The Essential Hamilton, page 26
It is presumed to have been satisfactorily shewn in the course of the preceding observations
That the power of the government, as to the objects intrusted to its management, is in its nature sovereign.
That the right of erecting corporations is one, inherent in & inseparable from the idea of sovereign power.
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 principle.
That the word necessary in the 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.
That the power to erect corporations is not to be considered, as an independent & substantive power but as an incidental & auxiliary one; and was therefore more properly left to implication, than expressly granted.
that the principle in question does not extend the power of the government beyond the prescribed limits, because it only affirms a power to incorporate for purposes within the sphere of the specified powers.
And lastly that the right to exercise such a power, in certain cases, is unequivocally granted in the most positive & comprehensive terms.
To all which it only remains to be added that such a power has actually been exercised in two very eminent instances: namely in the erection of two governments, One, northwest of the river Ohio, and the other south west—the last, independent of any antecedent compact.
And there results a full & complete demonstration, that the Secretary of State & Attorney General are mistaken, when they deny generally the power of the National government to erect corporations.
It shall now be endeavoured to be shewn that there is a power to erect one of the kind proposed by the bill. This will be done, by tracing a natural & obvious relation between the institution of a bank, and the objects of several of the enumerated powers of the government; and by shewing that, politically speaking, it is necessary to the effectual execution of one or more of those powers. In the course of this investigation, various instances will be stated, by way of illustration, of a right to erect corporations under those powers.
Some preliminary observations maybe proper.
The proposed bank is to consist of an association of persons for the purpose of creating a joint capital to be employed, chiefly and essentially, in loans. So far the object is not only lawful, but it is the mere exercise of a right, which the law allows to every individual. The bank of New York which is not incorporated, is an example of such an association. The bill proposes in addition, that the government shall become a joint proprietor in this undertaking, and that it shall permit the bills of the company payable on demand to be receivable in its revenues & stipulates that it shall not grant privileges similar to those which are to be allowed to this company, to any others. All this is incontrovertibly within the compass of the discretion of the government. The only question is, whether it has a right to incorporate this company, in order to enable it the more effectually to accomplish ends, which are in themselves lawful.
To establish such a right, it remains to shew the relation of such an institution to one or more of the specified powers of the government.
Accordingly it is affirmed, that it has a relation more or less direct to the power of collecting taxes; to that of borrowing money; to that of regulating trade between the states; and to those of raising, supporting & maintaining fleets & armies. To the two former, the relation may be said to be immediate.
And, in the last place, it will be argued, that it is, clearly, within the provision which authorises the making of all needful rules & regulations concerning the property of the United States, as the same has been practiced upon by the Government.
A Bank relates to the collection of taxes in two ways; indirectly, by increasing the quantity of circulating medium & quickening circulation, which facilitates the means of paying—directly, by creating a convenient species of medium in which they are to be paid.
To designate or appoint the money or thing in which taxes are to be paid, is not only a proper, but a necessary exercise of the power of collecting them. Accordingly congress in the law concerning the collection of the duties on imports & tonnage, have provided that they shall be payable in gold & silver. But while it was an indispensible part of the work to say in what they should be paid, the choice of the specific thing was mere matter of discretion. The payment might have been required in the commodities themselves. Taxes in kind, however ill judged, are not without precedents, even in the United States. Or it might have been in the paper money of the several states; or in the bills of the bank of North America, New York and Massachusetts, all or either of them: or it might have been in bills issued under the authority of the United States.
No part of this can, it is presumed, be disputed. The appointment, then, of the money or thing, in which the taxes are to be paid, is an incident to the power of collection. And among the expedients which may be adopted, is that of bills issued under the authority of the United States.
Now the manner of issuing these bills is again matter of discretion. The government might, doubtless, proceed in the following manner. It might provide, that they should be issued under the direction of certain officers, payable on demand; and in order to support their credit & give them a ready circulation, it might, besides giving them a currency in its taxes, set apart out of any monies in its Treasury, a given sum and appropriate it under the direction of those officers as a fund for answering the bills as presented for payment.
The constitutionality of all this would not admit of a question. And yet it would amount to the institution of a bank, with a view to the more convenient collection of taxes. For the simplest and most precise idea of a bank, is, a deposit of coin or other property, as a fund for circulating a credit upon it, which is to answer the purpose of money. That such an arrangement would be equivalent to the establishment of a bank would become obvious, if the place where the fund to be set apart was kept should be made a receptacle of the monies of all other persons who should incline to deposit them there for safe keeping; and would become still more so, if the Officers charged with the direction of the fund were authorised to make discounts at the usual rate of interest, upon good security. To deny the power of the government to add these ingredients to the plan, would be to refine away all government.
This process serves to exemplify the natural & direct relation which may subsist between the institution of a bank and the collection of taxes. It is true that the species of bank which has been designated, does not include the idea of incorporation. But the argument intended to be founded upon it, is this: that the institution comprehended in the idea of a bank being one immediately relative to the collection of taxes, in regard to the appointment of the money or thing in which they are to be paid; the sovereign power of providing for the collection of taxes necessarily includes the right of granting a corporate capacity to such an institution, as a requisite to its greater security, utility and more convenient management.
A further process will still more clearly illustrate the point. Suppose, when the species of bank which has been described was about to be instituted, it were to be urged, that in order to secure to it a due degree of confidence the fund ought not only to be set apart & appropriated generally, but ought to be specifically vested in the officers who were to have the direction of it, and in their successors in office, to the end that it might acquire the character of private property incapable of being resumed without a violation of the sanctions by which the rights of property are protected & occasioning more serious & general alarm, the apprehension of which might operate as a check upon the government—such a proposition might be opposed by arguments against the expediency of it or the solidity of the reason assigned for it, but it is not conceivable what could be urged against its constitutionality.
And yet such a disposition of the thing would amount to the erection of a corporation. For the true definition of a corporation seems to be this. It is a legal person, or a person created by act of law, consisting of one or more natural persons authorised to hold property or a franchise in succession in a legal as contradistinguished from a natural capacity.
Let the illustration proceed a step further. Suppose a bank of the nature which has been described with or without incorporation, had been instituted, & that experience had evinced as it probably would, that being wholly under public direction it possessed not the confidence requisite to the credit of its bills—Suppose also that by some of those adverse conjunctures which occasionally attend nations, there had been a very great drain of the specie of the country, so as not only to cause general distress for want of an adequate medium of circulation, but to produce, in consequence of that circumstance, considerable defalcations in the public revenues—suppose also, that there was no bank instituted in any State—in such a posture of things, would it not be most manifest that the incorporation of a bank, like that proposed by the bill, would be a measure immediately relative to the effectual collection of the taxes and completely within the province of the sovereign power of providing by all laws necessary & proper for that collection?
If it be said, that such a state of things would render that necessary & therefore constitutional, which is not so now—the answer to this, and a solid one it doubtless is, must still be, that which has been already stated—Circumstances may affect the expediency of the measure, but they can neither add to, nor diminish its constitutionality.
A Bank has a direct relation to the power of borrowing money, because it is an usual and in sudden emergencies an essential instrument in the obtaining of loans to Government.
A nation is threatened with a war. Large sums are wanted, on a sudden, to make the requisite preparations. Taxes are laid for the purpose, but it requires time to obtain the benefit of them. Anticipation is indispensible. If there be a bank, the supply can, at once be had; if there be none loans from Individuals must be sought. The progress of these is often too slow for the exigency: in some situations they are not practicable at all. Frequently when they are, it is of great consequence to be able to anticipate the product of them by advances from a bank.
The essentiality of such an institution as an instrument of loans is exemplified at this very moment. An Indian expedition is to be prosecuted. The only fund out of which the money can arise consistently with the public engagements, is a tax which will only begin to be collected in July next. The preparations, however, are instantly to be made. The money must therefore be borrowed. And of whom could it be borrowed; if there were no public banks?
It happens, that there are institutions of this kind, but if there were none, it would be indispensible to create one.
Let it then be supposed, that the necessity existed, (as but for a casualty would be the case) that proposals were made for obtaining a loan; that a number of individuals came forward and said, we are willing to accommodate the government with this money; with what we have in hand and the credit we can raise upon it we doubt not of being able to furnish the sum required: but in order to this, it is indispensible, that we should be incorporated as a bank. This is essential towards putting it in our power to do what is desired and we are obliged on that account to make it the consideration or condition of the loan.
Can it be believed, that a compliance with this proposition would be unconstitutional? Does not this alone evince the contrary? It is a necessary part of a power to borrow to be able to stipulate the consideration or conditions of a loan. It is evident, as has been remarked elsewhere, that this is not confined to the mere stipulation of a sum of money by way of interest—why may it not be deemed to extend, where a government is the contracting party, to the stipulation of a franchise? If it may, & it is not perceived why it may not, then the grant of a corporate capacity may be stipulated as a consideration of the loan? There seems to be nothing unfit, or foreign from the nature of the thing in giving individuality or a corporate capacity to a number of persons who are willing to lend a sum of money to the government, the better to enable them to do it, and make them an ordinary instrument of loans in future emergencies of the state.
But the more general view of the subject is still more satisfactory. The legislative power of borrowing money, & of making all laws necessary & proper for carrying into execution that power, seems obviously competent to the appointment of the organ through which the abilities and wills of individuals may be most efficaciously exerted, for the accommodation of the government by loans.
The Attorney General opposes to this reasoning, the following observation. “To borrow money presupposes the accumulation of a fund to be lent, and is secondary to the creation of an ability to lend.” This is plausible in theory, but it is not true in fact. In a great number of cases, a previous accumulation of a fund equal to the whole sum required, does not exist. And nothing more can be actually presupposed, than that there exist resources, which put into activity to the greatest advantage by the nature of the operation with the government, will be equal to the effect desired to be produced. All the provisions and operations of government must be presumed to contemplate things as they really are.
The institution of a bank has also a natural relation to the regulation of trade between the States: in so far as it is conducive to the creation of a convenient medium of exchange between them, and to the keeping up a full circulation by preventing the frequent displacement of the metals in reciprocal remittances. Money is the very hinge on which commerce turns. And this does not mean merely gold & silver, many other things have served the purpose with different degrees of utility. Paper has been extensively employed.
It cannot therefore be admitted with the Attorney General, that the regulation of trade between the States, as it concerns the medium of circulation & exchange ought to be considered as confined to coin. It is even supposeable in argument, that the whole, or the greatest part of the coin of the country, might be carried out of it.
The Secretary of State objects to the relation here insisted upon, by the following mode of reasoning—“To erect a bank, says he, & to regulate commerce, are very different acts. He who erects a bank, creates a subject of commerce, so does he, who makes a bushel of wheat, or digs a dollar out of the mines. Yet neither of these persons regulates commerce thereby. To make a thing which may be bought & sold is not to prescribe regulations for buying & selling: thus making the regulation of commerce to consist in prescribing rules for buying & selling.
This indeed is a species of regulation of trade; but is one which falls more aptly within the province of the local jurisdictions than within that of the general government, whose care must be presumed to have been intended to be directed to those general political arrangements concerning trade on which its aggregate interests depend, rather than to the details of buying and selling.
Accordingly such only are the regulations to be found in the laws of the United States; whose objects are to give encouragement to the entreprise of our own merchants, and to advance our navigation and manufactures.
And it is in reference to these general relations of commerce, that an establishment which furnishes facilities to circulation and a convenient medium of exchange & alienation, is to be regarded as a regulation of trade.
The Secretary of State further argues, that if this was a regulation of commerce, it would be void, as extending as much to the internal commerce of every state as to its external. But what regulation of commerce does not extend to the internal commerce of every state? What are all the duties upon imported articles amounting to prohibitions, but so many bounties upon domestic manufactures affecting the interests of different classes of citizens in different ways? What are all the provisions in the coasting act, which relate to the trade between district and district of the same State? In short what regulation of trade between the States, but must affect the internal trade of each State? What can operate upon the whole but must extend to every part!
The relation of a bank to the execution of the powers, that concern the common defence, has been anticipated. It has been noted, that at this very moment the aid of such an institution is essential to the measures to be pursued for the protection of our frontier.
It now remains to shew, that the incorporation of a bank is within the operation of the provision which authorises Congress to make all needful rules & regulations concerning the property of the United States. But it is previously necessary to advert to a distinction which has been taken by the Attorney General.
He admits, that the word property may signify personal property however acquired. And yet asserts, that it cannot signify money arising from the sources of revenue pointed out in the constitution; because, says he, “the disposal & regulation of money is the final cause for raising it by taxes.”
But it would be more accurate to say, that the object to which money is intended to be applied is the final cause for raising it, than that the disposal and regulation of it is such. The support of Government; the support of troops for the common defence; the payment of the public debt, are the true final causes for raising money. The disposition & regulation of it when raised, are the steps by which it is applied to the ends for which it was raised, not the ends themselves. Hence therefore the money to be raised by taxes as well as any other personal property, must be supposed to come within the meaning as they certainly do within the letter of the authority, to make all needful rules & regulations concerning the property of the United States.
A case will make this plainer: suppose the public debt discharged, and the funds now pledged for it liberated. In some instances it would be found expedient to repeal the taxes, in others, the repeal might injure our own industry, our agriculture and manufactures. In these cases they would of course be retained. Here then would be monies arising from the authorised sources of revenue which would not fall within the rule by which the Attorney General endeavours to except them from other personal property, & from the operation of the clause in question.
