- In December of 1790 Alexander Hamilton presented a plan to Congress
for the creation and incorporation of the National Bank of the United States.
Its purpose was to provide the government with a resource for short term
credit. Making funds available for business thereby helping to strengthen
the National Economy. Congress passed this proposal, and the only thing
standing in its way was a possible Presidential veto from George Washington.
Washington being unsure of the Bill's constitutionality asked his cabinet
members for advice. Thomas Jefferson and Edmund Jennings Randolph opposed
the Bill citing the apparent lack of power granting Congress the authority
to create Corporations. Hamilton's arguments were based on the premise
of "implied" powers, a power need not be explicitly granted in
order for Congress to exercise it, if the power was for the attainment
or goal of a granted power.
-
- Alexander Hamilton: FOR THE BANK (Feb 23 1791)
-
-
-
- THE SECRETARY OF THE TREASURY, having perused with attention the papers
- containing the opinion of the secretary of state and attorney general
- concerning the constitutionality of the bill for establishing a national
- bank, proceeds, according to the order of the President, to submit
the
- reasons which have induced him to entertain a different opinion...
-
- In entering upon the argument, it ought to be premised that the
- objections of the secretary of state and attorney general are founded
- on a general denial of the authority of the United States to erect
- corporations. The latter, indeed expressly admits that if there be
- anything in the bill which is not warranted by the Constitution, it
is
- the clause of incorporation.
-
- Now it appears to the secretary of the treasury that this general
- principle is INHERENT in the very DEFINITION of government and ESSENTIAL
- to every step of the progress to be made by that of the United States,
- namely: that every power vested in a government is in its nature soverign
- and includes, by force of the term, a right to employ all the MEANS
- requisite and fairly applicable to the attainment of the ENDS of such
- power, and which are not precluded by restrictions and exceptions
- specified in the Constitution, or not immoral, or contrary to the essential
- ends of political society...
-
- The circumstance that the powers of sovereignty are in this country
divided
- between the national and state governments does not afford the distinction
- required. It does not follow from this that each of the portion of
powers
- delegated to the one or to the other is not soverign with regard to
its
- proper objects. It will only follow from it that each has sovereign
power
- as to certain things and not as to other things. 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 10th section
of the
- 1st 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 society without soveriegnty,
or of a
- people governed without government.
-
- If it would be necessary to bring proof to a proposition so clear as
that
- which affirms that the powers of the the federal government, as to
its
- objects, were sovereign, there is a clause of its Constitution which
would
- be decisive. It is that which declares that the Constitution, and the
laws
- of the United States made in pursuance of it, and all treaties made,
or
- which shall be made, under their authority, shall be the supreme law
of
- the land. The power which can create the supreme law of the land in
any case
- is doubtless sovereign as to such case.
-
- This general and indisputable principle puts at once an end to the
- abstract question whether the United States have power to erect a corporation;
- that is to say, to give a legal or artificial capacity to one or more
persons,
- distinct from the natural. For it is unquestionably incident to sovereign
- power to erect corporations, and consequently to that of the United
States,
- in relation to the objects entrusted to the management of the government.
The
- difference is this: where the authority of the government is general,
it can
- create corporations in all cases; where it is confined to certain branches
of
- legislation, it can create corporations only in those cases.
-
- Here then, as far as concerns the reasonings of the secretary of state
and
- the attorney general, the affirmative of the constitutionality of the
bill
- might be permitted to rest. It will occur to the President that the
principle
- here advanced has been untouched by either of them.
-
- For a more complete elucidation of the point, nevertheless, the arguments
- which they had used against the power of the government to erect corporations,
- however foreign they are to the great and fundamental rule which has
been
- stated, shall be particularly examined....
-
- The first of these arguments is that the foundation of the Constitution
- is laid on this ground: "that all powers not delegated to the
United States
- by the Constitution, nor prohibited to it by the states, are reserved
for
- the states, or to the people," Whence it is meant to be inferred
that Congress
- can in no case exercise any power not included in those not enumerated
in the
- Constitution. And it is affirmed that the power of erecting a corporation
is
- not included in any of the enumerated powers....
-
- It is not denied that there are implied as well as express powers and
that
- the former are as effectually delegated as the latter....Then it follows
that
- as a power of erecting a corporation may as well be implied as any
other thing,
- it may as well be employed as an instrument or mean of carrying into
- execution any of the specified powers as any other instrument or mean
whatever.
-
- The only question must be, in this, as in every other case, whether
the mean
- to be employed or, in this instance, the corporation to be erected,
has a natural
- relation to any of the acknowledged objects or lawful ends of the government.
- Thus a corporation may not be erected by Congress for superintending
the police
- of the city of Philadelphia, because they are not authorized to regulate
the
- police of that city. But one may be erected in relation to the collection
of
- taxes, or to trade with foreign countries, or to trade between the
states, or
- with Indian tribes; because it is the province of the federal government
to
- regulate those objects, and because it is incident to a general sovereign
or
- legislative power to regulate a thing, to employ all the means which
relate
- to its regulation to the best and greatest advantage.
-
- Through 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 to be employed;
- and the secretary of the state maintains that no means are to be considered
- as NECESSARY but those without which the grant of the power would be
be
- nugatory. Nay, so far does he go in his restrictive interpretation
of the
- WORD as even to make the case of the NECESSITY which shall warrant
the
- constitutional exercise of the power to depend on casual and temporary
- circumstances - an idea which alone refutes the construction. The expediency
- of exercising a particular power at a particular time, must, indeed,
depend
- on circumstances; but the constitutional right of exercising it must
be
- uniform and invariable, the same today as tomorrow.
-
- All the arguments, therefore, against the constitutionality of the
bill
- derived from the accidental existence of certain state banks -- institutions
- which happen to exist today and, for aught that concerns the government
of
- the United States, may disappear tommorow -- must not only be rejected
as
- fallicous but must be viewed as demonstrative that there is a radical
source
- of error in the reasoning.
-
- It is essential to the being of the national government that so erroneous
- a conception of the meaning of the word "necessary" should
be exploded.
-
- Its is certain that neither a grammatical nor popular sense of the
term
- requires that construction. According to both, "necessary"
often means no
- more than needfull, requisite, incidental, usefull, or conductive to.
It is
- a common mode of expression to say that it is NECESARY for a government
or
- a person to do this or that thing, when nothing more is intended or
understood
- than than that the interests of the government or person require, or
will be
- promoted by, the doing this or that thing. The imagination can be at
no loss
- for the exemplifications of the true one in which it is to be understood
as
- used in the Constitution.
-
- The whole turn of the clause containing it indicates that it was the
intent
- of the Convention by that clause, to give a liberal latitude to the
exercise
- of the specified powers. The experessions have peculiar comprehensiveness.
- The are, "to make all laws necessary and proper for carrying into
the
- foregoing powers, and all other powers vested by the Constitution in
the
- government of the United States, or in any department or officer thereof."
-
- To understand the word as the secretary of state does would be to depart
- from its obvious and popular sense and to give it a restrictive operation,
an
- idea never before entertained. It would be to give it the same force
as if the
- word "absolutely" or "indispensably" had been prefixed
to it....To insist upon
- it would be to make the criterion on of the exercise of any implied
power a
- CASE OF EXTREME NECESSITY: which is rathe a rule to justify the overleaping
- of the bounds of constitutional authority than to govern the ordinary
exercise
- of it.
-
-
- It may he truly said of every government, as well as that of the United
- States, that it has only a right to pass such laws as are necessary
and
- proper to accomplish the objects entrusted to it; for no government
has
- a right to do MERELY WHAT IT PLEASES. Hence, by a process of reasoning
- similar to that of the secretary of state, it might be proved that
neither
- of the state governments has a right to incorporate a bank. It might
be
- shown that all the public business of the state could be performed
without
- a bank, and inferring thence it was unnecessary, it might be argued
that it
- could not be done, because it is against the rule which has been just
- mentioned. A like mode of reasoning would prove that there was no power
to
- incorporate the inhabitants of a town, with a view to a more perfect
police.
- For it is certain that an incorporation may be dis-pensed with, though
it is
- better to have one. It is to he remembered that there is no EXPRESS
power in
- any state constitution to erect corporations....
-
-
-
- This restrictive interpretation of the word "necessary" is
also contrary
- to this sound maxim of construction; namely, that the powers contained
in a
- constitution of government, especially those which concern the general
- administration of the affairs of a country, its finances, trade, defense,
- etc., ought to be construed liberally in advancement of the public
good.
- This rule does not depend on the particular form of a government, or
on the
- particular demarcation of the boundaries of its powers, but on the
nature
- and objects of government itself. The means by which national exigencies
are
- to be provided for, national inconveniences obviated, national prosperity
- promoted, are of such infinite variety, extent, and complexity that
there
- must of necessity be great latitude of discretion in the selection
and
- application of those means. Hence, consequently, the necessity and
propriety
- of exercising the authorities entrusted to a government on principles
of
- liberal construction. . . .
-
- The truth is that difficulties on this point are inherent in the nature
of
- the federal Constitution; they result inevitably from a division of
the
- legislative power. The consequence of this division is that there will
be
- cases clearly within the power of the national government; others,
clearly
- without its powers; and a third class which will leave room for controversy
- and difference of opinion, and concerning which a reasonable latitude
of
- judgment must be allowed.
-
- But the doctrine which is contended for is not chargeable with the
- consequences imputed to it. It does not affirm that the national government
- is sovereign in all respects but that it is sovereign to a certain
extent;
- that is, to the extent of the objects of its specified powers.
-
- It leaves, therefore, a criterion of what is constitutional and of
what is
- not so. This criterion is the END to which the measure relates as
a MEAN.
- If the end be clearly comprehended within any of the specified powers,
and
- if the measure have an obvious relation to that end, and is not forbidden
by
- a particular provision of the Constitution, it may safely be deemed
to come
- within the compass of the national authority.
-
- There is also this further criterion, which may materially assist the
- decision: Does the proposed measure abridge a preexisting right of
any state
- or of any individual? If it does not, there is a strong presumption
in favor
- of its constitutionality, and slighter relations to any declared object
of
- the Constitution may be permitted to turn the scale. . . .
-
- There are two points in the suggestions of the secretary of state .
. .
- that are peculiarly incorrect. One is that the proposed incorporation
is
- against the laws of monopoly, because it stipulates an exclusive right
of
- banking under the national authority; the other, that it gives power
to the
- institution to make laws paramount to those of the states.
-
- But, with regard to the first point: The bill neither prohibits any
state
- from erecting as many banks as they please, nor any number of individuals
- from associating to carry on the business, and consequently, is free
from
- the charge of establishing a monopoly; for monopoly implies a legal
- impediment to the carrying on of the trade by others than those to
whom it
- is granted.
-
- And with regard to the second point, there is still less foundation.
The
- bylaws of such an institution as a bank can operate only on its own
members
- can only concern the disposition of its own property, and must essentially
- resemble the rules of a private mercantile partnership. They are expressly
- not to be contrary to law; and law must here mean the law of a state
as well
- as of the United States. There never can be a doubt that a law of a
- corporation, if contrary to a law of a state, must be overruled as
void,
- unless the law of the state is contrary to that of the United States,
and
- then the question will not be between the law of the state and that
of the
- corporation, but between the law of the state and that United States.
. . .
-
- It is presumed to have been satisfactorily shown in the course of the
- preceding observations:
-
- 1. That the power of the government, as to the objects entrusted
to its
- ment, is, in its nature, sovereign.
-
- 2. That the right of erecting corporations is one inherent in, and
- inseparable from, the idea of sovereign power.
-
- 3. That the position that the government of the United States can
exercise
- no power but such as is delegated to it by its Constitution does
not
- militate against this principIe.
-
- 4. That the word "necessary", in general clause, can have
no restrictive
- operation derogating from the force of this principle; indeed,
that the
- degree in which a measure is or is not necessary cannot be a test
of
- constitutional right but of expediency only.
-
- 5. That the power to erect corporations is not to be considered as
an
- independent or substantive power but as an incidental and auxiliary
one
- and was therefore more properly left to implication than expressly
- granted.
-