Alexander Hamilton on the Constitutionality of a National Bank

While Hamilton’s opinion was already well known to Washington and the other cabinet members, the quote illustrates a fundamental difference of opinion, not simply on the question of banking and finance, but of the very idea of limited government. It was equally well known that Jefferson was opposed to the power in question. Particularly intriguing has been the fact that Madison, who had served with Hamilton as one of the two principal authors of the Federalist Essays favoring a stronger national government, now sided, as a member of the House of Representative, not with his former coauthor, but with Jefferson! Why?

The clue is to be found in this quote and an earlier subtle difference already expressed between the two authors writing under the common nom de plume of Publius. Both Madison and Hamilton believed in limited government under law. To that extent both were in the Old English Whig tradition of political thought. And both considered that America needed to have a government fully capable of representing the American people. To that extent, both represented the typically American position in favor of American Independence. Where they differed was over how that new government should be constituted.

In Federalist 39, Madison made the strong case that the powers of the general government would only extend “to certain enumerated objects only,” and would leave “to the several states, a residuary and inviolable sovereignty over all other objects.” The argument here was simply that the national government would be permitted to do only that which was granted to it by specific powers enumerated in the Constitution.

In Federalist 78, however, Hamilton took a somewhat different tack: “By a limited constitution I understand one which contains certain specified exceptions to the legislative authority; such for instance as that it shall pass no bills of attainder, no ex post facto laws, and the like.” In other words, the presumption here is that government, any government, has power to act unless expressly prohibited from doing so. And here is where this difference came to matter sufficiently to divide Hamilton from Madison. Madison believed that the power to incorporate a bank was a significant and unique power that it had to be explicitly granted in the Constitution for the national government to possess it. Hamilton, on the other hand, believed that it was an ordinary power incidental to all the regular powers of any government, national or otherwise.

Interestingly, Madison had made a motion in the Philadelphia Convention for the power of incorporation to be included in the Federal Constitution. The motion was defeated. As a consequence, he believed the national government had no such power. Hamilton, from his different angle on the meaning of constitutional limitations, disagreed and so was born one of the fundamental differences that helped shape the first party system in the early republic.