Alexander Hamilton: Traitor to the Constitution (Part III)

Can the federal government erect corporations (a national bank)? That was the big constitutional question in the Washington administration. Hamilton says yes and Thomas Jefferson says no. Jefferson argues there is no expressed or written power in the constitution for the government to erect a corporation. Hamilton concurs but argues that building a federal corporation is not forbidden by the constitution and it does not abate state rights. Hamilton argues further that any act is constitutional if it is a “means to attain the ends”. Powers enumerated in the constitution for the federal government include laying and collecting taxes, coining money, and borrowing money. And a national bank is the means to attain those ends. Hamilton even uses the “supremacy” clause to justify that a sovereign nation has the right to create laws that are the supreme laws of the land (federalist papers 33 and 44 illustrate how the interpretation of the “supremacy” clause has changed – especially Hamilton’s view).

Hamilton would also argue for the national bank using the “necessary and proper” clause of the constitution. He said this clause provides the federal government the right to build a national bank of the United States. He argues that it is “necessary and proper” to have a national bank so the federal government could sufficiently do its job to lay and collect taxes, coin money, and borrow money (that the means justify the ends). Jefferson would again argue that the power to erect companies is not expressed in the constitution. Hamilton would rebut by saying that the States do not have the expressed powers in their constitutions to build state banks, yet all states have them. Hamilton also gave an example that the constitution does not have the expressed power to build lighthouses, piers, or beacons, but it is “necessary and proper” for the federal government to do so in order to conduct trade. Many federalists, those wanting a stronger national government, felt the constitution as drafted was weak. The constitution in their view was rigid and too specific. In other words it was not “elastic” enough. Hamilton’s arguments and the 1819 Supreme Court decision in Maryland v. McCulloch would turn the “necessary and proper” clause into the “elastic” clause. This was especially true in times of war (federalist papers 33 and 44 to illustrate how the interpretation of the “necessary and proper” clause has changed in Hamilton’s view). James Madison was always a state rights advocate who saw the need for a stronger federal government. At the constitutional convention Madison lobbied hard for the federal power to nullify any bad state laws. It was widely opposed, but the 14th amendment following the civil war would essentially create this power further strengthening the federal government’s hold over state governments. Madison was wrong that the constitution did not have enough power after the “elastic” clause was created by the Supreme Court contrary to federalist papers 78 and 81.

Jefferson also cites the tenth amendment as to why the national bank is unconstitutional. The tenth amendment says (paraphrase): those rights (powers) not given to the federal government in the constitution belong to the states. Hence, the act of creating banks solely rests with the states. Hamilton argues that there are implied or resulting powers from the powers vested in the national government. For instance, the federal government has a right to tax, so a tax on rum would be an implied or a resultant power. Federalist papers 28, 45 and 62 show how Hamilton’s view has changed.

One proposed amendment for the constitution bill of rights that was submitted by several states reads: “That Congress erect no company of merchants with exclusive advantages of commerce.” This one became part of the argument against the national bank proposed by Alexander Hamilton. Thomas Jefferson opposed the national bank using that statement by contending it would create a monopoly or that with its special powers and privileges, the national bank would hinder the development of state banks. Jefferson also argued that the national bank would be far more helpful to wealthy businessmen in cities than farmers in rural areas. The national bank would be run by wealthy stockholders and would help this privileged class become more rich and powerful (See federalist paper 62). Hamilton argued that the national bank is not a monopoly because the law does not stop states and localities from creating new banks. However, Hamilton admits that Congress has the right to alter state laws if it is deemed necessary for the federal government to conduct its business. Hamilton also argues that many of the same states that wrote the proposed amendment did not have any issue with the federal government erecting trade companies. Hamilton would also suggest that the federal government created new governments (companies) in the northwest and southwest territories. Hamilton therefore insists that the federal government has the right and power to erect governments as well as corporations on government lands such as the District of Columbia or western territories.