Abridgement of the Debates of Congress, from 1789 to 1856 (4 of 16 vol.)

Mr. Pickering. – I will now, Mr. President, make some observations on the main question under consideration. Whether Congress have the power by the constitution to renew the charter of the Bank of the United States?

It has been said that the power to incorporate a bank for the United States is a substantive and original, and not a derivative or implied power. This has been repeated, but I have heard no arguments in support of the position; it is naked assertion.

It has also been called "act of sovereignty;" as if to alarm and deter us by its awful magnitude. But, sir, the sovereign power of Congress is sometimes exercised on subjects of comparatively little moment. A few days since we passed a bill to authorize the erection of a bridge; and another, to change the name of an individual, to enable him to inherit an estate. The power of Congress is sovereign to all the purposes of the constitution. They can lay and collect taxes, duties, imposts, and excises; borrow money, regulate commerce, and make all needful rules and regulations respecting the territory and other property of the United States. And they have the power to make all laws necessary and proper to carry the foregoing and all other constitutional powers into execution. When proposing to exercise this general power, in any case not expressly mentioned, we have to consider whether it be "necessary and proper." It has been said that "necessary" here means indispensable; something without which a particular power expressly granted cannot be carried into execution. But, sir, I see no ground for this interpretation. In the affairs of a nation, or other community, whatever the public good requires to be done, is necessary and proper to be done. It is a moral, not an absolute necessity. It is necessary for me to be here in my place, because it is my duty to be here. Necessary and proper are opposed to unnecessary and improper. Congress should do no act unnecessary and improper; but, like State Legislatures, do whatever is necessary and proper to attain the objects for which they are respectively constituted.

In determining whether any proposed measure be necessary and proper to carry into execution any power expressly given to Congress, we have to consider whether that measure has a just or useful relation to the end. For instance, the constitution having prescribed no mode of collecting the revenues, it rested in the discretion of Congress to adopt such a mode or such modes as should appear to them best adapted to that object. Instead of appointing custom-house officers in the large commercial cities and towns, where a banking establishment could be supported, Congress might there have erected banks, as the most certain, punctual, and cheap mode of collection. Suitable officers of a bank might have performed all the duties of entering and clearing vessels, and all other duties pertaining to the custom-house, without any charge to the public; the deposits of the public moneys so collected in those banks, upon which the usual banking operations might be carried on, yielding an adequate compensation for all the services so performed.

The public revenues, when collected, must also be safely kept. An experience has demonstrated that, of all depositaries, banks are the safest. And the same experience has shown that, as the public moneys are required to be frequently transferred, for the public expenditures, from one State to another, the Bank of the United States, with its branches, has furnished the best mode of transfer; it being effected with despatch, with certainty, and without any risk or expense to the United States.

The gentleman from Kentucky (Mr. Clay) asked, if banks are necessary for collecting the public revenues, why give them any other power? The answer is, that it is the essential nature of banks, which renders them so peculiarly fit to collect the revenues. The merchants, whose bonds are lodged in the banks for collection, are also borrowers of money from the banks; and if they fail of paying their bonds, as they become due, their credit will fail; they can obtain no more loans until their bonds are paid. This has just been presented to our view, in the most striking manner, by my colleague.

"To borrow money," is another of the great powers expressly vested in Congress. And in this, as in the power first considered, no mode of borrowing being prescribed in the constitution, Congress are to devise and provide the means in their judgment most sure, expeditious, and ample, to obtain loans. And this was one of the great objects for which the Bank of the United States was originally incorporated. The gentleman from Virginia, near me, (Mr. Brent,) and the gentleman from South Carolina, (Mr. Taylor,) have, in very forcible language, displayed the impolicy of depending on State banks or individuals for loans, in public emergencies. At such times, these banks and individuals may be most hardly pressed by their usual customers. To suffer the Bank of the United States to dissolve, and to have recourse to State banks, will be so far going back to the condition of the United States under the articles of Confederation, when our Union was but a rope of sand. When the pressure of the Revolutionary war was over, indeed, while that pressure remained, Congress in vain made requisitions on the individual States; no money, or none in any measure adequate to the public exigencies, could be obtained. After the war, when the public treasury was empty, Congress importuned – implored the States, individually, to grant the power to raise a revenue from commerce, to defray the current expenses of the General Government, and to fulfil the public obligations, but the power could not be obtained. States, deriving large revenues from commerce, chose to retain them for their own treasuries.

It was this helpless, forlorn condition of our country, which forcibly convinced the nation of the necessity of forming a new system of Government; and our present Government was the fruit of that necessity.

"To regulate commerce" is a third great power vested in Congress. And it is conceived that the exercise of any power well adapted to give safety, facility, and prosperity to commerce, must be comprised in the power to regulate it. Hence the erecting of light-houses has been mentioned as an instance in which an implied power, incidental to the regulating of commerce, has been exercised. But it has been said that this power is expressly given in another part of the constitution; that by which Congress is vested with exclusive legislation over the district which is the seat of Government, and over places ceded to the United States "for the erection of forts, magazines, arsenals, dockyards, and other needful buildings." But if we had no commerce, no navigation, light-houses would not be "needful buildings," they would be of no use whatever. Hence it is clear that they have a direct relation to commerce and to nothing else; and, therefore, the erecting of them is properly adduced as an instance of the exercise of a power implied in the general express power to regulate commerce.

The safety and facility of commercial operations was also greatly to be promoted by means of a general currency which should have equal credit throughout the Union. This has been accomplished by the notes issued from the Bank of the United States, under the authority of Congress, exercising the power incidental to that of regulating commerce.

A fourth great power, which I mentioned to have been vested in Congress, is that of "making all needful rules and regulations respecting the territory and other property of the United States." This "other property" consists partly of money. And, as Congress have power to make any regulations concerning it which are needful, that is, which may, in their opinion, best promote the general welfare, this money may be (as some of it has been) vested in bank stock; and with the truest regard to its safety and good management, in the stock of a bank erected by Congress, of which they may have a suitable inspection; and where it may safely deposit the public revenues, there to await the public demand; and, in the mean time, usefully aid those banking operations which give facility to commerce and to public loans.

But as an evidence that the constitutionality of the act to incorporate the Bank of the United States was at least doubtful, we have been told by the gentleman from Maryland, (Mr. Smith,) that President Washington doubted; that his mind was in suspense to the last moment, when the act was to be approved or disapproved. That while the then Secretary of the Treasury, (Mr. Hamilton,) a very great man, maintained the constitutional power of Congress to erect that bank, another man, (Mr. Jefferson,) equally great, then Secretary of State, and the Attorney-General, (Mr. Randolph,) a distinguished lawyer, maintained the contrary doctrine – that Congress had not that power. It is true, sir, that Washington, cautious and circumspect beyond any man I ever knew, did suspend his decision to the last day allowed him by the constitution. The confidence with which the Secretary of State and the Attorney-General supported their opinions on this question, was sufficient to excite in the President the greatest caution. Both were lawyers, and they raised many legal objections. The written opinions of these gentlemen were (as I have been well informed) put into the hands of the Secretary of the Treasury two days before it was necessary for the President to decide. And the reasoning of Mr. Hamilton, in his written argument, enabled the President to decide with satisfaction; with a full conviction of the constitutionality of the act.

The following are some of the objections offered by the Secretary of State: He said – "that the proposed incorporation (of the bank) undertakes to create certain capacities, properties, or attributes, which are against the laws of alienage, descents, escheat, and forfeiture, distribution, and monopoly. And that nothing but a necessity, invincible by other means, can justify such a prostration of laws which constitute the pillars of our whole system of jurisprudence, and are the foundation laws of the State governments." Washington, sir, was not a lawyer, and who can wonder that his fair mind was alarmed by such a solemn declaration? That it was kept in suspense by the assertion, that the act for establishing the bank would overturn the pillars of our whole system of jurisprudence, and the foundation laws of the State governments? But, sir, it required only the knowledge of a lawyer at once to overturn these objections. The following are some of the remarks of the Secretary of the Treasury: "If these are truly the foundation laws of the several States, then have most of them subverted their own foundations. For there is scarcely one of them which has not, since the establishment of its particular constitution, made material alterations in some of those branches of its jurisprudence, especially the law of descents. But it is not conceived how any thing can be called the fundamental law of a State government which is not established in its constitution, unalterable by its ordinary legislature."

"To erect a corporation, is to substitute a legal or artificial for a natural person; and, where a number are concerned, to give them individuality. To that legal or artificial person, once created, the common law of every State, of itself, annexes all those incidents and attributes which are represented as a prostration of the main pillars of their jurisprudence. It is certainly not accurate to say, that the erection of a corporation is against those different heads of the State laws; because it is rather to create a kind of person, or entity, to which they are inapplicable, and to which the general rule of those laws assigns a different regimen. The laws of alienage cannot apply to an artificial person, because it can have no country. Those of descent cannot apply to it, because it can have no heirs. Those of escheat are foreign from it, for the same reason. Those of forfeiture, because it cannot commit a crime. Those of distribution, because, though it may be dissolved, it cannot die." Sir, I beg leave to add a few explanations. By the laws of most, perhaps of all the States, aliens are not permitted to hold real estate; but in all they are free to hold personal property of every kind, and particularly bank stock. The law of escheat relates to the property of a citizen who dies without heirs, near or remote, and without a will. In such case his property falls to the State. But instances of escheat do not occur perhaps twice in a century in any State, and, consequently, is of trifling moment. Although a corporation cannot commit a crime, it may violate the rules prescribed in the law for its establishment, and thus incur an immediate forfeiture of its charter. Or, if for such a violation of its fundamental law, or any mismanagement of the institution to the public injury, its charter be not forthwith taken away, the State may refuse to renew it. As to the law of distribution, that operates when a person dies intestate. But though a corporation cannot die, yet the individuals to whom its property belongs will die; and their bank property, equally with their other property, becomes liable to the law of distribution.

One of the injurious consequences of destroying the Bank of the United States has been stated to be, the withdrawing of seven millions of dollars from the active capital of the United States, and transmitting it to Europe, where that portion of the bank stock is owned. To this it has been answered, by the opposers of the bank, that these millions will not be withdrawn, but transferred from the United States' Bank to banks of the several States. How then, sir, shall we get rid of that dangerous influence of foreign stockholders which the same gentlemen urge as a reason for not renewing the charter of the Bank of the United States? Sir, it is well known that money in Europe is less valuable than in the United States. That moneyed men there are glad to loan their money at an interest of five per cent, or less, while in these States the legal interest is six per cent. And a multitude of our citizens find their account in employing that foreign capital, paying an interest of six per cent., by which, in the course of trade, they gain ten, fifteen, or twenty per cent.; that foreign capital, in the hands of our merchants, has resembled the five and the ten talents, wherewith they have gained other five and other ten talents.

The distresses which will follow the dissolution of the Bank of the United States, especially in the great commercial cities, have been forcibly described in the plain testimonies of the committee of mechanics and manufacturers from Philadelphia – a committee selected wholly from the democratic party; distresses which were sufficient to move a heart of stone. And why should this bank be dissolved? It has been said that the State banks are competent to all the necessary operations of the general bank. If the contrary had not been shown, it might be answered, that the Bank of the United States was incorporated when there were only three banks in the United States; one in Philadelphia, one in New York, and one in Boston. These were inadequate to the necessities and accommodation of the General Government and of the citizens. To supply this deficiency, it was necessary to erect the National Bank; and the dignity, honor, good faith, and credit of the United States stand pledged for the renewal of its charter. The institution having been well conducted, and found in the highest degree useful and beneficial to Government, and to the citizens at large, it ought to be continued. Individual citizens and foreigners became stockholders on a well-grounded expectation of the stability of the Government. It was in this just expectation that foreigners, Englishmen, purchased of our Government, itself, its remaining shares of the public stock in the Bank of the United States, and at an advance of forty-five per cent.; so that, for every hundred dollars laid out by the Government in the purchase of bank shares, the United States received of these foreigners one hundred and forty-five dollars. And how was it possible for these foreigners to conceive the Government capable of destroying the work of its own hands, and of reducing their property to one hundred dollars a share, for which, but eight years before, they had paid the same Government one hundred and forty-five dollars?

Wednesday, February 20

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. Crawford said he regretted extremely, that at so late an hour, he was constrained to throw himself upon the indulgence of the Senate, especially as the subject was so much exhausted by the able and animated discussions which had for so many days attracted their attention. Before I enter upon the few remarks which I feel it my duty to make in reply to the numerous comments which have been made upon the observations which I had the honor to submit to the consideration of the Senate, at the commencement of this discussion, permit me, sir, to acknowledge the liberality and indulgence with which those observations have been generally treated. In the course of the few observations to which I intend to confine myself, it shall be my endeavor to exercise that indulgence towards others which has been extended to me. The gentleman from Kentucky (Mr. Clay) complains of the committee, because they have listened to the representations of two delegations from the city of Philadelphia who presented memorials to the Senate, who referred them to the committee; and because the committee have, in his opinion, given an adventitious importance to their representations, by the minuteness and by the pomp and parade with which they have been detailed to the Senate. It will be recollected that the committee did not seek the post which has been assigned them by the Senate, nor did they desert it after it was assigned to them. The object of referring petitions to committees is to collect that information which the Senate ought to have before it acts, and which in its collective capacity it cannot obtain. It has always been the practice of committees to permit the petitioners to be present at their meetings, to make such explanations, and to give such information touching the subject of their petition, as they think connected with it. It is the duty of committees to detail to the Senate the information which they collect, to enable the members to take a full view of the subject upon which they are called upon to act. The committee in the present case has done all this, and it has done nothing more. Had it pursued a different course it would have justly subjected itself to the animadversions of the Senate. To the information collected by the committee from these delegations, and laid before the Senate, my friend from Maryland (Mr. Smith) has opposed a statement of facts, and his opinion founded upon those facts. As the situation and talents of that gentleman entitle his statements and opinions to great weight; as it is more than probable that the votes of several members will ultimately rest upon the weight of his authority, my honorable friend from Maryland (Mr. Smith) will pardon me if I should examine his observations rather according to the rules of evidence, than those of logic. In making this declaration I wish to be explicitly understood, as excluding every idea of charging that gentleman with having made statements which he did not believe, or with having given opinions he did not entertain. I have no doubt but that he sincerely believes in the correctness of his statements, and in the accuracy of his opinions; but if, in the course of my observations, I shall prove incontestably that he is mistaken in some of his statements and opinions, it will teach the Senate the necessity of weighing the remainder of them with great circumspection. If I shall be able to show that he is mistaken in a case, the evidence of which is matter of record, that circumstance alone will induce the Senate to reject all idea of receiving his statements and opinions with implicit confidence.

The gentleman from Maryland has stated several cases in which the State banks, and the banks of this Territory have accommodated the Government where the United States had refused. The cases stated prove nothing, and ought to have no influence with this Government in establishing a permanent system of revenue. If the State and Territorial banks have upon several occasions received the bills of other State banks to accommodate the Government, it was because it suited their convenience at the time. It was a mere temporary transaction, and forms an exception to the general rule. The charter of no bank in the United States compels them to take the paper of other banks, and whether they do receive them or not will depend upon contingent circumstances, or upon whim and caprice. No reliance, therefore, ought to be placed upon the duration of any regulation which is not enforced by their charters. The gentleman from Maryland thinks that the United States will have the same influence over the State banks that it has had, and will have over that of the United States. If he is correct as to the extent of that influence, his conclusion may be correctly drawn. But, sir, is it true that the National Government has no other influence over this bank than that which can be produced by withdrawing of its deposits? If it is so, then it must be admitted that the United States will have the same influence over the State banks that they will have over one of their own creation, because they can as easily withdraw their deposits from the one as the other. But, sir, the United States have an influence over the Bank of the United States, which is wholly independent of, and unconnected with, the right of withdrawing their deposits from its vaults. The bank is dependent on them for its existence. By renewing the charter for short periods of time you create a state of dependency upon the Government, which will at all times make the bank completely subservient to all the legitimate objects for which it was created. How, sir, is it with the State banks? Upon whom are they dependent for legal existence and for length of days? Upon the State Governments. Suppose the authority from which they derive their existence should place itself in opposition to the Government of the United States; and suppose that this state of hostility should happen a year, or two before the time at which their charters were to expire, and the State Legislature should direct them to hold the deposit of public moneys against the demand of the National Government, what course would they pursue under such circumstances? Sir, the case which I have stated is not a mere possible case. The history of several of the large influential States proves that this state of hostility, which I have supposed, is not an imaginary one. Make yourselves dependent upon the State banks for the collection and transmission of your revenue, and that opposition, which has but seldom happened, will become more frequent. Their disposition to control the operations of the National Government will increase with every increase of the means of annoyance, which the folly and improvidence of Congress may throw into their hands. For whose benefit, sir, is the Government to strip itself of this right, so essential for the due administration of its finances? Is it for the benefit of the great mass of the American people? No; not one in a hundred of them have any interest in the State banks. They feel no interest in the question; their true interest is more effectually subserved by the operations of the Bank of the United States than it can possibly be by the State banks. This bank affords them a portable currency which is of equal value in every part of the United States, while the credit and currency of the State banks is local.

It is impossible to resist the conviction that the prompt and secure collection of our revenue is principally owing to the influence of the bank. But, sir, the bank has another direct influence upon the collection of your revenue. By the rules established in the bank at Philadelphia, every person whose bond to the Government is deposited there, has a right, upon getting an additional endorser, to claim a discount for half of the amount of his bond, and the part so discounted is immediately carried to the credit of the United States, and the bank takes upon itself the risk of the ultimate collection. In this way, sir, one-half of the bond is collected at the sole risk of the bank, without any possibility of loss on the part of Government. And yet, sir, it is contended that the bank has nothing to do with the collection of the public revenue. The gentleman from Maryland says that the scarcity of money, and the alarm and dismay which the delegation of mechanics had represented as existing in Philadelphia, could not be the effect of the contraction of discounts by the Bank of the United States, because that bank, as well as the State banks, are going on with their ordinary discounts. This is true, but the gentleman from Maryland has forgotten that this delegation stated that the bank, upon the rejection of their memorial by the House of Representatives, had contracted their discounts, and that a correspondent contraction had taken place in the discounts of the State banks which had produced the pressure; and that the pressure had spread alarm and dismay through the city. That before they left the city, the directors of the Bank of the United States had come to an understanding with the directors of the State banks, all of whom had determined to resume and continue their ordinary discounts until the last hour. Notwithstanding the banks had resumed their discounts, the panic which had been produced did not cease, and the scarcity of money, and the distrust which had taken place, still continue to exist in Philadelphia.