kindred ideas of the latter may be seen in his Memoirs, &c., vol. iv. pp. 196, 207, 526; * and his view of the state banks, vol. iv. pp. 199, 220. There are sundry statutes in Virginia, prohibiting the circulation of notes, payable to bearer, whether issued by individuals, or unchartered banks. JAMES MADISON. IDEAS OF MR. JEFFERSON ON BANKS; REFERRED TO BY MR. MADISON IN THE PRECEDING LETTER. [EXTRACT.] The bill for establishing a national bank, in 1791, undertakes, among other things, 1. To form the subscribers into a corporation. 2. To enable them, in their corporate capacities, to receive grants of lands; and, so far, is against the laws of mortmain.t 3. To make alien subscribers capable of holding lands; and, so far, is against the laws of alienage. 4. To transmit these lands, on the death of a proprietor, to a certain line of successors; and, so far, changes the course of descents. 5. To put the lands out of the reach of forfeiture, or escheat; and, so far, is against the laws of forfeiture and escheat. 6. To transmit personal chattels to successors, in a certain line; and, so far, is against the laws of distribution. 7. To give them the sole and exclusive right of banking, under the national authority; and, so far, is against the laws of monopoly. 8. To communicate to them a power to make laws, paramount to the laws of the states; for so they must be construed, to protect the institution from the control of the state legislatures; and so, probably, they will be construed. I consider the foundation of the Constitution as laid on this ground - that all powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states, or to the people, (12th amend.) To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition. The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States by the Constitution. *Extract from President Jackson's Message of December 7, 1830.-"It becomes us to inquire, whether it be not possible to secure the advantages afforded by the present bank, through the agency of a bank of the United States, so modified, in its principles and structure, as to obviate constitutional and other objections. It is thought practicable to organize such a bank, with the necessary officers, as a branch of the treasury department, based on the public and individual deposits, without power to make loans or purchase property, which shall remit the funds of the government, and the expenses of which may be paid, if thought advisable, by allowing its officers to sell bills of exchange to private individuals, at a moderate premium. Not being a corporate body, having no stockholders, debtors, or property, and but few officers, it would not be obnoxious to the constitutional objections which are urged against the present bank; and having no means to operate on the hopes, fears, or interests, of large masses of the community, it would be shorn of the influence which makes that bank formidable. The states would be strengthened by having in their hands the means of furnishing the local paper currency through their own banks; while the Bank of the United States, though issuing no paper, would check the issues of the state banks, by taking their notes in deposit, and for exchange, only so long as they continue to be redeemed with specie." Though the Constitution controls the laws of mortmain so far as to permit Congress itself to hold lands for certain purposes, yet not so far as to permit them to communicate a similar right to other corporate bodies. States? Were she permitted, by conferring on certain portions of her domain the name of colonies, to open from these a trade for herself to foreign countries, and to exclude, at the same time, a reciprocal trade to such colonies, by foreign countries, the use to be made of the monopoly need not be traced. Its character will be placed in a just relief by supposing that one of the colonial islands, instead of its present distance, happened to be in the vicinity of Great Britain; or that one of the islands in that vicinity should receive the name and be regarded in the light of a colony, with the peculiar privileges claimed for colonies. Is it not manifest that, in this case, the favored island might be made the sole medium of the commercial intercourse with foreign nations, and the parent country thence enjoy every essential advantage, as to the terms of it, which would flow from an unreciprocal trade from her other ports with other nations? Fortunately, the British claims, however speciously colored or adroitly managed, were repelled at the commencement of our commercial career as an independent people, and at successive epochs under the existing Constitution, both in legislative discussions and in diplomatic negotiations. The claims were repelled on the solid ground that the colonial trade, as a rightful monopoly, was limited to the intercourse between the parent country and its colonies, and between one colony and another; the whole being, strictly, in the nature of a coasting trade from one to another port of the same nation—a trade with which no other nation has a right to interfere. It follows, of necessity, that the parent country, whenever it opens a colonial port for a direct trade to a foreign country, departs, itself, from the principle of colonial monopoly, and entitles the foreign country to the same reciprocity, in every respect, as in its intercourse with any other ports of the nation. This is common sense and common right. It is still more, if more could be required. It is in conformity with the established usage of all nations, other than Great Britain, which have colonies. Some of those nations are known to adhere to the monopoly of their colonial trade, with all the vigor and constancy which circumstances permit. But it is also known that, whenever, and from whatever cause, it has been found necessary or expedient to open their colonial ports to a foreign trade, the rule of reciprocity in favor of the foreign party was not refused, nor, as is believed, a right to refuse it pretended. It cannot be said that the reciprocity was dictated by a deficiency in the commercial marine. France, at least, could not be, in every instance, governed by that consideration; and Holland still less, to say nothing of the navigating states of Sweden and Denmark, which have rarely, if ever, enforced a colonial monopoly. The remark is, indeed, obvious, that the shipping liberated from the usual conveyance of supplies from the parent country to the colonies might be employed, in the new channels opened for them, in supplies from abroad. Reciprocity, or an equivalent for it, is the only rule of intercourse among independent communities; and no nation ought to admit a doctrine, or adopt an invariable policy, which would preclude the counteracting measures necessary to enforce the rule. 2. The theory supposes, moreover, a perpetual peace - a supposition, it is to be feared, not less chimerical than a universal freedom of commerce. The effect of war, among the commercial and manufacturing nations of the world, in raising the wages of labor and the cost of its products, with a like effect on the charges of freight and insurance, need neither proof nor explanation. In order to determine, therefore, a question of economy, between depending on foreign supplies and encouraging domestic substitutes, it is necessary to compare the probable periods of war with the probable periods of peace, and the cost of the domestic encouragement in time of peace with the cost added to foreign articles in time of war. During the last century, the periods of war and peace have been nearly equal. The effect of a state of war in raising the price of imported articles cannot be estimated with exactness. It is certain, however, that the increased price of particular articles may make it cheaper to manufacture them at home. Taking, for the sake of illustration, an equality in the two periods, and the cost of an imported yard of cloth in time of war to be nine and a half dollars, and in time of peace to be seven dollars, whilst the same could at all times be manufactured at home for eight dollars, it is evident that a tariff of one dollar and a quarter on the imported yard would protect the home manufacture in time of peace, and avoid a tax of one dollar and a half imposed by a state of war. It cannot be said that the manufactures which could not support themselves against foreign competition, in periods of peace, would spring up of themselves at the recurrence of war prices. It must be obvious to every one, that, apart from the difficulty of great and sudden changes of employment, no prudent capitalists would engage in expensive establishments of any sort, at the commencement of a war of uncertain duration, with a certainty of having them crushed by the return of peace. The strictest economy, therefore, suggests, as exceptions to the general rule, an estimate, in every given case, of war and peace, periods and prices, with inferences therefrom of the amount of a tariff which might be afforded during peace, in order to avoid the tax resulting from war; and it will occur at once that the inferences will be strengthened by adding, to the supposition of wars wholly foreign, that of wars in which our own country might be a party. 3. It is an opinion in which all must agree, that no nation ought to be unnecessarily dependent on others for the munitions of public defence, or for the materials essential to a naval force, where the nation has a maritime frontier, or a foreign commerce, to protect. To this class of exceptions to the theory may be added the instruments of agriculture, and of the mechanic arts which supply the other primary wants of the community. The time has been, when many of these were derived from a foreign source, and some of them might relapse into that dependence, were the encouragement of the fabrication of them at home withdrawn. But, as all foreign sources must be liable to interruptions too inconvenient to be hazarded, a provident policy would favor an internal and independent source, as a reasonable exception to the general rule of consulting cheapness alone. 4. There are cases where a nation may be so far advanced in the prerequisites for a particular branch of manufactures, that this, if once brought into existence, would support itself; and yet, unless aided, in its nascent and infant state, by public encouragement and a confidence in public protection, might remain, if not altogether, for a long time, unattempted without success. Is not our cotton manufacture a fair example? However favored by an advantageous command of the raw material, and a machinery which dispenses in so extraordinary a proportion with manual labor, it is quite probable that, without the impulse given by a war cutting off foreign supplies, and the patronage of an early tariff, it might not even yet have established itself; and pretty certain that it would be far short of the prosperous condition which enables it to face, in foreign markets, the fabrics of a nation that defies all other competitors. The number must be small that would now pronounce this manufacturing boon not to have been cheaply purchased by the tariff which nursed it into its present maturity. 5. Should it happen, as has been suspected, to be an object, though not of a foreign government itself, of its great manufacturing capitalists, to strangle in the cradle the infant manufactures of an extensive customer, or an anticipated rival, it would surely, in such a case, be incumbent on the suffering party so far to make an exception to the "let alone" policy, as to parry the evil by opposite regulations of its foreign commerce. 6. It is a common objection to the public encouragement of particular branches of industry, that it calls off laborers from other branches found to be more profitable; and the objection is in general a weighty one. But it loses that character in proportion to the effect of the encouragement in attracting skilful laborers from abroad. Something of this sort has already taken place among ourselves, and much more of it is in prospect; and, as far as it has taken or may take place, it forms an exception to the general policy in question. The history of manufactures in Great Britain, the greatest manufacturing nation in the world, informs us that the woollen branch till of late her greatest branch-owed both its original and subsequent growths to persecuted exiles from the Netherlands; and that her silk manufactures- now a flourishing and favorite branch—were not less indebted to emigrants flying from the persecuting edicts of France. — Anderson's History of Commerce. It appears, indeed, from the general history of manufacturing industry, that the prompt and successful introduction of it into new situations has been the result of emigration from countries in which manufactures had gradually grown up to a prosperous state; as into Italy on the fall of the Greek empire; from Italy into Spain and Flanders, on the loss of liberty in Florence and other cities; and from Flanders and France into England, as above noticed. — Franklin's Canada Pamphlet. In the selection of cases here made as exceptions to the "let alone" theory, none have been included which were deemed controvertible. And if I have viewed them, or a part of them only, in their true light, they show, what was to be shown, that the power granted to Congress to encourage domestic products, by regulations of foreign trade, was properly granted, inasmuch as the power is, in effect, confined to that body, and may, when exercised with a sound legislative discretion, provide the better for the safety and prosperity of the nation. With great esteem and regard, JAMES MADISON. Jos. C. CABELL, Esq. BANKS. LETTER FROM J. MADISON TO CHAS. J. INGERSOLL, OF THE PENNSYLVANIA LEGISLATURE, ON THE SUBJECT OF "BILLS OF CREDIT;" Dated MONTPELIER, February 22, 1831. DEAR SIR: I have received your letter of January 21, asking1. Is there any state power to make banks? 2. Is the federal power, as has been exercised, or as proposed to be exercised, by President Jackson, preferable? The evil which produced the prohibitory clause in the Constitution of the United States, was the practice of the states in making bills of credit, and, in some instances, appraised property, a "legal tender." If the notes of state banks, therefore, whether chartered or unchartered, be made a legal tender, they are prohibited; if not made a legal tender, they do not fall within the prohibitory clause. The number of the Federalist referred to was written with that view of the subject; and this, with probably other contemporary expositions, and the uninterrupted practice of the states in creating and permitting banks, without making their notes a legal tender, would seem to be a bar to the question, if it were not inexpedient now to agitate it. A virtual and incidental enforcement of the depreciated notes of the state banks, by their crowding out a sound medium, though a great evil, was not foreseen; and, if it had been apprehended, it is questionable whether the Constitution of the United States, (which had many obstacles to encounter,) would have ventured to guard against it, by an additional provision. A virtual, and, it is hoped, an adequate remedy, may hereafter be found in the refusal of state paper, when debased, in any of the federal transactions, and the control of the federal bank; this being itself controlled from suspending its specie payments by the public authority. On the other question, I readily decide against the project recommended by the President. Reasons, more than sufficient, appear to have been presented to the public in the reviews, and other comments, which it has called forth. How far a hint for it may have been taken from Mr. Jefferson, I know not. The kindred ideas of the latter may be seen in his Memoirs, &c., vol. iv. pp. 196, 207, 526; * and his view of the state banks, vol. iv. pp. 199, 220. There are sundry statutes in Virginia, prohibiting the circulation of notes, payable to bearer, whether issued by individuals, or unchartered banks. JAMES MADISON. IDEAS OF MR. JEFFERSON ON BANKS; REFERRED TO BY MR. MADISON IN THE PRECEDING LETTER, [EXTRACT.] The bill for establishing a national bank, in 1791, undertakes, among other things, 1. To form the subscribers into a corporation. 2. To enable them, in their corporate capacities, to receive grants of lands; and, so far, is against the laws of mortmain.† 3. To make alien subscribers capable of holding lands; and, so far, is against the laws of alienage. 4. To transmit these lands, on the death of a proprietor, to a certain line of successors; and, so far, changes the course of descents. 5. To put the lands out of the reach of forfeiture, or escheat; and, so far, is against the laws of forfeiture and escheat. 6. To transmit personal chattels to successors, in a certain line; and, so far, is against the laws of distribution. 7. To give them the sole and exclusive right of banking, under the national authority; and, so far, is against the laws of monopoly. 8. To communicate to them a power to make laws, paramount to the laws of the states; for so they must be construed, to protect the institution from the control of the state legislatures; and so, probably, they will be construed. I consider the foundation of the Constitution as laid on this ground — that all powers not delegated to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states, or to the people, (12th amend.) To take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition. The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States by the Constitution. * Extract from President Jackson's Message of December 7, 1830. It becomes us to inquire, whether it be not possible to secure the advantages afforded by the present bank, through the agency of a bank of the United States, so modified, in its principles and structure, as to obviate constitutional and other objections. It is thought practicable to organize such a bank, with the necessary officers, as a branch of the treasury department, based on the public and individual deposits, without power to make loans or purchase property, which shall remit the funds of the government, and the expenses of which may be paid, if thought advisable, by allowing its officers to sell bills of exchange to private individuals, at a moderate premium. Not being a corporate body, having no stockholders, debtors, or property, and but few officers, it would not be obnoxious to the constitutional objections which are urged against the present bank; and having no means to operate on the hopes, fears, or interests, of large masses of the community, it would be shorn of the influence which makes that bank formidable. The states would be strengthened by having in their hands the means of furnishing the local paper currency through their own banks; while the Bank of the United States, though issuing no paper, would check the issues of the state banks, by taking their notes in deposit, and for exchange, only so long as they continue to be redeemed with specie." Though the Constitution controls the laws of mortmain so far as to permit Congress itself to hold lands for certain purposes, yet not so far as to permit them to communicate a similar right to other corporate bodies. |