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Considerations on the Bank of North America 1785. a - James Wilson, Collected Works of James Wilson, vol. 1 
Collected Works of James Wilson, edited by Kermit L. Hall and Mark David Hall, with an Introduction by Kermit L. Hall, and a Bibliographical Essay by Mark David Hall, collected by Maynard Garrison (Indianapolis: Liberty Fund, 2007). Vol. 1.
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Considerations on the Bank of North America 1785.a
An attack is made on the credit and institution of the Bank of North America. Whether this attack is justified by the principles of law and sound policy, is a natural subject of inquiry. The inquiry is as necessary and interesting, as it is natural: for, though some people represent the bank as injurious and dangerous, while others consider it as salutary and beneficial to the community, all view it as an object of high importance; deserving and demanding the publick attention.
In the investigation of this subject, it will be requisite to discuss some great and leading questions concerning the constitution of the United States, and the relation which subsists between them and each particular state in the Union. Perhaps it is to be wished that this discussion had not been rendered necessary; and that those questions had rested some time longer among the arcana imperii:1 but they are now presented to the publick; and the publick should view them with firmness, with impartiality, and with all the solicitude befitting such a momentous occasion.
A gentleman,b who had the best opportunities of observing, and who possesses the best talents for judging on the subject, informs his fellow citizens offcially, that “it may be not only asserted, but demonstrated, that, without the establishment of the national bank, the business of the department of finance could not have been performed” in the late war.
The millennium is not yet come. War, with all the horrours and miseries in his train, may revisit us. The finances may again be deranged: “publick credit may, again, be at an end: no means may be afforded adequate to the publick expenses.” Is it wise or politick to deprive our country, in such a situation, of a resource, which happy experience has shown to be of such essential importance? Will the citizens of the United States be encouraged to embark their fortunes on a similar bottom in a future war, by seeing the vessel, which carried us so successfully through the last, thrown aside, like a useless hulk, upon the return of peace?
It will not be improper to recal to our remembrance the origin, the establishment, and the proceedings of the Bank of North America.
In May, 1781, the superintendant of finance laid before congress a plan of a bank. On the 26th of that month, congress passed the following resolution concerning it.
Resolved, That congress do approve of the plan for establishing a national bank in these United States, submitted to their consideration by Mr. Robert Morris,3 the 17th May, 1781, and that they will promote and support the same by such ways and means, from time to time, as may appear necessary for the institution, and consistent with the publick good.
That the subscribers to the said bank shall be incorporated, agreeably to the principles and terms of the plan, under the name of “The President, Directors, and Company of the Bank of North America,” so soon as the subscription shall be filled, the directors and president chosen, and application made to congress for that purpose, by the president and directors elected.
Resolved, That it be recommended to the several States, by proper laws for that purpose, to provide that no other bank or bankers shall be established or permitted within the said states respectively during the war.
Resolved, That the notes hereafter to be issued by the said bank, payable on demand, shall be receivable in payment of all taxes, duties, and debts, due or that may become due or payable to the United States.
Resolved, that congress will recommend to the several legislatures to pass laws, making it felony without benefit of clergy, for any person to counterfeit bank notes, or to pass such notes, knowing them to be counterfeit; also making it felony without benefit of clergy, for any president, inspector, director, officer, or servant of the bank, to convert any of the property, money, or credit of the said bank to his own use, or in any other way to be guilty of fraud or embezzlement, as officers or servants of the bank.
Under these resolutions a subscription was opened for the national bank: this subscription was not confined to Pennyslvania: the citizens of other States trusted their property to the publick faith; and before the end of December, 1781, the subscription was filled, “from an expectation of a charter of incorporation from congress.” Application was made to congress by the president and directors, then chosen, for an act of incorporation. “The exigencies of the United States rendered it indispensably necessary that such an act should be immediately passed.” Congress, at the same time that they passed the act of incorporation, recommended to the legislature of each state, to pass such laws as they might judge necessary for giving its ordinance its full operation, agreeably to the true intent and meaning thereof, and according to the recommendations contained in the resolution of the 26th day of May preceding.
The bank immediately commenced its operations. Its seeds were small, but they were vigorous. The sums paid in by individuals upon their subscriptions did not amount in the whole, to seventy thousand dollars. The sum invested by the United States, in bank stock, amounted to something more than two hundred and fifty thousand dollars: but this sum may be said to have been paid in with one hand and borrowed with the other; and before the end of the first three months, farther sums were advanced to the United States, and an advance was made to this state. Besides, numerous accommodations were afforded to individuals. Little was it then imagined that the bank would ever be represented as unfriendly to circulation. It was viewed as the source and as the support of credit, both private and publick: as such, it was hated and dreaded by the enemies of the United States: as such, it was loved and fostered by their friends.
Pennsylvania, distinguished on numerous occasions by her faithful and affectionate attachment to federal principles, embraced, in the first session of her legislature after the establishment of the bank, the opportunity of testifying her approbation of an act, which had been found to be indispensably necessary. Harmonizing with the sentiments and recommendations of the United States, the assembly passed an act,c “for preventing and punishing the counterfeiting of the common seal, bank bills, and bank notes, of the president, directors, and company of the Bank of North America.” In the preamble to this act, which, according to the constitution of this state, expresses the reasons and motives for passing it, the “necessity” of taking “effectual measures for preventing and punishing frauds and cheats which may be put upon the president, directors, and company of the Bank of North America,” is explicitly declared by the legislature.
The sentiments and conduct of other states, respecting the establishment of the national bank by congress, were similar to those of Pennsylvania. The general assembly of Rhode Island and Providence Plantationsd made it felony, without benefit of clergy, “to counterfeit any note or notes issued, or to be issued, from the Bank of North America, as approved and established by the United States in Congress assembled.” The state of Connecticut enacted,e that a tax should be laid, payable in money, or “notes issued by the directors of the national bank, established by an ordinance of the United States in congress assembled.” By a law of Massachussetts, the subscribers to the national bank, approved of by the United States, were “incorporated, on the behalf of that commonwealth, by the name of the president, directors and company of the Bank of North America, according to the terms of the ordinance to incorporate the said subscribers, passed by the United States in congress assembled on the thirty first day of December, 1781.” The same law further enacts, “that all notes or bills, which have been or shall be issued by, for, or in the name of the said president, directors, and company, and payable on demand, shall be receivable in the payment of all taxes, debts and duties, due or that may become due, or payable to, or for account of, the said United States.” In the preamble of this law, the legislature declares that “a national bank is of great service, as well to the publick as to individuals.”
The president and directors of the bank had a delicate and a difficult part to act. On one hand, they were obliged to guard against the malice and exertions of their enemies: on the other, it was incumbent on them to sooth the timidity of some of their friends. The credit of a bank, as well as all other credit, depends on opinion. Opinion, whether well or ill founded, produces, in each case, the same effects upon conduct. Some thought that an act of incorporation from the legislature of this state would be beneficial; none apprehended that it could ever be hurtful to the national bank. Prudence, therefore, and a disposition, very natural in that season of doubt and diffidence, to gratify the sentiments, and even the prejudices, of such as might become subscribers or customers to the bank, directed an application to the assembly for “a charter, similar to that granted by the United States in congress assembled.” But though the directors were willing to avail themselves of encouragement from every quarter, they meant not to relinquish any of their rights, or to change the foundation on which they rested. They made their application in their corporate character. They expressly mentioned to the assembly, that the United States in congress assembled had granted to the bank a charter of incorporation, and that the institution was to be carried on under their immediate auspices. The legislature thought that it was proper and reasonable to grantf the request of the president and directors of the Bank of North America; and assigned, as a reason for the act, “that the United States in congress assembled, from a conviction of the support which the finances of the United States would receive from the establishment of a national bank, passed an ordinance to incorporate the subscribers for this purpose, by the name and style of the president, directors, and company of the Bank of North America.”
The first clause of the law enacts, that “those who are, and those who shall become subscribers to the said bank, be, and forever hereafter shall be, a corporation and body politick, to all intents and purposes.”
It is further enacted, that “the said corporation be, and shall be forever hereafter, able and capable in law to do and execute all and singular matters and things, that to them shall or may appertain to do.”
To show, in the most striking light, the kind sentiments of the legislature towards the institution, it is further enacted, that “this act shall be construed and taken most favourably and beneficially for the said corporation.”
On these facts and proceedings, two questions of much national importance present themselves to our view and examination.
I. Is the Bank of North America legally and constitutionally instituted and organized, by the charter of incorporation granted by the United States in congress assembled?
II. Would it be wise or politick in the legislature of Pennsylvania, to revoke the charter which it has granted to the institution?
The discussion of these two questions will naturally lead us to the proper conclusions concerning the validity and the utility of the bank.
I. Had the United States in congress assembled a legal and constitutional power to institute and organize the Bank of North America, by a charter of incorporation?
The objection, under this head, will be—that the articles of confederation express all the powers of congress, that in those articles no power is delegated to that body to grant charters of incorporation, and that, therefore, congress possess no such power.
It is true, that, by the second article of the confederation, “each state retains its sovereignty, freedom and independence, and every power, jurisdiction, and right, which is not, by the confederation, expressly delegated to the United States in congress assembled.”
If, then, any or each of the states possessed, previous to the confederation, a power, jurisdiction, or right, to institute and organize, by a charter of incorporation, a bank for North America; in other words—commensurate to the United States; such power, jurisdiction, and right, unless expressly delegated to congress, cannot be legally or constitutionally exercised by that body.
But, we presume, it will not be contended, that any or each of the states could exercise any power or act of sovereignty extending over all the other states, or any of them; or, in other words, incorporate a bank, commensurate to the United States.
The consequence is, that this is not an act of sovereignty, or a power, jurisdiction, or right, which, by the second article of the confederation, must be expressly delegated to congress, in order to be possessed by that body.
If, however, any person shall contend that any or each of the states can exercise such an extensive power or act of sovereignty as that above mentioned; to such person we give this answer—The state of Massachussetts has exercised such power and act: it has incorporated the Bank of North America. But to pursue my argument.
Though the United States in congress assembled derive from the particular states no power, jurisdiction, or right, which is not expressly delegated by the confederation, it does not thence follow, that the United States in congress have no other powers, jurisdiction, or rights, than those delegated by the particular states.
The United States have general rights, general powers, and general obligations, not derived from any particular states, nor from all the particular states, taken separately; but resulting from the union of the whole: and, therefore, it is provided, in the fifth article of the confederation, “that for the more convenient management of the general interests of the United States, delegates shall be annually appointed to meet in congress.”
To many purposes, the United States are to be considered as one undivided, independent nation; and as possessed of all the rights, and powers, and properties, by the law of nations incident to such.
Whenever an object occurs, to the direction of which no particular state is competent, the management of it must, of necessity, belong to the United States in congress assembled. There are many objects of this extended nature. The purchase, the sale, the defence, and the government of lands and countries, not within any state, are all included under this description. An institution for circulating paper, and establishing its credit over the whole United States, is naturally ranged in the same class.
The act of independence was made before the articles of confederation. This act declares, that “these United Colonies,” (not enumerating them separately) “are free and independent states; and that, as free and independent states, they have full power to do all acts and things which independent states may, of right, do.”
The confederation was not intended to weaken or abridge the powers and rights, to which the United States were previously entitled. It was not intended to transfer any of those powers or rights to the particular states, or any of them. If, therefore, the power now in question was vested in the United States before the confederation; it continues vested in them still. The confederation clothed the United States with many, though, perhaps, not with sufficient powers: but of none did it disrobe them.
It is no new position, that rights may be vested in a political body, which did not previously reside in any or in all the members of that body. They may be derived solely from the union of those members.g “The case,” says the celebrated Burlamaqui,4 “is here very near the same as in that of several voices collected together, which, by their union, produce a harmony, that was not to be found separately in each.”
A number of unconnected inhabitants are settled on each side of a navigable river; it belongs to none of them; it belongs not to them all, for they have nothing in common: let them unite; the river is the property of the united body.
The arguments drawn from the political associations of individuals into a state will apply, with equal force and propriety, to a number of states united by a confederacy.
New states must be formed and established: their extent and boundaries must be regulated and ascertained. How can this be done, unless by the United States in congress assembled?
States are corporations or bodies politick of the most important and dignified kind.
Let us now concentre the foregoing observations, and apply them to the incorporation of the Bank of North America by congress.
By the civil law, corporations seem to have been created by the mere and voluntary association of their members, provided such convention was not contrary to law.h
By the common law, something more is necessary—All the methods whereby corporations exist are, for the most part, reducible to that of the king’s letters patent, or charter of incorporation.i
From this it will appear that the creation of a corporation is, by the common law, considered as the act of the executive rather than of the legislative powers of government.
Before the revolution, charters of incorporation were granted by the proprietaries of Pennsylvania, under a derivative authority from the crown, and those charters have been recognised by the constitution and laws of the commonwealth since the revolution.
From analogy, therefore, we may justly infer, that the United States in congress assembled, possessing the executive powers of the union, may, in virtue of such powers, grant charters of incorporation for accomplishing objects that comprehend the general interests of the United States.
But the United States in congress assembled possess, in many instances, and to many purposes, the legislative as well as the executive powers of the union; and therefore, whether we consider the incorporation of the bank as a law, or as a charter, it will be equally within the powers of congress: for the object of this institution could not be reached without the exertion of the combined sovereignty of the union.
I have asked—how can new states, which are bodies politick, be formed, unless by the United States in congress assembled? Fact, as well as argument, justifies my sentiments on this subject. The conduct of congress has been similar on similar occasions. The same principles have directed the exercise of the same powers.
In the month of April, 1784, congress resolved, that part of the western territory “should be divided into distinct states.”
They further resolved, that the settlers should, “either on their own petition, or on the order of congress, receive authority from them to meet together, for the purpose of establishing a temporary government, to adopt the constitution and laws of any one of the original states.”
“When any such state shall have acquired twenty thousand free inhabitants, on giving due proof thereof to congress, they shall receive from them authority to call a convention of representatives, to establish a permanent constitution and government for themselves.”
“The preceding articles,” among others, “shall be formed into a charter of compact; shall be duly executed by the president of the United States in congress assembled, under his hand and the seal of the United States; shall be promulgated; and shall stand as fundamental constitutions between the thirteen original states, and each of the several states now newly described, unalterable from and after the sale of any part of the territory of such state, but by the joint consent of the United States in congress assembled, and of the particular state within which such alteration is proposed to be made.”
It will be difficult, I believe, to urge against the power of congress to grant a charter to the Bank of North America, any argument, which may not, with equal strength and fitness, be urged against the power of that body to form, execute, and promulgate a charter of compact for the new states.
The sentiments of the representatives of the United States, as to their power of incorporating the bank, ought to have much weight with us. Their sentiments are strongly marked by their conduct, in their first resolutions respecting the bank. These resolutions are made at the same time, and on the same subject: but there is a striking difference in their manner. It was thought proper “that no other bank should be permitted within any of the states, during the war.” Congress “recommended to the several states to make provision, for that purpose, by proper laws.” It was thought prudent that the bank should be protected, by penal laws, from fraud, embezzlement, and forgery. Congress recommended it to the several legislatures to pass such laws. It was deemed expedient that bank notes should be received in payment of sums payable to the United States: congress resolve, that the notes “shall be receivable” in such payments. It was judged necessary that the bank should have a charter of incorporation: congress resolve, that the bank “shall be incorporated,” on application made “to congress” for that purpose. The line of distinction between those things in which congress could only recommend, and those in which they could act, is drawn in the clearest manner. The incorporation of the national bank is ranked among those things, in which they could act.
This act of congress has, either expressly, or by implication, received the approbation of every state in the union. It was officially announced to every state by the superintendant of finance. Had any one state considered it as an exercise of usurped power, would not that state have remonstrated against it? But there is no such remonstrance.
This act of congress has been most explicitly recognised by the legislature of Pennsylvania. The law for preventing and punishing frauds and cheats upon the bank was passed on the 18th of March, 1782, and before the bank had obtained a charter from this state. By that law it is made felony without benefit of clergy, to forge the common seal of the president, directors, and company of the Bank of North America. Who were the president, directors, and company of the Bank of North America? Those whom congress had made “a corporation and body politick, to all intents and purposes, by that name and style.” How came that body by a “common seal?” The act of congress ordained that that body “should have full power and authority to make, have and use a common seal.” In the act to incorporate the subscribers to the Bank of North America, the legislature, after reciting that the United States in congress assembled had “passed an ordinance to incorporate them,” say, “the president and directors of the said bank have applied to this house for a similar act of incorporation, which request it is proper and reasonable to grant.”
When the foregoing facts and arguments are considered, compared, and weighed, they will, it is hoped, evince and establish, satisfactorily to all, and conclusively on the legislature of Pennsylvania, the truth of this position—That the Bank of North America was legally and constitutionally instituted and organized, by the charter of incorporation granted by the United States in congress assembled.
II. Would it, then, be wise or politick in the legislature of Pennsylvania, to revoke the charter which it has granted to this institution? It would not be wise or politick—
1st. Because the proceeding would be nugatory. The recal of the charter of Pennsylvania would not repeal that of the United States, by which we have proved the bank to be legally and constitutionally instituted and organized.
2d. Because, though the legislature may destroy the legislative operation, yet it cannot undo the legislative acknowledgment of its own act. Though a statute be repealed, yet it shows the sense and opinion of the legislature concerning the subject of it, in the same manner as if it continued in force.j The legislature declared, in the law, that it was proper and reasonable to grant the request of the president and directors of the bank, for an act of incorporation similar to the ordinance of congress: no repeal of the law can weaken the force of that declaration.
3d. Because such a proceeding would wound that confidence in the engagements of government, which it is so much the interest and duty of every state to encourage and reward. The act in question formed a charter of compact between the legislature of this state, and the president, directors, and company of the Bank of North America. The latter asked for nothing but what was proper and reasonable: the former granted nothing but what was proper and reasonable: the terms of the compact were, therefore, fair and honest: while these terms are observed on one side, the compact cannot, consistently with the rules of good faith, be departed from on the other.
It may be asked—Has not the state power over her own laws?—May she not alter, amend, extend, restrain, and repeal them at her pleasure?
I am far from opposing the legislative authority of the state: but it must be observed, that, according to the practice of the legislature, publick acts of very different kinds are drawn and promulgated under the same form. A law to vest or confirm an estate in an individual—a law to incorporate a congregation or other society—a law respecting the rights and properties of all the citizens of the state—are all passed in the same manner; are all clothed in the same dress of legislative formality; and are all equally acts of the representatives of the freemen of the commonwealth. But surely it will not be pretended, that, after laws of those different kinds are passed, the legislature possesses over each the same discretionary power of repeal. In a law respecting the rights and properties of all the citizens of the state, this power may be safely exercised by the legislature. Why? Because, in this case, the interest of those who make the law (the members of assembly and their constituents) and the interest of those who are to be affected by the law (the members of assembly and their constituents) is the same. It is a common cause, and may, therefore, be safely trusted to the representatives of the community. None can hurt another, without, at the same time, hurting himself. Very different is the case with regard to a law, by which the state grants privileges to a congregation or other society. Here two parties are instituted, and two distinct interests subsist. Rules of justice, of faith, and of honour must, therefore, be established between them: for, if interest alone is to be viewed, the congregation or society must always lie at the mercy of the community. Still more different is the case with regard to a law, by which an estate is vested or confirmed in an individual: if, in this case, the legislature may, at discretion, and without any reason assigned devest or destroy his estate, then a person seized of an estate in fee simple, under legislative sanction, is, in truth, nothing more than a solemn tenant at will.
For these reasons, whenever the objects and makers of an instrument, passed under the form of a law, are not the same, it is to be considered as a compact, and to be interpreted according to the rules and maxims, by which compacts are governed. A foreigner is naturalized by law: is he a citizen only during pleasure? He is no more, if, without any cause of forfeiture assigned and established, the law, by which he is naturalized, may at pleasure be repealed. To receive the legislative stamp of stability and permanency, acts of incorporation are applied for from the legislature. If these acts may be repealed without notice, without accusation, without hearing, without proof, without forfeiture; where is the stamp of their stability? Their motto should be, “Levity.” If the act for incorporating the subscribers to the Bank of North America shall be repealed in this manner, a precedent will be established for repealing, in the same manner, every other legislative charter in Pennsylvania. A pretence, as specious as any that can be alleged on this occasion, will never be wanting on any future occasion. Those acts of the state, which have hitherto been considered as the sure anchors of privilege and of property, will become the sport of every varying gust of politicks, and will float wildly backwards and forwards on the irregular and impetuous tides of party and faction.
4th. It would not be wise or politick to repeal the charter granted by this state to the Bank of North America, because such a measure would operate, as far as it would have any operation, against the credit of the United States, on which the interest of this commonwealth and her citizens so essentially depends. This institution originated under the auspices of the United States: the subscription to the national bank was opened under the recommendations and the engagements of congress: citizens of this state, and of the other states, and foreigners have become stockholders, on the publick faith: the United States have pledged themselves “to promote and support the institution by such ways and means, from time to time, as may appear necessary for it, and consistent with the publick good.”k They have recommended to the legislature of each state, “to pass such laws as they might judge necessary for giving the ordinance incorporating the bank its full operation.” Pennsylvania has entered fully into the views, the recommendations, and the measures of congress respecting the bank. She has declared in the strongest manner her sense of their propriety, their reasonableness, and their necessity: she has passed laws for giving them their full operation. Will it redound to the credit of the United States to adopt and pursue a contrary system of conduct? The acts and recommendations of congress subsist still in all their original force. Will it not have a tendency to shake all confidence in the councils and proceedings of the United States, if those acts and recommendations are now disregarded, without any reason shown for disregarding them? What influence will such a proceeding have upon the opinions and sentiments of the citizens of the United States and of foreigners? In one year they see measures respecting an object of confessed publick importance adopted and recommended with ardour by congress; and the views and wishes of that body zealously pursued by Pennsylvania: in another year they see those very measures, without any apparent reason for the change, warmly reprobated by that state: they must conclude one of two things:—that congress adopted and recommended those measures hastily and without consideration; or that Pennsylvania has reprobated them undutifully and disrespectfully. The former conclusion will give rise to very unfavourable reflections concerning the discernment both of the state and of the United States: the latter will suggest very inauspicious sentiments concerning the federal disposition and character of this commonwealth. The result of the conclusion will be—that the United States do not deserve, or that they will not receive, support in their system of finance.—These deductions and inferences will have particular weight, as they will be grounded on the conduct of Pennsylvania, hitherto one of the most federal, active, and affectionate states in the Union.
5th. It would not be wise or politick in the legislature to repeal their charter to the bank; because the tendency of such a step would be to deprive this state and the United States of all the advantages, publick and private, which would flow from the institution, in times of war, and in times of peace.
Let us turn our attention to some of the most material advantages resulting from a bank.
by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country. The part of his capital which a dealer is obliged to keep by him unemployed, and in ready money, for answering occasional demands, is so much dead stock, which, so long as it remains in this situation, produces nothing either to him or to his country. The judicious operations of banking enable him to convert this dead stock into active and productive stock: into materials to work upon, into tools to work with, and into provisions and subsistence to work for; into stock which produces something both to himself and to his country. The gold and silver money which circulates in any country, and by means of which the produce of its land and labour is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enables the country to convert a great part of this dead stock into active and productive stock; into stock which produces something to the country. The gold and silver money which circulates in any country may very properly be compared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces, itself, not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of wagon-way through the air, enable the country to convert, as it were, a great part of its highways into good pasture and corn fields, and thereby to increase very considerably the annual produce of its land and labour.
The same sensible writer informs us, in another place, that “them substitution of paper in the room of gold and silver money, replaces a very expensive instrument of commerce with one much less costly, and sometimes equally convenient. Circulation comes to be carried on by a new wheel, which it costs less both to erect and to maintain than the old one.—There are several sorts of paper money; but the circulating notes of banks and bankers is the species which is best known, and which seems best adapted for this purpose.”—“These notes come to have the same currency as gold and silver money, from the confidence that such money can at any time be had for them.”
To have a free, easy, and equable instrument of circulation is of much importance in all countries: it is of peculiar importance in young and flourishing countries, in which the demands for credit, and the rewards of industry, are greater than in any other. When we view the extent and situation of the United States, we shall be satisfied that their inhabitants may, for a long time to come, employ profitably, in the improvement of their lands, a greater stock than they will be able easily to procure. In such a situation, it will always be of great service to them to save as much as possible the expense of so costly an instrument of commerce as gold and silver, to substitute in its place one cheaper, and, for many purposes, not less convenient; and to convert the value of the gold and silver into the labour and the materials necessary for improving and extending their settlements and plantations.
“To the banks of Scotland,” says Sir James Stewart,o “the improvement of that country is entirely owing; and until they are generally established in other countries of Europe, where trade and industry are little known, it will be very difficult to set those great engines to work.”
2d. The influence of a bank on credit is no less salutary than its influence on circulation. This position is, indeed, little more than a corollary from the former. Credit is confidence; and, before we can place confidence in a payment, we must be convinced that he who is to make it will be both able and willing to do so at the time stipulated. However unexceptionable his character and fortune may be, this conviction can never take place, unless in a country where solid property can be, at any time, turned into a circulating medium.
3d. Trade, as well as circulation and credit, derives great support and assistance from a bank. Credit and circulation produce punctuality; and punctuality is the soul of commerce. Let us appeal to experience as well as reason.
Dr. Smith says,p he has heard it asserted, that the trade of the city of Glasgow doubled in about fifteen years after the first erection of the banks there; and that the trade of Scotland has more than quadrupled since the first erection of the two publick banks at Edinburgh, of which one was established in 1695, and the other in 1727. Whether the increase has been in so great a proportion, the author pretends not to know. But that the trade of Scotland has increased very considerably during this period, and that the banks have contributed a good deal to this increase, cannot, he says, be doubted.
These observations, and observations similar to these, have induced Sir James Stewart to conclude,—that
Banking,q in the age we live, is that branch of credit which best deserves the attention of a statesman. Upon the right establishment of banks depends the prosperity of trade, and the equable course of circulation. By them solid property may be melted down. By the means of banks, money may be constantly kept at a due proportion to alienation. If alienation increases, more property may be melted down. If it diminishes, the quantity of money stagnating will be absorbed by the bank, and part of the property formerly melted down in the securities granted to them will be, as it were, consolidated anew. These must pay, for the country, the balance of their trade with foreign nations: these keep the mints at work: and it is by these means, principally, that private, mercantile, and publick credit is supported.
I make no apology for the number and length of the quotations here used. They are from writers of great information, profound judgment, and unquestioned candour. They appear strictly and strongly applicable to my subject: and being so, should carry with them the greatest weight and influence; for the sentiments, which they contain and inculcate, must be considered as resulting from general principles and facts, and not as calculated for any partial purpose in this commonwealth.
But, here, it will probably be asked—Has your reasoning been verified by experience in this country? What advantages have resulted from the bank to commerce, circulation, and credit? Was our trade ever on such an undesirable footing? Is not the country distressed by the want of a circulating medium? Is not credit almost totally destroyed?
I answer—There is, unfortunately, too much truth in the representation: but if events are properly distinguished, and traced to their causes, it will be found—that none of the inconveniences abovementioned have arisen from the bank—that some of them have proceeded, at least in part, from the opposition which has been given to it—and that, as to others, its energy has not been sufficient to counteract or control them.
The disagreeable state of our commerce has been the effect of extravagant and injudicious importation. During the war, our ports were in a great measure blocked up. Imported articles were scarce and dear; and we felt the disadvantages of a stagnation in business. Extremes frequently introduce one another. When hostilities ceased, the floodgates of commerce were opened; and an inundation of foreign manufactures overflowed the United States: we seemed to have forgot, that to pay was as necessary in trade as to purchase; and we observed no proportion between our imports, and our produce and other natural means of remittance. What was the consequence? Those who made any payments made them chiefly in specie; and in that way diminished our circulation. Others made no remittances at all, and thereby injured our credit. This account of what happened between the European merchants and our importers, corresponds exactly with what happened between our importers and the retailers spread over the different parts of the United States. The retailers, if they paid at all, paid in specie: and thus every operation, foreign and domestick, had an injurious effect on our credit, our circulation, and our commerce. But are any of these disadvantages to be ascribed to the bank? No. Is it to be accounted a fault or defect in the bank, that it did not prevent or remedy those disadvantages? By no means. Because one is not able to stem a torrent, is he therefore to be charged with augmenting its strength? The bank has had many difficulties to encounter. The experiment was a new one in this country: it was therefore necessary that it should be conducted with caution. While the war continued, the demands of the publick were great, and the stock of the bank was but inconsiderable; it had its active enemies, and its timid friends. Soon after the peace was concluded, its operations were restrained and embarrassed by an attempt to establish a new bank. A year had not elapsed after this, when the measure, which has occasioned these considerations, was introduced into the legislature, and caused, for some time, a total stagnation in the business of the institution. When all these circumstances are recollected and attended to, it will be matter of surprise that the bank has done so much, and not that it has done no more. Let it be deemed, as it ought to be, the object of publick confidence, and not of publick jealousy: let it be encouraged, instead of being opposed, by the counsels and proceedings of the state: then will the genuine effects of the institution appear; then will they spread their auspicious influence over agriculture, manufactures, and commerce.
4th. Another advantage to be expected from the Bank of North America is, the establishment of an undepreciating paper currency through the United States. This is an object of great consequence, whether it be considered in a political, or in a commercial view. It will be found to have a happy effect on the collection, the distribution, and the management of the publick revenue: it will remove the inconveniences and fluctuation attending exchange and remittances between the different states. “It is the interest of every trading state to have a sufficient quantity of paper, well secured, to circulate through it, so as to facilitate payments every where, and to cut off inland exchanges, which are a great clog upon trade, and are attended with the risk of receiving the paper of people, whose credit is but doubtful.”r
Such are the advantages which may be expected to flow from a national bank, in times of peace. In times of war, the institution may be considered as essential. We have seen that, without it, the business of the department of finance could not have been carried on in the late war. It will be of use to recollect the situation of the United States with regard to this subject. The two or three first years of the war were sufficient to convince the British government, and the British armies, that they could not subdue the United States by military force. Their hopes of success rested on the failure of our finances. This was the source of our fears, as well as of the hopes of our enemies. By this thread our fate was suspended. We watched it with anxiety: we saw it stretched and weakened every hour: the deathful instrument was ready to fall upon our heads: on our heads it must have fallen, had not publick credit, in the moment when it was about to break asunder, been entwined and supported by the credit of the bank. Congress, to speak without metaphors, had not money or credit to hire an express, or purchase a cord of wood. General Washington, on one occasion, and probably more than one, saw his army literally unable to march. Our distress was such, that it would have been destruction to have divulged it: but it ought to be known now; and when known, ought to have its proper influence on the publick mind and the publick conduct.
The expenses of a war must be defrayed, either—1st, by treasures previously accumulated—or 2dly, by supplies levied and collected within the year, as they are called for—or 3dly, by the anticipation of the publick revenues. No one will venture to refer us to the first mode. To the second the United States, as well as every state in Europe, are rendered incompetent by the modern system of war, which, in the military operations of one year, concentres the revenue of many. While our enemies adhere to this system, we must adopt it. The anticipation of revenue, then, is the only mode, by which the expenses of a future war can be defrayed. How the revenues of the United States can be anticipated without the operations of a national bank, I leave to those who attack the Bank of North America to show. They ought to be well prepared to show it; for they must know, that to be incapable of supporting a war is but a single step from being involved in one.
The result of the whole, under this head, is,—that in times of peace, the national bank will be highly advantageous; that in times of war, it will be essentially necessary, to the United States.
I flatter myself, that I have evinced the validity and the utility of the institution.
It has been surmised, that the design of the legislature is not to destroy, but to modify, the charter of the bank; and that if the directors would assent to reasonable amendments, the charter, modified, might continue in force. If this is the case, surely to repeal the law incorporating the bank is not the proper mode of doing the business. The bank was established and organized under the authority and auspices of congress. The directors have a trust and duty to discharge to the United States, and to all the particular states, each of which has an equal interest in the bank. They could not have received, from this state, a charter, unless it had been similar to that granted by congress. Without the approbation of congress, where all the states are represented, the directors would not be justified in agreeing to any alteration of the institution. If alterations are necessary; they should be made through the channel of the United States in congress assembled.
[a. ]The publication of these considerations was occasioned by a bill, introduced into the legislature of Pennsylvania, to repeal an act of assembly passed in the year 1782, by which a charter of incorporation had been granted to the Bank of North America. The bill was passed into a law, in September 1785. Ed.
[1. ]State secrets.
[3. ]Robert Morris (1734–1806) was a highly successful merchant and financier of the American Revolution. He was a member of the Continental Congress (1775–1778), a signer of the Declaration of Independence, the Articles of Confederation, and the Constitution.
[c. ]18th of March, 1782.
[d. ]January Sessions, 1782.
[e. ]10th January, 1782.
[f. ]1st. of April, 1782.
[g. ]2. Burl. 42.
[4. ]Jean Jacques Burlamaqui(1694–1748) was a Swiss publicist and jurist who was a professor of ethics and the law of nature at the University of Geneva. He espoused a philosophy that most closely resembles rational utilitarianism. His major works are Principles of Natural Law (1747) and Principles of Political Law (1751).
[h. ]1. Bl. Com. 472.
[i. ]1. Bl. Com. 472. 473.
[j. ]Foster, 394.
[k. ]26th May, 1781.
[5. ]Adam Smith (1723–1790) was a Scottish political economist and moral philosopher. His Inquiry into the Nature and Causes of the Wealth of Nations was published in 1776.
[l. ]Vol. 1. p. 483, 484.
[m. ]Vol. 1. p. 434, 435.
[6. ]Sir James Stewart (1713–1780), of Coltness, Baronet, was the father of political economy in Britain.
[n. ]2. Pol. Ec. 350.
[o. ]2. Pol. Ec. 356.
[p. ]Vol. 1. p. 442.
[q. ]2. Pol. Ec. 358.
[r. ]2. Pol. Ec. 415.
[2. ]Direct attention to something.