American History

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. . . .

The institution of a bank has also a natural relation to the regulation

of trade between the states, insofar 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 merely mean gold and 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 concerns the medium of

circulation and exchange, ought to be considered as confine to coin....

Sources: Works of Alexander Hamilton, IV, pp 104-138,

Annals of America Vol 3 Sel 91.