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Part Seven: The Federalist Era

7-3 Alexander Hamilton, Final Version of "An Opinion on the Constitutionality of an Act to Establish a Bank" (1791)

An important document in the history of constitutional interpretation, this document sought t o avoid a veto by President Washington of Alexander Hamilton's National Bank. In the early years of the Republic, finances were i n great disarray and Hamilton, w h o had been Washington's aide de camp, a chief writer of the Federalist Papers, and was n o w the nation's first Secretary of the Treasury, sought t o stabilize this condition with a national bank. Madison and others were violently opposed and Washington himself was poised t o veto the measure. Hamilton's defense of the Bank became a classic statement of the implied powers of the Constitution.

The Secretary of the Treasury having perused with attention the papers containing the opinions of the Secretary of State and Attorney General [Edmund Randolph and Thomas Jefferson] concerning the constitutionality of the bill for estab- lishing a National Bank proceeds according to the order of the President [George Washington] to submit the reasons which have induced him to entertain a different opinion.

It will naturally have been anticipated that, in performing this task he would feel uncommon solicitude. Personal considerations alone arising from the reflection that the measure originated with him would be sufficient to produce it: The sense which he has manifested of the great importance of such an institution to the successfd administration of the depart- ment under his particular care; and an expectation of serious ill consequences to result from a failure of the measure, do not permit him to be without anxiety on public accounts. But the chief solicitude arises from a fm persuasion, that prin- ciples of construction like those espoused by the Secretary of State and the Attorney General would be fatal to the just & indispensible authority of the United States.

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 any thing in the bill which is not warranted by the constitution, it is the clause of incor- poration.

Now it appears to the Secretary of the Treasury, that this generalprinciple is inherent in the very defmition o f Gov- ernment 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 sovereign, and includes by force of the term, a right to employ all the means req- uisite, and fairly applicable to the attainment of the ends of such power; and which are not precluded by restrictions & exceptions specified in the constitution; or not immoral, or not contrary to the essential ends of political society.

This principle in its application to Government in general would be admitted as an axiom. And it will be incum- bent upon those, who may incline to deny it, to prove a distinction; and to shew that a rule which in the general system of things is essential to the preservation of the social order is inapplicable to the United States.

The circumstances 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 portions of powers del- egated to the one or to the other is not sovereign 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 sov- ereign power as to its declared purposes & 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 tenth section of the first 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 sociefy without sovereignty, or of a people governed without govemment.

If it would be necessary to bring proof to a proposition so clear as that which a f f m s that the powers of the fed- eral government, as to its objects, are 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.

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This general & 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 Strates, in relation to the objects intrusted 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 & 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 thetn. . . .

It is not denied, that there are implied, as well as express powers, and that the former are as effectually delegated as the latter. And for the sake of accuracy it shall be mentioned, that there is another class of powers, which may be prop- erly denominated resulting powers. It will not be doubted that if the United States should make a conquest of any of the territories of its neighbours, they would possess sovereign jurisdiction over the conquered territory. This would rather be a result from the whole mass of the powers of the government & from the nature of political society, than a consequence of either of the powers specially enumerated.

But be this as it may, it furnishes a striking illustration of the general doctrine contended for it. It shews an exten- sive case, in which a power of erecting corporations is either implied in, or would result from some or all of the powers, vested in the National Government. The jurisdiction acquired over such conquered territory would certainly be competent to every species of legislation.

To return-It is conceded, that implied powers are to be considered as delegated equally with express ones. 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 gov- ernment. Thus a corporation may not be erected by congress, for superintending the police of the city of Philadelphia because they are not authorised to regulate the police of that city; but one may be erected in relation to the collection of the taxes, or to the trade with foreign countries, or to the trade between the States, or with the Indian Tribes, because it is the province of the federal government to regulate those objects & because it is incident to a general sovereign or legisla- tive power to regulate a thing, to employ all the means which relate to its regulation to the best & greatest advantage.

A strange fallacy seems to have crept into the manner of thinking & reasoning upon the subject. Imagination appears to have been unusually busy concerning it. An incorporation seems to have been regarded as some great, inde- pendent, substantive thing-as a political end of peculiar magnitude & moment; whereas it is truly to be considered as a quality. capacity, or mean to an end. Thus a mercantile company is formed with a certain capital for the purpose of car- rying on a particular branch of business. Here the business to be prosecuted is the end; the association in order to form the requisite capital is the primary mean. Suppose that an incorporation were added to this; it would only be to add a new quality to that association; to give it an artificial capacity by which it would be enabled to prosecute the business with more safety & convenience.

That the importance of the power of incorporaton has been exaggerated, leading to erroneous conclusions, will fur- ther appear from tracing it to its origin. The roman law is the source of it, according to which a voluntary association of individuaIs at any time or for any purpose was capable of producing it. In England, whence our notions of it are immedi- ately borrowed, it forms a part of the executive authority, & the exercise of it has been often delegated by that authority. Whence therefore the ground of the supposition, that it lies beyond the reach of all those very important portions of sov- ereign power, legislative as well as executive, which belong to the government of the United States?

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To this mode of reasoning respecting the right of employing all the means requisite to the execution of the spec- ified powers of the Government, it is objected that none but necessary & proper means are to be employed, & the Secre- tary of State [Jefferson] maintains, that no means are to be considered as necessary, but those without which the grant of the power would be nugatory. Nay so far does he go in his restrictive interpretation of the word, as even to make the case of necessity which shall warrant the constitutional exercise of the power to depend on casual & t e m p o r q circumstances, an idea which alone refutes the construction. The expediency of exercising a particular power, at a particular time, must indeed depend on circumstance but the constitutional right of exercising it must be uniform & invariable-the same to day, as to morrow.

All the arguments therefore against the constitutionality of the bill derived from the accidental existence of cer- tain State-banks: institutions which happen to exist to day, & for ought that concerns the government of the United States, may disappear to morrow, must not only be rejected as fallacious, but must be viewed as demonstrative, that there is a rad- ical 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.

It is certain, that neither the grammatical, or popular sense of the term requires that construction. According to both, necessary often means no more than needful, requisite, incidental, useful, or conducive to. It is a common mode of expression to say, that it is necessary for a government or a person to do this or that thing, when nothing more is intended or understood, than that the interests of the government or person require, or will be promoted, by the doing of this or that thing. The imagination can be at no loss for exemplifications of the use of the word in this sense.

And it is the true one in which it is to be understood as used in the constitution. The whole turn of the clause con- taining 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 expressions have peculiar comprehensiveness. They are-''to make all laws, necessary & proper for carrying into execution the foregoing powers & all otherpowers vested by the constituion 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 & popular sense, and to give it a restn'ctive operation; an idea never before entertained. It would be to give it the same force as if the word absolutely or indispensibly had been prefixed to it.

Such a construction would beget endless uncertainty & embarassment. The cases must be palpable & extreme in which it could be pronounced with certainty, that a measure was absolutely necessary, or one without which the exercise of a given power would be nugatory. There are few measures of any government, which would stand so severe a test. To insist upon it, would be to make the criterion of the exercise of any implied power a case o f extreme necessiv, which is rather a rule to justify the overleaping of the bounds of constitutional authority, than to govern the ordinary exercise of it.

It may be truly said of every government, as well as of that of the United States, that it has only a right, to pass such laws as are necessary & proper to accomplish the objects intrusted 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 shewn, that all the public business of the State, could be performed without a bank, and inferring thence that 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 few to a more perfect police: For it is certain, that an incorporation inay be dispensed with, though it is better to have one. It is to be remembered, that there is no express power in any State constitution to erect corporations.

The degree in which a measure is necessary. can never be a test of the legal right to adopt it. That must ever be a matter of opinion; and can only be a test of expediency. The relation between the measure and the end, between the nature of the mean employed towards the execution of a power and the object of that power, must be the criterion of constitu- tionality not the more or less of necessity or utility. . . .

Part Seven: The Federalist Era

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, defence & 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 demarkation 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 ~nfinite variety, extent and complexity, that there must, of necessity, be great latitude of discretion in the selection & application of those means. Hence consequently, the necessity & propriety of exercising the authorities intrusted 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 power; and a third class, which will leave room for controversy & difference of opinion, & concerning which a reasonable latitude of judgment must be allowed.

But the doctrine which is contended for is not chargeable with the consequence 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, & if the measure have an obvious relation to that end, and is not forbidden by any 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 favour of its constitutionality; & slighter relations to any declared object of the constitution may be permitted to turn the scale. . . .

A hope is entertained, that it has by this time been made to appear, to the satisfaction of the President, that a bank has a natural relation to the power of collecting taxes; to that of borrowing money; to that of regulating trade; to that of pro- viding for the common defence: and that as the bill under consideration contemplates the government in the light of a joint proprietor of the stock of the bank, it brings the case within the provision of the clause of the constitution which immedi- ately respects the property of the United States.

1. Identify and Summarize Hamilton's opinion regarding the establishment of a National Bank 2. H o w does his consideration of what is "necessary" in government affect his reasoning?