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Madison / The National Bank

As the conflict with Secretary of the Treasury Alexander Hamilton intensified, Thomas Jefferson, the Secretary of State, could not take a public role in opposition to Hamilton and the President who supported him. Thus James Madison, who had started in 1789 as the President Washington's floor leader, had no choice but to become the leader of the opposition in the House of Representatives and the nation.  This must have been a hard choice for Madison who had worked with Washington for the creation of the Constitution and the Bill of Rights.  It was Washington, not Jefferson, who had been Madison silent but essential partner at the Constitutional Convention.  Washington, in turn, took the defection hard: his last words were reported to be a denunciation of Madison.

In the selection below Madison debates Federalist Congressmen concerning the constitutionality of the creation of a National Bank.  Madison makes the case for a limited interpretation of the powers of the federal government.  Two Federalists respond, and then Madison replies to disassociate himself from the very limited interpretation of federal powers which has been imputed to him.

Madison and Jefferson were not successful in their opposition: a National Bank was chartered.  Its charter expired during Madison's first administration as President.  In his second administration Madison called for and Congress established the Second National Bank.  Madison was not deterred by charges of inconsistency. --JMU Editor.

[Downloaded from the American Memory Collection of the Library of Congress with changes in appearance and links.]

House of Representatives, February 2, 1791.

Mr. MADISON did not oppose all the banking systems, but did not approve of the plan now under consideration.

Upon the general view of banks, he recapitulated the several advantages which may be derived from them. The public credit; he granted, might be raised for a time, but only partially. Banks, he conceived, tended to diminish the quantity of precious metals in a country; and the articles received in lieu of a portion of them, which was banished, conferred no substantial benefit on the country. He dwelt on the casualties that banks are subject to.

To be essentially useful in so extensive a country, banks, he said, should be fixed in different parts of the United States; and in this view, the local banks of the several states, he said, could be employed with more advantage than if any other banking system was substituted. Circumstances, in Great Britain, he observed, required that there should be one bank, as the object there is to concentrate the wealth of the country to a point, as the interest of their public debt is all paid in one place. Here a difference in circumstances called for another kind of policy: the public debt is paid in all the different states.

He then expressly denied the power of Congress to establish banks. And this, he said, was not a novel opinion; he had long entertained it. All power, he said, had its limits; those of the general government were ceded from the mass of general power inherent in the people, and were consequently confined within the bounds fixed by their act of cession. The Constitution was this act; and to warrant Congress in exercising the power, the grant of it should be pointed out in that instrument. This, he said, had not been done; he presumed it could not be done. If we ventured to construe the Constitution, such construction only was admissible, as it carefully preserved entire the idea on which that Constitution is founded.

He adverted to the clauses in the Constitution which had been adduced as conveying this power of incorporation. He said he could not find it in that of laying taxes. He presumed it was impossible to deduce it from the power given to Congress to provide for the general welfare. If it is admitted that the right exists there, every guard set to the powers of the Constitution is broken down, and the limitations become nugatory.

The present Congress, it was said, had all the powers of the old Confederation, and more. Under the old government a bank had been established; and thence it was deduced that the present legislature had indubitably that power. The exigencies of government were such, he answered, under the old Confederation, as to justify almost any infraction of parchment rights; but the old Congress were conscious they had not every power necessary for the complete establishment of a bank, and recommended to the individual states to make sundry regulations for the complete establishment of the institution.

To exercise the power included in the bill was an infringement on the rights of the several states; for they could establish hanks within their respective jurisdictions, and prohibit the establishment of any others. A law existed in one of the states prohibitory of cash notes of hand, payable on demand. The power of making such a law could not, be presumed, be denied to the states: and if this was granted, and such laws were in force, it certainly would effectually exclude the establishment of a bank.

This power of establishing a bank had been, he said, deduced from the right, granted in the Constitution, of borrowing money; but this, he conceived, was not a bill to borrow money. It was said that Congress had not only this power to borrow money, but to enable people to lend. In answer to this, he observed that, if Congress had a right to enable those people to lend, who are willing, but not able, it might be said that they have a right to compel those to lend, who were able, and not willing.

He adverted to that clause in the Constitution which empowers Congress to pass all the laws necessary to carry its powers into execution, and, observing on the diffusive and ductile interpretation of these words, and the boundless latitude of construction given them by the friends of the bank, said that, by their construction, every possible power might be exercised.

The government would then be paramount in all public cases: charters, incorporations, and monopolies, might be given, and every limitation effectually swept away, and could supersede the establishment of every bank in the several states. The doctrine of implication, he warned the friends to this system, was a dangerous one, which, multiplied and combined in the manner some gentlemen appeared to contemplate, would form a chain reaching every object of legislation of the United States. This power to incorporate, he contended, was of primary importance, and could by no means be viewed as a subaltern, and therefore ought to be laid down in the Constitution, to warrant Congress in the exercise of it, and ought not to be considered as resulting from any other power.

Incorporation, he said, is important as the power of naturalization; and Congress, he presumed, would not exercise the power of naturalizing a foreigner, unless expressly authorized by the Constitution. He read a sentence in the bill respecting the power of making such regulations as were not contrary to law. What law? Was it the law of the United States? There were so few, that this allowed a very considerable latitude to the power of making regulations, and more than any member, he conceived, would wish to grant. Were the laws of the individual states contemplated by this provision? Then it would be in the power of the separate states to defeat an institution of the Union. He asked by what authority Congress empowered a corporation to possess real estate. He reprobated this idea. To establish this bank was, he said, establishing a monopoly guarantied in such a manner that no similar privilege could be granted to any other number of persons whatever. He denied the necessity of instituting a bank at the present time. The Constitution ought not to be violated without urgent necessity indeed. There were banks, in several of the states, from which some advantages could be derived which could not be gained from an institution on the plan proposed.

In confirmation of his sentiments, he adduced certain passages from speeches made in several of the state conventions by those in favor of adopting the Constitution. These passages were fully in favor of this idea--that the general government could not exceed the expressly delegated powers. In confirmation also of this sentiment, he adduced the amendments proposed by Congress to the Constitution.

He urged, from a variety of considerations, the postponement of the business to the next session of Congress.

Mr. AMES. For his own part, he never doubted the constitutionality of the plan; and if the public sense was to be regarded on the occasion, their approbation of the measures taken by the old Confederation, respecting the Bank of North America, and their total silence on the constitutionality of the plan before Congress at this day, were to him sufficient proofs of their opinions on the subject.

The first question that occurred on this subject was, whether the powers of the house were confined to those expressly granted by the letter of the Constitution, or whether the doctrine of implication was safe ground to proceed upon. If the letter of the Constitution was to be adhered to, the question he deemed determined; but if a more rational plan was adopted, and the sense of the Constitution, upon strict, examination, appeared even doubtful, every member must then appeal to his conscience and understanding. If the powers of the house were circumscribed by the letter of the Constitution, much expense might have been saved to the public, as their hands would have been completely tied. But, by the very nature of government, the legislature had an implied power of using every means, not positively prohibited by the Constitution, to execute the ends for which that government was instituted. Every constitutional right should be so liberally construed as to effect the public good. This, it has been said, was taking too great a latitude; but certainly to promote the ends of government was the end of its existence; and by the ties of conscience, each member was bound to exercise every lawful power which could have a tendency to promote the general welfare. It had been said that the doctrine of implication was dangerous, and would alarm the people. He thought it would not, unless the alarm was founded.

Suppose, he said, the power of raising armies was not expressly granted to the general government; would it be inferred from hence, that the power of declaring war, without the means of carrying it on, had been ceded to them? Would it be said that the blood of fellow-citizens was crying for vengeance, though their lives and property called for protection from the hand of government? Would it be said that they had not a constitutional right to be protected? Would it be urged that the Constitution, by not expressly granting to the general government the power of levying armies, had put it out of their power to protect its citizens? This, he conceived, would be a very dangerous doctrine.

Suppose the power of borrowing money had not been expressly given to the federal government; would it not, in emergencies, be inferred from the nature of the general powers granted to it? Suppose the power to lend had not been mentioned, and a surplus of revenue in the public coffers; should it not be distributed among the people, but locked up and suffered to remain unproductive in the treasury? He imagined not. Suppose the question of redeeming the prisoners in captivity at Algiers was before the house; would it be urged that nothing could be done in their favor by the general government, because no power was specially granted? No. Every person, he conceived, that felt as a man, would not think his hands tied when they were to be extended to the relief of suffering fellow-citizens. The power of buying certificates was not particularly mentioned in the Constitution; yet it had been exercised by the general government, and was inferred from that of paying the public debt, and from the reason of the case. The power of establishing banks , he conceived, could be deduced from the same source--from their utility in the ordinary operations of government, and their indispensable necessity in cases of sudden emergencies. It was said that the state banks would serve all these purposes; but why deprive the general government, he asked, of the power of self-defence?

Mr. Ames proceeded to prove that the power of incorporating the subscribers to the bank could be deduced from that clause in the Constitution which had been termed the sweeping clause . Unless a reasonable latitude of Construction of this part of the Constitution was allowed, he did not see upon what authority several acts of Congress would rest. Whence did the general government draw the authority they had exercised over the western territory? That authority, he answered, must of necessity belong to Congress: it could not rest with the individual states.

The power here was derived by implication, and was deduced from the reason and necessity of the case; and the power contended for in the present case might, for the same reasons, be exercised, and was drawn from the same source. The government of the western territory was a species of corporation--corporation in its nature the most important; and would it be said that Congress had acted unconstitutionally when they established it? And would the territory be left under the control of the individual states? He presumed not.

By the Constitution, a power of regulating trade was specially given to Congress; and under this clause they had established regulations affecting ships, seamen, lighthouses, &c. By parity of reasoning, he conceived that, as the power of collecting taxes was specified among the rights granted by the Constitution to Congress, they undoubtedly were entitled to make regulations affecting the instruments by means of which those taxes were to be collected.

Some opposition to the system arose from the idea that it was an infringement on the rights of the individual states. This objection he answered. It could not be denied, he said, that Congress had the right to exercise complete and exclusive jurisdiction over the district of ten miles square, ceded for the seat of permanent residence, and over such spots as were ceded for the establishment of lighthouses, &c. In these places, then, it must be granted that Congress had authority to establish a bank . If this was allowed, (and he could not see how it could be denied,) then the question became a question of place, and not of principle. He adverted to the preamble of the Constitution, which declares that it is established for the general welfare of the Union. This vested Congress with the authority over all objects of national concern, or of a general nature. A national bank undoubtedly came under this idea; and though not specially mentioned, yet the general design and tendency of the Constitution proved more evidently the constitutionality of the system, than its silence in this particular could be construed to express the contrary. He deduced the power also from those clauses in the Constitution which authorize Congress to lay and collect taxes. This, he said, could not he done from every corner of so extended an empire without the assistance of paper. In the power of borrowing money, he saw that of providing the means, by the establishment of a bank. But it has been said that, if Congress could exercise the power of making those who were willing, able to lend, they might carry their authority to creating the will in those who were able. This would be, he said, an abuse of power, and reasonings drawn from it could not be just.

Gentlemen had noticed the amendment proposed by Congress to the Constitution, as conveying the sense of the legislature on the nature of the powers vested by that instrument. The amendment stated, that it should be declared, that the powers not expressly delegated to the general government, and such as could be exercised by the states, should be considered as belonging to the states. But the power of establishing a national bank , he said, could not be exercised by the states, and therefore rested nowhere but in the federal legislature.

The doctrine of implication, it had been said, would excite alarms. It had been resorted to, and alarms had not been excited. He conceived it a necessary doctrine in many cases.

He had no desire to extend the powers granted by the Constitution beyond the limits prescribed by them. But in cases where there was doubt as to its meaning and intention, he thought it his duty to consult his conscience and judgment to solve them; and even if doubts did still remain on two different interpretations of it, he would constantly embrace that the least involved in doubt.

Mr. SEDGWICK expressed his surprise at the objections made to the constitutionality of the bill.

A gentleman from Virginia (Mr. Madison) had taken some pains to convince the house that he had uniformly been opposed to seeing the general government exercise the power of establishing banks . He did not wish to dispute with the honorable member the merit of consistency, but only begged leave to remark that the same gentleman had not always been averse to the exercise of power by implication. Witness the proceedings on the propriety of vesting the President of the United States with the authority of removing officers. But in this case, he was willing to take up the question solely on its own merits, without reference to former opinions.

In the present case, he conceived the determination of the question rested, in a great measure, on the meaning of the words necessary and proper.

Mr. MADISON. Those two words had been, by some, taken in a very limited sense, and were thought only to extend to the passing of such laws as were indispensably necessary to the very existence of the government. He was disposed to think that a more liberal construction should be put on them,--indeed, the conduct of the legislature had allowed them a fuller meaning,--for very few acts of the legislature could be proved essentially necessary to the absolute existence of government. He wished the words understood so as to permit the adoption of measures the best calculated to attain the ends of government, and produce the greatest quantum of public utility.

In the Constitution, the great ends of government were particularly enumerated; but all the means were not, nor could they all be, pointed out, without making the Constitution a complete code of laws: some discretionary power, and reasonable latitude, must be left to the judgment of the legislature. The Constitution, he said, had given power to Congress to lay and collect taxes; but the quantum, nature, means of collecting; &c., were of necessity left to the honest and sober discretion of the legislature.

It authorized Congress to borrow money; but of whom, on what terms, and in what manner, it had not ventured to determine; these points of secondary importance were also left to the wisdom of the legislature. The more important powers are specially granted; but the choice from the known and useful means of carrying the power into effect, is left to the decision of the legislature. He enumerated some other powers which are specified in the Constitution as belonging to Congress, and of which the means of execution are not mentioned; and concluded this part of his argument by observing that, if the bank which it was proposed to establish by the bill before the house could be proven necessary and proper to carry into execution any one of the powers given to Congress by the Constitution, this would at once determine the constitutionality of the measure.

He would not, he said, dwell any longer on the constitutionality of the plan under consideration, but would only observe that no power could be exercised by Congress, if the letter of the Constitution was strictly adhered to, and no latitude of construction allowed, and all the good that might be reasonably expected from an efficient government entirely frustrated.