CHAPTER I.

THE STATES AND THE UNITED STATES CONTEND FOR SOVEREIGNTY.

While the first Congress was struggling with the question of amending the Constitution another question arose involving the administration of the government and the meaning of the Constitution. This was the establishment of a national bank. Concerning the constitutionality of such a venture, the chief advisers of Washington held irreconcilable opinions. Jefferson was loath to depart from the letter of the Constitution. While it empowered Congress to borrow money, to lay taxes, to equip fleets and armies and to promote the general welfare, it contained, he said, not one word about a bank. The boundaries of the powers of Congress were thus plainly laid down and beyond them it would be dangerous to advance a single step. He conceded that Congress could lay taxes for the purpose of providing for the general welfare, but this did not mean to lay them for any purpose for which it pleased, as it was restricted to paying the debts and providing for the welfare of the Union. The framers, he claimed, had never intended to make Congress the sole judge of good and evil, but rather had laced that body up within enumerated powers. A bank, he said, was not necessary in order to administer the broad provision that Congress can make all laws necessary and proper for carrying its powers into execution. To Jefferson such a corporation as a bank seemed plainly unnecessary, and, therefore, unauthorized by the Constitution. He did not deny that a bank would facilitate the collection of taxes, but the Constitution permitted only necessary and not merely convenient agencies for

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338

HAMILTON'S OPINION OF A BANK.

executing the authority of Congress. If a loose construction were permitted at the outset, it would prove in the end a more dangerous step, for the Constitution would be ultimately tortured into an interpretation which would transform necessity into mere convenience.1

To Hamilton, the question presented a very different aspect; Congress was plainly empowered by the Constitution, he said, to do what was necessary and proper." Not only were its powers expressed but they were implied, and so far as the objects entrusted to its management, they were sovereign. Clearly if these powers were sovereign, Congress had the right to erect corporations. The word, necessary, as descriptive of its powers was not a supreme test of a constitutional right, nor was it to be construed restrictively. Necessity signified expediency. It would be no stretch of the powers of the government to incorporate a bank, because it would be an exercise of the authority within the sphere of specified powers. Congress, moreover, had already exercised the right to erect corporations when it organized the two territorial governments, one northwest, the other southwest of the Ohio.3 Thus, Hamilton's advice rested on the sovereign power of the federal government to erect corporations, and, therefore, to charter a national bank. His opinion prevailed and Washington signed the bill. It will be remembered that Madison held in the Federalist, that the Congress of the Confederation had no authority to establish a government for the Northwest Territory, referring to the ordinance of 1787.5

1 Jefferson's Works, VII, 555.

2 Hamilton's Works, IV, 105, 119.

3 Northwest, August 7, 1789; Statutes at Large, I, 50; Southwest, May 26, 1790; Id., 123.

4 February 25, 1791; Id., 191,

See ante, p. 4.

MARSHALL SUSTAINS ITS CONSTITUTIONALITY.

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The financial institution thus authorized had a capital of ten millions of dollars, of which one-fifth was subscribed by the United States. Its charter ran for twenty years, and its bills were a legal tender for all debts to the United States. It established branch banks in the principal cities of the country and throughout its career enjoyed great prosperity and facilitated business of every kind. Twenty-eight years passed before the question of its constitutionality reached the Supreme Court. ChiefJustice Marshall then sustained the law creating it,1 and shortly afterward, in another case, held that the United States could protect the bank against a State.2 Hamilton's opinion, which had prevailed with Washington, ultimately prevailed with Jefferson, who, when President in 1804, signed the bill, which Congress had passed with a division, allowing the bank to establish branches in the territories.

3

Four years after the creation of the bank, a constitutional issue was raised by the Jay treaty. The treaty of 1783, which recognized the independence of the United States, left many matters unsettled, of which the principal were the removal of British troops from the northwest and the settlement of the boundary; the compensation for negroes taken by the British during the Revolution; the payment of claims to Americans for property seized by the British, and the right of the American people to trade with neutral powers undisturbed by England. To settle all these questions, if possible, Washington had dispatched the Chief-Justice, John Jay, as a special envoy

1 McCullough vs. Maryland, (1819) 4 Wheaton, 316; Story's Commentaries, 1262.

2 Osborn et al. vs. The Bank of the Northwest, (1824) 9 Wheaton, 738.

3 March 23, 1804; Statutes at Large, II, 274,

4 Treaties and Conventions, 379, 395.

340

JAY'S TREATY IN THE SENATE.

to England, and he had been successful in negotiating a treaty which was duly signed on the nineteenth of November, 1794. The Senate ratified it on the twenty-fourth of June of the following year, but amidst a tempest of hostility to the treaty. It may be said that the treaty was the cause of our first national excitement after the organization of the new government. The public quite lost its head; divided into an English party and a French party, each of which expressed itself in many outrageous ways; the one bitterly toward France; the other, even more bitterly toward England. If noise and tumult had determined the matter, Washington would never have signed the treaty, but he, serene amidst all difficulties, approved it. Thenceforth its execution would depend upon the action of the House in voting the necessary appropriations. The Senate had refused to approve the twelfth article, on neutral trade, and, as thus amended, the treaty was approved by the British government. Meanwhile, from January to May, 1796, it was debated in the House, which, not satisfied with the course matters had taken, called for all the papers in the case in the possession of the President; but Washington declined to deliver them, doubting the authority of the House to call for them, and convinced that their delivery was highly inexpedient at this time. The majority in the House was unfavorable to the treaty and held to the dangerous doctrine that as it could not be carried into effect without adequate appropriations by the House, which of course were within its control; and that body, therefore, had the right to judge of the expediency of the treaty, and thus practically to defeat it at their pleasure. The issue was not so much the right of the House to call for the papers in the case, as its right to refuse the necessary appropriations for carrying a treaty into effect.

THE HOUSE AND THE TREATY.

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Madison was the leader of the opposition, known at the time as the Democratic-Republicans, who insisted on the constitutional right of the House, not only to refuse the appropriations, but also to participate in the treaty-making power. The strictest of strict constructionists could find no word in the Constitution which empowered the House of Representatives thus to participate in the making of a treaty, and, therefore, the Republicans were forced to shift their ground to one of expediency; arguing that because of the exclusive authority given to the House to originate money bills, to regulate trade, and to lay and collect taxes, and as by the Constitution a treaty was a part of the supreme law of the land, it was expedient that the House should participate in the treaty-making power; otherwise a treaty, in which the House had taken no part, might be made which would regulate commerce. This was a very broad construction of the doctrine of expediency, and was hardly to be expected from a follower of Jefferson. The Federalists, for the time becoming strict constructionists, asserted that it was the plain intention of the Constitution to exclude the House from participating in the treaty-making power. The great speech on the subject was by Fisher Ames, whose argument would now be called economic, for he said much concerning the commercial advantages of ratifying the treaty, but very little of the constitutional functions of the House.1 He reached so high a plane of eloquence that the Republicans somewhat tumultuously adjourned the House lest a vote be taken, but even adjournment could not break the spell of his speech, for on the following day, the thirtieth of April, the House, though only by a majority of three, and, though a day or two before, a very large majority had

1 April 28, 1796; Johnston's American Orations, I, 64.