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The interdiction of loans on account of the United States, or of any particular State, beyond the moderate sum specified, or of any foreign Power, will serve as a barrier to Executive encroachments, and to combinations inauspicious 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, with 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. The 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 to have analyzed the subject in all its relations, to be able to form a just conception of the extent of that effect. Such an analysis cannot but satisfy an intelligent mind, that the difference of one per cent. in the rate at which money may be had, is often capable of 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 peculiarly worthy of the cares of legislators. And through laws, which violently sink the legal rate of interest greatly below the market level, are not to be commended, because they are not calculated to answer their aim, yet, whatever has a tendency to effect a reduction, without violence to the natural course 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 to clash.
But, as the most obvious ideas are apt to have greater force than those which depend on complex and remote combinations, there would be danger 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 accustomed, and might, on this account, be indisposed to embarking in the plan. There is, it is true, one reflection, which, in regard to men, actively engaged in trade, ought to be a security against this danger; it is this: That the accommodations 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 proposed 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 progressive, and bank notes may be thrown into circulation, instead of the gold and silver. Besides, there 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 the inducements to this measure, which results from the general interest of the Government to enlarge the sphere of the utility of the bank, 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 for their objects, the engrafting upon that institution, the characteristics which 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, and from the services it has rendered, are such as to claim a disposition favorable 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 otherwise arise, might, in a variety of ways, prove equally disagreeable and injurious. 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.
Opinion on Constitutionality of a National Bank
EDMUND RANDOLPH, ATTORNEY GENERAL, TO PRESIDENT WASHINGTON [Source: Letter book copy, papers of George Washington, Library of Congress]
The Attorney General of the United States in obedience to the order of the President of the United States, has had under consideration the Bill, entitled "An Act to incorporate the subscribers to the Bank of the United States," and reports on it, in point of constitutionality as follows:
It must be acknowledged, that, if any part of the bill does either encounter the Constitution, or is not warranted by it, the clause of incorporation is the only one.
The legal properties of this Corporation would be,
1st. To have succession until the 4th of March 1811.
2d. To purchase, receive, & retain, real and personal property to an amount not exceeding, fifteen millions of Dollars, including the Capital stock:
3d. To sell & dispose of the property.
4. To sue & be sued.
5. To have a Common seal; and
6. To make by-Laws, and do all Acts, appertaining to the Corporation, under certain restrictions prescribed in the Act.
These properties with different modifications in some instances, belong to all Corporations: their importance strikes the eye.
That the power of creating Corporations is not expressly given to Congress, is obvious.
If it can be exercised by them, it must be;
1st. because the nature of the Federal government implies it; or 2d. because it is involved in some of the specified powers of Legislation: or
3. because it is necessary and proper to carry into execution some of the specified powers;
1. To be implied in the nature of the Federal government would beget a doctrine so indefinite, as to grasp every power.
Governments, having no written constitution, may perhaps claim a latitude of power, not always easy to be determined. Those, which have written constitutions, are circumscribed by a just interpretation of the words contained in them-nay farther; a legislature instituted even by a written constitution, but without a special demarkation of powers, may perhaps be presumed to be left at large, as to all authority, which is communicable by the people, and does not affect any of those paramount rights, which a free people cannot be supposed to confide even to their representatives. Essentially otherwise is the condition of a legislature, whose powers are described. An example of the former is in the State Legislatures; of the latter, in the Legislature of the federal government, the characteristic of which has been confessed by Congress in the twelfth amendment, to be, that it claims no powers which are not delegated to it.
This last observation straitens the federal powers, and opposes an opinion, not unpatronized, that Congress may exercise all authority, to which the States are individually incompetent.
If any subject of government, from which the states are not excluded by the Constitution, be beyond their jurisdiction within their own limits, let it be shewn: it cannot be easily conceived.
But what, if such a subject should really exist? Is the argument less conclusive to say, that the States must retain it, because it is not given to the federal government, than that the latter although limitted in itself possesses it, because it is not within the verge of a State constitution? While, on the one hand, it ought not to be denied that the federal government superintends the general welfare of the States, it ought not to be forgotten, on the other, that it superintends it according to the dictates of the constitution.
The opinion, above alluded to, can have only one other object; namely, that every institution, to which a single State can give efficacy, only within its own boundaries, devolves on Congress. But the extravagance of such a position is manifested by a single circumstance, that the cutting of canals thro' two or more States, at the will of Congress, is one of its least consequences.
2. We ask then, in the second place, whether upon any principle of fair construction, the specified powers of legislation involve the power of granting charters of incorporation? We say charters of incorporation, without confining the question to the Bank; because the admission of it in that instance, is an admission of it in every other, in which Congress may think the use of it equally expedient.
There is a real difference between the rule of interpretation, applied to a law and a constitution. The one comprises a summary of matter, for the detail of which numberless laws will be necessary; the other is the very detail. The one is therefore to be construed with a discreet liberality; the other with a closer adherence to the literal meaning.
But when we compare the modes of construing a State, and the federal, constitution, we are admonished to be stricter with regard to the latter, because there is a greater danger of error in defining partial than general powers.
The rule therefore for interpreting the specified powers seems to be, that, as each of them includes those details which properly constitute the whole of the subject, to which the power relates, the details themselves must be fixed by reasoning. And the appeal may on this occasion be made to common sense & common language.
Those powers, then, which bear any analogy to that of incorporation, shall be examined separately in their constituent parts; and afterwards in those traits, which are urged to have the strongest resemblance to the favorite power.
1. Congress have power to lay & collect taxes &c.-the heads of this power are,
1. to ascertain the subject of taxation &c.
2. to declare the quantum of taxation &c.
3. to prescribe the mode of collection ; &
4. to ordain the manner of accounting for the Taxes &c:
2dly. Congress have also power to borrow money on the credit of the United States-the heads of this power are,
1. to stipulate a sum to be lent
2. to stipulate an interest, or no interest to be paid, &
3. to stipulate the time & manner of repayment, unless the Loan be placed on an irredeemable fund.
3. Congress have also power to regulate commerce with foreign nations, among the several States, and with the Indian tribes. The heads of this power with respect to foreign nations, are,
1. to prohibit them or their commodities from our ports.
2. to impose duties on them, where none existed before, or to increase existing duties on them.
3. to subject them to any species of custom house regulations: or 4. to grant them any exemptions or privileges which policy may suggest.
The heads of this power with respect to the several States, are little more, than to establish the forms of commercial intercourse between them, & to keep the prohibitions, which the constitution imposes on that intercourse, undiminished in their operation: that is, to prevent taxes on imports or exports; preferences to one port over another by any regulation of commerce or revenue; and duties upon the entering or clearing of the vessels of one State in the ports of another.
The heads of this power with respect to the Indian Tribes are 1. to prohibit the Indians from coming into, or trading within, the United States.
2. to admit them with or without restrictions.
3. to prohibit citizens of the United States from trading with them; or
4. to permit with or without restrictions.
4. Congress have also power to dispose of, & make all needful rules and regulations, respecting the territory or other property belonging to the United States: the heads of this power are,
1. to exert an ownership over the territory of the United States, which may be properly called the property of the United States, as is the western Territory; and to institute a government therein;
2. to exert an ownership over the other property of the United States.
This property may signify,
1. Personal property of the United States howsoever acquired;
2. real property, not aptly denominated territory, acquired by cession or otherwise.
It cannot signify,
1. Debts due from the United States.
2. Nor money, arising from the sources of revenue, pointed out in the Constitution. The disposal and regulation of money is the final cause for raising it by taxes &c.
5. The preamble to the Constitution has also been relied on, as a source of power.
To this it will be here remarked, once for all, that the preamble, if it be operative is a full constitution of itself; and the body of the Constitution is useless; but that it is declarative only of the views of the convention, which they supposed would be best fulfilled by the powers delineated; and that such is the legitimate nature of preambles.
With this analysis of the foregoing specified powers, compare each of the corporate powers: and where is the similitude? It lies, say the advocates of the Bill; in the power to lay & collect taxes &c.; because it facilitates the payment of them:-in that of borrowing money; because it creates an ability to lend: in that of regulating commerce; because it increases the medium of circulation; and thus encourages activity & industry.-In that of disposing and regulating property; because the contributions, and the interest of the United States in the Bank, are property of the United States.-Of each of these reasons something will be said in their order.
The incorporation of a Bank can facilitate the payment of taxes, only by creating a faculty to pay, or by supplying a deficient medium, or by rendering the transportation of money to the Seat of government more convenient. But to lay and collect taxes is in fact to demand & receive a public Debt, resting the mode of procuring the money on the resources of the debtors; and as to its transportation, surely there are many other vehicles besides bank-bills.
To borrow money presupposes the accumulation of a fund to be lent; and is secondary to the creation of an ability to lend.
By regulating commerce, in order to increase the medium of circulation cannot be intended any of the commercial powers, designated