Opinions on the Constitutionality of a National Bank: 1791
There were only three banks in the entire country when Alexander
Hamilton, in 1790, proposed the Bank of the United States to be modeled
on the Bank of England. It would be a private institution under strict
governmental supervision, and it would be useful to the United States
Treasury in issuing notes, in safeguarding surplus tax money, and in
facilitating numerous public financial transactions. President Washington
questioned whether creating a bank was constitutional or whether it was
an unconstitutional abuse of Congressional powers. Before signing the
bank bill, Washington solicited the views of some of his cabinet members.
The documents below are the opposing opinions of Thomas Jefferson,
Secretary of State, and Alexander Hamilton, Secretary of the Treasury.1
Thomas Jefferson, Secretary of State2
[This version of his opinion is condensed from five pages]
from the control of the State legislatures, and so, probably, they will be
construed.
I consider the foundation of the Constitution as laid on this ground:
That “all powers not delegated to the United States, by the Constitution,
nor prohibited by it to the States, are reserved to the States or to the
people.” [Amendment X] To take a single step beyond the boundaries
thus specially drawn around the powers of Congress, is to take possession
of a boundless field of power, no longer susceptible of any definition.
The incorporation of a bank, and the powers assumed by this bill,
have not, in my opinion, been delegated to the United States, by the
Constitution.
I. They are not among the powers specially enumerated: for these are:
The bill for establishing a National Bank undertakes among other
things:
1. To form the subscribers into a corporation.
1st A power to lay taxes for the purpose of paying the debts of the United
States; but no debt is paid by this bill, nor any tax laid…
2. “To borrow money.” But this bill neither borrows money nor
…[Jefferson lists several ways that this corporation could interfere
with the legal status of property, such as]
4. To transmit these lands, on the death of a proprietor, to a certain
line of successors; and so far changes the course of Descents…
ensures the borrowing it. The proprietors of the bank will be just as free as
any other money holders, to lend or not to lend their money to the
public…
3. To “regulate commerce with foreign nations, and among the States,
7. To give them the sole and exclusive right of banking under the
national authority; and so far is against the laws of Monopoly.
8. To communicate to them a power to make laws paramount to the
laws of the States; for so they must be construed, to protect the institution
and with the Indian tribes.” To erect a bank, and to regulate commerce,
are very different acts. He who erects a bank, creates a subject of
commerce in its bills,3 so does he who makes a bushel of wheat, or digs a
dollar out of the mines; yet neither of these persons regulates commerce
1
Introduction from Thomas Bailey et al., The American Spirit (Houghton
Mifflin, 1987). 150-154.
2
Paul Leicester Ford, ed. The Federalist : A commentary on the Constitution of
the United States by Alexander Hamilton, James Madison and John Jay (New
York : Henry Holt and Company, 1898). Via The Avalon Project:
http://avalon.law.yale.edu/18th_century/bank-tj.asp
thereby. To make a thing which may be bought and sold, is not to
3
At the time, all banks (not just government ones) issued Bills of Exchange,
like a money-order, that would be honored at the bank, but hopefully also
accepted by other creditors.
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prescribe regulations for buying and selling. Besides, if this was an
proposed as a means was rejected as an end by the Convention which
exercise of the power of regulating commerce, it would be void, as
formed the Constitution. A proposition was made to them to authorize
extending as much to the internal commerce of every State, as to its
Congress to open canals, and an amendatory one to empower them to
external. For the power given to Congress by the Constitution does not
incorporate. But the whole was rejected…
extend to the internal regulation of the commerce of a State, (that is to say
2. The second general phrase is, “to make all laws necessary and
of the commerce between citizen and citizen,) which remain exclusively
proper for carrying into execution the enumerated powers.” But they can
with its own legislature;…
all be carried into execution without a bank. A bank therefore is not
II. Nor are they within either of the general phrases, which are the two
following:
1. To lay taxes to provide for the general welfare of the United States,
necessary, and consequently not authorized by this phrase.
If has been urged that a bank will give great facility or convenience in
the collection of taxes, suppose this were true: yet the Constitution allows
that is to say, “to lay taxes for the purpose of providing for the general
only the means which are “necessary,” not those which are merely
welfare.” …They are not to lay taxes ad libitum for any purpose they
“convenient” for effecting the enumerated powers. If such a latitude of
please; but only to pay the debts or provide for the welfare of the Union.
construction be allowed to this phrase as to give any non-enumerated
In like manner, they are not to do anything they please to provide for the
power, it will go to everyone, for there is not one which ingenuity may not
general welfare, but only to lay taxes for that purpose. To consider the
torture into a convenience in some instance or other, to some one of so
latter phrase, not as describing the purpose of the first, but as giving a
long a list of enumerated powers…Therefore it was that the Constitution
distinct and independent power to do any act they please which might be
restrained them to the necessary means, that is to say, to those means
for the good of the Union, would render all the preceding and subsequent
without which the grant of power would be nugatory [pointless or
enumerations of power completely useless. It would reduce the whole
useless]…
instrument to a single phrase, that of instituting a Congress with power to
It may be said that a bank whose bills would have a currency all over
do whatever would be for the good of the United States; and, as they
the States, would be more convenient than one whose currency is limited
would be the sole judges of the good or evil, it would be also a power to
to a single State. So it would be still more convenient that there should be
do whatever evil they please…Certainly no such universal power was
a bank, whose bills should have a currency all over the world. But it does
meant to be given them. It was intended to lace them up straitly within the
not follow from this superior conveniency, that there exists anywhere a
enumerated powers, and those without which, as means, these powers
power to establish such a bank; or that the world may not go on very well
could not be carried into effect. It is known that the very power now
without it.
2
Alexander Hamilton, Secretary of the Treasury 4
Can it be thought that the Constitution intended that for a shade or
two of convenience, more or less, Congress should be authorized to break
[This version of his opinion is condensed from twenty pages]
down the most ancient and fundamental laws of the several States;[?]…
…In entering upon the argument, it ought to be premised that the
The negative [in Latin, veto; that is, the power to refuse to pass a law]
objections of the Secretary of State[Thomas Jefferson] and Attorney
of the President is the shield provided by the Constitution to protect
General [Edmund Randolph], are founded on a general denial of the
against the invasions of the legislature: 1. The right of the Executive. 2.
authority of the United States to erect corporations. The latter, indeed,
Of the Judiciary. 3. Of the States and State legislatures. The present is the
expressly admits, that if there be anything in the bill which is not
case of a right remaining exclusively with the States, and consequently
warranted by the Constitution, it is the clause of incorporation.
one of those intended by the Constitution to be placed under its protection,
Now it appears to the Secretary of the Treasury [me] that this general
It must be added, however, that unless the President’s mind on a view
principle is inherent in the very definition of government, and essential to
of everything which is urged for and against this bill, is tolerably clear
every step of progress to be made by that of the United States, namely:
that it is unauthorized by the Constitution; if the pro and the con hang so
That every power vested in a government is in its nature sovereign, and
even as to balance his judgment, a just respect for the wisdom of the
includes, by force of the term, a right to employ all the means requisite
legislature would naturally decide the balance in favor of their opinion. It
and fairly applicable to the attainment of the ends of such power, and
is chiefly for cases where they are clearly misled by error, ambition, or
which are not precluded by restrictions and exceptions specified in the
interest, that the Constitution has placed a check in the negative of the
Constitution, or not immoral, or not contrary to the essential ends of
President.
political society.
…To deny that the government of the United States has sovereign
power, as to its declared purposes and trusts, because its power does not
extend to all cases would be equally to deny that the State governments
have sovereign power in any case, because their power does not extend to
every case. The tenth section of the first article of the Constitution
exhibits a long list of very important things which they may not do. And
thus the United States would furnish the singular spectacle of a political
4
http://avalon.law.yale.edu/18th_century/bank-ah.asp and
3
society without sovereignty, or of a people governed, without
would be nugatory [useless, pointless]…It is essential to the being of the
government…
national government, that so erroneous a conception of the meaning of the
…the arguments which they had used against the power of the
government to erect corporations…shall be particularly examined.
word necessary should be exploded.
It is certain that neither the grammatical nor popular sense of the term
The first of these arguments is, that the foundation of the Constitution
requires that construction [definition]. According to both, necessary often
is laid on this ground: “That all powers not delegated to the United States
means no more than needful, requisite, incidental, useful, or conducive to.
by the Constitution, nor prohibited to it by the States, are reserved for the
…And it is the true one in which it is to be understood as used in the
States, or to the people.” Whence it is meant to be inferred, that Congress
Constitution. The whole turn of the clause containing it indicates, that it
can in no case exercise any power not included in those not enumerated in
was the intent of the Convention, by that clause, to give a liberal latitude
the Constitution. And it is affirmed, that the power of erecting a
to the exercise of the specified powers. The expressions have peculiar
corporation is not included in any of the enumerated powers…[but] It is
comprehensiveness. They are thought to make all laws necessary and
not denied that there are implied well as express powers...
proper for carrying into execution the foregoing powers,…
…The only question must be in this, as in every other case, whether
…The practice of the government is against the rule of construction
the mean to be employed or in this instance, the corporation to be erected,
[that is, the definition of necessary] advocated by the Secretary of State.
has a natural relation to any of the acknowledged objects or lawful ends of
Of this, the Act concerning lighthouses, beacons, buoys, and public piers,
the government. Thus a corporation may not be erected by Congress for
is a decisive example. This, doubtless, must be referred to the powers of
superintending the police of the city of Philadelphia, because they are not
regulating trade, and is fairly relative to it. But it cannot be affirmed that
authorized to regulate the police of that city. But one may be erected in
the exercise of that power in this instance was strictly necessity…
relation to the collection of taxes, or to the trade with foreign countries, or
This restrictive interpretation of the word necessary is also contrary to
to the trade between the States, or with the Indian tribes; because it is the
this sound maxim of construction, namely, that the powers contained in a
province of the federal government to regulate those objects,…
constitution of government, especially those which concern the general
…To this mode of reasoning respecting the right of employing all the
means requisite to the execution of the specified powers of the
government, it is objected, that none but necessary and proper means are
administration of the affairs of a country, its finances, trade, defense, etc.,
ought to be construed liberally in advancement of the public good…
…The truth is, that difficulties on this point are inherent in the nature
to be employed; and the Secretary of State maintains, that no means are to
of the Federal Constitution; they result inevitably from a division of the
be considered as necessary but those without which the grant of the power
legislative power…It leaves, therefore, a criterion of what is
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constitutional, and of what is not so. This criterion is the end, to which the
as any such document exists, it specifies only canals….It must be
measure relates as a mean. If the end be clearly comprehended within any
confessed, however, that very different accounts are given of the import of
of the specified powers, and if the measure have an obvious relation to
the proposition, and of the motives for rejecting it…
that end, and is not forbidden by any particular provision of the
...To establish such a right, it remains to show the relation of such an
Constitution, it may safely be deemed to come within the compass of the
institution to one or more of the specified powers of the government. …A
national authority. There is also this further criterion, which may
bank relates to the collection of taxes in two ways indirectly, by
materially assist the decision: Does the proposed measure abridge a pre-
increasing the quantity of circulating medium and quickening circulation,
existing right of any State or of any individual ? If it does not, there is a
which facilitates the means of paying directly, by creating a convenient
strong presumption in favor of its constitutionality, and slighter relations
species of medium in which they are to be paid5…A bank has a direct
to any declared object of the Constitution may be permitted to turn the
relation to the power of borrowing money, because it is an usual, and in
scale…
sudden emergencies an essential, instrument in the obtaining of loans to
The Secretary of State introduces his opinion with an observation, that
government. A nation is threatened with a war, large sums are wanted on
the proposed incorporation undertakes to create certain capacities,
a sudden to make the requisite preparations. Taxes are laid for the
…which are against the laws of alienage, descents, [etc.]…If these are
purpose, but it requires time to obtain the benefit of them. Anticipation is
truly the foundation laws of the several States, then have most of them
indispensable. If there be a bank the supply can at once be had. …
subverted their own foundations. For there is scarcely one of them which
A hope is entertained that it has, by this time, been made to appear, to
has not, since the establishment of its particular constitution, made
the satisfaction of the President, that a bank has a natural relation to the
material alterations in some of those branches of its jurisprudence,
power of collecting taxes-to that of regulating trade-to that of providing
especially the law of descents….
for the common defense and that, as the bill under consideration
…If the government of the United States can do no act which amounts
contemplates the government in the light of a joint proprietor of the stock
to an alteration of a State law, all its powers are nugatory; for almost
of the bank, it brings the case within the provision of the clause of the
every new law is an alteration, in same way or other, of an old law, either
Constitution which immediately respects the property of the United
common or statute…
States…
…Another argument made use of by the Secretary of State is, the
rejection of a proposition by the Convention to empower Congress to
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make corporations, either generally, or for some special purpose…As far
At the time, all banks (not just government ones) issued Bills of Exchange,
like a money-order, that would be honored at the bank, but hopefully also
accepted by other creditors.
5
No man is more ardently intent to see the public debt soon and
Thomas Jefferson, Letter to George Washington, September 9,
17916
…That I have utterly, in my private conversations, disapproved of the
sacredly paid off than I am. This exactly marks the difference between
Colonel Hamilton’s views and mine, that I would wish the debt paid
system of the Secretary of the Treasury, I acknowledge and avow; and this
tomorrow; he wishes it never to be paid, but always to be a thing where
was not merely a speculative difference. His system flowed from
with to corrupt and manage the legislature....
principles adverse to liberty, and was calculated to undermine and
…My objection to the Constitution was that it wanted [lacked] a bill
demolish the republic, by creating an influence of his department over the
of rights...Colonel Hamilton’s was that it wanted [lacked] a king and
members of the legislature. I saw this influence actually produced, and its
house of lords. The sense of America has approved my objection and
first fruits to be the establishment of the great outlines of his project by
added the bill of rights, not the king and lords....He wishes the general
the votes of the very persons who, having swallowed his bait...had nothing
government should have power to make laws binding the states in all
in view but to enrich themselves....
cases whatsoever. Our country has thought otherwise: has he
If what was actually doing [happening] begat uneasiness in those who
acquiesced?...
wished for virtuous government, what was further proposed was not less
Alexander Hamilton, Letter to Edward Carrington,7 May 26,
threatening to the friends of the Constitution. For, in a Report on the
subject of manufactures...it was expressly assumed that the general
17928
government has a right to exercise all powers which may be for the
It was not till the last session [of Congress] that I became
general welfare....The object of these plans taken together is to draw all
unequivocally convinced of the following truth—”That Mr. Madison,
the powers of government into the hands of the general legislature, to
cooperating with Mr. Jefferson, is at the head of a faction decidedly
establish means for corrupting a sufficient corps in that legislature
hostile to me and my administration, and actuated by views, in my
to...preponderate...and to have that corps under the command of the
judgment subversive of the principles of good government and dangerous
Secretary of the Treasury for the purpose of subverting step by step the
to the union, peace and happiness of the Country.”...
principles of the constitution, which he has so often declared to be a thing
of nothing which must be changed.
Mr. Jefferson...manifests his dislike of the funding system generally,
calling in question the expediency of funding a debt at all....In the
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6
From Dr. Micah Childress; available online at the Library of Congress:
http://memory.loc.gov/cgibin/query/r?ammem/mtj:@field%28DOCID+@lit%28tj070029%29%29
A Congressional Delegate from Virginia; served in the Revolutionary Army;
Member of the Continental Congress 1786-1788.
8
From Dr. Micah Childress; available online at the National Archives;
http://founders.archives.gov/documents/Hamilton/01-11-02-0349
6
question concerning the Bank [of the United States] he not only delivered
an opinion in writing against its constitutionality and expediency, but he
did it in a style and manner which I felt as partaking of asperity and ill
humor towards me....
I am told serious apprehensions are disseminated in your state as to
the existence of a Monarchical party meditating the destruction of State
and Republican Government....I assure you, ... there is not in my judgment
a shadow of foundation of it....As to my own political Creed, ... I am
affectionately attached to the Republican theory. I desire above all things
to see the equality of political rights exclusive of all hereditary distinction
firmly established by a practical demonstration of its being consistent with
the order and happiness of society....I acknowledge the most serious
apprehensions that the Government of the United States will not be able to
maintain itself against their [the states’] influence....Hence, a disposition
on my part towards a liberal construction of the powers of the National
Government....As to any combination to prostrate the State Governments I
disavow and deny it....On the whole, the only enemy which
Republicanism has to fear in this Country is the spirit of faction and
anarchy. If this will not permit the ends of Government to be attained
under it --if it engenders disorders in the community, all regular and
orderly minds will wish for a change, and the demagogues who have
produced the disorder will make it for their own aggrandizement. This is
the old Story.
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