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that quarter, issuing an emission of notes signed with ink of a different
shade, at the same time giving secret orders to said bank not to pay the
notes thus signed, and subjecting the owners of them to loss and disap-
pointment, compelling them either to sell them for what they would fetch,
or to return without accomplishing the business they went on. . . .

Others, by a different stratagem, but no less contrary to the intent



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442 National Spirit [xSis

and meaning of their charter, have issued a species of paper called
facility notes, purporting to be payable in neither money, country prod-
uce, or any thing else that has body or shape, and thereby rendering
their name appropriate only but by facilitating the ruin of those who
are so unfortunate as to hold them. There are other practices which
the committee are informed are very common, and they believe will not
be doubted, which no less vitiate the first principles of their charter.
They give large accommodations to individuals conditionally ; to some,
that they will keep in circulation a certain sum (which notes are desig-
nated by a private mark) for a specified time ; but in case they return
sooner, he is again to be charged with the discount on such sum for the
remainder of the time ; to avoid which he is compelled to make long
joumies into distant counties, to change the notes for those of other
banks, thus squandering his time and his money for their benefit. To
others, on condition that they will pay their note when due, in what is
called current money, (meaning notes of such of the banks as are cur-
rent throughout the state, they not considering theirs as entitled to that
appellation,) which compels the borrower, during the time his note is
to run, to lay by him all the current money he can collect, which of
necessity he must lose the use of, and for which he is obliged to pay for
the sum he may be deficient of, as the time draws near a close, a pre-
mium of from seven to fourteen, and sometimes, as your committee
have been informed, as high as twenty per cent, for one day, when his
note is again renewed, and the same operation is commenced anew.

To others on condition they exchange with them, a sum equal to their
note offered, of notes of other banks, (for which they are compelled to
give a premium,) and receive their own in return. To others, on con-
dition one half the sum remains in the bank until the note is due,
thereby receiving an usurious interest

They hold the purse strings of society, and by monopolizing the
whole of the circulating medium of the country, they form a precarious
standard, by which all the property in the country, houses, lands, debts
and credits, personal and real estate of all descriptions, are valued, thus
rendering the whole comnumity dependent on them, and proscribing
every man who dares oppose or expose their unlawful practices : and if
he happens to be out of their reach so as to require no favor from them,
then his friends are made the victims, so that no one dares complain.

The merchant who has remittance to make abroad, is contented to
pocket the loss, occasioned by the depreciation of their money, rather



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No. 13a] State Banking 443

than hazard their resentment by asking them for specie or current notes ;
and here the committee beg leave to state as a fact, an instance where
the board of directors of a bank passed a resolution, declaring that no
man should hold a seat at that board, or receive any discounts at the
bank, who should trade at a certain store in the same village, in conse-
quence of the owner having asked for a sum less than four thousand
dollars in current money to remit to New-York, while at the same time
he kept his account in said bank. . . .

. . . the committee cannot refrain from remarking, that hitherto
liberal and extended encouragement given to banking operations beyond
its legitimate object, has annually invited to our capitol, skilful and
experienced banking agents, professing general and not local objects
. . . who ... in the present instance, from seeing notices in the state
paper of eighteen new applications for banks intended to be made at the
present session, have no doubt come up with high raised expectations of
reaping a rich harvest, and by amalgamating banking bills with those of
more importance and more salutary in their nature, and by assorting
and canvassing the house with all the conflicting interests of individuals,
until all distinction is lost between the fair and the honest' petitioner, and
the cunning designing speculator, and thus the man who asks in the
simplicity of his heart for what he honestly conceives his right, is soon
made to understand, that in order to obtain it he must become the
instrument of designing men, and advocate that which his better judg-
ment tells him is wrong. And your committee are constrained to say,
that this practice has hitherto been carried to such an extent, and has
met with such success, as to encourage corporations as well as individ-
uals, to assume banking powers where none were ever granted : and
after having put all law and authority to defiance, and creating them-
selves a fund, calculating on the encouragement and skill of these agents,
have had the unexampled temerity to petition the legislature of this state
and urge them, through the medium of these agents, to grant them a
charter for banking, as a reward for the unwarrantable assumption of
that right. ...

The committee will conclude this general report on the state of the
currency, by examining briefly, the foundation on which the present circu-
lating medium is based. The committee believe, the present circulation
in the state principally consists of the notes of those banks whose nom-
inal capitals are small, and composed principally of the notes of the
individual stockholders, called stock-notes. So that the security of the



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444 National Spirit [xSxs

public consists of the private fortunes of individual stockholders, and
those fortunes, in a great measure, consist of the stock of the bank,
for which they have given their notes ; so that the bank is enriched by
holding their notes, and they are enriched by holding the stock of the
bank : And as these banks make large dividends, many rapid, and what
are considered solid fortunes, are made. Like a boy mounting a sum-
mit as the sun is setting, suddenly observes his shadow on the. opposite
precipice, (regardless of the gulph between,) is astonished to see how
tall he has grown ; when night ensues, ere he is aware, he is plunged,
shadow, substance and all, in the abyss below, covered with darkness and
despair. Such the committee extremely apprehend will be the result of
many of the present institutions, and bring ruin and distress on the
country, unless they change their mode of business. . . .

On the whole, the committee coincide fully in the opinion expressed
by his excellency on the subject of banks, in his speech, delivered at
the opening of the session, where he says : —

" The evils arising from the disordered state of our currency, have been
aggravated by the banking operations of individuals, and the una[u]thor-
ised emissions of small notes by corporations. They require the immedi-
ate and correcting interposition of the legislature. I also submit it to
your serious consideration, whether the inc orporaty>>n <^f Kanlfg in plar#>g
where they are not rpgnireH hyjlie eiogpn^ips nf ^9mTnprr#>^ trade or
manufactures, ought to be countenanced. Such institutions having but
few deposits of money, must rely for their profits principally upon the
circulation of their notes, and they are therefore tempted to extend it
beyond their faculties. These bills are diffused either in shape of
loans, or by appointing confidential agents to exchange them for those
of other establishments. But the former mode being conducive to
profit, is at first generally adopted ; and in the early stages of their
operations, discounts are liberaUy dispensed. This produces an appar-
ent activity of business, and the indications of prosperity. But it is all
fictitious and deceptive, resembling the hectic heat of consuming dis-
ease, not the genial warmth of substantial health; a reaction soon takes
place. These bills are in turn collected by rival institutions, or passed
to the banks of the great cities, and payment being required, the only
resource lefl is to call in their debts, and exact partial or total returns
of their loans. The continual struggle between conflicting establish-
ments to collect each other's notes, occasions constant apprehension.
The sphere of their operations is narrowed. Every new bank contracts



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No. 13a] State Banking 445

the area of their paper circulation ; and after subjecting the communi-
ties within their respective spheres of operation to the pernicious
vicissitudes of loans, at one period profusely granted, and at another
parsimoniously withheld, they finally settle down into a state of torpid
inaction, and become mere conduits of accommodation to a few indi-
viduals. The legislature are then solicited to apply a remedy by the
incorporation of other banks, whereas, every new one of this descrip-
tion, unless attended by peculiar circumstances, paralizes a portion of
capital and augments the general distress. The banishm ent of meta llic
money, th e loss of commercial confi dence, the exKibition of fictitio^is
capital, the in crease of civil prosec utions^ ro ultiplirflHon of rrin(] tg«^^ tht*
injurious enhancement o f prices, an d the da nger ous extens ion o f credit,

are a mong (He mischiefs which fl ow f rom this state 7>f th mgs. And it

is worthy of serious inquiry, whether a greater augmentation of such
institutions may not in course of time produce an explosion that will
demolish the whole system. The slow and periodical returns of hus-
bandry being incompetent to the exigencies of banking establishments,
the ag ricult ural interest is the principal sufferer by these proceedings."
If the facts stated in the foregoing be true, and your committee have
no doubt they are, together with others equally reprehensible and to be
dreaded, such as, that their influence too frequently, nay often, already
begins to assume a species of dictation altogether alarming, and unless
some judicious remedy is provided by legislative wisdom, we shall soon
witness attempts to control all selections to office in our counties, nay,
the elections to this very legislature. Senators and members of assem-
bly will be indebted to banks for their seats in this capitol, and thus the
wise ends of our civil institutions will be prostrated in the dust by
corporations of their own creation. It is therefore evident, the dele-
terious poison has already taken deep root and requires immediate
legislative interference with their utmost energy.

H[ezekiah] Niles, editor, Niles" Weekly Register, March 14, 1818 (Baltimore),
XIV, 39-41 passim.



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446 National Spirit [xSig

133. Doctrine of Implied Powers (1819)

BY THE SUPREME COURT OF THE UNITED STATES

Chief-Justice Marshall delivered the decision from which this extract is taken. He
belonged to the old Federalist school; and as head of the Supreme Court for over thirty
years he not only gave to his theories of a broad and efficient interpretation of the
powers of the national government the prestige of many decisions, but stamped those
ideas indelibly upon the Constitution itself. — For Marshall, see Winsor, Narrative and
Critical History, VII, 313. — Bibliography: Channing and Hart, Guide, § 159.

THE first question made in the cause is, has congress power to
incorporate a bank? . . .

This government is acknowledged by all to be one of enumerated
powers. . . .

Among the enumerated powers, we do not find that of establishing a
bank or creating a corporation. But there is no phrase in the instru-
ment which, like the articles of confederation, excludes incidental or
implied powers; and which requires that every thing granted shall be
expressly and minutely described. ... A constitution, to contain an ac-
curate detail of all the subdivisions of which its great powers will admit,
and of all the means by which they may be carried into execution, would
partake of the prolixity of a legal code, and could scarcely be embraced
by the human mind. It would probably never be understood by the
public. Its nature, therefore, requires, that only its great outlines should
be marked, its important objects designated, and the minor ingredients
which compose those objects be deduced from the nature of the objects
themselves. That this idea was entertained by the framers of the
American constitution, is not only to be inferred from the nature of
the instrument, but from the language. Why else were some of the
limitations, found in the 9th section of the ist article, introduced? It
is also, in some degree, warranted by their having omitted to use any
restrictive term which might prevent its receiving a fair and just inter-
pretation. In considering this question, then, we must never forget,
that it is a constitution we are expounding.

Although, among the enumerated powers of government, we do not find
the word " bank," or ** incorporation," we find the great powers to lay
and collect taxes ; to borrow money ; to regulate commerce ; to declare
and conduct a war ; and to raise and support armies and navies. The
sword and the purse, all the external relations, and no inconsiderable
portion of the industry of the nation, are intrusted to its government.



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Na 133] Implied Powers 447

It can never be pretended that these vast powers draw after them others
of inferior importance, merely because they are inferior. Such an idea
can never be advanced. But it may, with great reason, be contended,
that a government, intrusted with such ample powers, on the due exe-
cution of which the happiness and prosperity of the nation so vitally
depends, must also be intrusted with ample means for their execution.
The power being given, it is the interest of the nation to facilitate its
execution. It can never be their interest, and cannot be presumed to
have been their intention, to clog and embarrass its execution by with-
holding the most appropriate means. Throughout this vast republic,
from the St. Croix to the Gulf of Mexico, from the Atlantic to the
Pacific, revenue is to be collected and expended, armies are to be
marched and supported. The exigencies of the nation may require,
that the treasure raised in the North should be transported to the South,
that raised in the East conveyed to the West, or that this order should
be reversed. Is that construction of the constitution to be preferred
which would render these operations difficult, hazardous, and expensive ?
Can we adopt that construction, (unless the words imperiously require
it,) which would impute to the framers of that instrument, when grant-
ing these powers for the public good, the intention of impeding their
exercise by withholding a choice of means? . . .

It is not denied, that the powers given to the government imply the
ordinary means of execution. That, for example, of raising revenue,
and applying it to national purposes, is admitted to imply the power of
conveying money from place to place, as the exigencies of the nation
may require, and of employing the usual means of conveyance. But it
is denied that the government has its choice of means ; or, that it may
employ the most convenient means, if, to employ them, it be necessary
to erect a corporation. . . .

.... The power of creating a corporation is never used for its own
sake, but for the purpose of effecting something else. No sufficient
reason is, therefore, perceived, why it may not pass as incidental to
those powers which are expressly given, if it be a direct mode of
executing them.

But the constitution of the United States has not left the right of
congress to employ the necessary means, for the execution of the powers
conferred on the government, to general reasoning. To its enumera-
tion of powers is added that of making " all laws which shall be neces-
sary and proper, for carrying into execution the foregoing powers, and



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448 National Spirit [iSig

all other powers vested by this constitution, in the government of the
United States, or in any department thereof."

The counsel for the State of Maryland have urged various arguments,
to prove that this clause, though in terms a grant of power, is not so
in effect; but is really restrictive of the general right, which might
otherwise be implied, of selecting means for executing the enumerated
powers. . . .

But the argument on which most reliance is placed, is drawn from the
peculiar language of this clause. Congress is not empowered by it to
make all laws, which may have relation to the powers conferred 0/1 the
government, but such only as may be "necessary and proper" for
carrying them into execution. The word "necessary" is considered
as controlling the whole sentence, and as limiting the right to pass laws
for the execution of the granted powers, to such as are indispensable,
and without which the power would be nugatory. That it excludes the
choice of means, and leaves to congress, in each case, that only which
is most direct and simple.

Is it true, that this is the sense in whicb the word " necessary " is
alwa3rs used? Does it always import an absolute physical necessity,
so strong, that one thing, to which another may be termed necessary,
cannot exist without that other? We think it does not. ... It is
essential to just construction, that many words which import something
excessive, should be understood in a more mitigated sense — in that
sense which common usage justifies. The word " necessary " is of this
description. ... in its construction, the subject, the context, the inten-
tion of the person using them, are all to be taken into view.

Let this be done in the case under consideration. The subject is
the execution of those great powers on which the welfare of a nation
essentially depends. It must have been the intention of those who gave
these powers, to insure, as far as human prudence could insure, their
beneficial execution. This could not be done by confining the choice
of means to such narrow limits as not to leave it in the power of con-
gress to adopt any which might be appropriate, and which were con-
ducive to the end. This provision is made in a constitution intended
to endure for ages to come, and, consequently, to be adapted to the
various crises of human affairs. To have prescribed the means by
which government should, in all future time, execute its powers, would
have been to change, entirely, the character of the instrument, and
give it the properties of a legal code. It would have been an unwise



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No. 133] Implied Powers 449

attempt to provide, by immutable rules, for exigencies which, if foreseen
at all, must have been seen dimly, and which can be best provided for
as they occur. To have declared that the best means shall not be used,
but those alone without which the power given would be nugatory,
would have been to deprive the legislature of the capacity to avail itself
of experience, to exercise its reason, and to accommodate its legislation
to circumstances. If we apply this principle of construction to any of
the powers of the government, we shall find it so pernicious in its
operation that we shall be compelled to discard it. . . .

Take, for example, the power " to establish post-offices and post-roads."
This power is executed by the single act of making the establishment.
But, from this has been inferred the power and duty of carrying the
mail along the post-road, from one post-office to another. And, from
this implied power, has again been inferred the right to punish those
who steal letters from the post-office, or rob the mail. It may be said,
with some plausibility, that the right to carry the mail, and to punish
those who rob it, is not indispensably necessary to the establishment
of a post-office and post- road. This right is, indeed, essential to the
beneficial exercise of the power, but not indispensably necessary to its
existence. . . .

If this limited construction of the word " necessary " must be aban-
doned in order to punish, whence is derived the rule which would
reinstate it, when the government would carry its powers into execution
by means not vindictive in their nature? If the word "necessary"
means " needfiil," " requisite," " essential," " conducive to," in order to
let in the power of punishment for the infraction of law, why is it not
equally comprehensive when required to authorize the use of means
which facilitate the execution of the powers of government without the
infliction of punishment? . . .

But the argument which most conclusively demonstrates the error of
the construction contended for by the counsel for the State of Mary-
land, is founded on the intention of the convention, as manifested in the
whole clause. To waste time and argument in proving that, without
it, congress might carry its powers into execution, would be not much
less idle than to hold a lighted taper to the sun. . . .

The result of the most careful and attentive consideration bestowed
upon this clause is, that if it does not enlarge, it cannot be construed
to restrain the powers of congress, or to impair the right of the legis-
lature to exercise its best judgment in the selection of measures^ to

3Q



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450 National Spirit [1819

cairy into execution the constitutional powers of the government. If
no other motive for its insertion can be suggested, a sufl&cient one is
found in the desire to remove all doubts respecting the right to legislate
on that vast mass of incidental powers which must be involved in the
constitution, if that instrument be not a splendid bauble.

We admit, as all must admit, that the powers of the government are
limited, and that its limits are not to be transcended. But we think
the sound construction of the constitution must allow to the national
legislature that discretion, with respect to the means by which the
powers it confers are to be carried into execution, which will enable
that body to perform the high duties assigned to it, in the manner most
beneficial to the people. Let the end be legitimate, let it be within the
scope of the constitution, and all means which are appropriate, which
are plainly adapted to that end, which are not prohibited, but consist
with the letter and spirit of the constitution, are constitutional.

M'Culloch V, State of Maryland, 4 Wheaion^ 401-421 ; in B. R. Curtis,
Reports of Decisions in the Supreme Court of the United States (Boston,
1 881), IV, 418-430 passim.



134. Foreign Commerce (1819)

BY LATE CONSUL DAVID BAILIE WARDEN

Warden went to France in 1804 as secretary of the United States minister. He
acted as consul at Paris during the first months of Madison's administration, and
upon being appointed to the position continued to hold it fur many years. He was
an author, a man of varied learning, and a member of the French Academy. — Bibli-
ography : Channing and Hart, Guide, § 1 74. — For other articles on the commerce,
see Nos. 20, 22, 129 above.

IN commerce and navigation, the progress of the United States has
been rapid beyond example. Besides the natural advantages of
excellent harbours, extensive inland bays and navigable rivers, it has
been greatly in favour of their commerce, that it has not been fettered
by monopolies or exclusive privileges. Goods or merchandise circulate
through all the states free of duty, and a full drawback, or restitution of
duties of importation, is granted upon articles exported to a foreign
port, in the course of the year in which they have been imported
Commerce is considered by all those engaged in it as a most honour-
able employment. In the sea-port towns, the richest members of
society are merchants. Youths of sixteen are sent abroad as factors, or



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No. X34] Foreign Commerce 451

supercargoes, to every commercial country, intrusted with the manage-
ment of great concerns. Stimulated by the prospect of independence,
they study the manufactures and markets of foreign states ; the quality,
value, and profits of every commercial article, while the youth of other
countries, of the same age and rank, have not formed a thought of a
provision for future life. Maritime and commercial business is executed



Online LibraryAlbert Bushnell HartAmerican history told by contemporaries .. → online text (page 45 of 68)