1816, Constitutional Issues Surrounding The Second Bank Of The U. S. – Guest Essayist: Professor Kyle Scott

 

The debate over the First and Second Banks of the United States expose the difficulties of constitutional interpretation. Additionally, the debate surrounding the Second Bank of the United States is a study of how principles can give way to political expediency. The following essay will provide a brief overview the Banks, discuss the constitutional debate surrounding the Banks, and then discuss the Second Bank as it relates to the presidential election of 1816 in which James Monroe succeeded James Madison by defeating Rufus King.

After the ratification of the Constitution, the American political power structure quickly formed two parties at the national level: the Democratic-Republicans and the Federalists. Thomas Jefferson and James Madison aligned with the first and Alexander Hamilton and John Adams with the second. George Washington remained unaffiliated with either party but followed many of the Federalist recommendations like the establishment of a national bank.

The debate over the national bank divided along partisan lines with the Federalists arguing the implied powers of the Constitution granted congress the authority to establish a bank. This power, they argued, was derived from the necessary and proper clause: “Congress shall have the power…To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” (Article 1, Section 8, Clause 18). Alexander Hamilton and George Washington, two delegates at the Constitutional Convention, found the authority to establish a national bank implied within this Article. As Secretary of the Treasury in the Washington administration, Hamilton pushed for a national bank that would, through various measures, create liquidity for the national government and private enterprise. Congress granted a twenty-year charter expiring in 1811 for the establishment of a national bank. The bank was a private entity that functioned as a de facto central bank.

Thomas Jefferson, then Secretary of State, and James Madison, then serving in the House of Representatives, opposed the new bank for fear it would benefit the industrial North and the investor class at the expense of the South and the population in general. They also argued that a strict construction of the Constitution gave no such power to the government but only to the states and the people as stated in the 10th Amendment. Nowhere in the Constitution was such a power explicitly given to the national government.

Madison and Hamilton were both at the Constitutional Convention in Philadelphia and both had a major role in its drafting and ratification, particularly when they collaborated on The Federalist under the name Publius, and yet the two could not agree about what the Constitution actually said on this question. This exposes the difficulty of constitutional interpretation for if the people who had a hand in writing the document could not agree upon what it meant then there is very little hope that those who come along over 200 years later will be able to create a definitive interpretation of a document as it relates to matters non-existent at the time of the founding. This does not mean those of us engaged in political disputes today should simply give up on understanding the Constitution, but we should give pause when confronted with the notion that the Constitution gives a clear and definitive answer to all questions. No greater minds have existed in our country than in James Madison and Alexander Hamilton and yet they could not agree on what the Constitution said. Thomas Jefferson was equally brilliant but was in France when the Constitutional Convention convened. But Madison and Hamilton were both in the room and influential in seeing it drafted and ratified. Their disagreement should humble those of us who propose to know what the Constitution “really” says for if those two cannot agree it is doubtful any of us truly knows.

What the debate over the Second Bank of the United States exposes is that adherence to constitutional principle often times gives way to, or is shaped by, one’s political disposition or political pressures. Perhaps the debate between Hamilton and Madison, and their reading of the Constitution was ideological. But if that is the case then Madison seems to switch allegiances on the question when he threw his support behind the bank as President.

After the War of 1812 the issue of the bank arose again as the initial charter had expired in 1811 and now the country faced war debts. Madison, now President, vetoed the first bill asking for a second bank in 1814. But in 1816 he signed the bill into law and the bank’s charter was renewed for another twenty years. Madison abandoned his earlier opposition to the bank. To do this he had to abandon his earlier constitutionally based arguments opposing the bank. Madison sacrificed principle for political expediency.

One of the primary planks within the Federalist Party platform was the need for a national bank. When James Madison, a Democratic-Republican, changed his position on the bank, and on protective tariffs which he and Jefferson had initially opposed as well, Rufus King lost his chance to become president as the Democratic-Republicans, and their candidate James Monroe, had coopted their policy positions.

Monroe won in a landslide. The victory would not have been possible had Madison not abandoned his principled constitutional position for a political expedient position. Had the bank charter not have been granted by Madison the Federalists would have used that as a campaign issue as most Americans supported a bank thus potentially changing the outcome of the election.

Madison was one of the best political theorists our country has produced, but he was also a political tactician who knew what was necessary for his party to retain power. This is similar to Thomas Jefferson who, despite great opposition to extensive executive authority and adherence to a strict reading of the Constitution, abandoned his principles when he purchased the Louisiana territory from France in 1803. For the Louisiana Purchase James Madison (“Father of the Constitution”) was Secretary of State and gave his full-throated support to Jefferson. Both men, in this instance and others, were willing to abandon a strict construction of the Constitution for policies that would benefit the country and their party.

It may be a hard pill to swallow but our Founders were first and foremost politicians. Had they been anything else the United States would have remained only an idea. They had clear-eyed principles that guided them but they were willing to abandon those principles when circumstances demanded. This is not to diminish their accomplishments or question their integrity. Rather, this is an attempt to recognize that all men, no matter how much we admire them, are not perfect. As Madison wrote, “if all men were angels no government would be necessary.” The Founders were wise enough to know that a constitution was necessary to contain the appetites of men but no document would be sufficient. It was, and is, the responsibility of an enlightened and energetic citizenry to make sure politicians act within the bounds of the constitution and our Constitution provides avenues for citizens to exert their will if they choose.

This study of the election of 1816 within the context of the debate surrounding the second national bank has two relevant lessons for those of us focused on the current political debate. First, interpreting the Constitution is no easy matter and very likely not as clear as most of us would like to think. Two men who were at the Convention, Hamilton and Madison, among others, could not agree on what the document said. When considering this fact we should all recognize that those of us living today lack the ability to know precisely what the document meant to the founders. Second, we should not treat politicians as the embodiment of principles. All men are prone to error and capable of abandoning principles when the proper conditions arise. As citizens we must remain actively engaged at all times, and not just during election season, to hold our elected officials accountable.

Kyle Scott, PhD, serves on the Board of Trustees for the Lone Star College System and teaches political science at the University of Houston and is an affiliated scholar with the Baylor College of Medicine’s Center for Health Policy and Medical Ethics. He is also affiliated with the North Carolina History Project and is a contributor to a forthcoming compilation of essays on North Carolina. Kyle has authored dozens of articles and four books, the most recent of which is The Federalist Papers: A Reader’s Guide. He can be reached at kyle.a.scott@hotmail.com or on Twitter: @scottkylea.

4 Responses to “1816, Constitutional Issues Surrounding The Second Bank Of The U. S. – Guest Essayist: Professor Kyle Scott”

  1. Ralph T. Howarth, Jr. says:

    What is curious is how the issue of a central bank did come up indirectly during the Philadelphia Convention of 1787 on Friday, Sept 17, by proxy of a motion to add the building of canals to the enumerated powers of the federal government. Somehow this element is missing from the national bank debate. Granted, we did not know about the topic because the convention was held in secrecy, and James Madison did not release his notes except upon his death. But you would think the folks who attended the convention would remember this. What is noteworthy is how after building of canals was put to vote and denied, the very next topic was the building of a trans-denominational university to reflect the amalgamation of religious freedom of the states like the state of Virginia was considering establishing. But the motion was satisfied that the federal district already had discretion to build a university, or any other public work for that matter, in the proposed constitution by virtue of not belonging to any particular state. So no amendment was added regarding education as the delegates were satisfied that the federal government can just create a university within its own federal district boundaries. Nevertheless, despite the debates on the constitution explicitly covered and declined to enumerate powers to the federal government on the spheres of education, banks, labor, manufactures, and canals, the federal government proceeded eventually to operate, fund, establish, or regulate education, banks, labor, manufactures, and canals.

  2. Ralph T. Howarth, Jr. says:

    Excerpt of Madison’s Notes: Friday, Sept 17

    Doctor FRANKLIN moved2 to add, after the words, “post roads,” Article 1, Sect. 8, a power “to provide for cutting canals where deemed necessary.”

    Mr. WILSON seconded the motion.

    Mr. SHERMAN objected. The expense in such cases will fall on the United States, and the benefit accrue to the places where the canals may be cut.

    Mr. WILSON. Instead of being an expense to the United States, they may be made a source of revenue.

    Mr. MADISON suggested an enlargement of the motion, into a power “to grant charters of incorporation where the interest of the United States might require, and the legislative provisions of individual States may be incompetent.” His primary object was, however, to secure an easy communication between the States, which the free intercourse now to be opened seemed to call for. The political obstacles being removed, a removal of the natural ones, as far as possible ought to follow.

    Mr. RANDOLPH seconded the proposition.

    Mr. KING thought the power unnecessary.

    Mr. WILSON. It is necessary to prevent a State from obstructing the general welfare.

    Mr. KING. The States will be prejudiced and divided into parties by it. In Philadelphia and New York, it will be referred to the establishment of a bank, which has been a subject of contention in those cities. In other places it will be referred to mercantile monopolies.

    Mr. WILSON mentioned the importance of facilitating, by canals the communication with the Western settlements. As to banks, he did not think with Mr. KING, that the power in that point of view would excite the prejudices and parties apprehended. As to mercantile monopolies, they are already included in the power to regulate trade.

    Colonel MASON was for limiting the power to the single case of canals. He was afraid of monopolies of every sort, which he did not think were by any means already implied by the Constitution, as supposed by Mr. WILSON.

  3. Ralph T. Howarth, Jr. says:

    The motion being so modified as to admit a distinct question specifying and limited to the case of canals, —

    Pennsylvania, Virginia, Georgia, aye, — 3; New Hampshire, Massachusetts, Connecticut, New Jersey, Delaware, Maryland, North Carolina, South Carolina, no, — 8.

    The other part fell, of course, as including the power rejected.

    Mr. MADISON and Mr. PINCKNEY then moved to insert, in the list of powers vested in Congress, a power “to establish an University, in which no preferences or distinctions should be allowed on account of religion.”

    Mr. WILSON supported the motion.

    Mr. GOUVERNEUR MORRIS. It is not necessary. The exclusive power at the seat of government will reach the object.

    On the question, —

    Pennsylvania, Virginia, North Carolina, South Carolina, aye, — 4; New Hampshire, Massachusetts, New Jersey, Delaware, Maryland, Georgia, no, — 6; Connecticut, divided, (Dr. JOHNSON, aye; Mr. SHERMAN, no.)

  4. Publius Senex Dassault says:

    “It was, and is, the responsibility of an enlightened and energetic citizenry to make sure politicians act within the bounds of the constitution and our Constitution provides avenues for citizens to exert their will if they choose. … All men are prone to error and capable of abandoning principles when the proper conditions arise. As citizens we must remain actively engaged at all times, and not just during election season, to hold our elected officials accountable.”

    I agree. But how do the people actually hold them accountable and force them to act within the bounds of the Constitution when Bureaucracy will not allow Congress to hold them accountable, Presidents and Presidential candidates blatantly assert their right to implement laws and permanently change the rights of the people via Executive order? Have we crossed the Rubicon where our government refuses to be held accountable?

    Another issue is this. Will a people of which 65% have not saved anything for retirement be willing or able to hold accountable the politicians and bureaucrats on whom they will be 100% dependent? As pointed out in the essay, when pressed into a corner people will choose political expediency over ideology and what is right or best. More succinctly, can a dependent citizenry act independently?

    BTW – another excellent essay.

    PSD.

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