I
i
LEGISLATIVE
AND
DOCUMENTARY HISTORY
OF THE
BANK OF THE UNITED STATES:
INCLUDING THE ORIGINAL
BANK OF NORTH AMERICA
•
COMPILED
BY M. ST. CLAIR CLARKE & D. A. HALL,
WASHINGTON:
PRINTED BY GALES AND SEATON.
1832.
— •*• JS-* %.
X ^
PREFACE.
THE Editors present to the public the following pages, with the hope that they may impart useful knowledge in regard to the past legislation of Congress, upon the highly important subject of which they treat. It has been their design to collect and embody, in as brief compass as pos- sible, the entire proceedings, debates, and resolutions, of Congress, upon the various bills and projects for a National Bank, which, at any time during the existence of the Fe- deral Government, have been brought forward or discussed. In their proper connexion, they have also embraced such reports of committees and public officers, as had relation to the establishment, constitutionality, or public uses of a bank. The Debates, which form the great body of the collection, will be found to contain the opinions and ela- borate arguments of the most distinguished men of our country, both for, and against, the establishment of such an institution. For current reference, or preservation of speeches, in convenient form, this part of the work is cal- culated to be permanently useful. In the statement of the decision of important questions, the journals of Congress have, as far as possible, been relied on; it will occur, how- ever, to those familiar with the proceedings of Congress, that very much of the action of that body, on all bills of public interest, finds no place in their daily record. All proceedings in Committee of the Whole are excluded from the journals of the House; and, if they become matter of record at all, it is in the pages of the gazettes of the day.
PREFACE.
For the history of the proceedings and the debates in Com- mittee of the Whole, the files of the National Intelligencer have been consulted: these furnish, during a considerable period of our legislative history, the most correct sources of information. It has been a leading object with the editors, to collect with accuracy, and state with fidelity, the acts that have been done, and the opinions which have been uttered in Congress, and the Executive Departments, on the establishment and perpetuation of a National Bank. Errors and unimportant omissions may, perhaps, be de- tected; but none, it is hoped, which can detract from the merit, which the editors claim, of general accuracy.
CONTENTS
CHAPTER I.
The institution of the Bank of North America, page 9: Proposition in the old Congress, for a bank, 10: Resolution in favor of establishing a bank, ibid: Ayes and noes on resolution, 11: Plan of the bank, ibid: Ordinance incorpo- rating Bank of North America, 12.
CHAPTER II.
Bank of the United States projected — Hamilton's report, 15: Hamilton's plan of bank, 31: Bill introduced into Senate— proceedings thereon, 35: Be- rn the House, on the bill, 37—84: Vote on the passage of the bill, 85: •ii of Edmund Randolph, attorney general, given to the President, again uonality of the bill, 86— 89: Of Thomas Jefferson, Secre-
tary of State, on the same subject, 91: Of Alexander Hamilton, Secretary of the Treasury, in favor of the bill, 95: Supplementary acts, 114.
CHAPTER III.
Memorials presented for the renewal of the charter of bank, 115: Gallatin's
1S09, 116: Dividends of old bank, 120: Bill to establish a
lai Bank, reported by Mr. Love/from select committee, 122: Bill to re-
sie old charter, reported by Mr. Taylor, of S. C., 133: Bill for the same
purpose, reported 4th of January, 1811, by Mr. Burwell, 137: Debates in the
Hous« jill, 139 — 299: Ayes and noes on postponement of bill, 274:
Menu ^nate for renewal— bill reported — letter of Mr. Gallatin, 300:*
Debates in Senate on bill to renew charter, 302 — 446: Bill rejected, by the
casting vote of Vice President, 446: Debate in House, on Mr. Taylor's bill,
449 — 171.
CHAPTER IV.
Various propositions for the establishment of a National Bank, and pro- ceedings thereon, 472—480: Letter of Secretary Dallas, to Committee of Ways and Means, on a bank 481: Mr. Fisk, of N. Y. reports a bill, 487: Proceedings and debates thereon, 488—518: Same bill, as amended, 519: Bill rejected— ayes and noes, 534: Secretary Dallas to Mr. Lowndes, 535: Bill reported in Senate, by Mr. King, 539: Passed, ayes and noes, 549: Re- ported to the House, with amendments, and debated, 549—559: Ordered to a third reading, 560: Recommitted, 561: Again ordered to a third reading, 562: Mr. Webster's motion to recommit, and speech, 562-3: Bill rejected, by casting vote of Speaker, 571: Vote reconsidered, 574: Passed the House, 579: Amendments in House and Senate, 580—585: Bill as it passed both
vi CONTENTS.
Houses, 585: President's ve/o, 594: Bill reported in Senate, by Mr. Barbour, 596: Passed the Senate, 605: Indefinitely postponed in the House, 13th Feb- ruary, 1815, 608.
CHAPTER V.
On the grant of the charier of 1816 — Mr. Madison, on the defects of the currency, 609: Mr. Dallas proposes a bank to remedy these defects, 612: His letter on currency, and a bank, 613 — 619: Bill reported by Mr. Calhoun, 621: Mr. Calhoun's speech on bill, 630: Mr. Sergeant moves to reduce capi- tal of bank, 635: Mr. Smith's speech on said motion, 636: Messrs. Sergeant, Randolph, Ward, and Tucker, of Virginia, speak on the motion, 640 — 646: Further debates on motion, by Mr. Webster, Mr. Cuthbert, Mr. Hopkinson, Mr. Sharp, and Mr. Calhoun, 646 — 653: Motion overruled, 653: Motion to dispense with Government subscription of seven millions, and debate on said motion, 653 — 658: On the appointment of five directors by the Government— debate in committee thereon, 661 — 666: Same in the House, with vote, 678— 679: Speech of Mr. Clay, 669: Yarious amendments proposed, 672—676: Motion to locate bank at New York, carried, 676: This vote reversed, 677: Bill ordered to be engrossed, 680: Passed the House, 681: Considered aj«f debated in the Senate, 683—692: Speech of Mr. Wells, 694: Passed the/Se- nate, with amendments, 706: Amendments considered in the House, 707— 712: Agreed to, 713: Bill approved by the President, 713.
CHAPTER VI.
Certain proceedings after the bank went into operation— Mr. Spencer's re- solution for appointing a committee to inspect hank books, &c., 714: Com- mittee appointed— their report, 714—732: Mr. Trimble's motion for a scire facias, 732: Mr. Spencer's resolutions for withdrawing Government depo- sites, for scire facias, &c. 732: Mr. Johnson's resolution for a repeal of the charter, 734: President Jackson's suggestions in regard to the bank, 734: Mr. McDuffie's reportin 1830, 735: Mr. Smith's report in Senate, 773: Let- ters of Mr. Madison, in 1831, to C. J- Ingersoll, 778: Judicial decisioi bank charter, 781: Justice Marshall's opinion, 782.
LEGISLATIVE
........ .j**e,
AXD
DOCUMENTARY HISTORY
I \\ITED STATES BANK,
CHAPTER T.
BANK OF NORTH AMKWCA: PROC'FEDIXOS IX CONGRESS OX ITS ORIGINAL INSTITUTION.
IN tracing the history of the Bank of the Tinted States, it seems proper
logive some account of that moneyed institution, which, deriving its incipient
'•3 from the General Govcrninc-iit, may l.c considered as the prototype
of the corporations which have more recently borne that name. The Bank of
, which was the precursor of that of the United States, was
incorporated in 1781, by an ordinance of the American Congress. Its
dependence, however, upon this creating power, was of short continuance:
year, it accepted of a charter from the State of Pennsylvania,
ace been content to derive its powers from that source. All that is
. in relation to it, is to give the proceedings of Congress, on its
i;il institution, from the first introduction of the plan of the bank, to its
tinal consummation, in the grant of the ordinance; and these are given in the
r ot their dates, and chiefly in the words of the Journals of Congre&s,
from which they are taken.
oceedings on the enactment of this ordinance, together with those in the subsequent chapters, will place the reader in possession of the en- • •gislation of Congress, both before and since the adoption of the consti- •. upon the subject of a bank.
Proposition for the establishment of a Bank.
IN CONGRESS, June 21, 1780.
A letter of this day, from the Board of War, was read, informing "that a number of patriotic persons, having formed a plan for the establishment of a bank, whose object is the public service; that the directors have applied to that Board, to represent to Congress the desire of the company that a com- mitttee of this body maybe appointed to confer with the inspectors and direc- tors on the subject, to-morrow morning:" Whereupon,
Ordered, That a committee of three be appointed, for the purpose above mentioned. The members chosen were, Mr. Ellsworth, Mr. Duane, and Mr. Scott.
2
10 BANK OF NORTH AMERICA.
JUNE 22, 1780.
The committee appointed to confer with the inspectors and directors of the proposed bank, brought in a report, which was read.
The committee also laid before Congress, the plan of the bank, communi- cated to them at the said conference, which being read, Congress, thereupon, came to the following resolutions:
Whereas a number of the patriotic citizens of Pennsylvania have com- municated to Congress a liberal offer, on their own credit, and by their own exertions, to supply and transport three millions of rations, and 300 hogsheads of runij for the use of the army, and have established a bank, for the sole pur- pose of obtaining and transporting the said supplies, with the greater facility and despatch: And whereas, on the one hand, the associators, animated to this laudable exertion by a desire to relieve the public necessities, mean not to derive from it the least pecuniary advantage; so, on the other, it is just and reasonable, that they should be fully reimbursed and indemnified: Therefore,
Resolved, unanimously, That Congress entertain a high sense of the liberal offer of the said associators to raise and transport the beforementioned sup- plies for the army, and do accept the same as a distinguished proof of their patriotism.
Resolved, That the faith of the United States be, and the same hereby is, pledged, to the subscribers to the said bank, for their effectual reimburse- ment in the premises.
Resolved, That the Board of Treasury be directed to deposite, in the said bank, bills of exchange in favor of the directors thereof, on the ministers of these United States in Europe, or any of them, and in such sums as shall be thought convenient, but not to exceed, in the whole, £150,000 sterling; that the said bills are to be considered, not only as a support of the credit of the said bank, but as an indemnity to the subscribers for all defi ciences of losses and ex- penses which they may sustain, on account of their said engagements, and which shall not, within six months from the date hereof, be made good to them out of the public treasury; and, in case of failure, such a proportion of said bills as shall be requisite to make good the deficiency ,.shall be negotiated for that pur- pose, by the said directors, and the residue returned into the treasury.
Resolved* That, upon representation made, that the bank stands in need of occasional assistance, Congress will advance as much of their current money as can be spared from other services.
Resolved, That a standing committee of Congress be appointed, to confer with the officers of the said bank, as occasion may require. The.members chosen are Mr. Ellsworth, Mr. Duane, and Mr. Scott.
JUNE 23, 1780.
Ordered, That two members be added to the committee appointed to con- fer with the directors and inspectors of the proposed bank, in the room of Mr. Duane and Mr. Ellsworth, who are absent. The members chosen are Mr. Livingston and Mr. Adams.
Whether the preceding proposition and resolutions had any immediate connexion with the plan that was subsequently submitted, as hereafter exhi- bited, by Robert Morris, and adopted by Congress, does not appear.
Proceedings on the incorporation of the Bank of North America.
MAY 26, 1781.
On the report of a committee, consisting of Messrs. Witherspoon, Sulli- van, M. Smith, and Clymer, to whom was referred a letter from Mr. R. Mor- ris, with the plan of a bank:
Resolved, That Congress do approve of the plan for establishing a national bank, in these United States, submitted to their consideration by R. Morns, on the 17th May, 1781, and that they will promote and support the same, by
CHARTERED BY CONGRESS. JJ
such ways and means, from time to time, as may appear necessary for the in- stitution, and consistent with the public good.
That the subscribers to the said bank shall be incorporated agreeably to the principles and terms of the plan, und-cr the name of the 4* President, Directors, and Company of the Bank of North America," so soon as the subscription shall be filled, the directors and president chosen, and application for that purpose made to Congress, by the president and directors elected.
On the question to agree to this paragraph, the yeas and nays being re- quired by Mr. T. Smith, were as follows:
New Hampshire, . . . . Mr. Sullivan, ay. 7
Livermore, ay. 5 ' MattachutctUt .... Mr. Lovell, n0. ? no
Ward, no. 5
Rhode Island, Mr. Varnum, ay.
Connecticut, - - Mr. Huntington, ay.
New Jersey, Mr. Witherspoon, ay. ? a
Houston, av. 5
Pennsylmtoto, Mr. Clymer, ay. I divided
T. Smitl), no. ^
Maryland, Mr. Jenifer, ay.-)
Carroll, *Z'\
Virginia, . Mr. Jones, ay.-T
Madison, no. I av
Bland, ay. f y'
M. Smith, ay. I .\nrth Carolina, Mr. Sharp, ay. 7
Johnson, ay. v &y*
South ('(irnhiHi, Mr. Matthews, ay.-)
Bee, ay.£ay-
Motte, ay. \
Mr. Walton, a.*
Howly, av. S
So it was roolvcd in the affirmative.
Resolved, Thai it be recommended to the several States, by proper laws for that purpose, to provide that no other bank or bankers shall be established or permitted within the said States, respectively, during the war.
fasolvcd, That the notes hereafter to be issued by the said bank, payable on demand, shall Irc receivable in payment of all taxes, duties, and debts, due, or that may become due or payable to the United States,
Resvlved, That Congress will recommend to the several Legislatures to
laws making it ielony, without benefit of clergy, for any person to
counterfeit bank notes, or to pass such notes, knowing them to be counter-
: also, making it felony, without benefit of clergy, for any president, in-
spector, director, officer, or servant of the bank, to convert any of the pro-
perty, money, or credit, of the said bank, to his own use, or in any other way
bank1 °r embexzlemcnt> as an officer or servant of the said
The plan of the bank above referred to is as follows:
1st. That a subscription be opened for 400,000 dollars, in shares of 400 dol- lars each, to be paid in gold or silver.
T ~d- ^hat th6 subscription te paid into the hands of George Clymer and John Nixon, Esquires, or their agents.
3d. That every subscriber of less than five shares shall pay the whole sum «n the day ot his subscription,
hat every subscriber of five shares or upwards pay one half of the subscription, and the other half within three months of
4th. T sum on that da
tat a
5th. That every holder of a share shall be entitled to vote by himself his agent, or proxy, properly appointed, at all elections of directors, and that he
12 BANK OF NORTH AMERICA.
have as many votes as he holds shares? and that every subscriber may sell or transfer his share or shares at pleasure, the transfer being made in the bank books, in presence and with the approbation of the proprietor, or his lawful attorney, the purchaser then to become entitled to the right of voting, &c.
6th. That there be twelve directors chosen from among those entitled to vote, who, at their first meeting, shall choose one as president.
7th. That there be a meeting of directors quarterly, for the purpose of regu- lating the affairs of the bank, and seven of the directors to make a Board, and that the Board have power to adjourn from time to time.
8th. That the Board of Directors determine the manner of doing business, and the rules and forms to be pursued, appoint the various officers which they may find necessary, and dispose of the money and credit of the bank, for the interest and benefit of the proprietors, and make, from time to time, such divi- dends out of the profits, as they may think proper.
9th. That the Board be empowered, from time to time, to open new subscrip- tions for the pu rose of increasing the capital of the bank, on such terms and conditions as they shall think proper.
10th. That the Board, at every quarterly meeting, shall choose two directors to inspect and control the business of the bank for the ensuing three months,
lira. That the inspectors, so chosen, shall, on the evening of every day, Sun- days excepted, deliver to the superintendent of the finances of America, a state of the cash account, and of the notes issued and received,
12th. That the bank notes,'payable on demand, shall, by law,be made receiv- able in the duties and taxes of every State in the Union, and from the respec- tive States, by the treasury of the United States, as specie.
13th. That the superintendent of the finances of America shall have a right, at all times, to examine into the affairs of the bank, and for that purpose shall have access to all the books and papers,
14th. That any director or officer ot the bank, who shall convert any of the property, moneys, or credits thereof, to his own use, or shall, any other way, be guilty of fraud, or embezzlement, shall forfeit all his share or stock to the company.
15th. That laws shall be passed, making it felony, without benefit of clergy, to commit such fraud or embezzlement,
16th. That the subscribers shall be incorporated under the name of" the Pre- sident, Directors, and Company, of the Bank of North America/'
17th. That none of the directors shall be entitled to any pecuniary advantage for his attendance on the duties of his office as director, or as president or inspector, unless an alteration, in this respect, shall hereafter be made, by the consent of a majority of the stocklvolders, at a general election.
18th. That, as soon as the subscription shall be filled, George Clymer and John Nixon, Esquires, shall publish a list of the names and sums respec- tively subscribed, with the place of abode of the subscribers, and appoint a day tor the choice of directors, to whom, when chosen, they shall deliver over the money by them received.
DECEMBER 29, 1781.
An ordinance for incorporating the subscribers to the national bank was read a first time.
Ordered, That Monday next be assigned for a second reading.
MONDAY, December 3 1st.
The said ordinance was read a second and third time, and agreed to, as fol- lows: Jin Ordinance to incorporate the subscribers to the Bank of North America.
Whereas Congress, on the 26th day of May last, did, from a conviction of the support which the finances of the United States would receive from the establishment of a National Bank, approve a plan for such an institution, sub- mitted to their consideration by Robert Morris, Esq. and now lodged among
CHARTERED BY CONGRESS. jg
the archives of Congress, and did engage to promote the same by the most effectual means: And whereas the subscription thereto is now fillet!, from an expectation of a charter of incorporation from Congress, the directors and president are chosen, and application hath been made to Congress, by the said president and directors, for an act of incorporation: And whereas the exigencies of the United States render it indispensably necessary that such an act be immediately passed:
Be it therefore ordained and it is hereby ordained by the United States in Congress assembled, That those who are, and those who shall become, sub- scribers to the said bank, be, and forever after shall be, a corporation and body politic, to all intents and purposes, by the name and style of k< The President, Directors, and Company, of the Bank of North America."
Jind be it further ordained, That the said corporation are hereby declared and made able and capable, in law, to have, purchase, receive, possess, enjoy, and retain, lands, rents, tenements, hereditaments, goods, chattels, and effects, of what kind, nature, or quality, soever, to the amount of ten millions of Spa- nish silver milled dollars, and no more: and, also, to sell, grant, demise, alien, or dispose of, the same lands, rents, tenements, hereditaments, goods, chattels, and effects.
And be it further ordained, That the said coporation be, and shall be, for ever, hereafter, able and capable, in law, to sue and be sued, plead and be im- pleaded, answer and be answered unto, defend and be defended, in courts of record, or any other place whatsoever, and to do and execute all and singu- lar other matters and things that to them shall or may appertain to do.
And be it further ordained. That, for the well governing of the said cor- poration and the ordering of their affairs, they shall have such officers as they shall hereafter direct orappoint. Provided* never thde99, That twelve direc- tors, one of whom shall be the president of the corporation, be of the number of their officer-.
And be it further ordained, 'That Thomas Willing be the present president, and that the said Thomas Willing and Thomas Fitzsimmons, John Maxwell Nesbit, James Wilson, Homy Hill, Samuel Osgood. Cadwallader Morris, Andrew Caldwell, Samuel Inglis, Samuel Meredith, William Hinghani, Timothy Matlack, be the present directors of the said corporation ^ and shall so continue until another president and other directors shall be chosen, ac- cording to the laws and regulations of the said corporation.
And be it further ordainc d* That the president and directors of the said corporation shall be capable of exercising such power for the well governing and ordering of the affairs of the said corporation, and of holding such occa- sional meetings for that purpose, as shall be described, fixed, and determined, by the laws, regulations, and ordinances, of the said corporation.
Jlnd be it further ordained. That the said corporation may make, ordain, establish, and put in execution, such laws, ordinances, and regulations, as shall seem necessary and convenient to the government of the said corpora- tion .
Provided* always. That nothing herein before continued shall be construed to authorize the said corporation to exerci/e any powers, in any of the United States, repugnant to the laws or constitution of such State.
Ana be it further ordained, That the said corporation shall have full power and authority to make, have, and use, a common seal, with such device and inscription as they shall think proper, and the same to break, alter, and renew, at their pleasure.
Jlnd be it further ordained. That this ordinance shall be construed and taken most favorably and beneficially for the said corporation.
Done by the United States in Congress assembled, &c.
Resolved, That it be recommended to the Legislature of each State to pass such laws as they may judge necessary, for giving the foregoing ordinance its full operation, agreeably to the true intent and meaning thereof, and accord-
|4 BANK OF NORTH AMERICA
«
ing to the recommendations contained in the resolutions of the 26th day ot May last.
NOTE. — By the kindness of the author, the editors are enabled to lay before their readers the following- interesting- extract in relation to this bank, from the life of Go- verneur Morris, recently published.
" One of the first acts of the Superintendent of Finance was to propose the plan of a bank, which was incorporated by Congress, under the name of the Bank of North America. Mr. Governcur Morris says, in a letter to a friend, written not long1 before his death, « the first bank in this country was planned by your humble servant.' By this, he probably meant, that he drew up the plan of the bank, and the observations accom- panying-;t, which were presented to Congress, and not, that he, individually, origi- nated the scheme . This was doubtless matured in conjunction with the superintendent. A warm friendship had subsisted between them for some time, which, it may be pre- sumed, was increased by a similarity in their turn of mind for financial pursuits. To Hamilton, also, may properly be ascribed a portion of the merit in forming1 this bank. About two weeks before the plan was sent to Congress, Hamilton wrote a letter to Robert Morris, enclosing- an elaborate project for a bank. In a letter acknowledging the reception of this paper, the financier speaks of it with commendation. He says, 'I have read your performance with that attention which it justly deserves, and finding- many parts of it to coincide with my own opinions on the subject, it naturally strength- ened that confidence, which every man ought to possess, to a certain degree, in his own judgment.' He then tells him that he shall communicate it to the directors of the bank, to aid them in their deliberation on certain points, which it was not thought expedient to embrace in the plan itself, particularly that of interweaving a security with the capital.
" This bank had an extraordinary effect in restoring public and private credit in the country, and was of immense utility in aiding the future operations of the financier, although it was begun with the small capital of $400,000. Hamilton's project contem- plated a vastly larger sum, in which Mr. Morris agreed with him, but its immediate success, on so large a scale, was doubtful, and if it failed in the outset, it could not be revived; whereas, by beginning with a small capital, and establishing a credit with the public, gradually, it would be easy afterwards to increase the amount, and, in the end, all needful advantages would be derived, to the utmost extent of banking facilities. " — See Sparks' Life of Governeur Morris, vol. 1, page 235.
In the same valuable work will be found, also, an address of Mr. Morris to the Gen- eral Assembly of Pennsylvania, in behalf of the said bank, in 1785, on an occasion when a proposition had been made to abolish its charter. It is written with uncom- mon ability and knowledge of the subject, considering the infancy, at that period, of banking operations in this country. — Sec vol. Ill, page 437.
CHAPTER II.
BANK OF THE UNITED STATES.
PROCEEDINGS ON THE GRANT OF THE FIRST CHARTER, IN 1791.
HorsE OF REPRESENTATIVES, ?
i 'ungresa, Third Session. 5
ON the 14th December, 1790, as appears by the Journals of the House of Representatives of that date, (see vol. 1, page 336> the Secretary of the Treasury, Alexander Hamilton, transmitted to the House a letter, accom- panying his Report, No. 2, of a plan for the institution of a National 15ank; which was read and ordered* to be referred to a Committee of the \Vhol<» House, on that day se'nnight.
On the xJ3d of December, it was
Ordered, That the Clerk of the House do communicate to the Senate thai, this House has received a report from the Secretary of the Treasury, contain- ing a plan for a National Bank, and that he cany an attested copy of the said report to the Senate. The report was as follows:
In obedience to the order of the House of Representatives, of the ninth day of August last, requiring the Secretary of the Treasury to prepare and re-- port, on this day, such further provision as may, in his opinion, be neces- sary for establishing the public credit, the said Secretary further respect- fully reports: t
That, from a conviction that a National Hank is an institution of primary importance to the prosperous administration of the finances, and would be of the greatest utility in the operations connected with the support of the public credr&Shis attention has been drawn to devising the plan of such -an institu- tion, upon a scale which will entitle it to the confidence, and be likely to render it equal to the exigencies of the public.
Previously to entering upon the detail of this plan, he intreats the indul- gence of the House towards some preliminary reflections naturally arising out of the subject, which he hopes will be deemed neither useless nor out of place. Public opinion being the ultimate arbiter of every measure of government, it can scarcely appear improper, in deference to that, to accompany the origi- nation of any new proposition with explanations, which the superior informa- tion of those to whom it is immediately addressed, would rentier superiiuous.
It is a fact, well understood, tha^public banks have found admission and patronage among the principal and most enlightened commercial nations. They have successively obtained in Italy, Germany, Holland, England, and France, as well as in the United States. * Ami it is a circumstance which cannot but have considerable weight, in a candid estimate of their tendency, that, after an experience of centuries, there exists not a question about their utility, in the countries in which they have been so long established. Theo- rists and men of business unite in the acknowledgment of it. y Trade and industry, wherever they have been tried, have been indebted to them for important aid. And government has been repeatedly under the greatest obligations to them in dangerous and dirt, ^hm emergencies. That
1(3 BANK OF THE UNITED STATES.
of the United States, as well in some of the most critical conjunctures of the late war, as since the peace, has received assistance from those established among us, with which it could not have dispensed. "N
With this twofold evidence before us, it might be expected that there would be a perfect union of opinions in their favor. -Yet doubts have been enter- tained: jealousies and prejudices have circulated;, and, though the experi- ment is every day dissipating them, within the spheres in which effects are best known, yet there are still persons by whom they have not been entirely renounced. To give a full and accurate view of the subject, would be to make a treatise of a report; but there are certain aspects in which it may be cursorily exhibited, which may perhaps conduce to a just impression of its merits. These will involve a comparison of the advantages with the disad- vantages, real or supposed, of such institutions.
The following are among the principal advantages of a bank: First. The augmentation of the active or productive capital of a country. Gold and silver, when they are employed merely as the instruments of ex- change and alienation, have been, not improperly, denominated dead stock; but when deposited in banks, to become the basis of a paper circulation, which takes their character and place, as the signs or representatives of value, they then acquire life, or, in other words, an active and productive quality X This idea, which appears rather subtile and abstract, in a general form, may be made obvious and palpable, by entering into a feTv particulars. It is evident, for instance, that th<Hmoriey which a merchant keeps in his chest, waiting for a favorable opportunity to employ it, produces nothing till that opportu- nity arrives. But if, instead of locking it up in this manner, he either de- posites it in a bank, or invests it in the stock of a bank, it yields a profit during the interval, in which he partakes, or not, according to the choice he may have made of being a depositor or a proprietor^ and when any advanta- geous speculation offers, in order to be able to embrace it, he has only to withdraw his money, if a depositor-, or, if a proprietor, to obtain a loan from the bank, or to dispose of his stock— an alternative seldom or never attended with difficulty, when the affairs of the institution are in a prosperous train. vHis money, thus deposited or invested, is a fund upon which himself and •others can borrow to a injich larger amount. V It is a well established feet. \ that banks in good credit can circulate a far greater sum than the actual quantum of their capital in gold and silver./ The extent of the possible ex- cess seems indeterminate; though it has been conjecturally stated at the pro- portions of two and three to one. This faculty is produced in various ways. 1st. A great proportion of the notes which are issued, and pass current as cash, are indefinitely suspended in circulation, from the confidence which each holder has, that he can, at any moment, turn them into gold and silver. 2dly. Every loan which a bank makes, is, in its first shape, a credit given to the borrower on its books, the amount of which it stands ready to pay, either in its own notes, or in gold or silver, at his option. But, in a great number of cases, no actual payment is made in either. The borrower frequently, by a check or order, transfers his credit to some other person, to whom he has a payment to make; who, in his turn, is as often content with a similar credit, pecause he is satisfied that he can, whenever he pleases, either convert it into cash, or pass it to some other hand, as an equivalent for it. And in this manner the credit keeps circulating, performing in e'very stage the office of money, till it is extinguished by a discount with some person who has a pay- ment to make to the bank, to an equal or greater amount.^Thus large sums are lent and paid, frequently through a variety of hands, without the inter- vention of a single piece of coin, \ficlly. There is always a large quantity of gold and silver m the repositories of the bank, besides its own stock, which is placed there, with a view partly to its safe keeping, and partly to the ac- commodation of an institution,, which is itself a source of general accommoda- tion. % These deposites are of immense consequence in the operations of a bank. Though liable to be redrawn at any moment, experience proves that
CHARTER OF 1791. 17
die money so much oftener changes proprietors than place, and that what is drawn out is generally so speedily replaced, as to authorize the counting upon the sums deposited, as an effective fund, which, concurring with the stock of the bank, enables it to extend its loans, and to answer all the de- mands for coin, whether in consequence of those loans, or arising from the occasional return of its note?.
These different circumstances explain the manner in which the ability of a bank to circulate a greater sum than its actual capital in coin, is acquired. This, however, must be gradual, and must be preceded by a. firm establish- ment of confidence — a confidence which mav be bestowed on the most rational grounds, since the excess in question will always be bottomed on good secu- rity of one kind or another. This, every well conducted bank carefully re- quires, before it will consent to advance either its money or its credit, and where there is an auxiliary capital, (as will be the case in the plan hereafter submitted) which, together with the capital in coin, define the boundary that shall not be exceeded by the engagements of the bank, the security may. con- sistently with all the maxims of a reasonable circumspection, be regarded as complete.
; The same circumstances illustrate the truth of the position, that it is one of the properties of banks to increase the active capital of a country. This, in other words, is the sum of them: the money of one individual, while he is waiting for an opportunity to employ it, by being either deposited in the bank for safe keeping, or invested in its stock, is in a condition to administer to the wants or others, without being put out ot his own reach when occasion presents. This yields an extra profit, arising from what is paid for the use of nis money by others, when he could not himself make use of it, and keeps the money itself in a state of incessant activity. In the almost infinite vicis- situdes and competitions of mercantile enterprise, there never can be danger of an intermission of demand, or that the money will remain for a moment idle in the vaults of the bank. This additional employment given to money, and the faculty of a bank to lend and circulate a greater sum than the amount of its stock in coin, are, to all the purposes of trade and industry, an absolute increase of capital. Purchases ana undertakings, in general, can be carried on by any given sum of bank paper or credit, as effectually as by an equal sum of gold and silver. '-And thus, by contributing to enlarge the mass of industrious and commercial enterprise, banks become nurseries of national wealth — a consequence as satisfactorily verified by experience, as it is clearly deducible in theory./
Secondly. Greater facility to tta government, in obtaining pecuniary aids, especially in sudden emergencies^ This is another, and an undisputed advan- tage of public banks — one which, as already remarked, has been realized in signal instances among ourselves. The reason is obvious^ the capitals of a great number of individuals are, by this operation, collected to a point, and placed under one direction. The mass formed by this union, is, in a certain sense, magnified by the credit attached to itj and while this mass is always ready, and can at once be put in motion, in aid of the government, the inter- est of the bank to afford that aid, independent of regard to the public safety and welfare, is a sure pledge for its disposition to go as far in its compliances as can in prudence be desired. There is, in the nature of things, as will be more particularly noticed in another placeman intimate connexion of i between the government and the bank of a nation,/
Thirdly. The facilitating of the payment of taxes.,? This advantage is pro-' duced in two ways. /Those who are in a situation to have access to the bank, can have the assistance of loans, to answer, with punctuality, the public calls upon them.-¥This accommodation has been sensibly felt in the payment of the duties heretofore laid by thf)se who reside where establishments of this nature exist. This, however, though an extensive, is not an universal benefit. -The other way in which the effect here contemplated is produced, and in which the benefit is general, isthe increasing of the quantity of circulating medium, and the quickening of circulation." The manner in which the first happens, 3
18 BANK OF THE UNITED STATES.
has already been traced. The last may require some illustration. When payments are to be made between different places, having an intercourse of business with each other, if there happen to be no private bills at market, and there are no bank notes which have a currency in both, the consequence is, that coin must be remitted. This is attended with trouble, delay, expense, and risk. If, on the contrary, there are bank notes current in both places, the transmission of these by the post, or any other speedy or convenient con- veyance, answers the purpose^and these again, in the alternations of de- mand, are frequently returned, veiy soon after, to the place from whence they were first sent: whence the transportation and re -transportation of the metals are obviated, and a more convenient and more expeditious medium of payment is substituted. Nor is this all : the metals, instead of being sus- pended from their usual functions during this process of vibration from place to place, continue in activity, and administer still to the ordinary circulation, which, of course, is prevented from suffering either diminution or stagnation. These circumstances are additional causes oif what, in a practical sense, or to the purposes of business, may be called greater plenty of money* And it is evident, that whatever enhances the quantity of circulating money, adds to the ease with which every industrious member of the community may ac- quire that portion of it of which lie stands in need, and enables him the better to pay his taxes, as well as to supply his other wants. Even where the cir- culation of (he bank paper is not general, it must still have the same effect, though in a less degree: for, whatever furnishes additional supplies to the channels of circulation, in one quarter, naturally contributes to keep the streams fuller elsewhere. This last view of the subject serves both to illus- trate the position that banks tend to facilitate the payment of taxes, and to exemplify their utility to business of every kind in which money is an agent. It would be to intrude too much on the patience of the House, to prolong the details of the advantages of banks; especially, as all those which might still be particularized, are readily to be inferred as consequences from those which have been enumerated. Their disadvantages, real or supposed, are now to be reviewed. The most serious of the charges which have been brought against them, are,
/ That they serve to increase usury;
That they tend to prevent other kinds of lending;
£ That they furnish temptations to overtrading;
* That they afford aid to ignorant adventurers, who disturb the natural and beneficial course of trade;
5 That they give to bankrupt and fraudulent traders a fictitious credit, which enables them to maintain false appearances, and to extend their impositions; and, lastly,
t That they have a tendency to banish gold and silver from the country.
There is great reason to believe that, on a close and candid survey, it will be discovered that these charges are either destitute of foundation, or that, as far as the evils they suggest nave been found to exist, they have proceeded from other, or partial, or temporary causes; are not inherent in the nature and permanent tendency of such institutions; or are more than counterba- lanced by opposite advantages. This survey shall be had, in the order in which the charges nave been stated. The first of them is —
^ That banks serve to increase usury.
It is a truth, which ought not to be denied, that the method of conducting business, which is essential to bank operations, has, among us, in particular instances, given occasion to usurious transactions. The punctuality in pay- ments, which they necessarily exact, has sometimes obliged those who have adventured beyond both their capital and their credit, to procure money at any price, and, consequently, to resort to usurers for aid.
But experience and practice gradually bring a cure to this evil. A general habit of punctuality among traders is the natural consequence of the neces-
CHARTER OF 1791. 1Q
sity of observing it with the bank; a circumstance which, itself, more than compensates for any occasional ill which may have sprung from that necessi- ty, in the particular under consideration. As far, therefore, as traders depend on each other for pecuniary supplies, they can calculate their expectations with greater certainty; and are in proportionably less danger of disappoint- ments, which might compel them to have recourse to so pernicious an expe- dient as that of borrowing atusury^the mischiefs of which, after a few ex- amples, naturally inspire great care in all but men of desperate circumstan- ces, to avoid the possibility of being subjected to them. One, and not the least of these evils incident to the Hse of that expedient, if the fact be known, or even strongly suspected, is" loss of credit with the bank itself.
The directors of a bank, too, though, in order to extend its business and its popularity, in the infancy of an institution, they may be tempted to go fur- ther in accommodation than the strict rules of prudence will warrant, grow more circumspect, of course, *&s its affairs become better established, and as evils of too great facility are experimentally demonstrated. They be- come more attentive to the situation and conduct of those with whom they deal; they observe more narrowly their operations and pursuits; they econo- mize the credit they give to those of suspicious solidity^ they refuse it to those •whose career is more manifestly hazardous. In a word, in the course of practice, from the very nature of things, the interest will make it the policy of a bank to succor the wary and industrious; to discredit the rash and un- thrifty; to discountenance both usurious lenders and usurious borrowers.
There is a leading view, in which the tendency of banks will be seen to be, to abridge rather than to promote usury. This relates to their property of in- creasing the quantity and quickening the circulation of money. If it be evi- dent that usury will prevail or diminish, according to the proportion which the demand for borrowing bears to the quantity of money at market to be lent;, whatever has the property just mentioned, whether it be in the shape of paper or cohvl^y contributing to render the supply more equal to the de- mand, must tend to counteract the progress of usury.
— But bank lending, it is pretended, is an impediment to other kinds of lend- ing; which, by confining the resource of borrowing to a particular class, leaves . the rest of the community more destitute, and, therefore, more exposed to the extortions of usurers. As the profits of bank stock exceed me legal rate of interest, the, possessors of money, it is urged, prefer investing it in that article to lending it at this rate^ to which there are the additional mo- tives of a more prompt command of the capital, and of more frequent and exact returns, without trouble or perplexity in the collection. This consti- tutes the second charge which has been enumerated-
The fact on which this charge rests is not to be admitted without several <iualifications; particularly in reference to the state of things in this country. first. The greajt bulk of the stock of a bank will consist of the funds of men in trade, among^ ourselves, and moneyed foreigners^ the former of whom could not spare their capitals out of their reach, to be invested in loans for long periods, on mortgages or personal security; and the latter of whom would not be willing to be subjected to the casual ties,[delays, and embarrasments, of such a disposition of their money, in a distant country. Secondly. There will always be a considerable proportion of those who are properly the money lenders of a country, who, from that spirit of caution which usually character- izes this description of men, will incline rather to vest their funds in mort- gages on real estate, than in the stock of a bank, which they are apt'to consi- der as a more precarious security.
These considerations serve, in a material degree, to narrow the foundation of the objection, as to the point of fact, But there is a more satisfactory an- swer to it. The effect supposed, as far as it has existence, is temporary. The reverse of it takes place in the general and permanent operation of the thing. The capital of every public bank will, of course, be restricted within a cer- tain denned limit. It is the province of legislative prudence so to adjust this limit, that, while it will not be too contracted for the demand which the course
20 BANK OF THE UNITED STATES.
of business may create, and for the security which the public ought to have for the solidity of the paper which may be issued by the bank, it will still be within the compass of the pecuniary resources of the community; so that there may be an easy practicability of completing the subscriptions to it. When this is once done, the supposed effect of necessity ceases. There is then no longer room for the investment of any additional capital. Stock may indeed change hands by one person selling and another buy ing; but the money which the buyer takes out of the common mass to purchase the stock, the seller re- ceives and restores to it. Hence, the future surplusses which may accumulate must take their natural course, and lending at interest must go on as if there were no such institution.
It must, indeed, flow in a more copious stream. The bank furnishes an extraordinary supply for borrowers, within its immediate sphere. A largev supply consequently remains for borrowers elsewhere. In proportion as the circulation ot the bank is extended, there is an augmentation of the aggre- gate mass of money for answering the aggregate mass of demand. Hence* greater facility in obtaining it for every purpose.
It ought not to escape without a remark, that, as far as the citizens of other countries become adventurers in the bank, there is a positive increase of the gold and silver of the country. It is true, that, from this, a half yearly rent is di^yn back, accruing from the dividends upon the stock.. But as this rent arises from the employment of the capital by our own citizens, it is pro- bable that it is more than replaced by the profits of that employment. It i& also likely that a part of it is, in the course of trade, converted inta the pro- ducts of our country; and it may even prove an incentive, in some cases, to emigration to a country,. i*1 which the character of citizen is as easy to be ac- quired as it is estimable and important.. This view of the subject furnishes an answer to an objection whicn has been deduced from the circumstance here taken notice of, namely, the income resulting to foreigners from the part of the stock owned by them, which has been represented as tending to drain, the country of its specie. In this objection, the original investment of the capital, and the constant use of it afterwards, seem. both to have been over--
"^That banks furnish, temptations to overtrading, is the third of the enumerated objections. This must mean, that, by affording additional aids to mercantile enterprise, they induce the merchant sometimes to adventure beyond the prudent or salutary point. But the very statement of the thin^ shows that the subject of the charge is an occasional ill, incident to a general good. Credit of every kind, (as a species of which only, can bank lending have the effect supposed) must be, in different degrees,, chargeable with the same inconve- nience. It is even applicable to gold and silveiv when they abound in circula- tion. But would it be wise, on this account, to decry the precious matals, to. root out credit, or to proscribe the means of that enterprise which is the main- spring of trade, and a principal source of national wealth, because it now and then runs into excesses,, of which overtrading is one.^
If the abuses of a beneficial thing are to determine its condemnation there is scarcely a source of public prosperity which will not speedily be closed- In every case the evil is to be compared with the good; and in the present ease, such a comparison will issue in this, that the new and increased energies derived to commercial enterprise, from the aid of banks, are a source of gen- eral profit and advantage, which greatly outweigh the partial ills, the over- trading of a few individuals at particular times, or of numbers in particular conjunctures.
^ The fourth and- fifth charges may be considered together.. These relate to the aid which is sometimes afforded by banks to unskilful adventurers and fraudulent traders* These charges also have some degree of foundation, though far less than has been pretended; and they add to the instances of
s partial ills, connected with more extensive and overbalancing benefits.
The practice of giving fictitious credit to improper persons, is one of those evils which experience, guided by interest, speedily corrects. The bank itself
CHARTER OF 1791. £1
is in so much jeopardy of being a sufferer by it, that it has the strongest of all inducements to be on its guard. It may not only be injured immediately by the delinquencies of the persons to whom such credit is given, but eventually by the incapacities of others, whom their impositions or failures may have ruined.
Nor is there much danger of a bank's being betrayed into this error from want of information. The directors themselves being, for the most part, se- lected from the class of traders, are to be expected to possess individually an accurate knowledge of the characters and situations of those who come within that description. And they have, in addition to this, the course of dealing of the persons themselves with the bank, to assist their judgment, which is in most cases a good index of the state in which those persons are- The arti- fices and shifts which those in desperate or declining circumstances are obli- ged to employ, to keep up the countenance which the rules of the bank re- quire, and the train ot their connexions, are so many prognostics, not difficult to be interpreted, of the fate which awaits them. Hence, it not unfrequently happens, that banks are the first to discover the unsoundness of such charac- ters, and, by withholding credit, to announce to the public that they are not entitled to it.
If banks, in spite of every precaution, are sometimes betrayed into giving a false credit to the persons described, they more frequently enable honest and industrious men, of small, or, perhaps, of no capital, to undertake and pro - secute business with advantage to themselves and to the community; and as- sist merchants, of both capital and credit, who meet with fortuitous and un- foreseen shocks, which might, without such helps, prove fatal to them and to others, to make head against their misfortunes, and finally to retrieve their affairs — circumstances which form no inconsiderable encomium on the utility of banks.
~~ But the last and heaviest charge is still to be examined: this is, that banks tend to banish the gold and silver of the country.
The force of this objection rests upon their being an engine of paper credit, which, by furnishing a substitute for the metals, is supposed to promote their exportation. It is an objection, which, if it has any foundation, lies not against banks peculiarly, but against every species of paper credit.
The most common answer given to it is, that the thing supposed is of little or no consequence; that it is immaterial what serves the purpose of money, whether paper or gold and silver; that the effect of both upon industry is the same; and that the intrinsic wealth of a nation is to be measured, not by the abundance of the precious metals contained in it, but by the quantity of the. productions of its labor and industry.
This answer is not destitute of solidity, though not entirely satisfactory. It is certain, that the vivification of industry, by a full circulation, with the aid of a proper and well regulated paper credit, may more than compensate for the loss ot a part of the gold and silver of a nation, if the consequence of avoiding that loss should be a scanty or defective circulation.
But the positive and permanent increase or decrease of the precious metals in a country can hardly ever be a matter of indifference. As the commodity taken HI lieu of every other, it is a species of the most effective wealth; and as the money of the world, it is of great concern to the State, that it possess a sufficiency of it to face any demands which the protection of its external interests may create.
The objection seems to admit of another and more conclusive answer, which controverts the fact itself. A nation that has no mines of its own, must derive, the precious metals from others; generally speaking, in exchange for the products of its labor and industry. The quantity it will possess, will, there- lore, in the ordinary course of things, be regulated by the favorable or unfa- vorable balance of its trade; that is, by the proportion between its abilities to supply foreigners, and its wants of them; between the amount of its exporta- tions and that of its importations. Hence, the state of its agriculture and manufactures, the quantity and quality of its labor and industry, must, in the
22 BANK OF THE UNITED STATES.
main, influence and determine the increase or decrease of its gold and silver. If this be true, the inference seems to be, that well constituted banks favor the increase of the precious metals. It has been shown that they augment, in different ways, the active capital of a country. This it is which generates employment; which animates and expands labor and industry. Every addi- tion which is made to it, by contributing to put in motion a greater quantity ofbqthj tends to create a greater qi lantity of the products of both; and, by furnishing more materials for exportation, conduces to a favorable balance of trade, and, consequently, to the introduction and increase of gold and silver.
This conclusion appears to be drawn from solid premises. There are, how- ever, objections to be made to it.
It may be said that, as bank paper affords a substitute for specie, it serves to counteract that rigorous necessity for the metals, as a medium of circulation, which, in the case of a wrong balance, might restrain, in some degree, their exportation; and it may be added, that, from the same cause, in the same case, it would retard those economical and parsimonious reforms in the manner of living, which the scarcity of money is calculated to produce, and which might be necessary to rectify such wrong balance.
There is, perhaps, some truth in D9th these observations; but they appear to be of a nature rather to form exceptions to the generality of the conclusion, than to overthrow it. The state of things in whicn the absolute exigencies of circulation can be supposed to resist, with any effect, the urgent demands for specie which a wrong balance of trade may occasion, presents an extreme case. And a situation in which a too expensive manner of living of a community, compared with its means, can stand in need of a corrective, from distress or necessity, is one which, perhaps, rarely results but from extraordinary and adventitious causes: such, for example, as a national revolution; which unset- tles all the established habits of the people, and inflames the appetite for extra- vagance, by the illusions of an ideal wealth, engendered by the continual multiplication of a depreciating currency, or some similar cause. There is a good reason to believe, that, where the laws are wise and well executed, and the inviolability of property and contracts maintained, the economy of a people will, in the general course of things, correspond with its means.
The support of industry is, probably, in every case, of more consequence towards correcting a wrong balance of trade, than any practicable retrench- ments in the expenses of families or individuals; and the stagnatiou of it would be likely to have more effect in prolonging, than any such savings in shorten- ing, its continuance. That stagnation is a natural consequence of an inade- quate medium, which, without the aid of bank circulation, would, in the cases supposed, be severely felt.
It also deserves notice, that, as the circulation is always in a compound ratio to the fund upon which it depends, and to the demand for it, and as that fund is itself affected by the exportation of the metals, there is no danger of its being overstocked, as in the case of paper issued at the pleasure of the government, or of its preventing the consequences of any unfavorable balance from being sufficiently felt to produce the reforms alluded to, as far as cir- cumstances may require and admit.
Nothing can be more fallible than the comparisons which have been made between different countries, to illustrate the truth of the position unfler con- sideration. The comparative quantity of gold and silver, in different countries depends upon an infinite variety of facts and combinations, all of which ought to be known in order to judge whether the existence or non-existence of paper currencies has any share in the relative proportions they contain: the mass and value of the productions of the labor and industry of each, compared with its wants; the nature of its establishments abroad; the kind ot wars in which it is usually engaged; the relations it bears to the countries which are the original possesors of those metals; the privileges it enjoys in their trade;— these, and a number of other circumstances, are all to be taken into the account, and render the investigation too complex to justify any reliance on the vague and general surmises which have been hitherto hazarded on the point.
CHARTER OF 1791. 23
In the foregoing discussion, the objection has been considered as applying to the permanent expulsion and diminution of the metals- Their temporary ex- portation, for particular purposes, has not been contemplated. This, it must be confessed, is facilitated by banks, from the faculty they possess of sup- plying their place. But their utility is in nothing more conspicuous than m these very cases. They enable the government to pay its foreign debts, and to answer any exigencies which the external concerns of the community may have produced. They enable the merchant to support his credit, (on which the prosperity of trade depends) when special circumstances prevent remit- tances in other modes. They enable him also to prosecute enterprises which ultimately tend to an augmentation of the species of wealth in question. It is evident that gold and silver may often be employed in procuring commodities abroad, which, in a circuitous commerce, replace the original fund, with con- siderable addition. But it is not to be inferred, from this facility given to tem- porary exportation, that banks, which are so friendly to trade and industry, are, in their general tendency, inimical to the increase of the precious metals.
These several views of the subject appear sufficient to impress a full con- viction of the utility of banks, and to demonstrate that they are of great im- portance, not only in relation to the administration of the finances, but in the general system of the, political economy.
The judgment of many concerning them has, no doubt, been perplexed, by the misinterpretation of appearances which were to be ascribed to other causes. The general devastation or personal property, occasioned by the late war, na- turally produced, on the one hand, a great demand for money, and, on the other, a great deficiency of it to answer the demand. Some injudicious laws, which grew out of the public distresses, by impairing confidence, and causing a part of the inadequate sum in the country to be locked up, aggravated the evil. The dissipated habits contracted by many individuals, during the war, which, after the peace, plunged them into expenses beyond their incomes; the number of adventurers without capital, and, in many instances, without in- formation, who at that epoch rushed into trade, and were obliged to make any sacrifices to support a transient credit; the employment of considerable sunis in speculations upon the public debt, which, from its unsettled state, was in- capable of becoming itself a substitute: all these circumstances concurring, necessarily led to usurious borrowing, produced most of the inconveniences, and were the true causes of most of the appearances, which, where banks were established, have been by some erroneously placed to their account — a mistake which they might easily have avoided by turning their eyes towards places where there were none, and where, nevertheless, the same evils would have- been perceived to exist, even in a greater degree than where those institutions had obtained.
These evils have either ceased or been greatly mitigated. Their more com- plete extinction may be looked for from that additional security to property which the constitution of the United States happily gives; (a circumstance of prodigious moment in the scale, both of public and private prosperity) from the attraction of foreign capital, under the auspices of that security, to be employ- ed upon objects, and in enterprises, for which the state of this country opens a wide and inviting field; from the consistency and stability which the public debt is fast acquiring, as well in the public opinion at home and abroad, as, in fact, from the augmentation of capital which that circumstance and the quarter- yearly payment of interest will afford; and from the more copious circulation which will be likely to be created by a well constituted national bank.
The establishment of banks in this country seems to be recommended by |j reasons of a peculiar nature. Previously to the Revolution, circulation was in H a great measure carried on by paper emitted by the several local governments. In Pennsylvania alone, the quantity of it was near a million and a half of dol- lars. This auxiliary may be said to be now at an end. And it is generally supposed that there has been, for some time past, a deficiency of circulating medium. How far that deficiency is to be considered as real or imaginary, is not susceptible of demonstration; but there are circumstances and appear-
24 BANK OF THE UNITED STATES.
ances, which, in relation to the country at large, countenance the supposition of its reality.
The circumstances are, besides the .fact just mentioned respecting paper emissions, the vast tracts of waste land, and the little advanced state of manu- factures. The progressive settlement of the former, while it promises ample retribution, in the generation of future resources, diminishes or obstructs, in the mean time, the active wealth of the country. It not only draws off a part of the circulating money, and places it in a more passive state, but it diverts, into its own channels, a portion of that species of labor and industry which would otherwise be employed in furnishing materials for foreign trade, and which,by contributing to a favorable balance, would assist the introduction of specie. In the early periods of new settlements, the settlers not only furnish no sur- plus for exportation, but they consume apart of that which is produced by the labor of others. The same thing is a cause that manufactures do not advance, or advance slowly. And, notwithstanding some hypotheses to the contrary, there are many things to induce a suspicion, that the precious metals will not abound in any country which has not mines, or variety of manufactures. They have been sometimes acquired by the sword ; but the modern system of war has expelled this resource, and it is one upon which it is to be hoped the United States will never be inclined to rely.
The appearances alluded to are, greater prevalency of direct barter in the more interior districts of the country which, however, has been for some time past gradually lessening, and greater difficulty, generally, in the advanta- geous alienation of improved real estate, which, also, has of late diminished, but is still seriously felt in different parts of the Union. The difficulty of getting money, \yhich has been a general complaint, is not added to the number, be- cause it is the complaint of all times, and one in which imagination must ever have too great scope to permit an appeal to it.
If the supposition of such a deficiency be in any degree founded, and some aid , to circulation be desirable, it remains to inquire what ought to be the nature of that aid.
The emitting of paper money by the authority of Government is wisely pro- hibited to the individual States by the national constitution, and the spirit of that prohibition ought not to be disregarded by the Government of the United States. Though paper emissions, under a general authority, might have some advantages not applicable, and be free from some disadvantages which are ap- plicable to the like emissions by the States, separately, yet they are of a na- ture so liable to abuse— and, it may even be affirmed, so certain of being abus- ed—that the wisdom of the Government will be shown, in never trusting itself with the use of so seducing and dangerous an expedient. In times of tranquil- lity, it might have no ill consequence; it might even perhaps be managed in a way to be productive of good; but, in great and trying emergencies, there is al- most a moral certainty of its becoming mischievous. The stamping of paper is an operation so much easier than the laying of taxes, that a government in the practice of paper emissions, would rarely fail, in any such emergency, to indulge itself too far in the employment of that resource, to avoid as much as possible one less auspicious to present popularity. If it should not even be carried so far as to be rendered an absolute bubble, it would at least be likely to be ex- tended to a degree which would occasion an inflated and artificial state of things, incompatible with the regular and prosperous course of the political economy.
Among ot-iier material differences between a paper currency, issued by the
, mere authority of government, and one issued by a bank, payable in coin, is
|«this: that, in the first case, there is no standard to which an appeal can be
" made, as to the quantity which will only satisfy, or which will surcharge the
circulation; in the last, that standard results from the demand. If more should
be issued than is necessary, it will return upon the bank. Its emissions, as
elsewhere intimated, must always be in a compound ratio to the fund and the
demand; whence it is evident, that there is a limitation in the nature of the
'CHARTER OF 1791. 25
thing; while the discretion of the government is the only measure of the extent of the emissions, by its own authority.
This consideration further illustrates the danger of emissions of that sort, and the preference which is due to bank paper.
The payment of the interest of the public debt, at thirteen different places, is a weighty reason, peculiar to our immediate situation, for desiring a bank cir- culation. Without a paper in general currency, equivalent to gold and sil- ver, a considerable proportion of' the specie of the country must always be sus- pended from circulation, and left to accumulate, preparatory to each day of payment; and as often as one approaches, there must in several cases be an ac- tual transportation of the metals, at both expense and risk, from their natural and proper reservoirs, .to distant places, M his necessity will be felt very in- juriously to the trade of some of the States: and will embarrass, not a little, the operations of the treasury in those States It will also obstruct those ne- gotiations, between different parts of the Union, by the instrumentality of trea- sury bills, which have alreacfy afforded valuable accommodations to trade in general,
Assuming it, then, as a consequence, from what has been said, that a na- tional bank is a desirable institution, two inquiries emerge: Is there no such in- stitution, already in being, which has a claim to that character, and which su- persedes the propriety or necessity of another? If there be none, what are the principles upon which one ought to be established?
There are at present three, banks in the United States: that of North Ame- rica, established in the city of Philadelphia: that of New York /established in the citv of New York; that of Massachusetts, established in the tovvn of Bos- ton. Of these three, the first is the only one which has at any time had a direct relation to the Government of the United States^
The Bank of North America originated in a resolution of Congress of the 2Gthof May, 1781, founded upon a proposition of the Superintendent of Fi- nance, which was afterwards carried into execution by an ordinance of the 31st of December following, entitled "An ordinance to incorporate the subscribers to the Bank of North America."
The aid afforded to the United States by this institution, during the re- maining period of the war, was of essential consequence; and its conduct towards them since the peace, has not weakened its title to their patronage and favor. So far, its pretensions to the character in question are respecta- ble; but there are circumstances which militate against them, and considera- tions which indicate the propriety of an establishment on different principles. The directors of this bank, on behalf of their constituents, have since accepted and acted under a new charter from the State of Pennsylvania, ma- / terially variant from their original one, and which so narrows the foundation - of the institution, as to render it an incompetent basis for the extensive pur- > poses of a national bank. •
The limit assigned by the ordinance of Congress to the stock of the bank, is ten millions of dollars. The last charter of Pennsylvania confines it to two millions. Questions naturally arise, whether there be not a direct re- pugnancy between two charters so differently circumstanced? and whether the acceptance of the one is not to be deemed a virtual surrender of the other? But, perhaps it is neither advisable nor necessary to attempt a solu- tion of them.
There is nothing in the acts of Congress which imply an exclusive right, in the institution to which they relate, except during the term of the war. There is, therefore, nothing, if the public good require it, which prevents the establishment of another. It may, however, be incidentally remarked, that, in the general opinion of the citizens of the United States, the Bank of North America has taken the station of a bank of Pennsylvania only. This is a strong argument for a new institution, or for a renovation of the old, to re- store it to the situation in which it originally stood in the view of tb? United States.
4
20 BANK OF THE UNITED STATES.
But, though the ordinance of Congress contains no grant of exclusive pri- vileges, there may be room to allege that the Government of the United States ought not, in point of candor and equity, to establish any rival or in- terfering institution, in prejudice of the one already established; especially as this has, from services rendered, well founded claims to protection and regard.
The justice of such an observation, ought, within proper bounds, to be ad- mitted. A new establishment of the sort, ought not to be made without co- gent and sincere reasons of public good. And in the manner of doing it, every facility should be given to a consolidation of the old with the new, upon terms not injurious to the parties concerned. But there is no ground to maintain, that, in a case in which the Government has made no condition restricting its authority, it ought voluntarily to restrict it, through regard to the interests of a particular institution, when those of the State dictate a dif- ferent course; especially, too, after such circumstances have intervened, as characterise the actual situation of the Bank of North America.
The inducements to a new disposition of the thing are now to be consider- ed. The first of them which occurs is, the at least ambiguous situation in .which the Bank of North America has placed itself, by the acceptance of its last charter. If this has rendered it the mere bank of a particular State, lia- ble to dissolution at the expiration of fourteen years, to which term the act of that State has restricted its duration, it would be neither fit nor expedient to accept it as an equivalent for a bank of the United States.
The restriction of its capital, also, which, according to the same supposition, cannot be extended beyond two millions of dollars, is a conclusive reason for a different establishment. So small a capital promises neither the requisite aid to Government, nor the requisite security to the community. It may an- swer very well the purposes of local accommodation, but is an inadequate foundation for a circulation co-extensive with the United States, embracing the whole of their revenues, and effecting every individual into whose hands the paper may come.
An*', inadequate as such a capital would be to the essential ends of a na- tional bank, it is liable to be rendered still more so, by that principle of the constitution of the Bank of North America, contained equally in its old and in its new charter, which leaves the increase of the actual capital at any time (now far short of the allowed extent) to the discretion of the directors or stockholders. It is naturally to be expected, that the allurements of an ad- vanced price of stock, and of large dividends, may disincline those who are interested to an extension of capital, from which they will be apt to fear a diminution of profits. And from this circumstance, the interest and accom- modation of the public, (as well individually as collectively) are made more subordinate to the interest, real or imagined, of the stockholders, than they ought to be. It is true, that, unless the latter be consulted, there can be no bank, (in the sense at least in which institutions of this kind, vyorthy of con- Ifidence, can be established in this country.") But, it does not follow that this lis alone to be consulted, or that it even ougnt to be paramount. Public utility I is more truly the object of public banks than private profit. And it is the business of Government to constitute them on such principles, that, while the latter will result in a sufficient degree to afford competent motives to engage in them, the former be not made subservient to it. To effect this, a principal object of attention ought to be to give free scope to the creation of an ample capital, and with this view, fixing the bounds which are deemed safe and con- venient, to leave no discretion either to stop short of them, or to overpass them. The want of this precaution, in the establishment of the Bank of North America, is a further and an important reason for desiring one differently constituted.
There may be room at first sight for a supposition, that, as the profits of a bank will bear a proportion to the extent of its operations, and as. for this rea- son, the interest of the stockholders will not be disadvantageous^ affected by any necessary augmentations of capital, there is no cause to apprehend that
< HARTER OF 1/91. 2?
will be indisposed to such augmentations. But most men. in matters of ts nature, prefer the certainties they enjoy, to probabilities depending on untried experiments, especially when these promise rather that they will not be injured than that they will be benefitted.
From the influence of this principle, and a desire of enhancing its profits, the directors of a bank will be more apt to overstrain its faculties, in an at- tempt to face the additional demands which the course of business may create, than to set on foot new subscriptions, which may hazard a diminution of the profits, and even a temporary reduction of the price of stock.
Banks are among the best expedients for lowering the rate of interest in a country: but, to have this effect, their capitals must be completely equal to all the demands of business^ and such as will tend to remove the idea, that the accommodations they afford are in any degree favors — an idea very apt to accompany tjie parsimonious dispensation of contracted funds. In this, as in every other case, the plenty of the commodity ought to beget a moderation of the price.
1 he want of a principle of rotation in the constitution of the Bank of North i America is another argument for a variation of the establishment. Scarcely one of the reasons which militate against this principle in the constitution of a country, is applicable to that of a" bank; while there are strong reasons in favor of it, in relation to the one, which do not apply to the other. The know- ledge to be derived from experience is the only circumstance common to both, which pleads against rotation in the directing officers of a bank.
But the objects of the government of a nation, and those of the government of a bank, are so widely different, as greatly to weaken the force of that con- sideration in reference to the latter. Almost eveiy important case of legisla- tion requires, towards a right decision, a general and accurate acquaintance with the affairs of the State, and habits of thinking, seldom acquired but from a familiarity with public concerns. The administration of a bunk, on the con- trary, is regulated by a few simple fixed maxims, the application of which is not difficult to any man of judgment, especially if instructed in the principles of trade. It is, in general, a constant succession of the same details.
But, though this be the case, the idea of the advantages of experience is not to be slighted. Room ought to be left for the regular transmission of official information,- and, for this purpose, the head of the direction ought to be ex- cepted from the principle of rotation. With this exception, and with the aid of the information of the subordinate officers, there can be no danger of any ill •effects from want of experience or knowledge; especially as the periodical exclusion ought not to reach the whole of the directors at one time.
The argument in favor of the principle of rotation is this: that, by lessening the danger of combinations among the directors, to make the institution sub- servient to party views, or to the accommodation, preferably, of any particu- lar set of men, it will render the public confidence more firm, stable, and un- qualified.
AVhen it is considered that the directors of a bank are not elected by the great body of the community, in which a diversity of views will naturally prevail at different conjunctures, but by a small and select class of men, among whom it is far more easv to cultivate a steady adherence to the same persons and objects, and that those directors have it in their power so imme- diately to conciliate, by obliging the most influential of this class, it is easy to perceive that, without the principle of rotation, changes in that body can rarely happen, but as a concession which they may themselves think it expe- dient to make to public opinion.
The continual administration of an institution of this kind, by the same persons, will never fail, with or without cause, from their conduct^ to excite distrust and discontent. The necessary secrecy of their transactions gives unlimited scope to imagination to infer that something is or may be wrong. And this inevitable mystery is a solid reason for inserting in the constitution of a bank the necessity of a change of men. As neither me mass of the par- ties interested, nor the public in general, can be permitted to be witnesses of
2g BANK OF THE UNITED STATES.
the interior management of the directors, it is reasonable that both should h.u <; that check upon their conduct, and that security against the preyalency of a partial or pernicious system, which will be produced by the certainty of peri- odical changes. Such, too, is the delicacy of the1 credit of a bank, that every thing which can fortify confidence and repel, suspicion, without injuring ite operations, ought _ carefully to be sought after in its formation. * A further consideration in favor of a change, is the improper rule by which the right of voting for directors is regulated in the plan upon which the Bank of North America was originally constituted, namely, a vote for each share, and the want of a rule in the last charter; unless the silence of it, on that point, may signify that every stockholder is to have an equal and a single vote; which would be a rule in a different extreme, not less erroneous. It is of im- portance that a rule should be established on this head, as it is one of those things which ought not to be left to discretion; and it is, consequently, of equal importance that the rule should be a proper one.
A vote for each share renders a combination between a few principal stock- holders, to monopolize the power and benefits of the bank, too easy. An equal vote to each stockholder, however great or small his interest in the in- stitution, allows not that degree of weight to large stockholders which it is reasonable they should have, and which, perhaps, their security, and that of the bank, require. A prudent mean is to be preferred. A conviction of this has produced a by-law of the corporation of the Bank of North America, which evidently aims at such a mean. But a reflection arises here, that a like majority with that which enacted this law, may, at any moment, repeal it.
The last inducement which shall be mentioned, is the want of precautions to guard against a foreign influence insinuating itself into the direction of the bank. It seems scarcely reconcileable with a due caution, to permit that any but citizens should be eligible, as directors of a national bank, or that non- resident foreigners should be able to influence the appointment of directors by the votes of their proxies. In the event, however, of an incorporation of the Bank of North America, in the plan it may be necessary to qualify this principle, so as to leave the right of foreigners, who now hold shares of its stock, unimpaired; but without the power of transmitting the privilege in question to foreign alienees.
It is to be considered that such a bank is not a mere matter of private pro- perty, but a political machine of the greatest importance to the State,
There are other variations from trie constitution of the Bank of North America, not of inconsiderable moment, which appear desirable, but which are not of magnitude enough to claim a preliminary discussion. These will be seen in the plan which will be submitted in the sequel.
If the objections which have been stated, to the constitution of the Bank of North America, are admitted to be well founded, they will, nevertheless, not derogate from the merit of the main design, or of the services which that bank has rendered, or of the benefits which it lias produced. The creation of such an institution, at the time it took place, was a measure dictated by wisdom. Its utility has been amply evinced by its fruits — American inde- pendence owes much to it; and it is very conceivable, that reasons of the moment may have rendered those features in it inexpedient, which a revision, with a permanent view, suggests as desirable.
The order of the subject leads next to an inquiry into the principles upon which a national bank ought to be organized.
The situation of the United States naturally inspires a wish that the form of the institution could admit of a plurality of branches. But various con- siderations discourage from pursuing this idea. The complexity of such a plan would be apt to inspire doubts, which rnisht deter from adventuring in it. And the practicability of a safe and orderly administration, though not to be abandoned as desperate, cannot be made so manifest in perspective, as to promise the removal of those doubts, or to justify the Government in adopt- ing the idea as an original experiment. The most that would seem advisa- ble, on this point, is to insert a provision which may lead to it hereafter, if
( HARTER OF 1701, 29
experience shall nlore clearly demonstrate its utility, and satisfy those who may have the direction, that it may be adopted with safety. It is certain that it would have some advantages, both peculiar and important. Besides more general accommodation, it would lessen the danger of a run upon the bank,
The argument against it is, that each branch must be under a distinct, though subordinate direction, to which a considerable latitude of discretion must of necessity be entrusted. And as the property of the whole institution would be liable for the engagements of each part, that and its credit \yould be at stake, upon the prudence of the directors of every part. The misma- nagement of either branch might hazard serious disorder in the whole.
Another wish, dictated by the particular situation of the country, is, that the bank could be so constituted as to be made an immediate instrument of loans to the proprietors of land; but this wish also yields to the difficulty of accom- plishing it. Land is alone an unlit fund fora bank circulation. If the notes issued upon it were not to be payable in coin, on demand, or at a short date, this would amount to nothing more than a repetition of the paper emissions, which are now exploded by the general voice. If the notes are to be payable in coin, the land must first be converted into it by sale, or mortgage. The difficulty of effecting the latter, is the very thing which begets the desire of finding another resource, and the former would not be practicable on a sudden emergency, but with sacrifices which would make the cure \yorse than the disease. Neither is the idea of constituting the fund partly of coin and part- ly of land, free from impediments. These two species of property do not, for the most part, unite m the same hands. Will the moneyed man consent to enter into a partnership with the land holder, by which the latter will share in the profits which will be made by the money of the former? The money, it is evident, will be the agent or efficient cause of the profits — the land can only be regarded as an additional security. Itjs not difficult to foresee, that an union, on such terms, will not readily be formed. If the landholders are to procure the money by sale or mortgage of a part of their lands, this they can as well do when the stock consists wholly of money, as if it were to be compounded of money and land.
To procure for the landholders the assistance of loans, is the great desi- deratum. Supposing other difficulties surmounted, and a fund created, corn- posed partly of coin and partly of land, yet the benefit contemplated could only then be obtained, by the bank's advancing them its notes for the whole, or part, j»f the value ot the lands they had subscribed to the stock. If this advance'was small, the relief aimed at would not be given; if it was large, the quantity of notes issued would be a cause of distrust; and, if receivecfat all, they would be likely to return speedily upon the bank for payment; which, after exhausting its coin, might be under a necessity of turning its lands into money, at any price that could be obtained for them, to the irre- parable prejudice of the proprietors.
Considerations of public advantage suggest a further wish, which is? that the bank could be established upon principles that would cause the profits of it to redound to the immediate benefit ol the State. This is contemplated by many who speak of a national bank, but the idea seems liable to insupera- ble objections. To attach full confidence to an institution of this nature, it appears to be an essential ingredient in its structure, that it shall be under a private not a public direction — under the guidance of individual interest, not of public policy; which would be supposed to be, and, in certain emergencies, under a feeble or too sanguine administration, would really be, liable to being too much influenced by public necessity. The suspicion of this would most probably be a canker that would continually corrode the vitals of the credit of the bank, and would be most likely to prove fatal in those sitaations in which the public good would require that they should be most sound and vigorous. It would, indeed, be little less than a miracle, should the credit of the bank be at the disposal of the Government^ if, in a long series of time, there was not experienced a calamitous abuse of it. It is true, that it would
;3Q BANK OF THE UNITED STATES.
be (he real interest of the Government not to abuse it; its genuine policy, to husband and cherish it with the most guarded circumspection, as an inesti- mable treasure. But what government ever uniformly consulted its true in- terests in opposition to the temptations of momentary exigencies? What nation was ever blessed with a constant succession of upright and wise ad- ministrators?
The keen, steady, and, as it were, magnetic sense of their ovyn interest, as proprietors, in (he directors of a bank, pointing invariably to its true pole, the prosperity of the institution, is the only security that can always be relied upon lor a careful and prudent administration. It is, therefore, the only basis on which an enlightened, unqualified, and permanent confidence can be expected to be erected and maintained.
The precedents of the banks established in several cities of Europe, Am- sterdam, Hamburgh, and others, may seem to militate against this position. Without a precise knowledge of all the peculiarities of their respective con- stitutions, it is difficult to pronounce how far this may be the case. That of Amsterdam, however, which we best know, is rather under a municipal than a governmental direction. Particular magistrates of the city, not officers of the republic, have the management of it. It is also a bank of deposite, not of loan, or circulation; consequently less liable to abuse, as well as less use- ful. Its general business consists in receiving money for safe keeping, which, if not called for within a certain time, becomes a part of its stock, and irre- claimable. But a credit is given for it on the books of the bank, which, being transferable, answers all the purposes of money.
The directors being magistrates of the city, and the stockholders in general its most influential citizens, it is evident that the principle of private interest must be prevalent in the management of the bank. And it is equally evi- dent, that, from the nature of its operations, that principle is less essential to it than to an institution constituted with a view to the accommodation of the public and individuals, by direct loans and a paper circulation.
As far as may concern the aid of the bank, within the proper limits, a good government has nothing more to wish for than it will always possess, though the management be in the hands of private individuals. As the in- titution, if rightly constituted, must depend for its renovation, from time to time, on the pleasure of the government, it will not be likely to feel a dis- position to render itself, by its conduct, unworthy of public patronage. The government, too, in 4he administration of its finances, has it in its power to reciprocate benefits to the bank, of not less importance than those which the bank affords to the government, and which, besides, are never unattended with an immediate and adequate compensation. Independent of these more particular considerations, the natural weight and influence of a good govern- ment will always go far towards procuring a compliance with its desires; and, as the directors will usually be composed of some of the most discreet,?respect- able, and well informed citizens, it can hardly ever be difficult to make them sensible of the force of the inducements which ought to stimulate their exertions.
It will not follow, from what has been said, that the State may not be the holder of a part of the stock of a bank, and consequently a sharer in the pro- fits of it. It will only follow that it ought not to desire any participation in the direction of it, and therefore ought not to own the whole or a principal part of the stock: for, if the mass of the property should belong to the public, and if the direction of it should be in private hands, this would be to commit the interests of the State to persons not interested, or not enough interested in their proper management.
There is one thing, however, which the Government owes to itself and to the community, at least to all that part of it who are not stockholders, which is, to reserve to itself a right of ascertaining, as often as may be necessary, the state of the bank-— excluding, however, all pretension to control. This right forms an article in the primitive constitution of the Bank of North America, and its propriety stands upon the clearest reasons. If the paper of a bank is to be permitted to insinuate itself into all the revenues and re-
CHARTER OF 1791. gj
ceipts of a country; if it is even to be tolerated as the substitute for gold and silver, in all the transactions of business; it becomes, in either view, a national concern of the first magnitude. As such, the ordinary rules of prudence re- quire that the government should possess the means of ascertaining, when- ever it thinks tit, that so delicate a trust is executed with fidelity and care. A right of this nature is not only desirable, as it respects the government, but it ought to be equally so to all those concerned in the institution, as an additional title to public and private confidence, and as a thing which can only be formidable to practices that imply mismanagement. The presump- tion must always be, that the characters who would be entrusted with the exercise of this right, on behalf of the government, will not be deficient in the discretion which it may require; at least, the admitting cf this presumption cannot be deemed too great a return of confidence for tnat very large portion of it which the government is required to place in the bank.
Abandoning, therefore, ideas which, however agreeable or desirable, are neither practicable nor safe, the following plan, for the constitution of a na- tional bank, is respectfully submitted to the consideration of the House.
1. The capital stock of the bank shall not exceed ten millions of dollars, divided into twenty -five thousand shares, each share being four hundred dol- lars; to raise which sum, subscriptions shall be opened on the first Monday of April next, and shall continue open until the whole shall be subscribed. Bodies politic as well as individuals may subscribe.
2. The amount of each share shall be payable, one-fourth in gold and sil- ver coin, and three-fourths in that part of the public debt which, according to the loan proposed by the act making provision for the debt of the United States, shall bear an accruing interest, at the time of payment, of six per cent, per annum.
3. The respective sums subscribed shall be payable in four equal parts, as well specie as debt, in suncs-ion, and at the distance of six calendar months from each other; the first payment to bo made at the time of subscription. If there shall be a failure in any subsequent payment, the party failing shall lose the benefit of any dividend which may have accrued prior to the time for making such payment, and during the delay of the same.
4. Ihe subscribers to the bank, and their successors, shall be incorporated, and shall so continue, until the final redemption of that part of its stock which shall consist of the public debt.
5. The capacity of the corporation to hold real and personal estate, shall be limited to fifteen millions of dollars, including the amount of its capital or original stock. The lands and tenements which it shall be permitted to hold, shall be only such as shall be requisite for the immediate accommodation of the institution; and such as shall have been bona fide mortgaged to it by way of security, or conveyed to it in satisfaction of debts previously contracted, in the usual course of its dealings, or purchased at sales upon judgments which shall have been obtained for such debts.
(5. The totality of the debts of the company, whether by bond, bill, note, or other contract, (credits for deposites. excepted) shall never exceed the amount of its capital stock. In case of excess, the directors, under whose administration it shall happen, shall be liable for it in their private or separate capacities. Those who may have dissented, may excuse themselves from this responsibility, by immediately giving notice of the fact, and their dissent, to the President of the United States, and to the stockholders, at a general meet- ing, to be called by the President of the Bank, at their request.
7. The company may sell or demise its lands and tenements, or may sell the whole or any part of the public debt, whereof its stock shall consist; but shall frade'm nothing except bills of exchange, gold and silver bullion, or in the sale of goods pledged for money lent; nor shall take more than at the rate of six per centum per annum, upon its loans or discounts.
8. No loan shall be made by the bank for the use, or on account of, the Government of the United States, or of either of them, to an amount exceed-
32 BANK OF THE UNITED STATES.
ing fifty thousand dollars, or of any foreign Prince or State, unless previously authorized by a law of the United States.
9. The stock of the bank shall be transferable, according to such rules as shall be instituted by the company in that behalf.
10. The affairs of the bank shall be under the management of twenty-five directors, one of whom shall be the president; and there shall be, on the first Monday of January, in each year, a choice of directors, by a plurality of suf- frages of the stockholders, to serve for a year. The directors, at their first meeting after each election, shall choose one of their number as president.
11. The number of votes to which each stockholder shall be entitled, shall be according to the number of shares he shall hold, in the proportions follow- ing, that is to say: For one share, and not more than two shares, one vote; for every two shares above two, and not exceeding ten, one vote; for every four shares above ten, and not exceeding thirty, one vote; for every six shares above thirty, and not exceeding sixty, one vote; for every eight shares above sixty, and not exceeding one hundred, one vote; and for every ten shares above, one hundred, one vote; but no person, co-partnership, or body politic, shall be entitled to a greater number than thirty votes. And, after the first election, no share or shares shall confer a right of suffrage, which shall not have been holden three calendar months previous to the day of election. Stockholders actually resident within the United States, and none other, may vote in the elections by proxy.
12. Not more than three-fourths of the directors in office, exclusive of the president, shall be eligible for the next succeeding year. But the director who shall be president at the time of an election, may always be re-elected.
13. None but a stockholder being a citizen of the United States, shall be eligible as a director.
14. Any number of stockholcbrs, not less than sixty, who, together, shall be proprietors of two hundred snares or upwards, shall have power, at any time, to call a general meeting of the stockholders, for purposes relative to the institution; giving at least six weeks' notice, in two public gazettes, of the place where the bank is kept, and specifying in such notice the object of the meeting.
15. In case of the death, resignation, absence from the United States, or removal ot a director by the stockholders, his place may be filled by a new choice for the remainder of the year.
16. No director shall be entitled to any emolument, unless the same shall have been allowed by the stockholders at a general meeting. The stock- holders shall make such compensation to the president, for his extraordinary attendance at the bank, as shall appear to them reasonable.
17. Not less than seven directors shall constitute a board for the transac- tion of business.
18. Every cashier or treasurer, before he enters on the duties of his office, shall be required to give bond, with two or more sureties, to the satisfaction of the directors, in a sum not less than twenty thousand dollars, with condi- dition for his good behavior.
19. Half-yearly dividends shall be made of so much of the profits of the bank as shall appear to the directors advisable; and, once in every three years, the directors shall lay before the stockholders, at a general meeting, for their information, an exact and particular statement of the debts which shall have remained unpaid, after the expiration of the original credit, for a period of treble the term of that credit, and of the surplus of profit, if any, after deducting losses and dividends.
20. The bills and notes of the bank originally made payable, or which shall have become payable, on demand, in gold and silver coin, shall be receivable in all payments to the United States.
21. The officer at the head of the Treasury Department of the United States shall be furnished, from time to time, as often as he may require, not exceeding once a week, with statements of the amount of the capital stock of the bank, and of the debts due to the same, of the moneys deposited therein.
CHARTER OF 1791. 33
of the notes in circulation, and of the cash in hand; and shall have a right to inspect such general accounts in the books of the bank, as shall relate to the said statements; provided that this shall not be construed to imply a right of inspecting the account of any private individual or individuals with the bank.
22. No similar institution shall be established by any future act of the United States, during the continuance of the one hereby proposed to be es- tablished.
23. It shall be lawful for the directors of the bank to establish offices wheresoever they shall think fit, within the United States, for the purposes of discount and deposite, only, and upon the same terms, and in the same manner, as shall be practised at the bank, and to commit the management of the said offices, and the making of the said discounts, either to agents spe- cially appointed by them, or to such persons as may be chosen by the stock- holders residing at the place where any such office shall be, under such agree- ments, and subject to such regulations, as they shall deem proper, not being contrary to law, or to the constitution of the bank.
24. And lastly, the President of the United States shall be authorized to cause a subscription to be made to the stock of the said company, on behalf of the United States, to an amount not exceeding two millions of dollars, to be paid out of the moneys which shall be borrowed by virtue of either of the acts, the one, entitled " An act making provision for the debt of the United Strtes," and the other, entitled " An act making provision for the reduction of the public debt;" borrowing of the bank an equal sum, to be applied to the purposes for which the said moneys shall have been procured, reimbursable in ten years, by equal annual instalments; or at any time sooner, or in any greater proportions, that the Government may think tit.
The reasons for the several provisions contained in the foregoing plan, have been so far anticipated, and will, for the most part, be so readily suggested by the nature of those provisions, that any comments which need further be made, will be both few and concise.
The combination of a portion of the public debt, in the formation of the capital, is the principal thing of which an explanation is requisite. The chief object of this is to enable me creation of a capital sufficiently large to be the basis of an extensive circulation, and an adequate security for it. As has been elsewhere remarked, the original plan of the Bank of North America contemplated a capital of ten millions of dollars, which is certainly not too broad a foundation for the extensive operations to which a national bank is destined. But, to collect such a sum in this country, in gold and silver, into one depository, may, without hesitation, be pronounced impracticable. Hence the necessity of an auxiliary, which the public debt at once presents.
This part of the fund will be always ready to come in aid of the specie; it will more and more command a ready sale; and can therefore expeditiously be turned into coin, if an exigency of the bank should at any time require it. This quality of prompt convertibility into coin, renders it an equivalent for that necessary agent of bank circulation, and distinguishes it from a fund in land, of which the sale would generally be far less compendious, and at great disadvantage, v The quarter yearly receipts of interest will also be an actual addition to the specie fund, during the intervals between them, and the half yearly dividends of profits. The objection to combining land with specie, resulting from their not being generally in possession of the same persons, does not apply to the debt, which will always be found in considerable quan- tity among the moneyed and trading people.
The debt composing part of the capital, besides its collateral effect in ena- bling the bank to extend its operations, and consequently to enlarge its pro- fits, will vproduce a direct annual revenue of six per centum from the Go- vernment, which will enter into the half yearly dividends received by the stockholders. \
When the present price of the public debt is considered, and the effect which its conversion into bank stock, inc9rporated with a specie fund, would, in all probability, have to accelerate its rise to the proper point, it will easily 5
34 BANK OF THE UNITED STATES.
be discovered that the operation presents, in its outset, a very considerable advantage to those who may become subscribers; and from the influence which that rise would have on the general mass of the debt, a proportional benefit to all the public creditors, and, in a sense which has been more than once adverted to, to the community at large.
There is an important fact which exemplifies the fitness of the public debt for a bank fund, and which may serve to remove doubts in some minds on this point: it is this, that the iJank of England, in its first erection, rested wholly on that foundation. *> The subscribers to a loan to Government of one million two hundred thousand pounds sterling, were incorporated as a bank, of which the debt created by the loan, and the interest upon it, were the sole fund. The subsequent augmentations of its capital, which now amounts to between eleven and twelve millions of pounds sterling, have been of the same nature.
The confining ol the right of the bank to contract debts to the amount of its capital, is an important precaution, which is not to be found in the consti- tution of the Bank of North America, and which, while the fund consists wholly of coin, would be a restriction attended with inconveniences, but would be free from any, if the composition of it should be such as is now proposed. The restriction exists in the establishment of the Bank of England, and, as a source of security, is worthy of imitation. The consequence of exceeding the limit, there, is, that each stockholder is liable for the excess, in proportion to his interest in the bank. When it is considered that the directors ovye their appointments to the choice of the stockholders, a responsibility of this kind, on the part of the latter, does not appear unreasonable; but, on the other hand, it may be deemed a hardship upon those who may have dissented from the choice. And there are many among us whom it might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the responsibility upon the. directors by whom the limit prescribed should be transgressed.
The interdiction of loans on account of the United States, or of any parti- cular State, beyond the moderate sum specified, or of any foreign Power, will serve as a barrier to Executive encroachments, and to combinations inauspi- cious to the safety, or contrary to the policy of the Union.
The limitation of the rate of interest is dictated by the consideration, that different rates prevail in different parts of the Union; and as the operations of the bank may extend through the whole, some rule seems to be necessary. There is room for a question, whether the limitation ought not rather to be to five than to six per cent, as proposed. It may, ^vith safety.be taken for granted, that the former rate would yield an ample dividend, perhaps as much as the latter, by the extension which it would give to business. Ihe natural effect of low interest is to increase trade and industry; because undertakings of every kind can be prosecuted with greater advantage. This is a truth generally admitted; but it is requisite toliave analyzed the subject in all its relations, to be able to form a just conception of the extent ol that ettect. feucn an analysis cannot but satisfy an intelligent mind, that the difference ot one per cent, in the rate at which money may be had, is often capable ot making an essential change for the better in the situation of any country or place.
Every thing, therefore, which tends to lower the rate of interest, is peculi- arly worthy of the cares of legislators. And though laws, which violently sink
the legal rate of interest greatly below the market level are not to be com- mended, because they are not calculated to answer their aim, yet, whatever has a tendency to effect a reduction, without violence to the natural c of things, ought to be attended to and pursued. Banks are among the means most proper to accomplish this end; and the moderation of the rate at which their discounts are made, is a material ingredient towards it; with which their own interest, viewed on an enlarged and permanent scale, does not appear 1
L But, as the most obvious ideas are apt to have greater force than those lich depend on complex and remote combinations, there would be danger
CHARTER OF 1791. 35
that the persons, whose funds'must constitute the stock of the bank, would be diffident of the sufficiency of the profits to be expected, if the rate of loans and discounts were to be placed below the point to which they have been ac- customed,- and might, on this account, be indisposed to embarking in the plan. There is, it is true, one reflection, vyhich, in regard to men actively engaged in trade, ought to be a security against this danger; it is this: that the ac- commodations which they might derive in the way of their business, at a low rate, would more than indemnify them for any difference in the dividend, supposing even that some diminution of it were to be the consequence. But, upon the whole, the hazard of contrary reasoning among the mass of moneyed men, is a powerful argument against the experiment. The institutions of the kind already existing add to the difficulty of making it. Mature reflection, and a large capital, may, of themselves, lead to the desired end.
The last thing which requires any explanatory remark is the authority pro- posed to be given to the President to subscribe the amount of two millions of dollars on account of the public. The main design of this is to enlarge the specie fund of the bank, and to enable it to give a more early extension to its operations. Though it is proposed to borrow with one hand what is lent with the other, yet the disbursement of what is borrowed will be pro- gressive, and bank notes may be thrown into circulation instead of the gold and silver. Besides,"1;n^re is to be an annual reimbursement of a part of the sum borrowed, which will finally operate as an actual investment of so much specie. In addition to die inducements to this measure, which result from the general inti'iv-i of the Government to enlarge the sphere of the utility of the qank, there is this more particular consideration, to wit: that, as far as the dividend on the stock shall exceed the interest paid on the loan, there is a positive profit.
The Secretary begs leave to conclude with this general observation: That, if the Bank of North America shall come forward with any propositions which have Jor their object the engrafting upon that institution, the characteristics whicfi shall appear to the Legislature necessary to the due extent and safety of a national bank, there are, in his judgment, weighty inducements to giving every reasonable facility to the measure. Not only the pretensions of that institution, from its original relation to the Government of the United States, am? from the services it has rendered, are such as to claim a disposition favora- ble to it, if those who are interested in it are willing, on their part, to place it on a footing satisfactory to the Government, and equal to the purposes of a Bank of the United States, but its co-operation would materially accelerate the accomplishment of the great object; and the collision, which might other- wise arise, might, in a variety of ways, prove equally disagreeable and inju- rious. The incorporation or union here contemplated, may be effected in different modes, under the auspices of an act of the United States, if it shall be desired by the Bank of North America, upon terms which shall appear expedient to the Government.
All which is humbly submitted.
ALEXANDER HAMILTON, Secretary of the Treasury.
TREASURY DEPARTMENT, December 13, 1790.
IN SENATE, December 23, 1790.
On the reception of the copy of the said report, in the Senate, it was, on motion,
Ordered, That Messrs. Strong, of Massachusetts, Morris, of Pennsylvania, Schuyler, of New York, Butler, of South Carolina, and Ellsworth, of Con- // necticut, be a committee to take into consideration the report of the Secre- / / tary of the Treasury, upon the plan of a national bank, and to prepare a bill upon that subject.
On the 3d of January, 1791, Mr. Strong, from the said committee, reported a bill " to incorporate the subscribers to the bank of ."
3(5 BANK OF THE UNITED STATES.
The history of this bill, on its passage through the Senate, is to be learnt from one source only — the journals of that body. Its debates and proceed- ings were not then, as now, open to the public.
From the journals, howevei> we learn that, on the 6th, 10th, llth, and 12th days of January, 1791, the bill was under consideration, and on the 13th of January it was agreed to fill the blank in the title with these words: " the United States of America."
A motion was made to limit the term of incorporation to seven years, and another to extend it to March 4th, 1815. On this latter motion, the yeas and nays were:
YEAS — Messrs. Bassett, Dickinson, Ellsworth, Elmer, Johnson, King-, Langdon, Morris, Read, Schuyler, and Strong — 11.
NATS — Messrs. Butler, Few, Foster, Hawkins, Henry, Johnston, Izard, Maclayr Monroe, and Wingate — 10.
So it passed in the affirmative.
A motion was made to subjoin to the last clause agreed to, as follows: " Provided^ nevertheless, that nothing herein contained shall be construed to exclude the right of amending the same, on giving twelve months' noticey from and after the first of January, 1800."
On the 1 4th of January, the question being taken on this amendment, it passed in the negative.
On motion, it was agreed to reconsider the term of incorporation agreed to yesterday, and to limit it to the 4th of March, 1811.
On the 18th of January, the bill being under consideration, it was ordered that it be recommitted tor further amendments; and Mr. Strong, from the committee to whom it was referred, reported sundry amendments; which were agreed to.
On the 19th, a motion being made to expunge the 12th section, to writt " And be it further enacted, That no other bank shall be established, by any future law of the United States, during the continuance of the corporation hereby created, for which the faith of the United States is hereby pledged," it passed in the negative.
20th January, 1791. "On motion to reconsider the term of incorporation, and limit it to the year 1801, instead of 1811," the vote was as follows: .
YEAS — Messrs. Butler, Few, Gunn, Hawkins, Izard, and Monroe — 6.
NATS — Messrs. Bassett, Dalton, Dickinson, Ellsworth, Elmer, Foster, Johnson, King, Langdon, Maclay, Morris, Read, Schuyler, Stanton, Strong, and Wingate — 16.
On motion to expunge the twelfth section, quoted above, it passed in the negative.
Whereupon,
Resolved, That this bill do pass; that the title of it be, "An act to incor- porate the subscribers to the Bank of the United States."
The bill was then transmitted to the House of Representatives for concur- rence.
HOUSE OF REPRESENTATIVES.
The bill to incorporate the subscribers to the Bank of the United States was, on the 21st of January, read a first and second time, and committed to a Committee of the Whole House.
On the 31st, the House resolved itself into a Committee of the Whole, (Mr. Boudinot in the chair) and the bill was read by paragraphs; and no amendments being offered, the chairman reported it to the House, which voted that it should be read the third time on the succeeding day.
FEBRUARY 1, 1791.
\fter the bill was read the third time, Mr. Smith, of South Carolina, hav- ing moved that the bill be recommitted to a Committee of the Whole House, it was determined by ayes and noes, in the negative, and it was
Ordered, That the bill do lie on the table.
CHARTER OF 1791,
DEBATE ON THE MOTION OF MR. SMITH, OF SOUTH CAROLINA, TO RECOMMIT THE BILL.
FEBRUARY 1, 1791.
Mr. SMITH, of South Carolina, observed, that the bill being taken up rather unexpectedly yesterday, gentlemen did not appear prepared to discuss the subject; it, therefore, was suffered to be read in Committee of the Whole, and passed to the third reading, in his opinion rather informally, as the mem- bers were, thereby, deprived of giving their sentiments in the usual manner, on a bill of the greatest importance.
He thought it susceptible of various amendments. [The SPEAKER having observed that the bill, agreeable to the rules of the House, could not be amend- ed without being recommitted,] Mr. Smith moved that the bill should be re- committed for the purpose of making sundry alterations and removing objec- tions which he thought the bill liable to. He then enumerated several objec- tions. Those who are to receive the subscriptions, he said, are not obliged to give any bonds for their fidelity. He thought the clause which excluded foreigners from voting by proxy exceptionable. And the time in which sub- scriptions are to be received, he thought too contracted.
Mr. JACKSON said he was in favor of the motion for a recommitment, but not for the reasons offered by the gentleman from South Carolina. He was, he said, opposed to the principles of the bill altogether. He then adverted to the situation of the United States, and observed that it was so different from that of Great Britain, at the time the bank was established in that country, that no reason in favor of the institution could be deduced from thence. He adverted to the argument arising from the facility which banks afford, of an- ticipating the public resources in cases of emergency. This idea of anticipa- tions he reprobated, as tending to involve the country in debt, and an end- less labyrinth of perplexities. This plan of a National Bank, said he, is cal- culated to benefit a small part of the United States — the mercantile interest only 5 the farmers, the yeomanry of the country, will derive no advantage from it. as the bank bills will not circulate to the extremities of the Union. He said he had never seen a bank bill in the State of Georgia; nor will they ever benefit the farmers of that State, or of New Hampshire. He urged that there was no necessity for instituting a new bank; there is one already esta- blished in this city, under the style of the Bank of North America. This pro- posed institution is an infringement of the charter of that bank, which cannot be justified. He urged the unconstitutional of the plan; called it a mo- nopoly, such an one as contravenes the spirit of the constitution — a monopoly of a very extraordinary nature — a monopoly of the public moneys for the bene- fit of the corporations to be created. He then read several passages from the Federalist, which, he said, were directly contraiy to the assumptions of the power proposed by the bill. He hoped, therefore, it would be recommitted, and he could not help hoping, also, that it would be deferred to the next session.
Mr. LAWRENCE observed, that the friends of the institution proposed, had been unjustly charged with precipitating the bill; but, he said, it had long been in the hands of the members; they have had time to consider it; the usual forms have been observed in its progress, thus far, and if those who are opposed to the bill did not see proper to come forward with their objections, it surely is their own fault, and the advocates of the bill are not justly chargea- ble with precipitancy. He then particularly replied to the objections offered by Mr. Smith, of South Carolina, and after considering them, said that those objections did not, in his opinion, constitute sufficient reasons to induce a recommitment of the bill. He then noticed the constitutional objections of Mr. Jackson, and said the Government of the United States is vested, by the constitution, with the power of borrowing money, and, in pursuance of this
38 BANK OF THE UNITED STATES.
idea, they have a right to create a capital by which they may, with greater facility, cany the powers of borrowing, on any emergency, into effect. Under the late confederation, the Pennsylvania bank, called the Bank of North America, was instituted. He presumed that it would not be controverted, that the present Government is vested with powers equal to those of the late confederation. He said that he had no doubt its operations would benefit, not only the centre, but the extremities also, of the Union. The commer- cial, mechanical, and agricultural interests of the United States, are so com- bined, that one cannot be benefitted without benefiting the other. He con- cluded by observing that he thought the Legislature of the United States could not better answer the purposes ot their appointment, than by passing this bill. He hoped, therefore, it would not be recommitted, but that it would now pass.
Mr. LEE observed, that, having been confined by sickness, he was preclud- ed from attending the House yesterday; but, sick as he was, had he supposed there was a prospect of a bill of such magnitude and importance passing, with- out a discussion of its principles, he certainly would have attended, and offered his objections to various parts of it, which he thought very exceptionable. He hoped, therefore, it would now be recommitted, that a bill which is so une- qual and so partial may undergo a thorough discussion.
Mr. TUCKER was in favor of recommitment. He acknowledged that those who had their objections to the bill were certainly blameable for not coming forward with them yesterday. He then stated sundry objections to the bill. The time allowed to receive the subscriptions, he said, is too short, arid will benefit those only in the vicinity of the bank. The clause which authorizes the loaning $100,000 to the Government, without express provision by law, he thought exceptionable, as the Executive will be able, by this means, to borrow, at any time, without being authorized, to almost any amount, of the. bank. The loan of $2,000,000, by the United States, to the bank, he objected to, as diverting that sum from the particular object for which it was borrowed. There is no appropriation, said he, of the half yearly dividend of profits ac- cruing; to the United States, which, he observed, was a very essential defect. Mr. Tucker stated other objections as reasons fora recommitment.
Mr. WILLIAMSON was in favor of the recommitment, to give those who say thev have not had an opportunity of offering their objections, time to do it; and if the motion is not agreed to, he should not give his vote for the bill. He then adverted to the objections deduced from the constitution, and ex- plained the clause respecting monopolies, as referring altogether to commer- cial monopolies.
Mr. SHERMAN objected to the recommitment. He said, that, though the bill could not be amended without its being recommitted, yet it was open to discussion and objection, previous to taking a vote on its passing. He did not think the objections offered, afforded sufficient reasons for a recommitment. He replied to the 9bservations offered by several gentlemen who had spoken in favor of the motion.
Mr. GERRY expressed his surprise at the observations of the gentlemen who had neglected to offer their objections to the bill before, and said it could only be imputed to their own neglect, and not to any precipitancy on the part of the friends of the bill. Mr. Gerry noticed the several objections which had been offered, and said, if nothing more important could be offered, he thought it unjustifiable in the House to go into a committee.
Mr. MADISON observed, that at this moment it was not of importance to determine how it has happened that the objections which several gentlemen, now say they have to oner, against the bill, were not made at the proper time; it is sufficient for them, if the candor of the House should lead them now to recommit the bill, that, in a Committee of the Whole, they may have an opportunity to offer their objections.
CHARTER OF 1791.
Mr. AMES replied to Mr. Madison. He said he did not cone „.„,. „„
appeal now made to the candor of the House was in point. The gentlemen who object to the bill had an opportunity to offer their objections; the cus- tomary forms have been attended to, and the whole question for recommit- ment turns on the force of the objections which are now offered to the §ej ral principles of the bill, altogether; the candor of the House, lie conceivi was entirely out of the question, and therefore not to be appealed to; but the justice due to their constituents in the proper discharge of the duty reposed in them. He said it appeared to him absurd togo into a Committee of the Whole. to determine whether the bill is constitutional or not; if it is unconstitutional, that amounts to a rejection of it altogether.
Mr. MADISON thought there was the greatest propriety in discussing a con - stitutional question in the Committee of the Whole.
Mr. STONE and Mr. GILES were in favor of recommitment; they objected to the unconstitutionality of the bill, and to several of its particular clauses.
Mr. VIXING said he thought it was a subject of congratulation that the bill was in its present situation; it had happily passed to the third reading with- out that tedious discussion which bills usually receive. The subject has been a considerable time before the House, and the gentlemen have had time to contemplate it. The bill is now in the stage to which gentlemen very usu- ally reserve themselves to state their objections at large; he hoped they would now do it. He was not perfectly satisfied as to the constitutional point; he therefore hoped gentlemen would slate their objections, that those who are satisfied on that point, may otter their reasons.
Mr. BOUDINOT stated the process of the business yesterday. He observed he had then the honor to be in the chair; he had reau the bill very distinctly and deliberately, with proper pauses; he thought that the fullest opportunity had been offered for gentlemen to come forward with their objections; he was opposed to the recommitment, as it would, he feared, issue in a defeat of the bill, this session. He had one difficulty, however, respecting the unconstitu- tionality of the bill; this he hoped to have removed, and he noped that a full discussion of its general principles would take place.
FEBRUARY 2, 1791.
On the question, " Shall the bill pass ?" the following debate took place.
Mr. MADISON began with a general review of the advantages and disadvan- tages of banks. The former he stated to consist in, First. The aids they afford to merchants, who can thereby push their mercantile operations far- ther, with the same capital. Second. The aids to merchants in paying punc- tually, the customs. Phird. Aids to the Government, in complying punctu- ally with its engagements, when deficiencies and delays happen in the reve- nue. Fourth. In diminishing usury. Fifth. In saving the wear of gold and silver, kept in the vaults, and represented by notes. Sixth. In facilitating occasional remittances from different places where notes happen to circulate. The effect of the proposed bank in raising the value of stock, he thought, had been greatly overrated. It no doubt would raise that of the stock subscribed into the bank, but could have little effect on stock in general, as the interest on it would remain the same, and the quantity taken out of the market would be replaced by the bank stock.
The principal disadvantage consisted in, First. Banishing the precious metals, by substituting another medium to perform their office. This effect was inevitable. It was admitted by the most enlightened patrons of banks, particularly by Smith on the Wealth of Nations. The common answer to the objection was, that the money banished was only an exchange for something equally valuable, that would be imported in return. He admitted the weight of this observation, in general, but doubted ^vhether, in the present habiis* of this country, the return would not be in articles of no permanent use to it.
40 BANK OF THE UNITED STATES.
Second. Exposing the public and individuals to all the evils of a run on the bank, which would be particularly calamitous in so great a country as this, and might happen from various causes, as false rumors, bad management of the institution, an unfavorable balance of trade, from short crops, &c. It was proper to be considered, also, that the most important of the advantages would be better obtained by several banks, properly distributed, than by a single one. The aids to commerce could only be afforded at, or very near, the seat of the bank. The same was true of aids to merchants in the payment of customs. Anticipations of the Government would, also, be most convenient at the different places where the interest of the debt was to be paid. The case in America was different from that in England; the interest there was all due at one place, and the genius of the monarchy favored the concentration of wealth and influence at the metropolis.
He thought the plan liable to other objections; it did not make so good a bargain for the public as was due to its interests. The charter to the Bank of England had been granted only for eleven years, and was paid for by a loan to the Government, on terms better than could be elsewhere got. Every renewal of the charter had, in like manner, been purchased; in some in- stances at a very high price. The same had been done by the banks of Genoa, Naples, and other like banks of circulation. The plan was unequal to the public creditors; it gave an undue preference to the holders of a particular demonination of the public debt; and to those at, and within reach of, the seat of Government. If the subscriptions should be rapid, the distant holders of paper would be excluded altogether.
In making these remarks on the merits of the bill, he had reserved to him- self, he said, the right to deny the authority of Congress to pass it. He had entertained this opinion from the date of the constitution. His impressions might, perhaps, be the stronger, because he well recollected that a power to grant charters of incorporation had been proposed in the general convention, and rejected. Is the power of establishing an incorporated bunk among the powers vested by the constitution, in the Legislature of the United States? This is the question to be examined.
After some general remarks on the limitations of all political power, he took notice of the peculiar manner in which the Federal Government is limited. It is not only a general grant out of which particular powers are excepted; it is a grant of particular powers, leaving the general mass in other hands. So it had been understood by its friends and its foes; and so it was to be inter- preted.
As preliminaries to a right interpretation, he laid down the following rules:
An interpretation that destroys the very characteristic of the Government, cannot be just.
Where a meaning is clear, the consequences, whatever they may be, are to be admitted; where doubtful, it is fairly triable by its consequences.
In controverted cases, the meaning of the parties to the instrument, if to be collected by reasonable evidence, is a proper guide.
Contemporary and concurrent expositions are a reasonable evidence of the meaning of the parties.
In admitting or rejecting a constructive authority, not only the degree of its incidentally to an express authority is to be regarded, but the degree of its importance also; since on this will depend the probability or improbability ot its being left to construction.
Reviewing the constitution with an eye to these positions, it was not possi- ble to discover in it the power to incorporate a bank. The only clauses under which such power could be pretended, was, either,
tirit. The power to lay and collect taxes to pay the debts and provide for the common defence and general welfare; or,
Second. The power to borrow money on the credit of the United States; or,
Third. The powers to pass all laws necessary and proper to carry into execution those powers.
CHARTER OF 1791. 41
The bill did not come within the first power. It laid no tax to pay the debts, or provide for the general welfare. It laid no tax whatever. It was altogether foreign to the subject.
No argument could be drawn from the terms "common defence and general welfare." The power as to tliese general purposes was limited to acts laying taxes for them; ami the general purposes themselves were limited and ex- plained by the particular enumerations subjoined. To understand these terms in any sense that would justify the power in question, would give to Congress an unlimited power; would render nugatory the enumeration of particular powers; would supersede all the powers reserved to the State Governments. These terms are copied from the articles of confederation: had it ever been pretended that they were to be understood otherwise than as here explained? It had been said, that 4i general welfare" meant cases in which a general power might be exercised by Congress, without interfering with the power of the States; and that the establishment of a National Bank was of this sort. There were, he said, several answers to this novel doctrine.
First. The proposed bank would interfere, so as indirectly to defeat a State bank at the same place.
Second. It would directly interfere with the rights of States to prohibit, as well as to establish, banks, and the circulation of T}ank notes. He mentioned a law of Virginia, actually prohibiting the circulation of notes payable to bearer.
TTiird. Interference with the powers of the States was no constitutional criterion of the power of Congress. If the power was not given, Congress could not exercise it; if given, they might exercise it, although it should inter- fere with the laws, or even the constitution, of the States.
Fourth. If Congress could incorporate a bank, merely because the act would leave the States free to establish banks also, any other incorporation might be made by Congress. They could not incorporate companies of manufacturers, or companies for cutting canals, or even religious societies, leaving similarin- corporations by the States, like State banks, to themselves; Congress might even establish religious teachers in every parish, and pay them out of the treasury of the United States, leaving other teachers unmolested in their functions. These inadmissible consequences condemned the controverted principle.
The case of the bank, established by the former Congress, had been cited as a precedent. This was known, he said, to have been the child of neces- sity. It never could be justified by the regular powers of the articles of con- federation. Congress betrayed a consciousness of this, in recommending to the States to incorporate the bank also. They did not attempt to protect the bank notes, by penalties against counterfeiters. These were reserved wholly to the authority of the States.
The second clause to be examined is that which empowers Congress to borrow money.
Is this a bill to bornny money? It does not borrow a shilling. Is there any fair construction by which the bill can be deemed an exercise of the power to borrow money? '1 he obvious meaning of the power to borrow money, is, that accepting from, and stipulating payments to, those who are able and willing to lend.
To say that the power to borrow involves the power of creating the ability, where there may be the will to lend, is not only establishing a dangerous prin- ciple, as will be immediately shown, but is as forced a construction, as to say, that it involves the power of compelling ^the will, where there maybe the ability to lend.
The third clause is that which gives the power to pass all laws necessary and proper to execute the specified powers.
Whatever meaning this clause may have, none can be admitted that would give an unlimited discretion to Congress.
42 BANK OF THE UNITED STATES.
Its meaning must, according to the natural and obvious force of the terms and the context, be limited to means necessary to the end, and incident to the nature, of the specified powers.
The clause is, in fact, merely declaratory of what would have resulted, by unavoidable implication, as the appropriate, as it were, technical means of executing those powers. In this sense it had been explained, by the friends of the constitution /and ratified by the State conventions.
The essential characteristic of the Government, as composed of limited and enumerated powers, would be destroyed, if, instead of direct and (incidental means, any means could be used, which, in the language of the preamble to the bill, might be conceived to be conducive to the successful conducting of the finances, or might be conceived to tend to give facility to the obtaining of loans. He urged an attention to the diffuse and ductile terms which had been found requisite to cover the stretch of power contained in the bill. He com- pared them with the terms necessary and proper, used in the constitution, and asked whether it was possible to view the two descriptions as synonymous, or the one as a fair and safe commentary on the other.
If, proceeded he, Congress, by virtue of the power to borrow, can create th« means of lending, and, in pursuance of these means, can incorporate a bank, they may do any thing whatever creative of like means.
The East India Company has been a lender to the British Government, as well as the Bank, and the South Sea Company is a greater creditor tnan either. Congress may then incorporate similar companies in the United States, and that, too, not under the idea of regulating trade, but under that of borrowing money.
Private capitals are the chief resources for loans to the British Government. Whatever these may be conceived to favor the accumulation of capital, may be done by Congress. They may incorporate manufacturers. They may give monopolies in every branch of domestic industry.
If, again, Congress, by virtue of the power to borrow money, can create the
ability to lend, they may, by virtue of the power to levy money, create the ability to pay it. The ability to pay taxes depends on the general wealth of the society, and this, on the general prosperity of agriculture, manufactures,
id commerce. Congress may then give bounties, and make regulations
11 these objects.
The States have, it is allowed on all hands, a concurrent right to lav £
)llect taxes. This power is secured to them, not by its being expressly
and commerce. Congress may then give bounties, and make regulations on all these objects.
The States have, it is allowed on all hands, a concurrent right to lav and collect taxes. This power is secured to them, not by its being expressly re- served, but by its not being ceded by the constitution. The reasons for the bill cannot be admitted, because they would invalidate that right; why may it not be conceived by Congress, that a uniform and exclusive imposition of taxes would not, less than the proposed bank, be conducive to the successful conducting of the national finances, and tend to give facility to the obtaining of a revenue for the use of the Government?
The doctrine of implication is always a tender one. The| danger of it has been felt in other Governments. The delicacy was felt in the adoption of our own; the danger may also be felt, if we do not keep close to our chartered authorities.
Mark the reasoning on which the validity of the bill depends. To borrow money is made the end, and the accumulation of capital implied as the means. The accumulation of capital is, then, the end, and a bank implied as the means. The bank is then the end, and a charter of incorporation, a monopoly, capital punishments, &c. implied as the means.
If implications, thus remote, and thus multiplied, can be linked together, a chain may be formed, that will reach every object of legislation, every object within the whole compass of political economy.
The latitude of interpretation required by the bill is condemned by the rule furnished by the constitution itself.
Congress have power "to regulate the value of money," yet it is expressly added, not left to be implied, that counterfeiters may be punished. They have the power "to declare war," to which armies are more incident than
CHARTER OF 1791. 43
incorporated banks to borrowing, yet it is expressly added, the power " to raise and support armies;" and to this again, the express power, " to make rules and regulations for the government of armies" — a like remark is appli- cable to the powers as to a navy.
The regulation and calling out of the militia are more appurtenant to war* than the proposed bank to borrowing; yet the former is not left to construc- tion.
The very power to borrow money is a less remote implication from the power of war, than an incorporated monopoly bank from the power of bor- rowing— yet the power to borrow is not leu to implication.
It is not pretended, that every insertion or omission in the constitution is the effect of systematic attention. This is not the character of any human work, particularly the work of a body of men. The example cited, with others that might be added, sufficiently inculcate, nevertheless, a rule of interpre- tation very different from that on which the bill rests. They condemn the exercise of any power, particularly a great and important power, which is not evidently and necessarily involved in an express power.
It cannot be denied that the power proposed to be exercised, is an import- ant power.
As a charter of incorporation, the bill creates an artificial person, previously not existing in law. It confers important civil rights and attributes, which could not otherwise be claimed. It is, although not precisely similar, at least equivalent to the naturalization of an alien, by whicn certain new civil char- acters are acquired by him. Would Congress nave had the power to natural- ize, if it had not been expressly given?
In the power to make by-laws, the bill delegated a sort of legislative power, which is unquestionably an act of a high and important nature. He took notice of the only restraint on the by-laws, that they were not to be contrary to the law and the constitution of the bank, and asked, what law was intended? If the law of the United States, the scantiness of their code would give a power, never before given to a corporation, and obnoxious to the States, whose laws would then be superseded, not only by (he laws of Congress, but by the by-laws of a corporation within their own jurisdiction. If the law in- tended was the law of the State, then the State might make laws that would destroy an institution of the United States.
The bill gives a power to purchase and hold lands: Congress could not purchase lands within a State, " without the consent of its Legislature." How could they delegate a power to others which they did not possess themselves?
It takes from our successors, who have equal rights with ourselves, and with the aid of experience will be morecapable of/leciding on the subject, an opportunity of exercising that right -for an immoderate term.
It takes from our constituents the opportunity of deliberating on the untried measure, although their hands ate also to be tied by it, for the same term.
It involves a monopoly which effects the equal rights of every citizen.
It leads to a penal regulation, perhaps capital punishment — one of the most solemn acts of sovereign authority.
From this view of the power of incorporation exercised in the bill, it never could be deemed an accessory or subaltern power, to be deduced by implica- tion, as a means of executing another power. It was in its nature a distinct, and independent, and substantive prerogative, which, not being enumerated in the constitution, could never have been meant to be included in it, and, not being included, could never be rightfully exercised.
He had adverted to a distinction, which he said had not been sufficiently kept in view, between a power necessary and proper for the Government or Union, and a power necessary for executing the enumerated powers in the latter case; the powers included in each of the enumerated powers were not expressed, but to be drawn from the nature of each. In the former, the pow- ers composing the Government were expressly enumerated. This constituted the peculiar nature of the Government; no power, therefore, not enumerated, could be inferred from the general nature of Government. Had the power of
44 BANK OT THE UNITED STATES.
making treaties, for example, been omitted, however necessary it might have been, the defect could only have been lamented, or supplied by an amend- ment of the constitution.
But the proposed bank could not even be called necessary to the Govern- ment; at most, it could be but convenient. Its uses to the Government could be supplied by keeping the taxes a little in advance; by loans from indivi- duals; by the other banks over which the Government would have equal com- mand, nay, greater, as it may grant or refuse to these the privilege, made a free and irrevocable gift to the proposed bank, of using their notes in the fede- ral revenue.
He proceeded next to the contemporary expositions given to the constitution*
The defence against the charge founded on the want of a bill of rights, pre- supposed, he said, that the powers not given, were retained; and that those given were not to be extended by remote implication. On any other suppo- sition, the power of Congress to abridge the freedom of the press or the rights of conscience, &c. could not have been disproved.
The explanations in the State conventions all turned on the same funda- mental principle, and on the principle, that the terms necessary and proper, gave no additional powers to those enumerated. [Here he read sundry pas- sages, from the debates of the Pennsylvania, Virginia, and North Carolina conventions, showing the ground on which the constitution had been vindi- cated by its principal advocates against a dangerous latitude of its powers, charged on it by its opponents. ] He did not undertake to vouch for the accu- racy or authenticity of the publications which he quoted. He thought it proba- ble that the sentiments delivered might, in many instances, have been mis- taken, or imperfectly noted; but the complexion of the whole, with what he himself, and many others must recollect, fully justified the use he had made of them.
The explanatory declarations and amendments accompanying the ratifica- tions of the several States, formed a striking evidence, wearing me same com- plexion. He referred those who might doubt, to the several acts of ratifica- tion.
The explanatory amendments, proposed by Congress themselves,jit least, would be good authority with them; all these annunciations of power pro- ceeded on a rule of construction excluding the latitude now contended for. These explanations were the more to be respected, as they had not only been proposed by Congress, but ratified by nearly three-fourths of the States. He read several of the articles proposed, remarking particularly on the llth and 12th; the former, as guarding against a latitude of interpretation — the latter as excluding every source of power not within the constitution itself.
With all this evidence of the sense in which the constitution was under- stood and adopted, will it not be said, if the bill should pass, that its adoption was brought about by one set of arguments, and that it is now administered un- der the influence oi another set? And this reproach will have the keener sting, because it is applicable to so many individuals concerned in both the adoption and administration.
In fine, if the power were in the constitution, the immediate exercise of it cannot be essential; if not there, the exercise of it involves the guilt of usurpa- tion, and establishes a precedent of interpretation, levelling all the barriers which limit the powers of the General Government and protect those of the State governments. If the point be doubtful only, respect for ourselves, who ought to shun the appearance of precipitancy and ambition; respect for our successors, who ought not lightly to be deprived of the opportunity of exercising the rights of legislation; respect for our constituents, who have had no opportunity of making known their sentiments, and who are themselves to be bound down to the measure for so long a period; all these considerations require that the irrevocable decision shouluat least be suspended until another session.
It appeared, on the whole, he concluded, that the power exercised by the bill was condemned by the silence of the constitution; was condemned by the
CHARTER OF 1791, 45
rule of interpretation, arising out of the constitution; was condemned by its tendency to destroy the main characteristic of the constitution; was con- demned by the expositions of the friends of the constitution, whilst depending before the public; was condemned by the apparent intentions of the parties, which ratified the constitution; was condemned by the explanatory amend- ments proposed by Congress themselves to the constitution; and he hoped it^ would receive its final condemnation by the vote of this House.
FEBRUARY 3, 1791.
A motion was made by Mr. WILLIAMSON, and seconded, that the first sec- tion of the said bill be recommitted to a Committee of the Whole House, "for the purpose of altering the time or manner of subscribing; so that the holders of State securities, assumed to be paid by the United States, may be on a foot- ing with the holders of other securities, formerly called national securities."
It passed in the negative. Ayes 21, noes 38.
Further debate arising on the main question,
MR. AMES said, little doubt remains with respect to the utility of banks. It seems to be conceded, within doors and without, that a public bank would!be useful to trade, that it is almost essential to revenue, and that it is little short of indispensable necessity in time of public emergency. In countries whose forms of government left them free to choose, this institution has been adopted of choice; and in times of national danger and calamity, it has afforded such aid to Government as to make it appear, in the eyes cf the People, a neces- sary means of self preservation. Tne subject, however intricate in its nature, is at least cleared from obscurity. It would not be difficult to establish its principles, and to deduce from its theory, such consequences, as would vindi- cate the policy of the measure. But why should we lose time to examine the theory, when it is in our power to resort to experience? After being tried by that test, the world has agreed in pronouncing the institution excellent. This new capital will invigorate trade and manufactures with new energy. It will furnish a medium for the collection of the revenues; and if Government should be pressed by a sudden necessity, it will afford seasonable and effec- tual aid. With all these, and many otner pretensions, if it was now a ques- tion whether Congress should be vested witli the power of establishing a bank, I trust that this House, and all America, would assent to the affirmative.
This, however, is not a question of expediency, but of duty. We are not at liberty to examine which of several modes of acting is entitled to the prefer- ence. But we are solemnly warned against acting at all. We are told, that the constitution will not authorize Congress to incorporate the subscribers to the bank. Let us examine the constitution; and if that forbids our proceed- ing, we must reject the bill; though we shall do it with deep regret, that such an opportunity to serve our country must be suffered to escape, for the want of a constitutional power to improve it.
The gentleman from Virginia considers the opposers of the bill as suffer- ing disadvantage, because it was not debated as bills usually are, in commit- tee of the whole house. He has prepared us to pronounce an eulogium upon his consistency, by informing us that ne voted, in the old Congress, against the Bank of North America, on the ground of his present objection to the consti- tutionality. He has told us, that the meaning of the constitution is to be in- terpreted by contemporaneous testimony. He was a member of the conven- tion which formed it, and of course, his opinion is entitled to peculiar weight. While we respect his former conduct, and admire the felicity of his situation, we cannot think he sustains disadvantage in the debate. Besides, he must have been prepared with objections to the constitutionality, because he tells us they are ot longstanding, and had grown into a settled habit of thinking. \Vhy then did he suffer the bill to pass the committee in silence? The friends of the bill have more cause to complain of disadvantage: for, while he has had time to prepare his objections, they are obliged to reply to them without pre- meditation.
46 BANK OF THE UNITED STATES.
In making this reply, I am to perform a task for which my own mind had not admonished me to prepare. 1 never suspected that the objections I have heard stated, had existence. I consider them as discoveries; and had not the acute penetration of that gentleman brought them to light, I am sure that my own understanding would never have suggested them.
It seems strange, too, that, in our enlightened country, the public should have been involved in equal blindness. While the exercise of even the lawful powers of Government is disputed, and a jealous eye is fixed on its proceed- ings, not a whisper has been heard against its authority to establish a bank. Still, however unseasonably, the old alarm of public discontent is sounded in oin^ears.
Two questions occur: May Congress exercise any powers, which are not expressly given in the constitution, but may be deduced by a reasonable con- struction of that instrument? And, secondly, will such a construction war- rant the establishment of the bank?
The doctrine, that powers may be implied which are not expressly vested in Congress, has long been a bugbear to many worthy persons. They appre- hend that Congress, by putting constructions upon the constitution, will govern by its own arbitrary discretion; and therefore, that it ought to be bound to exercise the powers expressly given, and those only.
If Congress may not make laws conformably to the powers implied, though not expressed in the frame of government, it is rather late in the day to adopt it as a principle of conduct. A great part of our two years' labor is lost, and worse than lost to the public: for we have scarcely made a law, in which we have not exercised our discretion, with regard to the true intent of the constitution. Any words but those used in that instrument will be liable to a different interpretation. We may regulate trade — therefore we have taxed ships; erected light houses; made laws to govern seamen, &c.; because we say they are the incidents to that power. The most familiar and undisputed acts of legislation will shew, that we have adopted it as a safe rule of action, to legislate beyond the letter of the constitution.
He proceeded to enforce this idea by several considerations, and illustrated it by various examples. He said that the ingenuity of man was unequal to providing, especially, before hand, for all the contingencies that would hap- pen. The constitution contains the principles which are to govern in making laws; but every law requires the application of the rule to the case in question. Wre may err in applying it; but we are to exercise our judgments, and, on every occasion, to decide according to an honest conviction of its true meaning.
The danger of implied powers does not arise from its assuming a new prin- ciple. We have not only practised it often, but we can scarcely proceed without it Nor does the danger proceed so much from the extent of the power, as from its uncertainty. While the opposers of the bank exclaim against the exercise of this power by Congress, do they mark out the limits of the power which they will leave to us with more certainty than is done by the advocates of the bank? Their rules, by interpretation, by ex-tempora- neous testimony, the debates of conventions, and the doctrine of substantive and auxiliary powers, will be found as obscure, and, of course, as formidable, as that which they condemn. They only set up one construction against another.
The powers of Congress are dissected. We are obliged to decide the ques- tion according to truth. The negative, if false, is less safe than the affirma- tive, if true. Why, then, shall we be told that the negative is the safe side? Not exercising the powers we have, may be as pernicious as usurping those we have not. If the power to raise armies had not been expressed in the enumeration of the powers of Congress, it would be implied from other parts of the constitution. Suppose, however, it were 9mitted, and our country invaded — would a decision in Congress, against raising armies, be safer than the affirmative? The blood of our citizens would be shed, and shed una- venged. He thought, therefore, that there was too much prepossession with
CHARTER OF 1791. 47
tome against the bank, and the debate ought to be considered more impar- tially, as the negative was neither more safe, certain, nor conformable to our duty, than the other side of the question. After all, the proof of the affirma- tive imposed a sufficient burden, as it is easier to raise objections than to remove them. Would any one doubt that Congress may lend money, that they may buy their debt in the market, or redeem their captives from Algiers? Yet no such power is expressly given, though it is irresistibly implied.
If, therefore, some interpretation ot the constitution must be indulged, by what rules is it to be governed? The great end of every association of per- sons or States, is to effect the end of its institution. The matter in debate affords a good illustration. A corporation, as soon as it is created, has cer- tain powers or qualities tacitly annexed to it, vyhich tend to promote the end for which it was formed; such as, for example, its individuality, its powers to sue and be sued, and the perpetual succession of persons. Government is, itself, the highest kind of corporation; and, from the instant of its formation, it haSj tacitly annexed to its being, various powers, which the individuals who framed it did not separately possess, but which are essential to its effect- ing the purposes for which it was framed; to declare, in detail, every thing that Government may do, could not be performed, and has never been at- tempted. It would be end less, useless, and dangerous; exceptions of what it may not do, are shorter and safer.
Congress may do what is necessary to the end for which the constitution was adopted, provided it is not repugnant to the natural rights of man, or to those which they have expressly reserved to themselves, or to the powers which are assigned to the States. This rule of interpretation seems to be safe, and not a very uncertain one, independently of the constitution itself. By that instrument certain powers are specially delegated, together with all powers necessary and proper to carry theni into execution. That construc- tion may be maintained to be a safe one, which promotes the good of the society and the ends for which the Government was adopted, without impairing the rights of any man, or the powers of any State.
This, he said, was remarkably true of the bank; no man could have cause to complain of it; the bills would not be forced upon any one. It is of the first utility to trade. Indeed, the intercourse, from State to State, can never be on a good footing without a bank, whose paper will circulate more exten- sively than that of any State bank. Whether the power to regulate trade, from State to State, will involve that of regulating inland bills of exchange and bank paper, as the instruments of the trade incident to the power, he would not pause to examine. That is an injury and wrong which violates the right of another. As the bank is founded on the free choice of those who make use of it, and is highly useful to the People and to Government, a libe- ral construction is natural and safe. This circumstance creates a presump- tion in favor of its conformity to the constitution. This presumption is enforced by the necessity of a bank to other Governments. The most orderly governments in Europe have banks. They are considered as indispensably necessary; these examples are not to be supposed to have been unnoticed. We are to pay the interest of our debt in thirteen places. Is it possible to transport the revenue from one end of the continent to the other? Nay, a week before the quarter's interest becomes due, transfers may be made which may require double the sum in Boston which was expected. To guard against this danger, an extra sum must be deposited at the different loan offices. This extra sum is not to be had; our revenue is barely equal to the interest due. This imposes an absolute necessity upon the Government to make use of a bank. The answer is, that the State banks will supply this aid. This is risking a good deal to the argument against the bank: for, will they admit the necessity and yet deny to the Government the lawful and only adequate means of providing for it? Ten of the States have no banks; those who have, may abolish theirs, or suffer their charters to expire. But the State banks are insufficient to the purpose; their paper has not a sufficient circulation; of course their capitals are small. Congress is allowed a complete legislative
48 BANK OF THE UNITED STATES.
power over its own finances, and yet, without the courtesy of the States, it cannot be exercised. This seems to be inconsistent.
If a war should suddenly break out, How is Congress to provide for it? perhaps Congress would not be sitting; great expenses would be incurred, and thev must be instantly provided for. How is this to be done? By taxes? And will the enemy wait till they can be collected? By loans at home? Our citi- zens would employ their money in war speculations, and they are not, indivi- dually, in a condition to lend a sufficient sum in specie, or shall we send across the sea for loans? The disputes between England and Spain furnish an example; the aid of their banks, for several millions, was prompt and effec- tual. Or will you say that Congress might issue paper money? That power, ruinous and fallacious as it is, is deduced from implication: for it is not ex- pressly given. A bank only can afford the necessary aid, in time of sudden emergency. If we have not the power to establish it, our social compact is incomplete; we want the means of self preservation.
I shall, perhaps, be told, that necessity is the tyrant's plea. I answer that it is a miserable one, when it is urged to palliate the violations of private right. Who suffers by this use of our authority? Not the States: tor they are not warranted to establish a national bank. Not individuals: for they will be assisted in trade, and defended from danger by it.
Having endeavored to enforce his argument by noticing the uses of banks to trade, to revenue, to credit, and, in cases of exigency, he adverted to the au- thority of our own precedents. Our right to govern the Western territory is not disputed. It is a power which no State can exercise. It must be exercis- ed, and, therefore, it resides in Congress. But how does Congress get this power? It is not expressly given in the constitution, but is derived from the nature of the case, or by implication from the power to regulate the property of the United States. If the power flows from the nature and necessity of the case, it may be demanded, is there not equal authority for the bank? If it is derived from the power of Congress to regulate the territory and other property of the United States, and to make all needful rules and regulations concerning it, and for the disposal of it, a strict construction would restrain Congress merely to the management and disposal of property, and of its own property; yet it is plain that more is intended. Congress has, accordingly, made rules, not only for governing its own property, but the property of the persons residing there. It has made rules which have no relation to property, at all, for punishing crimes. In short, it exercises all power in that territory. Nay, it has exercised the very power of creating a corporation. The Govern- ment of that territory is a corporation; and who will deny that Congress may lawfully establish a bank beyond the Ohio? It is fair to reason by analogy from a power which is unquestionable, to one which is the subject of debate.
He then asked whether it appeared, on this view of the subject, that the establishment of a national bank would be a violent misinterpretation of the constitution? He did not contend for an arbitrary, unlimited discretion in the Government to dp every thing. He took occasion to protest against such a misconception of his argument. He had noticed the great marks by which the construction of the constitution, he conceived, must be guided and limit- ed, arid these, if not absolutely certain, were very far from being arbitrary or unsafe. It is for the House to judge whether the construction, which denies the power of Congress, is more definite and safe.
In proving that Congress may exercise powers, which are not expressly granted by the constitution, he had endeavored to establish such rules of in- terpretation, and had illustrated his ideas by such observations as would anti- cipate, in a considerable degree, the application of his principles to the point in question. Before he proceeded to me construction of the clauses of the constitution which apply to the argument, he observed that it would be oro- per to notice the qualities of a corporation, in order to take a more exact view of the controversy.
He adverted to the individuality and the perpetuity of a corporation, and that the property of the individual should not be liable for the debts of the
CHARTER OF 1791. 4Q
bank or company. These qualities are not more useful to the corporation than conformable to reason; but Government, it is said, cannot create these qualities. This is the marrow of the argument: for Congress may set up a bank of its own to be managed as public property, to issue notes which shall be received in all payments at the treasury, which shall be exchangeable into specie on demand, and which it shall be death to counterfeit. Such a bank would be less safe and less useful than one under the direction of private persons; yet the power to establish it is indisputable. If Congress has the authority to do this business illy, the question returns whether the powers of a cprporation, which are essential to its being well done, may be annexed as incident to it. The bank of New York is not a corporation, yet its notes have credit. Congress may agree with that bank, or with a company of mer- chants, to take their notes, and to cause all payments to pass through their coffers. Every thing that the Government requires of, and will perform to the bank, may be lawfully done without giving them corporate powers; but to do it well, safely, and extensively, those powers are indispensable. This seems to bring the clebate within a narrow compass.
This led him to consider whether the corporate powers are incidental to those which Congress may exercise by the constitution.
He entered into a discussion of the construction of that clause, which em- powers Congress to regulate the territory and other property of the United States. The United States may hold property; may dispose of it; they may hold it in partnership; they may regulate the terms of the partnership. One condition may be that the common stock only, shall be liable for the debts of the partnership, and that any purchaser of a share shall become a partner. These are the chief qualities of a corporation. It seems that Congress, having the power to make all needful rules and regulations for the property of the United States, may establish a corporation to manage it; without which we have seen that the regulation cannot be either safe or useful. The United States will be the proprietor of one-tenth of the bank stock.
Congress may exercise exclusive legislation, in all cases whatsover, over the ten miles square, and the places ceded by the States for arsenals, light houses, docks, &c.; of course, it may establish a bank in those places, with corporate powers. The bill has not restrained the bank to this city, and if it had, this dispute would lose a part of its solemity. If, instead of principles, it concerns only places, what objection is there to the constitutional authority of Congress to fix the bank at Sandy Hook or Reedy Island, where we have light houses, and a right of exclusive legislation? A bank established there, or in the district located by law on the Potomac for the seat of government, could send its paper all over the Union. It is true that the places are not the most proper for a bank, but the authority*! establish it in them, overthrows the argument which is deduced from the definite nature of the powers vested in Congress, and the dangerous tendency of the proposed construction of them.
The preamble of the constitution warrants this remark, that a bank is not repugnant to the spirit and essential objects of that instrument.
He then considered the power to borrow money. He said it was natural to understand that authority as it was actually exercised in Europe, which is to borrow of the bank. He observed, the power to borrow was of narrow use without the institution of a bank, and, in the most dangerous crisis of affairs, would be a dead letter.
After noticing the powers to lay and collect taxes, he adverted to the sweep- ing clause, as it is usually called, which empowers Congress to exercise all power necessary and proper to carry the enumerated powers into execution. He did not pretend that it gives any new power, but it established the doc- trine of implied powers. He then demanded whether the power to incorpo- rate a bank is not fairly relative, and a necessary incident to the entire power to regulate trade and revenue, and to provide for the public credit and defence?
He entered into a particular answer to several objections, and after recapi- tulating his argument, he concluded with observing, that we had felt the disad- 7
50 BANK OF THE UNITED STATES.
vantages of the confederation. We adopted the constitution, expecting to^ place the national affairs under a federal head. This is a power which Congress can only exercise. We may reason away the whole constitution. All nations have their times of adversity and danger. The neglect of providing against therii in season, may be the cause of ruining the country.
FEBRUARY 4.
MR. SEDOWIUK said he would endeavor not to fatigue the patience of the House in the observations he should make on the important subject now under consideration. Without entering into a discussion on a scale so extensive as had been indulged by some gentlemen,, he would dwell only on a few impor- tant principles, and such consequericees as were conclusively deducible from, them, which had made a strong impression on his mind.
The opposition to the bill had called into question the constitutional powers of Congress to establish the proposed corporation, and the utility of banks, neither of which, till within a few days, did he suppose was doubted by airy intelligent person in America; and had charged the present system with hold- ing out unequal terms against the Government, to those who should subscribe to the proposed stock.
With regard to the question of constitutionality ,jnuch had been said, which, in his opinion, had not an intimate relation to the subject now before the House. We have with great earnestness been warned of the danger of grasping power by construction and implication— and this warning has been given in very animated language by the gentleman from Virginia (Mr. M.) I do not wish to deprive that member of the honor of consistency: but I well remember the time when the energy; of his reasoning impressed on the minds of a majority of this House, a conviction that the power of removal from offices holdeu at will, was, by construction and implication, vested by the constitution in the President — so there could be no-pretence, that it was expressly granted to him.
He said he would observe,, in answer to every thing that had been said of the danger of extending construction and implication, that the whole busi- ness of legislation was a practical construction of the powers of the Legisla- ture, and that probably no instrument for the delegation of power could be drawn up with such precision and accuracy, as to leave nothing to necessary implication. That all the different Legislatures in the United States !>id, and this, in his opinion, indispensably must, construe the powers which had been granted to them; and they must assume such auxiliary powers as are necessarily implied in those which are expressly granted. In doing which it was no doubt their duty to be careful not to exceed those limits within which it was intend- ed they should be restricted. By any other limitation, said he, the Govern- ment would be so shackled that it would be incapable of operating any of the effects which were intended by its institution.
He observed that, on almost all the great and important measures which come under the deliberation of Congress, there were immense difficulties ta he surmounted. If we attempt, said he, to proceed intone direction, our ears- are assailed with the exclamation of the constitution is in danger; if we at- tempt to attain our objects, by pursuing a different course, we are told the pass is guarded by the stern spirit of democracy. Did I concur with gen- tlemen in opinion on this subject, I should think it my duty to go home to my constituents, and honestly declare to them, that, by their jealousy of power, they had so restrained the operations of the Government, that we have not the means of effecting any of the great purposes for which the constitution was designed, without attempting what, perhaps, would be found impracticable to- fix the general rules, the nice point within which Congress would be autho- rized to assume powers by construction and implication, and beyond which they may be justly considered usurpers.
He wished gentlemen to reflect, what effect a single principle, universally acknowledged, would have, in determining the question now under consider- ation. It is universally agreed, that wherever a power is delegated for ex- press'purposes, all the knoivn and usual means for the attainment of the oh-
CHARTER OF 1791. 51
Jccts expressed, are conceded also. That, to decide what influence this ac- V knowledged principle would have on the subject before the House, it would 1 be necessary to reflect on the powers with which Congress are expressly in- vested. He then repeated, that Congress was authorized to lay and collect taxes, to borrow money on the credit of the United States, to raise and sup- port armies, provide and maintain navies, to regulate foreign and domestic trade, to make all laws necessary and proper to carry these, and the other enumerated powers, into effect; they were, in fine, entrusted with the exercise of ail those powers, which the People of America thought necessary to secure their fame and happiness against the attacks of internal violence and external invasion. And, in the exercise of these powers, the Legislature was authoriz- ed, agreeably to the principles which he had mentioned, to exercise all the known and usual means* necessary and proper, to effectuate the ends which are expressed. It might be of use to determine, with precision, what will be the meaning of the words necessary and proper. They do not restrict the power of the Legislature to enacting such laws only as are indispensable. Such a construction would be infinitely too narrow and limited; and to apply the meaning strictly, it would prove, perhaps, that all the laws which had been passed, were unconstitutional; for few, if any, of them, could be proved indispensable to the existence of the Government. The conduct of Congress had a construction on those words more rational and consistent with common sense, and the purposes for which the Government was instituted; which he conceived to be, that the laws should be established on such principles, and such an agency in the known and usual means employed in the execution of them, as to effect the ends expressed in the constitution, with the greatest pos- sible degree of utility. If banks were among the known and usual means to effectuate or facilitate the ends which had been mentioned, to enable the Go- vernment, with the greatest ease and least burden to the People, to collect taxes, to borrow money, regulate commerce, raise and support armies, pro- vide and maintain fleets; he thought the argument irrefragable and conclusive, to prove the constitutionality of the bill. Pursuing, further, the same idea, he asked, for what purpose were banks instituted and patronised by govern- ments which were unrestricted by constitutional limits? Were they not employed as the means, and the most useful engines, to facilitate the collec- tion of taxes, borrowing of money, and the other enumerated powers? Be- sides, he said, it was to be observed, that the constitution had expressly de- clared the ends of legislation; but, in almost every instance, had left the means to the honest and sober discretion of the Legislature. From the nature of things, this must ever be the case; for, otherwise, the constitution must contain, not only all the necessary laws under the existing circumstances of the community, but also a code so extensive, .as to adapt itself to all future possible contingencies. By our constitution, Congress has power to lay and collect taxes; but every thing subordinate to that end, such as the objects, the means, the instruments, and the purposes, are left to the honest and sober discretion of the Legislature. The power of borrowing money was expressly granted; but all the known and usual means to that end, vvere left in silence. The same observations might, in truth, be made, respecting the other dele- gated powers. The great ends to be obtained, as means to effectuate the ulti- mate end — the public good and general welfare — are capable, under general terms of constitutional specification; but the subordinate means are so nu- merous, and capable of such infinite variation, as to render an enumeration impracticable, and must, therefore, be left to construction and necessary im- plication. He said, on this ground he was willing to leave the general argu- ment— it was simple? intelligible, and he hoped would be thought conclusive. He said, the constitutionality had been attacked from another quarter. It was said, we could not give commercial advantages to one port above another. The constitutional provision which had been quoted, was undoubtedly intend- ed to prevent a partial regulation of commerce; if extended to the case under consideration, it would much more strongly prove, that Congress ought not to reside in any commercial city; for he verily believed, that the commercial
52 BANK OF THE UNITED STATES.
/advantages of Philadelphia were incomparably greater, from the residence, than they could be supposed from the institution of a national bank. Indeed, it was his opinion, that, considering that this city had a bank, the capital of which was adequate to all her commercial exigencies, that she could enlarge that capital as her necessity should require, and that her bank will, if thisbUl shall be refected, receive the benefit of national operation, that the measure will not advance her individual interest.
With regard to the utility of banks, he observed, that lie would not attempt to display a knowledge of the subject, by repeating all he had read and heard m relation to it, nor fatigue the House by a detail of his own reflections and reasoning upon it; the causes were unnecessary to be explained; the effects had been such m all countries where banks had been instituted, as to produce an universal opinion, that they were alike useful to all the great purposes of government, and to promote the general happiness of the people. Nor was our own experience wanting to the same purpose. At a time when our public resources were almost annihilated, our credit pros trater our Government im- becile, and its patronage inconsiderable, a bank, of small capital, was among the most operative causes which produced that first dawn that ultimately ter- minated in meridian splendor, by the establishment of peace, independence, |j and freedom. There were two circumstances which he would take the liberty to mention, which would render the banks of more importance in this coun- try than in any where they are at present in use. The first, the com- mercial enterprise of our merchants, compared with the smallness of their capitals, which, as we had no large manufacturing capitals, whereby the pre- cious metals would be retained in circulation, would frequently, by their ex- portation, greatly distress the people; the other, originated from a measure of the Government. Congress, from a laudable intention of accommodating their constituents, instituted treasuries in all the States: in some of these there would be, in the ordinary course of events, a deficiency, and in others* a redundancy. To keep them in equilibrio, by the transportation of the pre- cious metals, or by the purchase of bills in the market, would not be only in- convenient and expensive, but would keep out of circulation a considerable part of the medium of the country.
Gentlemen, he said, had been pleased to consider the proposed terms as giving an undue advantage to the stockholders. He would leave this part of the subject to gentlemen who better understood it, only observing that, as Government must rely principally on merchants to obtain the proposed stock, it would be necessary to afford to them sufficient motives to withdraw from, their commercial pursuits a part of their capitals.
He said he would attempt to answer some of those desultory objections which had been made; and, in doing this, he would omit to answer such as had been, in his opinion, already refuted. He observed that it had been said that granting charters of incorporation was a high prerogative of Government. He supposed it was not intended that it was, in the nature of things, too transcendent a power to be exercised by a national government; but that the exercise of it should only be in consequence of express delegation. Let this objection be compared with the conduct of Congress on another subject, in all respects, at least, as important. There is not, by the constitution, any power expressly delegated to mortgage our revenues; and yet, without any question being made on the constitutionality of the measure, we have mortgaged them to an immense amount From whence, he asked, do we acquire the autho- rity to exercise this power? Not from express grants, but being empowered to borrow money on the credit of the United States. We have very properly considered the pledged funds as among the known and usual means necessary and proper to be employed for the attainment of the end expressly delegated.
It had been said that the bill authorized the stockholders to purchase real estate. He considered the provision in the bill, in that regard, not a grant, but a limitation of power. Any man, or body of men, might, by the existing laws, purchase, in their private capacities, real estate to any amount. This right was limited as respects the proposed corporation*
CHARTER OF 1791. 53
It is said there are banks already, and, therefore, the proposed incorpora- tion is unnecessary. To this he answered, that, if the Government should agree to receive all its demands in the paper of the existing banks, it would give to them every advantage which, in the opinion of gentlemen, renders the present system objectionable, without stipulating for any equivalent to the Government. But are, he asked, gentlemen serious in these observations? Do they believe the capitals of the present banks adequate to the exigencies of the nation? Do they believe that those banks possess any powers by which they can give a projectile force to their paper, so as to extend its circulation throughout the United States? Or, do they really wish to have the Govern- ment repose itself on institutions with which they have no intimate connex ion, and over which they have no control?
Mr. Sedgwick concluded by observing, he was very confident a majority in that House could never be induced to believe that it was the intention of the constitution to deprive the Legislature of one of the most important and necessary means of executing the powers expressly delegated.
Mr. LAWRENCE said, the advocates of this measure stand in an unfor- tunate situation; for, being those who, in general, advocate national measures, they are charged with designs to extend the powers of the Government un- duly. He, however, consoled himself with a conscious attachment to the constitution, and with the reflection that their conduct received the approba- tion of their constituents. If the- present is contrasted with the former cir- cumstances of this country, he said he doubted not the measures of this Go- vernment would continue to receive the approbation of the People of the Unit- ed States.
The silence of the People on the subject now before the House, is strongly presumptive that the measure of a bank is not considered by them as uncon- stitutional. He then endeavored to shovy the constitutionality of the bank system. It must be conceded that there is nothing in the constitution ex- pressly against it, and, therefore, we ought not to deduce a prohibition by con- struction. He adverted to the amendment proposed by Congress to the con- stitution, which says, " powers not delegated are retained." Here, he said, to prove that the bank is constitutional, the constructive interpretation, so much objected against, is recurred to.
The great objects ol this Government are contained in the context of the constitution- He recapitulated those objects, and inferred that every power necessary to secure these, must necessarily follow: for, as to the great objects for which this Government was instituted, it is as full and complete, in all its parts, as any system that could be devised. A full, uncontrollable power to regulate the fiscal concerns of this Union, is a primary consideration in this Government; and, from hence, it clearly follows, that it must possess the power to make every possible arrangement conducive to that great object.
He then adverted to the late confederation, and pointed out its defects and incompetency; and hence, the old Congress called on the States to enact cer- tain laws, which they had not power to enact. From hence he inferred, that, as the late confederation could not pass those laws, and to capacitate the Government of the United States, and form a more perfect union, the consti- tion under which we now act was formed. To suppose that this Government does not possess the powers for which the constitution was adopted, involves the grossest absurdity.
The deviations from charters, and the infringement of parchment rights, which had been justified on the principle of necessity, by the gentleman from Virginia, (Mr. MADISON) he said, had been on different principles from those now mentioned; the necessity, he contended, did not, at the time, exist; and the old Congress exercised the power, as they thought, by a fair construction of the confederation.
On constructions, he observed, it was to be lamented that they should ever be necessary; but they had been made; lie instanced the power of remova-
54 BANK OF THE UNITED STATES.
bility, which had been an act of the three branches, and has not been com- plained of. It was, at least, as important a one as the present.
But the construction now proposed, he contended, was an easy and natural construction. Recurring to the collection law, he observed, that it was by con- struction that the receipts are ordered to be made in gold and silver.
With respect to creating a mass of capital, he supposed just and upright national measures would create a will to form this capital.
Adverting to the idea that Congress has not the power to establish compa- nies with exclusive privileges, he observed that, by the amendments proposed by New Hampshire, Msssachusetts, and New York, it plainly appears that these States considered that Congress does possess the power to establish such companies.
The constitution vests Congress with power to dispose of certain property in lands, and to make all useful rules and regulations for that purpose. Can its power be less over one species of its own property than over another?
"With respect to giving preference to one State over another, he observed that, ten years hence, the seat of Government is to be on the Potomac, and, where- ever the Government is finally settled, the place will enjoy superior ad vantages; but still the Government must go there, and the places not enjoying those ad- vantages must be satisfied.
It is said we must not pass a problematical bill, which is liable to a super- vision by the judges of the supreme court; but, he conceived there was no force in this, as those judges are invested, by the constitution, with a power to pass their judgment on all laws that may be passed.
It is said that this law may interfere with the State Governments; but this may or may not be the case; and in all interferences of the kind, the particu- lar interest of a State must give way to the general interest.
With respect to the C9rporation possessing the power of passing laws, this, he observed, is a power incidental to all corporations, and, in the instance of the Western territory, Congress have exercised the powers of instituting cor- porations, or bodies politic, to the greatest possible extent.
He defended the right of Congress to purchase and possess property, and quoted a passage in the constitution to show that they possess this right.
He then touched upon the expediency of banks, and of that proposed, in particular. The advantages generally derived from these institutions, he be- lieved, applied peculiarly to this country. He noticed the objections, from banks banishing the specie; he said, the surplus only would be sent out of the country. But, is it given away? No, Sir, it is sent off for articles which are wanted, and which will enrich the country.
With respect to a run on the bank, he mentioned the circumstances under which those runs on the British banks, which had been noticed, took place, and showed there was no parallel that would ever take place in this country.
From several particulars, he showed that the objection which arose, from the United States not having made a good bargain by the system, was not well founded. He then mentioned the peculiar advantages which the Unit- ed States will enjoy over common subscribers-
The objections from banks being already established in the several States, he obviated, by stating the mischiefs which might arise from an ignorance of the situation of those banks: and concluded by some remarks on the inexpe- diency of the General Government's having recourse to institutions of mere- ly a local nature.
Mr. JACKSON said that, having been the person who brought forward the constitutional objections against the bill, he thought himself bound to notice the answers which had been offered to that objection. Newspaper authorities, he said, have been alluded to, and their silence on the subject considered as indicating the approbation of the People. He would meet the gentlemen on that ground, and, though he did not consider newspapers as an authority to be depended on, yet, it opinions, thro' that channel, were to be regarded, he
CHARTER OF 1791.
55
would refer gentlemen to those of this city. The expediency and constitution- ality of the bill has been called in question by the newspapers of this city.
The latitude contended for in construing the constitution on this occasion, he reprobated very fully. If the sweeping clause, as it is called, extends to vesting Congress with such powers, and necessary and proper means are an indispensable implication, in the sense advanced by the advocates of the bill, we shall soon be in possession of all possible powers, and the charter under which we sit will be nothing but a name. i
This bill will essentially interfere with the rights of the separate States, } J for it is riot denied that they possess the power ot instituting banks; but the proposed corporation will eclipse the Bank of North America, and contravene the interests of individuals concerned in it.
He then noticed the several arguments drawn from the doctrine of impli- « cation; the right to incorporate a national bank has been deduced from the power to raise armies; but he presumed it would not be contended that this is a bill to provide for the national defence. Nor could such a power, in his opi- nion, be derived from the right to borrow money. It has been asked what the United States could do with the surplus of their revenue, without the convenience of a bank, in which to deposite it with advantage? For his part, though he wished to anticipate j)leasing occurrences, he did not look forward to the time when the General Government would have this superabundance at its disposal.
The right of Congress to purchase and hold lands has been urged, to prove that they can transfer this power; but the General Government is expressly restricted in the exercise of this power; the consent of the particular State to the purchase, for particular purposes only, is required; these purposes are de- signated, such as building light houses, erecting arsenals, &c.
It has been said that brinks may exist without a charter, but that this in- corporation is necessary, in order that it may have a hold on the Government. Mr. Jackson strongly reprobated this idea; he was, he said, astonished to , hear such a declaration, and hoped that such ideas would prevent a majority of the. House from passing a bill that would thus establish a perpetual mono- poly. We have, said he, I believe, a perpetual debt : I hope we shall not make a perpetual corporation. /What was it drove our forefathers to this country? Was it not the ecclesiastical cornorations^and perpetual monopolies of Eng- land and Scotland? Shall vye sufter the same evils to exist in this country, in- stead of taking every possible method to encourage the increase of emigrants to settle among us? For, if we establish the precedent now before us, there is no saying where it shall stop.
The power to regulate trade is said to involve this, as a necessary means; but the powers consequent on this express power, are specified: such as re- gulating light houses, ships, harbors, &c. It has been said, that Congress has borrowed money; this shews that there is no necessity of instituting any new bank, those already established having been found sufficient for the purpose. He denied the right of Congress to establish banks at the permanent seat ot Government, or on those sand heaps mentioned yesterday: for, if they should, they could not force the circulation of their paper one inch beyond the limits of those places. But, it is said, if Congress can establish banks in those si- tuations, the question becomes a question of place, and not of principle; from hence, it is interred that the power may be exercised in any other part of the United States; this appeared to him to form a very dangerous construction of the powers vested in the General Government.
Adverting to the powers in Congress, in respect to the finances of the Union, he observed that those powers did not warrant the adoption of whatever mea- sures they thought proper; the constitution has restricted the exercise of those fiscal powers; Congress cannot lay a poll tax, nor impose duties on exports, and yet these undoubtedly relate to the finances.
The powers exercised in respect to the Western territory, he observed, had reference to property already belonging to the United States; it does not refer to property to be purchased, nor does it authorize the purchase of any
56 BANK OP THE UNITED STATES.
additional property; besides, the powers are express and definite, and the exercise of them, in making needful rules and regulations in the government of that territory, does not interfere with the rights of the respective States.
Mr. Jackson then denied the necessity of the proposed institution, and, noticing the observation of Mr. Ames, that it was dangerous, on matters of importance, not to give an opinion, observed, that he could conceive of no danger that would result from postponing that construction of the constitution now contended for, to some future Congress, who, when the necessity of a bank institution shall be apparent, will be as competent to the decision as the present House. Alluding to the frequent representations of the flourish-
/ing situation of the country, he inferred that this shows that the necessity of the proposed institution does not exist at the present time; why should we then be anticipating for future generations? State banks he considered preferable to a national bank, as counterfeits can be detected in the States; but, if you establish a national bank, the checks will be found only in the city of Philadelphia or Conogocheague. He then passed an eulogium on the Bank of Pennsylvania; the stockholders, said he, are not speculators; they have the solid coin deposited in their vaults.
He adverted to the preamble and context of the constitution, and asserted that this context is to be interpreted by the general powers contained in the instrument. Noticing the advantages it had been said would accrue to the United States from the bank, he asked, is the United States going to com- mence stockjobbers? The " general welfare" are the two words which are to involve and justify the assumption of every power. But what is this gene- ral welfare? It is the welfare of Philadelphia, New York, and Boston: for, as to the States of Georgia and New Hampshire, they may as well be out ofthe Union, as to any advantages they will receive from the institution. He re-
( probated the idea of the United States deriving any emolument from the bank, and, more especially, he reprobated the influence which it was designed ithe Government should enjoy by it. He said, the banks of Venice and Amsterdam were founded upon different principles. In the famous bank of Venice, the Government holds no shares, and yet has at command 5,000,000 ducats; but the United States were to be immediately concerned in theirs, and to become stockjobbers. The Bank of Amsterdam was under the entire direction of the burgomasters, who had alone the power of making by-laws for its regu- lation; this power, by the bill, was given up by Government, very improper- ly he thought, and was to be exercised by the stockholders. The French bank, he added, was first established on proper principles, and flourished; but afterwards became a royal bank; much paper was introduced, which destroy - tlie establishment, and was near oversetting the Government.
The facility of borrowing, he deprecated; it will, said he, involve the Union in irretrievable debts; the facility of borrowing is but another name for antici- pation, whidywill, in its effects, deprive the Government of the power to con- trol its revenues — they will be mortgaged to the creditors of the Government. Let us beware of following the example of Great Britain in this respect. He said, undue advantages had been taken in precipitating the measure, and the reasonable proposition respecting the State debts is not admitted; this, I con- sider, as partial and unjust. A gentleman from Virginia has well observed, that we appear to be divided by a geographical line-— not a gentleman, scarcely, to the eastward of a certain line, is opposed to the bank, and where is the gen- tleman to the southward, that is for itr This ideal line will have a tendency to establish a real difference. He added a few more observations, and conclud- ed by urging a postponement, if any regard was to be had to the tran • quillity ofthe Union.
Mr. BOUDINOT said he meant to confine himself to two or three great points, on which the whole argument appeared to him to rest. He considered the objections to the bill as pointed against its constitutionality and expediency. It was essential, he observed, that every member should be satisfied, as far as possible, of the first: for, however expedient it might be, if it was clearly
CHARTER OF 1791. 57
unconstitutional, the bill should never receive the sanction of the Representa- tives of the People, He would, in a great measure, refer for its expediency, if constitutional, to the experience of every gentleman of the House, as the most satisfactory proof on that head, and he conceived there was no need of much argument in support of its decision. The first question, then, was, is Congress vested with a power to grant the privileges contained in the bill? This is denied, and oyght to be proved. In order to show in what manner this subject had struck his mind, he first laid down these principles:
Whatever power is exercised by Congress must be drawn from the consti- tution; either from the express words or apparent meaning, or from a neces- sary implication, arising from the obvious intent of the framers.
That whatever powers, (vested heretofore in any individual State) not granted by this instrument, are still in the people o'f such State, and cannot Be exercised by Congress; that whatever implication destroys the principle of the constitution, ought to be rejected; that, in construing an instrument, the different parts ought to be so expounded as to give meaning to every part which will admit of it.
Having stated these preliminaries, Mr. Boudinot proceeded to inquire what were the powers attempted to be exercised by this bill: for, until the powers were known, the question of constitutionality could not be determined,
By it, Congress was about to exercise the power of incorporating certain, individuals, thereby establishing a banking company "for successfully con- ducting the finances of the country."
The next inquiry is, What rights will this company enjoy in this nevv cha- racter, that they do not enjoy independent of itr Every individual citizen had an undoubted right to purchase and hold property, both real and personal, to any amount xvhatever; to dispose of this property to whom, and on what terms, he pleased; to lend his money, on legal interest, to any person willing to take the same; and, indeed, to exercise the power over his property, that was contained in the bill. Individual citizens, then, having these powers, might also associate together in company of co-partnership, ami, jointly, exer- cising the same rights, might hold lands in joint-tenancy, or as tenants in common, to any amount whatever; might put any sum of money into joint stock: might issue their notes to any amount; might make by-laws, or arti- cles of co partnership for their own government; and, finally, might set up a bank to any amount, however great, and no authority in the Government could legally interfere with the exercise of these rights. The great difference be- tween this private association of citizen*, in their individual capacities, and the company to be created in this bill, and which is held up in so dangerous a light, is, that the one exposes the company to the necessity of using each indi- vidual's name in all their transactions; suits must be brought in all their names; deeds must be taken and given in like manner; each one, in his private estate, is liable for the default of the rest; the death of a member dissolved the partnership, as to him; and, for want of a political existence, the union may be dissolved by any part of its members, and, of course, many obvious incon- veniences must be suffered, merely of an official kind. By the bill, these difficulties are to be removed, by conveying three qualities to them: . First. Individuality, or constituting a number of citizens into one legal ar- tificial body, capable, by a fictitious name, of exercising the rights of an individual.
Second. Irresponsibility in their individual capacity, not being answerable beyond their joint capital.
Third. Durability, or a political existence for a certain time, not to be effected by the natural death of its members.
These are the whole of the powers exercised and the rights conveyed. It is true these are convenient and advantageous to the company, but of trifling importance when considered as a right or power exercised by a national legis- lature, for the benefit of the government Can it be of any importance to the State, whether the number of its citizens are considered, in legal contempla- tion, as united in an individual capacity, or separately, as so many individuals, 8
58 BANK OF THE UNITED STATES.
especially if the public weal is thereby promoted? By their irresponsibility being known, every pei son dealing with them gives his tacit consent to the principle, and it becomes part of the contract; and, by political duration, their powers and abilities are limited, and their rights restricted, so as to prevent any danger that might arise from the exercise of their joint natural right, not only as to the amount of their capital, but as to the by-laws they may make for their government.
A private bank could make contracts with the Government, and the Govern- ment with them, to all intents and purposes as great and important as a public bank, would their capital admit of it; though they would not possess such qualities as to justify the confidence of Government, by depending on them in a time of danger and necessity. This might put it. in the power of any indi- vidual to injure the community in its essential interests, by withdrawing the capital when most needed. To prevent this, and many other inconveniences, it is necessary that a bank, for the purposes of Government, should be a legally artificial body, possessing the three qualities above mentioned.
Mr. Boudinot then took up the constitution, to see if this simple power was not fairly to be drawn, by necessary implication, from those vested by this instrument in the legislative authority of the United States. It sets out, said he, in the preamble, by declaring the general purposes for which it was formed: 4 The cnsu ranee of domestic tranquillity^ provision for the common de- fence, and promotion of the general welfare." These are the prominent fea tures of this instrument, and are confirmed and enlarged by the specific grants in the body of it, where the principles on which the .Legislature should rest their after proceedings are more fully laid down, and the division of power to be exercised by the general and particular governments distinctly marked out. By the eighth section, Congress has power " to levy taxes, pay debts, provide for the common defence and general welfare, declare war, raise and support armies, provide for and maintain a navy;" and, as a means to accom- plish these important ends, "; to borrow money;" and, finally, " to make all laws necessary and proper for the carrying into execution the foregoing powers." Le't us then inquire, is the constituting a public bank necessary to these important and essential ends of government r It so, the right to exercise the power must be in the supreme Legislature.
He argued, the power was not contained in express words, but it was neces- sarily deduced, by the strongest and most decisive implication, because, he contended, it was a necessary means to attain a necessary end. Necessary implication had led Congress, under the power to lay and collect imposts and taxes, to establish officers for the collection, to inflict penalties against those who should defraud the revenue, to oblige vessels to enter one port and deli- ver at another, subjected them to various ceremonies in their proceedings, for which the owners were made to pay; and he conceived it was not so great an exertion of power, by implication, to incorporate a company for the purpose of a bank. He also deduced the right from the power of paying debts, raising armies, providing for the general welfare and common defence, for which they were to borrow money. All these necessarily include the right of using every proper and necessary means to accomplish these necessary ends. It was cer- tain, he said, that money must be raised from the People. This could not be done in sums sufficient for the exigencies of Government in a country where the precious metals were so scarce as in this. The people, in general, are poor, when compared with European nations; they have a wilderness to subdue and cultivate; taxes must be laid with prudence, and collected with discretion. The anticipation of the revenues, therefore, by borrowing money, becomes absolutely necessary. If so, then, as the constitution had not specified the manner of borrowing, or from whom the loan was to be obtained, the Supreme Legislature of the Union were at liberty, it was their duty, to fix upon the best mode of effecting the purposes of their appointment. For it was a sound principle, that, when a general power is granted, and the means are not speci- fied, they are left to the discretion of those in whom the trust is reposed, pro • vided they do not adopt means expressly forbidden. The public defence or
CHARTER OF 1791. 59
general welfare, rested on the annual supplies from uncertain revenues, would expose the very existence of the. community. It is the duty, then, of those to whom the people have committed this power, to prepare, in time of peace, for the necessary defence in a time of war. The United States are now, happily, in a state of peace; but it was impassible for anyone to say how long it would continue. By prudent management, it might long be preserved; but this pru- dence consisted in being always in a state ot preparation to defend our country.
The constitution contemplates this very duty, by authorizing Congress to provide for the common defence, by borrowing money. Why borrow money? Are not the annual revenues sufficient? It might be so. if nothing was attend- ed to but internal wants: but the common defence and general welfare loudly call for that provision which will produce a constant guard on external ene- mies and internal insurrections* To this necessary end, it becomes Congress to provide that the necessary means may be always at hand, by being able to arm their citizens^ and provide for their support while engaged in the defence r»f their common country. This can be done only by borrowing money, which is usually of citizens or foreigners: if of the first, it must be from individuals or from private banks. Will it be prudent to trust to either? Loans from individuals were attempted during the war, when patriotism produced a will in some lenders, and others were glad to get rid of a depreciating paper cur- rency, almost on any terms whatever.
But, even these loan?, arising from this paper medium, with which the mar- ket was glutted, were altogether insufficient; and. by one change of circum- stances, every hope was precluded of being any ways successful in procuring money from that source. The circumstances of individuals, too. in this coun- try, are such, when compared with the wants of a nation, as render the source too va§ue and uncertain to rely upon, and it would be a most improvident execution of the powers granted for the express purpose of the common de- fence and general welfare. Private banks were almost as inadequate to the object, and, for reasons already given, were neither to be depended on, for will or capital, as to the supply for the principal wants of Government. They are generally established for commercial purposes, and on capitals not always sufficient for them. If they should be prevailed upon, at any thne, to attempt to supply the demands of a nation at war, it must, be from a general combination of their whole stocks, to the destruction of the original designs of their several institutions. This ought not to be expected: for, as far as it goes to the depression of the mercantile interest, so far it is injurious to the Government; besides, a dependence upon such a combination would be impo • Utic, both from its slowness and an certainty. The votes of a few individuals, affected by local, selfish, or adverse politics, might endanger the whole people. Such a dependence ought not to be attributed to the wise tram era of the con- stitution, neither does the language warrant it. But, foreign loans have been mentioned as a proper source for this purpose. The imprudence of placing the common defence of a nation on the will of those \yho have no interest in its welfare, is a good answer to this observation. Would it be prudent to trust a foreigner, perhaps a rival, if not an enemy, with your supply of what has emphatically been called the sinews of war? Would it not expose us to exorbitant demands, and often a refusal? Many adventitious circumstan- ces^of a '.var, increasing demands from other quarters, scarcity of coin, and difficulty of communication, as well as the intrigues of courts, all loudly op- pose the measure, as contrary to the spirit and meaning of a provision for the common defence and general welfare. The only resort, then, he conceived, was a timely provision to secure institutions at home, from which loans might be obtained at all times, on moderate terms, and to such amount as the neces- sity of tie State might require. But, gentlemen say that the constitution does not expressly warrant the establishment of such a corporation. If by cx- prccsly, express words are meant, it is agreed that there are no express words; and this is the case with most of the powers exercised by Congress: for, if the doctrine of necessary implication is rejected, he did not sec what the supreme
50 BANK OF THE UNITED