CHAPTER timate a connection on the part of the banks with the III. national government; in the one case as rash and im1791. provident lenders, in the other case as borrowers no less rash and improvident.

A bill for the charter of a national bank, introduced into the Senate by a committee to which the secretary's report had been referred, and corresponding precisely with his recommendations, encountered but very little opposition in that body. On the third reading, Jan. 20. the yeas and nays were twice called; once on a motion to limit the duration of the charter to ten years, which failed, six to sixteen; and again on a motion, lost also, five to eighteen, to strike out the clause restraining Congress from chartering any other bank during the continuance of this. Finally, the bill passed without a division. In the House, it was suffered to pass a second reading, the usual stage of discussion, without opposition; but on the questions of the third reading and the final passage, a warm debate arose. Jackson, Richard Bland Lee, Giles, and Madison spoke against the bill; for it, Lawrence, Sherman, Gerry, Ames, Vining, and Sedgwick. Jackson and Giles attacked the whole policy of the banking system, which they seemed to think little better than a cunningly-devised scheme for enriching the bankers at the expense of the public. Madison confined his objections to the want of power in Congress to pass such a bill. There was no direct grant of any such power, nor could it be implied, so he maintained, from any power expressly granted. It was answered that the power to establish a bank was implied in the powers to collect a revenue and to pay the debts of the United States, and in the authority expressly granted to make all laws necessary and proper for carrying those powers into execution. The terms "necessary and prop

III.

er," in this connection, could not be restricted to those CHAPTER means only without which the effect could not be produced, but must be understood as comprehending all 1791. means adapted to, and commonly employed for, the purpose. A bank was such a means, in reference to revenue transactions, in use by the Continental government previous to the adoption of the Constitution, and well known to the people. This line of argument, the same adopted long afterward by the Supreme Court of the United States, being based on an assumed state of facts liable to change, it would seem to follow, that if the use of a bank should happen, by change of circumstances, to become inexpedient, it would, at the same time, become unconstitutional. So far, indeed, as sentiment and feeling go, always of great weight in political affairs, questions of constitutionality and expediency are always intimately connected. When the expediency of a certain course of policy has been established, arguments in favor of its constitutionality will not be wanting. Hence, too, the opposite practice, already commenced by Virginia, and which soon came to be common to all parties, of denouncing as unconstitutional almost every measure to which opposition was made.

The bill finally passed the House by a vote of thirty.. nine to twenty; but, before signing it, the president required the written opinions of the members of his cabinet as to its constitutionality. Hamilton, supported by Knox, was strong in the affirmative; Jefferson and Randolph took the opposite side-the first instance, it would seem, of an important difference of opinion in the cabinet, and forerunner of that decided breach which soon followed.

After due deliberation, the president put his signature to the act. Except in a few particulars of little importance, it conformed to the plan suggested by Hamilton,

CHAPTER and has served as a model, not only for the second Bank III. of the United States, to the charter of which Madison 1791. himself afterward placed his signature, but for a great

number of state banks also; though by few, if by any, of these state charters was the public security so amply provided for.

Individual

The charter was limited to twenty years, for which period Congress renounced the power of establishing any other bank. The capital was to consist of 25,000 shares of $400 each, amounting in the whole to ten millions of dollars, eight millions to be subscribed by individuals, the other two millions by the United States. subscriptions were payable in four installments, one at the moment of subscription, the others in six, twelve, and eighteen months, one fourth in gold or silver, the other three fourths in stock of the United States, the six per cents. at par, the three per cents. at half that value. The United States were to pay in cash, out of the proceeds of the foreign loans hitherto authorized, but they were to be entitled to a loan from the bank to the amount of their subscription, applicable to the original objects of the foreign loans, and reimbursable in ten annual payments. In other words, while the individual subscribers were obliged to pay up within eighteen months, the United States had the advantage of extending their payments through a period of ten years.

In receiving three fourths of the individual subscriptions in government stocks, there were several objects in view. One was to create a new demand for those stocks, and so to bring them to par, which very soon happened; another was to give the bank a direct interest in sustaining the credit of the government; a third was to provide ample security for the circulation and deposits of the bank, in so far as six millions in government

stocks at six per cent. were a far more certain reliance, CHAPTER and a resource more instantaneously available, than the. same amount vested in promissory notes and bills of 1791. exchange. While the bank would do business on a cash capital of four millions, added to which would be the amount of its deposits and circulation, the depositors and bill-holders would have the security not only of this extra cash capital, but of an additional fund of six millions of dollars invested in government securities. In this particular the new bank was closely modeled after the Bank of England, the greater part of whose capital has always been invested in government stocks. And the same idea has been substantially acted upon in the recent free banking system of New York, by which a deposit of government stocks is required as security for the amount of the circulating bills.

The affairs of the bank, whose head-quarters were to be at Philadelphia, were to be managed by a board of twenty-five directors, chosen annually by the stockholders by a plurality of votes. One share entitled to one vote; three shares to two votes; five shares to three votes; ten shares to five votes; thirty shares to ten votes; sixty shares to fifteen votes; one hundred shares to twenty votes, with a proportional number for intervening amounts. For every ten shares above a hundred an additional vote was allowed; but no single individual or corporation was to be entitled to more than thirty votes. Votes by proxy were allowed, but only in case of residents in the United States. The directors, who must be stockholders and citizens, were to choose a president from among their own number, and, including the president or his special deputy, seven were to constitute a quorum to do business. At least one fourth of the board, exclusive of the president, was to be renewed at every annual election.

CHAPTER The whole property which the bank could hold, capital III. included, was limited to fifteen millions of dollars, nor 1791. were its debts, exclusive of deposits, ever to exceed ten

millions. Should any such excess occur, the directors under whose administration it happened were to be personally liable to that extent, except those who were absent, or who, if present, should dissent from the act creating such excess of debt, and should give immediate notice to the President of the United States, and to a meeting of stockholders, which they were authorized to call for that purpose. Meetings of stockholders might also be called at any time, for purposes relative to the institution, by any sixty stockholders, proprietors together of not less than two hundred shares, by giving ten weeks' notice in two Philadelphia newspapers specifying the object of the meeting. Statements as often as once a week, if required, were to be rendered by the directors to the Secretary of the Treasury, of the amount of capital, debts due the bank, circulation, deposits, and cash in hand; and, so far as related to these matters, the secretary was authorized to inspect the books, but not the accounts of private individuals. The bills or notes of the bank, payable on demand in gold or silver, were made receivable in all payments to the United States.

The bank was forbidden to hold lands or buildings, except such as might be necessary for its own accommodation, or which might come into its hands by the foreclosure of mortgages, or be conveyed to it in satisfaction of debts previously contracted, or be purchased at sales upon judgments for debts due to it. All dealing was prohibited in goods and merchandise of any description beyond the sale of the produce of its lands, or of goods pledged to secure the payment of money and not