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These two powers are indispensably connected with, and subservient to, particular enumerated powers, and are therefore among the means which are necessary and proper for their effectuation; and as such are given to Congress by the express words of the constitution, which are: Congress shall have power "to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this constitution in the Government of the United States, or in any department or officer thereof." From this course of interpretation, the gentlemen, reasoning from a supposed analogy, have asked, if Congress can derive the right to erect light-houses and custom-houses from their necessary agency in effectuating the particular powers to which they are said to be appendant or appurtenant, why may it not in the same way derive the right of granting charters of incorporation for the same objects? Or, in other words, if Congress can constitutionally erect custom-houses for the purpose, or as the necessary means of collecting duties; why may it not establish a bank for the same object, &c.? The question is admitted to be a fair one; and if a clear distinction cannot be made in the two cases, it will be admitted either that Congress may constitutionally establish a bank, or that it has heretofore transcended its powers in erecting custom-houses, &c. A clear and most obvious distinction appears to me to exist in the cases suggested by the gentlemen to be analogous, arising from the striking difference in the nature and essential character of these powers. A custom-house is in its nature incidental and subservient to the collection of duties. It is one of the common, necessary, and proper means to effect that end. It is believed that in no commercial country in the world are duties collected without them. Besides, the erection of custom-houses does not involve in it the exercise of any other higher or consequential powers. The same remarks will apply to light-houses, as among the common, necessary, and proper means for the regulation of commerce, &c.

Is the incorporation of a bank of this character? It is not among the common, necessary, and proper means of effecting either of the foregoing enumerated powers, nor of any other enumerated in the constitution; still less is it incidental or subservient to any of the enumerated powers. It wants that connection, affiliation, and subserviency, to some enumerated power, which are clearly pointed out in relation to the two powers, to which it has been said to be analogous. Besides, does granting a charter of incorporation to a bank involve no other higher or consequential power than merely erecting a needful building for collecting duties, &c.? It certainly does. It involves the power to grant charters of incorporation generally; and in this respect, principally, its character is essentially different from both of the powers cited by the gentleman. The power to grant charters of incorporation is not an incidental, subordinate, subservient power; it is a distinct, original, substantive power. It is also susceptible of the clearest definition; and not being among the enumerated powers, it seems to me that Congress can have no fair claim to its exercise in any case. If Congress had been expressly authorized to grant charters of incorporation generally, then granting a charter of incorporation to a bank would have been an instance, or among the means, of carrying into effect that enumerated power, and would have been as much connected and affiliated with it as is the erection of custom-houses with the collection of duties; but the power to grant charters of incorporation generally not being expressly given in the constitution, no particular instance involving the exercise of that power can be inferred by a fair and candid interpretation of the instrument. I do not mean to exaggerate the consequences which might result from an assumption of the power to grant charters of incorporation, &c. It is sufficient for me to say that it is a power of primary importance; that it involves as many incidental powers in its exercise as any one of the enumerated powers; that it is equal, if not paramount, to any; and, therefore, in my judgment, cannot be assumed by fair construction as incidental and subservient to any; and, of course, not as among the necessary and proper means for carrying any into effect. In fact, in its nature it does not in the smallest degree partake of the derivative, incidental character. It is original, substantive, distinct in itself, and susceptible of the plainest definition. Hence, whilst I am willing to admit that a power, which is in its nature incidental and subservient to any enumerated power, and also among the necessary and proper means for carrying it into effect, may be exercised by Congress without the express words of the constitution, I should be very unwilling to admit that Congress should also exercise a power neither incidental nor subservient to any of the enumerated powers, nor among the necessary and proper means for carrying any into effect; still less should I be inclined to this admission, when the power thus proposed to be derived, incidentally or constructively, involves in it the exercise of almost unlimited powers. To illustrate my idea still further in this respect, I would observe, that the power to regulate descents, and to regulate the distribution of intestates, I conceive to be original, distinct, substantive powers; and, being among the powers which could in all respects be limited by the geographical boundaries of the individual States, and were therefore among the powers reserved to the management of the States, might as easily be assumed by Congress as incidental to some one of the enumerated powers, as the assumption of the power to grant charters of incorporation, which I conceive was, for the same reason, left to the management of the States. I believe no gentleman will contend that Congress can, under any candid construction, go so far in relation to those powers; nor do I see how it can in relation to the power of granting charters of incorporation.

Friday, February 15

Bank of the United States

The Senate resumed, as in Committee of the Whole, the bill to amend and continue in force an act, entitled "An act to incorporate the subscribers to the Bank of the United States," passed on the 25th day of February, 1791.

Mr. Clay. – Mr. President: When the subject involved in the motion now under consideration was depending before the other branch of the Legislature, a disposition to acquiesce in their decision was evinced. For although the committee who reported this bill had been raised many weeks prior to the determination of that House on the proposition to recharter the bank, except the occasional reference to it of memorials and petitions, we scarcely ever heard of it. The rejection, it is true, of a measure brought before either branch of Congress, does not absolutely preclude the other from taking up the same proposition; but the economy of our time, and a just deference for the opinion of others, would seem to recommend a delicate and cautious exercise of this power. As this subject, at the memorable period when the charter was granted, called forth the best talents of the nation – as it has, on various occasions, undergone the most thorough investigation, and as we can hardly expect that it is susceptible of receiving any further elucidation, it was to have been hoped that we should have been spared a useless debate. This was the more desirable because there are, I conceive, much superior claims upon us for every hour of the small portion of the session yet remaining to us. Under the operation of these motives, I had resolved to give a silent vote, until I felt myself bound, by the defying manner of the arguments advanced in support of the renewal, to obey the paramount duties I owe my country and its constitution; to make one effort, however feeble, to avert the passage of what appears to me a most unjustifiable law. After my honorable friend from Virginia (Mr. Giles) had instructed and amused us with the very able and ingenious argument which he delivered on yesterday, I should have still forborne to trespass on the Senate, but for the extraordinary character of his speech. He discussed both sides of the question, with great ability and eloquence, and certainly demonstrated to the satisfaction of all who heard him, both that it was constitutional and unconstitutional, highly proper and improper to prolong the charter of the bank. The honorable gentleman appeared to me in the predicament in which the celebrated orator of Virginia, Patrick Henry, is said to have been once placed. Engaged in a most extensive and lucrative practice of the law, he mistook in one instance the side of the cause on which he was retained, and addressed the court and jury in a very splendid and convincing speech in behalf of his antagonist. His distracted client came up to him whilst he was progressing, and interrupting him, bitterly exclaimed, "you have undone me! you have ruined me!" – "Never mind, give yourself no concern," said the adroit advocate; and turning to the court and jury, continued his argument by observing, "May it please your honors, and you, gentlemen of the jury, I have been stating to you what I presume my adversary may urge on his side. I will now show you how fallacious his reasoning and groundless his pretensions are." The skilful orator proceeded, satisfactorily refuted every argument he had advanced, and gained his cause! A success with which I trust the exertion of my honorable friend will on this occasion be crowned.

It has been said by the honorable gentleman from Georgia (Mr. Crawford) that this has been made a party question, although the law incorporating the bank was passed prior to the formation of parties, and when Congress was not biased by party prejudices. [Mr. Crawford explained. He did not mean that it had been made a party question in the Senate. His allusion was elsewhere.] I do not think it altogether fair to refer to the discussions in the House of Representatives, as gentlemen belonging to that body have no opportunity of defending themselves here. It is true that this law was not the effect, but it is no less true that it was one of the causes of the political divisions of this country. And if, during the agitation of the present question, the renewal has, on one side, been opposed on party principles, let me ask if, on the other, it has not been advocated on similar principles? Where is the Macedonian phalanx, the opposition in Congress? I believe, sir, I shall not incur the charge of presumptuous prophecy, when I predict that we shall not pick up from its ranks one single straggler! And if, on this occasion, my worthy friend from Georgia has gone over into the camp of the enemy, is it kind in him to look back upon his former friends, and rebuke them for the fidelity with which they adhere to their old principles?

I shall not stop to examine how far a representative is bound by the instructions of his constituents. This is a question between the giver and receiver of the instructions. But I must be permitted to express my surprise at the pointed difference which has been made between the opinions and instructions of State Legislatures, and the opinions and details of the deputations with which we have been surrounded from Philadelphia. Whilst the resolutions of those Legislatures – known, legitimate, constitutional and deliberative bodies – have been thrown into the back ground, and their interference regarded as officious, these delegations from self-created societies, composed of whom nobody knows, have been received by the committee with the utmost complaisance. Their communications have been treasured up with the greatest diligence. Never did the Delphic priests collect with more holy care the frantic expressions of the agitated Pythia, or expound them with more solemnity to the astonished Grecians, than has the committee gathered the opinions and testimony of these deputies, and through the gentleman from Massachusetts, pompously detailed them to the Senate! Philadelphia has her immediate representatives, capable of expressing her wishes upon the floor of the other House. If it be improper for States to obtrude upon Congress their sentiments, it is much more highly so for the unauthorized deputies of fortuitous congregations.

The first singular feature that attracts attention in this bill is the new and unconstitutional veto which it establishes. The constitution has required only, that after bills have passed the House of Representatives and the Senate, they shall be presented to the President for his approval or rejection, and his determination is to be made known in ten days. But this bill provides, that when all the constitutional sanctions are obtained, and when according to the usual routine of legislation it ought to be considered as a law, it is to be submitted to a new branch of the Legislature, consisting of the President and twenty-four Directors of the Bank of the United States, holding their sessions in Philadelphia, and if they please to approve it, why then it is to become a law! And three months (the term allowed by our law of May last, to one of the great belligerents for revoking his edicts, after the other shall have repealed his) are granted them to decide whether an act of Congress shall be the law of the land or not! An act which is said to be indispensably necessary to our salvation, and without the passage of which, universal distress and bankruptcy are to pervade the country. Remember, sir, that the honorable gentleman from Georgia has contended that this charter is no contract. Does it, then, become the representatives of the nation to leave the nation at the mercy of a corporation? Ought the impending calamities to be left to the hazard of a contingent remedy?

This vagrant power to erect a bank, after having wandered throughout the whole constitution in quest of some congenial spot whereupon to fasten, has been at length located by the gentleman from Georgia on that provision, which authorizes Congress to lay and collect taxes, &c. In 1791, the power is referred to one part of the instrument; in 1811, to another. Sometimes it is alleged to be deducible from the power to regulate commerce. Hard pressed here, it disappears, and shows itself under the grant to coin money. The sagacious Secretary of the Treasury in 1791 pursued the wisest course – he has taken shelter behind general, high-sounding, and imposing terms. He has declared in the preamble to the act establishing the bank, that it will be very conducive to the successful conducting of the national finances; will tend to give facility to the obtaining of loans, and will be productive of considerable advantage to trade and industry in general. No allusion is made to the collection of taxes. What is the nature of this Government? It is emphatically federal, vested with an aggregate of specified powers for general purposes, conceded by existing sovereignties, who have themselves retained what is not so conceded. It is said that there are cases in which it must act on implied powers. This is not controverted, but the implication must be necessary, and obviously flow from the enumerated power with which it is allied. The power to charter companies is not specified in the grant, and I contend is of a nature not transferable by mere implication. It is one of the most exalted attributes of sovereignty. In the exercise of this gigantic power we have seen an East India Company created, which has carried dismay, desolation, and death throughout one of the largest portions of the habitable world. A company which is, in itself, a sovereignty – which has subverted empires and set up new dynasties – and has not only made war, but war against its legitimate sovereign! Under the influence of this power, we have seen arise a South Sea Company, and a Mississippi Company, that distracted and convulsed all Europe, and menaced a total overthrow of all credit and confidence, and universal bankruptcy. Is it to be imagined that a power so vast would have been left by the wisdom of the constitution to doubtful inference? It has been alleged that there are many instances, in the constitution, where powers, in their nature incidental, and which would have necessarily vested along with the principal power, are nevertheless expressly enumerated; and the power "to make rules and regulations for the government of the land and naval forces," which, it is said, is incidental to the power to raise armies and provide a navy, is given as an example. What does this prove? How extremely cautious the convention were to leave as little as possible to implication. In all cases where incidental powers are acted upon, the principal and incidental ought to be congenial with each other, and partake of a common nature. The incidental power ought to be strictly subordinate and limited to the end proposed to be attained by the specified power. In other words, under the name of accomplishing one object which is specified, the power implied ought not to be made to embrace other objects which are not specified in the constitution. If then you could establish a bank to collect and distribute the revenue, it ought to be expressly restricted to the purpose of such collection and distribution. It is a mockery, worse than usurpation, to establish it for a lawful object, and then extend it to other objects which are not lawful. In deducing the power to create corporations, such as I have described it, from the power to collect taxes, the relation and condition of principal and incident are prostrated and destroyed. The accessory is exalted above the principal. As well might it be said that the great luminary of day is an accessory, a satellite to the humblest star that twinkles forth its feeble light in the firmament of heaven!

Suppose the constitution had been silent as to an individual department of this Government, could you, under the power to lay and collect taxes, establish a judiciary? I presume not; but if you could derive the power by mere implication, could you vest it with any other authority than to enforce the collection of the revenue? A bank is made for the ostensible purpose of aiding in the collection of the revenue, and while it is engaged in this, the most inferior and subordinate of all its functions, it is made to diffuse itself through society, and to influence all the great operations of credit, circulation, and commerce. Like the Virginia justice, you tell the man, whose turkey had been stolen, that your book of precedents furnishes no form for his case, but then you will grant him a precept to search for a cow, and when looking for that he may possibly find his turkey! You say to this corporation, we cannot authorize you to discount – to emit paper – to regulate commerce, &c. No! Our book has no precedents of that kind. But then we can authorize you to collect the revenue, and, while occupied with that, you may do whatever else you please!

What is a corporation such as the bill contemplates? It is a splendid association of favored individuals, taken from the mass of society, and invested with exemptions and surrounded by immunities and privileges. The honorable gentleman from Massachusetts (Mr. Lloyd) has said that the original law, establishing the bank, was justly liable to the objection of vesting in that institution an exclusive privilege, the faith of the Government being pledged that no other bank should be authorized during its existence. This objection he supposes is obviated by the bill under consideration; but all corporations enjoy exclusive privileges – that is, the corporators have privileges which no others possess; and if you create fifty corporations instead of one, you have only fifty privileged bodies instead of one.

I contend that the States have the exclusive power to regulate contracts, to declare the capacities and incapacities to contract, and to provide as to the extent of responsibility of debtors to their creditors. If Congress have the power to erect an artificial body and say it shall be endowed with the attributes of an individual – if you can bestow on this object of your own creation the ability to contract, may you not, in contravention of State rights, confer upon slaves, infants, and femes covert, the ability to contract? And if you have the power to say that an association of individuals shall be responsible for their debts only in a certain limited degree, what is to prevent an extension of a similar exemption to individuals? Where is the limitation upon this power to set up corporations? You establish one, in the heart of a State, the basis of whose capital is money. You may erect others whose capital shall consist of land, slaves, and personal estate, and thus the whole property within the jurisdiction of a State might be absorbed by these political bodies. The existing bank contends that it is beyond the power of a State to tax it, and if this pretension be well founded, it is in the power of Congress, by chartering companies, to dry up the whole of the sources of State revenue. Georgia has undertaken, it is true, to levy a tax on the branch within her jurisdiction, but this law, now under a course of litigation, is considered as invalid. The United States own a great deal of land in the State of Ohio; can this Government, for the purpose of creating an ability to purchase it, charter a company? Aliens are forbidden, I believe, in that State, to hold real estate – could you, in order to multiply purchasers, confer upon them the capacity to hold land, in derogation of the local law? I imagine this will hardly be insisted upon; and yet there exists a more obvious connection between the undoubted power, which is possessed by this Government, to sell its land, and the means of executing that power, by increasing the demand in the market, than there is between this bank and the collection of a tax. This Government has the power to levy taxes – to raise armies – provide a navy – make war – regulate commerce – coin money, &c. It would not be difficult to show as intimate a connection between a corporation, established for any purpose whatever, and some one or other of those great powers, as there is between the revenue and the bank of the United States.

Let us inquire into the actual participation of this bank in the collection of the revenue. Prior to the passage of the act of 1800, requiring the collectors of those ports of entry, at which the principal bank or any of its offices are situated, to deposit with them the custom-house bonds, it had not the smallest agency in the collection of the duties. During almost one moiety of the period to which the existence of this institution was limited, it was noways instrumental in the collection of that revenue, to which it is now become indispensable! The collection, previous to 1800, was made entirely by the collectors; and even at present, where there is one port of entry, at which this bank is employed, there are eight or ten at which the collection is made as it was before 1800. And, sir, what does this bank or its branches when resort is had to it? It does not adjust with the merchant the amount of the duty, nor take his bond; nor, if the bond is not paid, coerce the payment by distress or otherwise. In fact, it has no active agency whatever in the collection. Its operation is merely passive; that is, if the obligor, after his bond is placed in the bank, discharges it, all is very well. Such is the mighty aid afforded by this tax-gatherer, without which the Government cannot get along! Again, it is not pretended that the very limited assistance which this institution does in truth render, extends to any other than a single species of tax, that is, duties. In the collection of the excise, the direct and other internal taxes, no aid was derived from any bank. It is true, in the collection of those taxes, the farmer did not obtain the same indulgence which the merchant receives in paying duties. But what obliges Congress to give credit at all? Could it not demand prompt payment of the duties? And in fact does it not so demand in many instances? Whether credit is given or not, is a matter merely of discretion. If it be a facility to mercantile operations (as I presume it is) it ought to be granted. But I deny the right to ingraft upon it a bank, which you would not otherwise have the power to erect. You cannot create the necessity of a bank, and then plead that necessity for its establishment. In the administration of the finances, the bank acts simply as a payer and receiver. The Secretary of the Treasury has money in New York and wants it in Charleston; the bank will furnish him with a check, or bill, to make the remittance, which any merchant would do just as well.

I will now proceed to show by fact, actual experience, not theoretic reasoning, but by the records themselves of the Treasury, that the operations of that department may be as well conducted without as with this bank. The delusion has consisted in the use of certain high-sounding phrases, dexterously used on the occasion. "The collection of the revenue" – "The administration of the finance" – "The conducting the fiscal affairs of the Government," the usual language of the advocates of the bank, extort express assent, or awe into acquiescence, without inquiry or examination into its necessity. About the commencement of this year there appears, by the report of the Secretary of the Treasury of the 7th of January, to have been a little upwards of two millions four hundred thousand dollars in the Treasury of the United States; and more than one-third of this whole sum was in the vaults of local banks. In several instances, where an opportunity existed of selecting the bank, a preference has been given to the State bank, or at least a portion of the deposits has been made with it. In New York, for example, there was deposited with the Manhattan Bank $188,670, although a branch bank is in that city. In this District, $115,080 were deposited with the bank of Columbia, although here also is a branch bank, and yet the State banks are utterly unsafe to be trusted! If the money, after the bonds are collected, is thus placed with these banks, I presume there can be no difficulty in placing the bonds themselves there, if they must be deposited with some bank for collection, which I deny.

Again, one of the most important and complicated branches of the Treasury Department is the management of our landed system. The sales have some years amounted to upwards of half a million of dollars, are generally made upon credit, and yet no bank whatever is made use of to facilitate the collection. After it is made, the amount in some instances has been deposited with banks, and according to the Secretary's report, which I have before adverted to, the amount so deposited was in January upwards of three hundred thousand dollars, not one cent of which was in the vaults of the Bank of the United States, or in any of its branches, but in the Bank of Pennsylvania, its branch at Pittsburg, the Marietta Bank, and the Kentucky Bank. Upon the point of responsibility, I cannot subscribe to the opinion of the Secretary of the Treasury, if it is meant that the ability to pay the amount of any deposits which the Government may make under any exigency, is greater than that of the State banks; that the accountability of a ramified institution, whose affairs are managed by a single head, responsible for all its members, is more simple than that of a number of independent and unconnected establishments, I shall not deny; but, with regard to safety, I am strongly inclined to think it is on the side of the local banks. The corruption or misconduct of the parent, or any of its branches, may bankrupt or destroy the whole system, and the loss of the Government in that event will be of the deposits made with each; whereas in the failure of one State bank the loss will be confined to the deposit in the vaults of that bank. It is said to have been a part of Burr's plan to seize on the branch bank at New Orleans. At that period large sums, imported from La Vera Cruz, are alleged to have been deposited with it, and if the traitor had accomplished his design, the Bank of the United States, if not actually bankrupt, might have been constrained to stop payment.

It is urged by the gentleman from Massachusetts, (Mr. Lloyd,) that as this nation progresses in commerce, wealth, and population, new energies will be unfolded, new wants and exigencies will arise, and hence he infers that powers must be implied from the constitution. But, sir, the question is, shall we stretch the instrument to embrace cases not fairly within its scope, or shall we resort to that remedy, by amendment, which the constitution prescribes?

Gentlemen contend that the construction which they give to the constitution has been acquiesced in by all parties, and under all administrations; and they rely particularly on an act which passed in 1804, for extending a branch to New Orleans, and another act, of 1807, for punishing those who should forge or utter forged paper of the bank. With regard to the first law, passed no doubt upon the recommendation of the Treasury Department, I would remark, that it was the extension of a branch to a Territory, over which Congress possesses power of legislation almost uncontrolled, and where, without any constitutional impediment, charters of incorporation may be granted. As to the other act, it was passed no less for the benefit of the community than the bank – to protect the ignorant and unwary from counterfeit paper, purporting to have been emitted by the bank. When gentlemen are claiming the advantage supposed to be deducible from acquiescence, let me inquire what they would have had those to have done who believed the establishment of the bank an encroachment upon State rights? Were they to have resisted, and how? By force? Upon the change of parties, in 1800, it must be well recollected that the greatest calamities were predicted as consequences of that event. Intentions were ascribed to the new occupants of power of violating the public faith and prostrating national credit. Under such circumstances, that they should act with great circumspection was quite natural. They saw in full operation a bank, chartered by a Congress who had as much right to judge of their constitutional powers as their successors. Had they revoked the law which gave it existence, the institution would, in all probability, have continued to transact business notwithstanding. The Judiciary would have been appealed to; and, from the known opinions and predilections of the judges then composing it, they would have pronounced the act of incorporation, as in the nature of a contract, beyond the repealing power of any succeeding Legislature. And, sir, what a scene of confusion would such a state of things have presented – an act of Congress, which was law in the statute book, and a nullity on the judicial records! Was it not wisest to wait the natural dissolution of the corporation, rather than accelerate that event by a repealing law involving so many delicate considerations?