they wanted High tariffs more taxes notice I didn't say more tariffs or high taxes they just wanted more taxes not necessarily high taxes but a lot more taxes so high tariffs more taxes they followed hamiltonian economics they were favored in the north and in large cities and they wanted closer relations with uh Britain and foreign policy and they also more favored industry building up American manufacturing such as it existed at the time so that's the list the other side here is the Democratic Republican Party under Thomas Jefferson there are also sometimes called the Jeffersonian Republican party this is a better name they had both because Jefferson wasn't there the whole time this party existed so the Democratic Republican Party it was Senator Jefferson and his ideas which are basically the opposite of Hamilton so take that list I gave you for Hamilton and you reverse it so lower tariffs fewer

**[13:59]:** taxes favorite in the South and rural areas followed Jeffersonian economics favored the French and foreign policy and were more about agriculture versus industry the uh this party is also not a direct origin of either of the parties of the same name the Democratic party and the Republican party you can't really draw a straight line between the this party and those a little with the Democratic party but it's not like this became split and became those two parties it's a much more complicated and long-term story so these parties are still just forming so these defined policies were just barely coming together right now at this point with the strict and loose debate over the National Bank it was more that you had people starting to line up behind Hamilton and Jefferson but this is what they become and understanding that is key to understanding the next several events

**[15:00]:** which brings us to 1792 an election year now Washington did not want to run for a second term he was tired of politics but he was convinced to stay and he'll win once again unanimous once again Adams will be his VP Washington hated politics he what and he wasn't affiliate affiliated with either party he's the only President by choice to not have a party though he did tend to sign tend to side more with the Federalists though again he wasn't he hated political parties this will set the standard for future presidents to serve only two terms and it wasn't a rule until 1947. so there wasn't an actual rule that's the 22nd amendment that presidents could only serve two terms they just followed Washington's example because that's what Washington did he refused to come back for a third term so when we get to the election of 96 Washington won't be involved because he absolutely refused he said you can get me for two not for three

**[16:02]:** this was the first opportunity for the jeffersonians to attack the Federalists and vice versa it was a very vicious election but the Federalists will come to dominate all three branches of government uh again even though Washington wasn't a federalist he tend to decide with them the Congress was majority Federalist and most of the Court appointees were from leaned federalist there's one more thing to talk about with Washington's presidency at least with domestic policy and that's the Whiskey Rebellion hey look Fort Mitchell Mackinac hey guess what still not relevant Hamilton pushed for attacks on Whiskey distillment on the frontier we've mostly dealt with Western Pennsylvania right here the way that this worked was that um these settlers relied on Whiskey production it was made from corn surpluses so they grew corn as their primary source of income and then the extra corn that they had that they couldn't sell they would then turn into whiskey so

**[17:01]:** it was basically a side business and as such wasn't taxed but the farmers decided the tax was unfairly aimed at them and they launched a general Revolt aimed at anyone associated with collecting the tax it starts with protests then becomes violent state of Pennsylvania doesn't really have the ability to put this down so they turned and asked the national government hey can you help now under the Articles could the national government have done anything no but this is the Constitution and they could so Washington assembles a volunteer army after negotiations failed he will then send that Army out to Western Pennsylvania but the rebels were nowhere to be found because once they heard the Army was coming they just left they just went home said oh okay well they're actually gonna deal with us this is going to be like Chase so the Rebellion just kind of ends the army goes back home that's the

**[17:57]:** end of the Rebellion kind of a nothing event right not quite there are three significances to the Whiskey Rebellion it's actually one of the more important events of this period first it showed that the new government armed with the new constitution could deal with internal disturbances which they could not do under the Articles so this is that fourth check mark right tax Taxation and regulation or trade regulation from the Tariff currency from the National Bank internal disturbances from the Whiskey Rebellion second show that the government could enforce the law and that the new constitution was working third it set the precedent for how the government deals with internal disturbances which was the president calling for troops not necessarily the Army itself but for militia or today the National Guard to come in and put down a domestic Uprising so it set that precedent up until around the early 1900s it was state militias or a volunteer Force like this after

**[19:07]:** that point it's the the State National Guards now so those are the significances this is a pretty big deal right because it's the the internal disturbances showing the government could was working that they could enforce the law that the executive branch could enforce the law all very big things what look we're going to to next is foreign policy under Washington and that's it