View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by University of St. Thomas, Minnesota University of St. Thomas Law Journal Volume 14 Article 4 Issue 1 The Pre-Marbury Constitution 2018 America's First Great Constitutional Controversy: Alexander Hamilton's Bank of the United States Charles J. Reid Bluebook Citation Charles J. Reid, America's First Great Constitutional Controversy: Alexander Hamilton's Bank of the United States, 14 U. St. Thomas L.J. 105 (2018). This Article is brought to you for free and open access by UST Research Online and the University of St. Thomas Law Journal. For more information, please contact [email protected]. \\jciprod01\productn\U\UST\14-1\UST104.txt unknown Seq: 1 10-APR-18 14:36 ARTICLE AMERICA’S FIRST GREAT CONSTITUTIONAL CONTROVERSY: ALEXANDER HAMILTON’S BANK OF THE UNITED STATES DR. CHARLES J. REID* ABSTRACT This article aims at a careful reconstruction of what has been called America’s first great constitutional controversy—the 1791 debate over Al- exander Hamilton’s Bank of the United States. This article reviews this de- bate both at the congressional level and within the executive branch. The debate over the bank led to the articulation of theories of constitutional interpretation that are with us still. On the one hand, we find theories of interpretation that stress implied constitutional powers and an expansive role for the federal government. On the other hand, we encounter theories of interpretation that emphasize limited federal authority and a preeminent role for the states. These debates included not only well known figures such as Alexander Hamilton, Thomas Jefferson, and James Madison, but other leading figures of the time less well known today, such as Fisher Ames, Theodore Sedgwick, and Elbridge Gerry. Introduction ..................................................... 106 R I. The Economic Crisis of the 1780s ........................ 112 R II. Alexander Hamilton and the Bank of the United States ..... 116 R A. Alexander Hamilton: Background ..................... 116 R B. Hamilton’s Proposal for the Bank of the United States . 118 R 1. The Sources of Hamilton’s Banking Theory ....... 118 R 2. Hamilton’s Report on a National Bank ............ 120 R C. Hamilton: Commerce, Nationhood, and the Constitution .......................................... 124 R * Dr. Charles J. Reid, Jr., is a professor of law at the University of St. Thomas (MN). He would like to thank Ann Bateson and her library staff for their fluency with the sources. He would like to thank Robert Delahunty for his many thought provoking conversations and questions. He would finally like to acknowledge in gratitude Dan Berlinger, Class of 2017, for his help as a research assistant. 105 \\jciprod01\productn\U\UST\14-1\UST104.txt unknown Seq: 2 10-APR-18 14:36 106 UNIVERSITY OF ST. THOMAS LAW JOURNAL [Vol. 14:1 III. Congress Debates Hamilton’s Bank of the United States . 128 R A. The Opposition to the Bank .......................... 128 R 1. The Personalities ................................. 128 R 2. The Opposition Case ............................. 133 R a. James Madison .............................. 133 R b. James Jackson ............................... 139 R c. Michael Jenifer Stone ........................ 140 R 3. Observations ..................................... 142 R B. The Supporters of the Bank........................... 143 R 1. The Personalities ................................. 143 R 2. The Proponents’ Case ............................ 147 R a. Fisher Ames ................................. 147 R b. Theodore Sedgwick .......................... 152 R c. Elias Boudinot ............................... 154 R d. Elbridge Gerry ............................... 160 R 3. Observations ..................................... 163 R C. Rebuttal ............................................. 165 R 1. William Branch Giles ............................ 165 R 2. James Madison .................................. 168 R 3. Observations ..................................... 169 R 4. The House Votes on the Bank .................... 170 R IV. The Bank Debate in Washington’s Cabinet ................ 172 R A. Edmund Randolph ................................... 173 R 1. Randolph’s Background .......................... 173 R 2. Randolph’s Opinions ............................. 174 R B. Thomas Jefferson .................................... 178 R 1. Notes on the State of Virginia .................... 178 R 2. Jefferson on the Bank of the United States ........ 181 R C. Alexander Hamilton .................................. 184 R Conclusion ...................................................... 191 R INTRODUCTION This Article has a single major focus. It aims at a careful reconstruc- tion of what has been called America’s “first great constitutional contro- versy”1—the 1791 debate over Alexander Hamilton’s Bank of the United States. The controversy unfolded over three stages. It commenced when Alexander Hamilton, who was George Washington’s Secretary of the Trea- sury, proposed that Congress create the Bank as one part of his larger pro- gram for national economic integration and renewal. 1. Stephen G. Calabresi, Text, Precedent, and the Constitution: Arguments for Overruling Planned Parenthood of Southeastern Pennsylvania v. Casey, 22 CONST. COMMENT. 311, 334 (2005); Randy E. Barnett, The People or the State?: Chisholm v. Georgia and Popular Sover- eignty, 93 VA. L. REV. 1729, 1739 (2007). \\jciprod01\productn\U\UST\14-1\UST104.txt unknown Seq: 3 10-APR-18 14:36 2018] AMERICA’S FIRST CONSTITUTIONAL CONTROVERSY 107 In his proposal to Congress, Hamilton did not reference the Constitu- tion at all. He made the case for the Bank entirely on the grounds of public policy. It would benefit America’s commercial classes and thereby benefit the economy as a whole if the United States had a Bank of the sort that could be found in some European capitals. His sources for this claim in- cluded the latest developments in banking theory and European experience. One can infer from his silence on the matter that Hamilton must have viewed the constitutional question as unproblematic. Hamilton’s proposal, however, was immediately met with objections over its constitutionality. These objections led to the commencement of stage two of the controversy. A vigorous debate ensued in the House of Representatives between James Madison and a small group of mostly Southern House members, on one side, and, on the other side, a larger num- ber of mostly Northern and Eastern Representatives, many of them allies of Hamilton. The debate caused both sides to advance novel but important theories concerning the application and interpretation of the Constitution. The House and Senate both eventually enacted the Bill, but the contro- versy was not yet concluded. It entered its third and final stage when Presi- dent George Washington requested that three members of his cabinet brief him on the Bank’s constitutionality. Washington plainly took his role as constitutional interpreter seriously and thus he sought opinions on the Bank’s constitutionality from Edmund Randolph, his Attorney General, his Secretary of State Thomas Jefferson, and from Alexander Hamilton. Having satisfied his own scruples, Washington finally signed the legislation into law. A careful examination of the three stages of this controversy provides an important window into how the Constitution was understood in its earli- est years. Madison and his allies argued that the Constitution must be seen primarily as a restraining document. It was meant to limit the federal gov- ernment. Consisting as it did of carefully enumerated powers, Madison maintained that Congress could not transgress these carefully-crafted boundaries. Hamilton and his allies, on the other hand, viewed the Constitution principally as an empowering document. The Constitution was created and ratified so as to preserve the Union from the chaos and disarray of the Arti- cles of Confederation. Consistent with this history and purpose, the federal government, they maintained, possessed broad and extensive powers to build a powerful and unified nation. In back of these theories was yet another layer of more fundamental ideas about nationhood and sectionalism. Hamilton and his supporters stressed national unity as the Constitution’s overarching goal, while Madison, and at a later stage Jefferson, contended for the primacy of the states. After careful deliberation, George Washington, himself a native Vir- ginian, aligned with the Hamiltonian side of this debate. \\jciprod01\productn\U\UST\14-1\UST104.txt unknown Seq: 4 10-APR-18 14:36 108 UNIVERSITY OF ST. THOMAS LAW JOURNAL [Vol. 14:1 Throughout, this Article will be sensitive to historical context. And that means chiefly that attention must be paid to the ways in which mem- bers of Congress and the executive branch viewed themselves as constitu- tional interpreters. It must be borne in mind that the debate over the Bank of the United States occurred twelve years before the United States Supreme Court handed down Marbury v. Madison.2 If we view the debate as the participants would have seen it, we must acknowledge that they could not have known whether a subsequent Supreme Court would claim for itself the implied power of judicial review. In that context, Congress was defining for itself what it meant to behave constitutionally, and the debate over the Bank was very much a part of that self-definition. Indeed, we must also note that the Congress that