Published by EH.Net (July 2019)

Eric Lomazoff, Reconstructing the National Bank Controversy: Politics and Law in the Early American Republic. Chicago: University of Chicago Press, 2018. x + 253 pp. $90 (cloth), ISBN: 978-0-226-57945-0.

Reviewed for EH.Net by David Cowen, Museum of American Finance.

“… [Of] all acts of government none perhaps was more delicate, none required greater discretion and caution to guard it against improper speculations than the granting of a bank charter,” wrote Secretary of the Treasury Albert Gallatin to Thomas Jefferson in 1804. He continued that “… It is an act of the highest legislative nature.”[1] Eric Lomazoff understands this as well, and his book, Reconstructing the National Bank Controversy: Politics and Law in the Early American Republic, brings back to the fore the constitutional banking debate that raged throughout much of the early history of our country. This playing field constitutes well-tread ground with established paradigms by previous generations of scholars. Given that there are well-established narratives, it is not easy to shed new light. Lomazoff does so by taking an incredibly deep dive into the bank debates, starting with the 1791 creation of the First Bank of the United States, and continuing with the 1811 death of the institution, the 1816 subsequent re-charter, the 1819 McCulloch v. Maryland challenge in front of the John Marshall-led Supreme Court, and Andrew Jackson’s attack leading to the death of the Second Bank of the United States in 1836. For good measure, in the concluding chapter Lomazoff brings the discussion forward to look at the implications for the founding of the Federal Reserve and other monetary debates.

Lomazoff — to his credit — has pored over the debates and legislative records with a fine-tooth comb. The extensive research extends to his secondary sources as well. The work is carefully footnoted throughout, and the footnotes themselves provide a wealth of knowledge and demonstrate the depth of scholarship. For instance, he took care to self-catalogue the 3,150 letters of Nicholas Biddle on microfilm held at the Library of Congress (p. 216, note 21). The structure of the book includes vignettes at the beginning of several chapters that recount the traditional viewpoints on the subject. Given that the title of the book is Reconstructing the National Bank Controversy and “reconstruct” means to rebuild after something has been destroyed or damaged, the author needed to set the stage by first constructing the accepted dogma via the vignettes.

Lomazoff has gone back and read the primary source materials in depth and has effectively placed them side-by-side for the debates of 1791, 1811, 1816, 1819 and 1836. What makes this thought provoking is that so many others have done so as well, and they have drawn different conclusions. A first step is to understand the standard and accepted line of logic that is central to the original narrative: Article I Section 8 of the U.S. Constitution. This section empowers the government to perform many duties, including raising an Army and Navy and declaring war, and its final paragraph constitutes the famous Sweeping Clause, “to make all Laws which shall be necessary and proper.” The Sweeping Clause allows for a broad interpretation of the Constitution. It has been the linchpin to the bank debates for years, as it authorized the government to create two national banks and own part of them. In Lomazoff’s journey through the research, he found that another part of Article 1 Section 8 has received scant attention, but it may hold the key to much of the debate. That portion is the Coinage Clause, which authorizes Congress to coin and regulate money. While that argument is known to scholars, it has taken a backseat to the Sweeping Clause. Lomazoff is out to correct the historical record and give the Coinage Clause equal due. Interestingly, buried in a footnote the author admits that, “in an early pass I too adopted a version of the strict/broad dichotomy” (p. 176). A second recurring theme is that the constitutional debates were often shaped by self-interest or messy party politics.

As part of his case, Lomazoff introduces the three F’s that anti-bank advocates rally their objections around: federal, functional and frequency standards. In short, federal questions whether there are other institutions, i.e. state banks, which can provide a similar service. Functional gets to the core of the Necessary and Proper Clause, i.e. as it relates to Article I and the Sweeping Clause, and asks whether a national bank would fill that role directly or indirectly. Frequency is exogenous to Article I and debates what power a government should have as it relates to coinage, borrowing money, and banking. The three F’s are used throughout the book to assist in defining the debates.

The book begins with the 1791 creation of the First Bank of the United States, when the opponents threw, “everything but the kitchen sink at it” (p. 15). But the anti-bankers needed a legal issue, and in 1791 that was a strict interpretation of the Constitution. Therefore, Lomazoff agrees that, “the traditional 1791 narrative certainly does not err,” but he wants to ensure that constitutional scholars realize it was not one size fits all with other factors at play (p. 30).

A pivotal chapter titled “The Compromise of 1816” takes a very deep dive into the charter debate of the Second Bank of the United States. Here the book highlights how a Republican-controlled Congress and the White House cloned a national bank that many of them had killed just a few years prior. Given the stress of financing the War of 1812, these politicians realized the need for a national bank, and they needed to “swallow their long-standing objections” (p. 105). But how? Their answer was the Coinage Clause of Article 1 Section 8.

A few years hence was the landmark McCulloch v. Maryland case, where the Supreme Court reaffirmed the national bank. Using the Compromise of 1816 as a lens on this case is interesting, although the author admits, “it may be too much, however, to claim that the Compromise of 1816 ultimately helps make better sense of what occurred in McCulloch” (p.139). When we fast forward to the 1830s and Andrew Jackson’s attack on the Second Bank, Lomazoff explains that traditional historical fare has excluded that his veto message also included the Coinage Clause. That portion has been lost to scholars over time.

Revisionist history is not an easy hill to climb, especially when the traditional paradigms are so well entrenched. This book is geared toward constitutional scholars and members of the academic community who can handle the in-depth analysis. This is not light summertime reading. In one section, Lomazoff points out that, “American economic historians are familiar with these facts” (p. 98). However, economic historians who grew up on traditional narratives will find this a detailed refresher course with a Coinage Clause twist. Lomazoff has opened our eyes that the Coinage Clause needs some due. Some months after the difficult fight over chartering the First Bank, Alexander Hamilton stated that, “a mighty stand was made on the affair of the Bank. There was much commitment in that case. I prevailed.”[2] Eric Lomazoff also prevails, as he brings much commitment to the role of the Coinage Clause in shaping early national bank debates.


1. Albert Gallatin to Thomas Jefferson. April 12, 1804. The Writings of Albert Gallatin. Vol II, pp. 184-85. The italics are Gallatin’s.


David Cowen is President/CEO of the Museum of American Finance. He is the co-author (with Richard Sylla) of Alexander Hamilton on Finance, Credit, and Debt (Columbia University Press, 2018) and (with Robert Wright) of Financial Founding Fathers: The Men Who Made America Rich (University of Chicago Press, 2006).

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