Alexander Hamilton’s Constitutional Jurisprudence and the Bank Bill

Abstract

‘Who Lives, Who Dies, Who Tells Your Story’ is the concluding ensemble musical number in the musical play Hamilton. The performers included a wide range of Hamilton’s achievements in the finale, from the city orphanage he helped establish to his anti-slavery views. Two of the members of the troop, playing Thomas Jefferson and James Madison, added that Hamilton’s proposals for financial reform saved the new federal government from bankruptcy (although in fact both men opposed Hamilton’s financial package).¹

One item missing from the litany of Hamilton’s contributions was anything like constitutional theory. But in fact Hamilton was one of the most important interpreters of the federal Constitution, and the manner in which he read the text of law deserves our attention.²

How likely is it to see Hamilton as an original contributor to constitutional jurisprudence? No one then or now doubted Hamilton’s opportunistic genius. However, in the eyes of his many critics, his faults overshadowed his achievements. Accused of moral turpitude, and guilty of adultery, his public reputation was tainted by his private weaknesses. Indeed, as his biographer Ron Chernow conceded, ‘few figures in American history have aroused such visceral love and loathing as Alexander Hamilton’. Even his admirers conceded that Hamilton ‘instinctively hurled himself onto the offensive and never looked back’. At the same time, ‘Hamilton’, prize-winning historian Gordon Wood claimed, ‘clung as long and as hard to the classical conception of leadership as anyone in post-revolutionary America’. Perhaps taken as a whole, ‘He survives in our memory as a collection of sensational details’.³

In one area of his life, and our nation’s history, his versatility shown. His contributions to American finance, whether admired or detested, cannot be gainsaid, but his approach to law in his efforts to solve the financial crisis is not so well explored. In small measure, this essay attempts to remedy that lapse.

A vexing, persistent, and a potentially fatal problem for the new nation was its debt. During and immediately after the war the nation faced debts both domestic and foreign. Loans to support the war effort both local and national were unpaid. Loans from foreign allies, particularly the French and the Dutch, were even more burdensome. Finally, the Treaty of Paris ending the war had committed the new nation to repaying private debts to British creditors. Eighteenth-century monetary theory saw debt as a proof and inducement to corruption. Odious debt in a state was proof that the ministers of state were not acting in the best interests of the people. Individual debt was proof of fiscal mismanagement, even if the debt was not fraudulent, although creditors often delayed or deferred demands for repayment. Still, both public and private debt reflected a political economy of public irresponsibility. Hamilton was not alone in offering one solution: a national bank—a central institution to pay off debts and manage future economic growth. But what legal theory could justify such an institution when it was not mentioned in the new federal Constitution?⁴

On 8 December 1790, President George Washington’s first Annual Message to Congress called on that body to handle the growing national debt. As the first secretary of the treasury in George Washington’s cabinet, Alexander Hamilton had to find ways for Congress to comply with the president’s wishes. Hamilton had experience with private debt, handling father-in-law Phillips Schuler’s finances, and public debt, working with confederation financier Robert Morris. The young administrator and lawyer was confident, but the crisis was pressing and its resolution unclear. The issue was economic and the route to a solution was political, but the central problem, a problem not recognized by Hamilton scholars, was jurisprudential. By what reading of law, what theory of interpretation of the Constitution, could a solution be found?⁵

Hamilton produced two substantial essays on government credit. The first was a defense of his own Funding Act of 1790, which provided for the assumption of all state debts arising from the war, and their repayment with federal customs receipts and other paper instruments. Funding and assumption of the national and state debt did not require a lot of theoretical invention, but the establishment of a national bank to manage funding and assumption, the second of Hamilton’s financial essays, did. This required a more novel reading of existing law, for the new federal Constitution did not mention the creation of a national bank. Hamilton however envisioned a constitution that did.

Here then is my argument—in the process of defending his proposals, Hamilton developed a jurisprudence that read law forward. That is, he argued that good law, which included a right reading of the Necessary and Proper Clause of Article I of the Constitution, foresaw future problems and projected an interpretation of existing law to solve those problems. This was not limited to finance, although my example here is limited to that subject. The origins of this jurisprudence, for that is what jurisprudence does, make sense of law and how law operated, lay not in the library, but in Hamilton’s revolutionary and early national experience. It can be seen, in dimmest outline, in his argument for financial support of the Continental Army, and later, more clearly, because Hamilton had become a lawyer, in his advocacy of a national, as opposed to a confederated system of government. Its shadow fell across his Federalist essays. But the fullest evolution of this jurisprudence of forward-looking law came in his defense of the Funding and Assumption plan and most evidently the first Bank of the United States.⁶

Perhaps Alexander Hamilton did not have a proper jurisprudence, or, if one insists on using the term, only ‘an applied jurisprudence’? Perhaps he was merely pragmatic, or even deliberately evasive? Perhaps jurisprudence belongs to academics and jurists, not to working lawyers, even if they were also high officeholders making policy decisions. True, Hamilton was flexible and program focused. He was a problem solver. But students of his financial program do not hesitate to find in it theoretical attachments to capitalism. And those attachments required legal support. Thus finance and law, interwoven with appropriate attention to ‘first principles’, called for a jurisprudence that read law forward.⁷

The fact remains that Hamilton had to find some grounds in federal law, in particular the new federal Constitution, on which to base his program. Without textual support, the origin of that effort must lie outside the Constitution, an unworkable prospect for the new federal administration. That set of circumstances led to one of Hamilton’s most enduring contributions to American legal thinking. He argued that law must be read forward, outside the narrow confines of text (as well as the limitations of missing text) to solve problems that were not addressed in the text. He understood these would occur, and that to prosper, government must be prepared to solve them. In a time when innovation in the new nation’s law and lawmaking was critical to its survival, this view of law was a vital practical tool. Hamilton’s willingness to project existing law into the future was a philosophical foundation for effective governance. He repeatedly read existing law to find in it the best, most efficient consequences, but did not stop there. Because it looks to the future, such a jurisprudence gives to government more license and greater discretion. Under its auspices, law does not command; it is not fixed; it is not autonomous. As a theory of lawmaking in the hands of a brilliant thinker like Hamilton, would became a founding jurisprudence of federalism.⁸

Alexander Hamilton was born in 1757, on the West Indian island of Nevis, to a Scottish merchant and ne’er-do-well named James Hamilton and a local Huguenot woman, Elizabeth Faucett. The family was not wealthy but owned several slaves and a homestead. Hamilton’s prospects should have been reasonably bright, but his father deserted the family and his mother died when he was young. Hamilton was reared by the kindness of strangers, a collection of Presbyterian worshippers, Jewish philanthropists, and overseas traders. Restless himself, ambitious and brilliant, and an autodidact like Benjamin Franklin, the teenaged Hamilton found passage to the mainland as a supercargo (the shipowner’s representative) on a merchant vessel.⁹

Hamilton found a place at King’s College in New York City during the final stage of the revolutionary crisis, and avidly joined in the new cause. When the British armed forces invaded Long Island, he organized and led a volunteer artillery company. General Washington, in command of the Continental forces, recognized the abilities of the young immigrant, and asked him to serve as an aide-de-camp. During his service at Washington’s headquarters in the final stages of the war, Hamilton unlimbered his pen to write a series of six essays entitled ‘The Continentalist’. Four of these appeared in 1781, and the last two in April and July 1782, after which Hamilton began to seriously devote his energy to the study of law. The new nation’s problem in these years was the weakness of the Articles of Confederation Congress, a weakness that serving officers like Hamilton were well placed to notice. Here was an example of revolutionary lawmaking for which Hamilton’s admonitions to look ahead had failed:

Our whole system is in disorder; our currency depreciated, till in many places it will hardly obtain a circulation at all, public credit at its lowest ebb, our army deficient in numbers, and unprovided with every thing, the government, in its present condition, unable to command the means to pay, clothe, or feed their troops.

Hamilton was already thinking about the future of national governance. The Congress was too weak, and:

if it is too weak at first, it will continually grow weaker. The ambition and local interests of the respective members, will be constantly undermining and usurping upon its prerogatives, till it comes to a dissolution; if a partial combination of some of the more powerful ones does not bring it to a more SPEEDY and VIOLENT END.

A unification of power in the hands of a single leader or a small group of powerful men was no answer, for ‘The security therefore of the public liberty, must consist in such a distribution of the sovereign power, as will make it morally impossible for one part to gain an ascendency over the others, or for the whole to unite in a scheme of usurpation’.

Legal reform was not the focus of these essays, but Hamilton was obviously beginning to focus on an object for reform. As he wrote in the last of the essays, ‘Happy America! if those, to whom thou hast intrusted the guardianship of thy infancy, know how to provide for thy future repose; but miserable and undone, if their negligence or ignorance permits the spirit of discord to erect her banners on the ruins of thy tranquility!’ The purpose of law was to provide for the future, not to preserve the past. A fuller elaboration of those purposes would have to wait, however, until he mastered existing law.¹⁰

These thoughts, while proof that Hamilton was thinking about the future, were not yet anything like a jurisprudence. Seen in retrospect, through the lens of his later life, they were only the seeds of a jurisprudence. The language is still filled with boilerplate; unoriginal and unfocused. The danger for Hamilton scholars is that they impose the later Hamilton’s thinking on the earlier Hamilton’s career. For, I believe, it was his study and practice of law that impelled him toward a forward-looking philosophy of law.¹¹

In the summer of 1782, Hamilton was racing through the study of law to provide for his new family. He had married Elizabeth Schuyler and they had their first child. As he wrote to Robert Morris, on 17 June 1782, ‘It is of primary moment to me as soon as possible to take my station in the law, and on this consideration I am pressing to qualify myself for admission the next term which will be the latter end of July’. He was a fast and practical reader—that is, he did not read for mastery of the classics or even for complete comprehension, but for what he needed to pass the bar, and when that obstacle was lowered, to represent his clients. Nor was he, unlike James Madison and Thomas Jefferson, a devotee of political theory. Unlike almost all of his comrades who entered the legal profession in the waning years of the war, Hamilton did not ‘read’ law in the office of a member of the bar. Such preparation was onerous and much complained of at the time, for the apprentice counselor spent most of his time drafting legal documents. Instead, Hamilton studied law on his own and then compiled a 177-page manual, which he titled ‘Practical Proceedings in the Supreme Court of the State of New York’. Although the original has disappeared, it was copied and passed down hand to hand by lawyers who followed him to the bar. The text was typical of the man, picaresque and pedantic by turns. He wrote it for his own use: if A, then you do this, if B, then you do that. As dry as common law procedure was, the manual was nevertheless not. Hamilton transformed gray old writ pleading into a lively step-by-step helper to the uninitiated, a veritable ‘Idiot’s Guide’ to New York procedure.¹²

Hamilton represented New York in the Confederation Congress in 1782 and 1783 and attended the Annapolis convention in 1786. He was a major contributor to the report of that body urging a stronger national government. He was chosen to represent the state of New York at the constitutional convention in Philadelphia the next year, and notably served on the Committee on Style and Detail reducing the Constitution to its final form in September 1787. Thereafter, in conjunction with his service as a delegate to the New York Ratification Convention, he wrote a number of the Federalist newspaper essays defending the new federal Constitution, and seeking its ratification in New York. Although much in the arguments in his Federalist essays was not new, pleading for the new system of general government itself required him to look into its future. In this endeavor, his essays made the case for viewing law based on anticipation of future exigency. The many contemporary justifications of law change, including reinterpreting precedent, natural law exegesis, and turning custom into law, simply did not apply. Arguing for the Constitution meant more than assembling the various pieces of older texts. The real innovation was the federal system itself—creating a national government while retaining states’ sovereignty. Recall that the original Confederal Congress summons to the states to send representatives to Philadelphia called for amendments to the Articles of Confederation. The delegates, whether intending from the outset to propose an entirely new government or coming to that decision during the convention, had accomplished a coup. It was this innovation to which Hamilton alluded. But the novelty of delegates going far beyond, indeed against, their instructions was necessitated. Amending the Confederation would not do. So, the very first Federalist paper was a first rehearsal of a forward-looking jurisprudence.¹³

Hamilton’s experience in war, as a litigator, and in state and confederation politics had convinced him that new problems required novel solutions. Those solutions had to rest not only on literal fidelity to the text of laws, but on a rule for the interpretation of text. It was: determine what government must and should do, look to future needs and opportunities, and use these to work back to shaping good law. It was the feedback loop that was the innovation. In the Federalist essays that he wrote, he hinted that this method could be employed across the entire landscape of the new Constitution:

The principal purposes to be answered by union are these[—]the common defense of the members; the preservation of the public peace as well against internal convulsions as external attacks; the regulation of commerce with other nations and between the States; the superintendence of our intercourse, political and commercial, with foreign countries.

Hamilton’s proposition that ‘These powers ought to exist without limitation’, is commonly understood as an example of his commitment to strong central government, but such a limited interpretation of his ideas misses the importance of the rest of the passage: ‘because it is impossible to foresee or define the extent and variety of national exigencies, or the correspondent extent and variety of the means which may be necessary to satisfy them’. A strong government was one with discretion; it was the necessity of that discretion that justified strong central government, rather than the other way around. ‘Every view we may take of the subject, as candid inquirers after truth, will serve to convince us, that it is both unwise and dangerous to deny the federal government an unconfined authority, as to all those objects which are intrusted to its management’. What allowed such discretion? The national interest demanded it, and a sound jurisprudence should provide it. ‘A government, the constitution of which renders it unfit to be trusted with all the powers which a free people ought to delegate to any government, would be an unsafe and improper depositary of the NATIONAL INTERESTS’ (emphasis in original). The particular subject of these wide-ranging statements was the national defense—but they went beyond that field to imply a jurisprudence of results.¹⁴

In general terms, the principle of interpretation of the texts of fundamental law became:

A government ought to contain in itself every power requisite to the full accomplishment of the objects committed to its care, and to the complete execution of the trusts for which it is responsible, free from every other control but a regard to the public good and to the sense of the people.

The public good was the aim of forward-looking law.¹⁵

Hamilton seized on the Necessary and Proper Clause in the draft Constitution to explain how his view of law’s purpose worked. It was an obvious choice, but posed some difficulties. The Necessary and Proper Clause (art 1, s 8, cl 18.1) was added to Article I late at the convention. On 24 July 1787, the Convention had chosen a five-member Committee of Detail that issued its Report on 6 August. Nathaniel Gorham of Massachusetts, James Wilson of Pennsylvania, Oliver Ellsworth of Connecticut, Edmund Randolph of Virginia, and John Rutledge of South Carolina were selected to the Committee. The first time the language of the Necessary and Proper Clause appeared at the convention was in this report. That provision was not debated after it was proposed. The clause itself was unanimously approved. It was incorporated in its present form by the Committee on Style and Arrangement, whose principal (and apparently sole) draftsman was Gouverneur Morris of Pennsylvania. Morris had spoken often during the debates (second only to Madison) and was an advocate of a strong central government; he was certainly one author of the clause. Other members of the committee on style were Hamilton, Madison, Rufus King of New York, and William Samuel Johnson of Connecticut. All approved the clause. In Federalist Number 44, Madison defended it as rational and, well, necessary.¹⁶

No sooner was the draft Constitution unveiled, than the Necessary and Proper Clause invited a storm of anti-federalist criticism. For example, Hamilton’s former colleague at the convention, New York lawyer and judge Robert Yates, devoted much of his first Brutus essay to the clause. The key to the dreaded consolidation of government from a federation of sovereign states into a single monolithic national state was the very open-ended grant of power to the federal Congress to which Hamilton’s logic had led. Brutus replied:

Although the government reported by the convention does not go to a perfect and entire consolidation, yet it approaches so near to it, that it must, if executed, certainly and infallibly terminate in it … for by the last clause of section 8th, article 1st, it is declared ‘that the Congress shall have 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 office thereof’.

There would be no stopping consolidation:

The government then, so far as it extends, is a complete one, and not a confederation. It is as much one complete government as that of New-York or Massachusetts, has as absolute and perfect powers to make and execute all laws, to appoint officers, institute courts, declare offences, and annex penalties, with respect to every object to which it extends, as any other in the world.¹⁷

By the beginning of 1788, Hamilton knew that the clause had already attracted critics ‘as the pernicious engines by which their local governments were to be destroyed and their liberties exterminated’. In Federalist Number 33, he tried to quiet the wind and waves of antifederalist fears. The clause was ‘only declaratory of a truth which would have resulted by necessary and unavoidable implication from the very act of constituting a federal government, and vesting it with certain specified powers’. The logic of this defense actually repeated the logic of the clause itself—necessity required that the clause be present and because the future needs of the country could not be foreseen. Who was the judge of those exigencies? ‘The national government, like every other, must judge, in the first instance, of the proper exercise of its powers, and its constituents in the last.’ Hamilton’s jurisprudence looked forward, and the Constitution must allow the new government to do the same:

In pursuing this inquiry, we must bear in mind that we are not to confine our view to the present period, but to look forward to remote futurity. Constitutions of civil government are not to be framed upon a calculation of existing exigencies, but upon a combination of these with the probable exigencies of ages, according to the natural and tried course of human affairs.

In the end result, Hamilton justified looking ahead with instrumentalist pleading.¹⁸

Hamilton was circumspect in his jurisprudence in the Federalist essays. He could look into the future, and did, but the new Constitution was supposed to remedy the failures of the Articles, and he needed to tether himself to that project. Once he was given the opportunity to read the Constitution’s provisions in the context of future government policy, however, he loosened that tether. The first of those enterprises arose from his appointment as secretary of the treasury in President George Washington’s first administration. The problem he faced was the nation’s towering debt and how to manage it. But he had by figured out how law could be read by now forward.

Hamilton’s first major assay of the debt question came in his First Report on the Public Credit to Congress on 9 January 1790, following a request to him from Congress on 21 September 1789. Without a sound credit rating, the new national government could not fulfill its promise in the Preamble to the Constitution of ‘promoting the general welfare’. The debt was of three types. First, there was nearly 12 million in debt to foreigners who had loaned money or goods during the war. Second, there was 42 million in debt owed by Congress to those who had served it (for example veterans) and to those who had loaned it money or purchased its debts, and finally there was nearly 24 million owed to states by those who had loaned money to the states or were owed money. Much of the domestic debt had been resold by original holders to speculators at a trifle of its original value. Hamilton proposed to fund the foreign debt at par (the original value) to establish US credit abroad. There was little opposition to this, although the means of funding it was not yet clear. It was assumed that tariffs on imports and customs duties would serve to pay the debt. Hamilton, this time facing great opposition, proposed to fund the national debt at par, not discriminating between original holders and current holders—the policy that Madison advocated strongly. This would favor a small class of creditors largely in the Northeastern cities, and disfavor farmers and veterans in rural areas. Hamilton also wished to assume the state debts, paying them out of funds from federal sources (largely a new loan issue, followed by excise taxes). This part of the plan aroused even more opposition, since it seemed to favor those states in the Northeast with outstanding debts over those in the South that had paid off their creditors. Congress passed the policy as the Funding Act of 1790.¹⁹

On some occasions, especially those of public danger and foreign war, a nation had to borrow money. The new nation was not a wealthy one, and that meant that it had to offer good terms to potential creditors. The same situation meant that the nation must pay dearly for necessities. This double burden continued after the peace. The danger then was an ‘unsound state of the public credit’. Looking ahead, and that is what Hamilton asked Congress to do, the ‘cause of good government’ depended on repayment of the debt. It was not just honor at stake, it was the future of the nation. ‘States, like individuals, who observe their engagements, are respected and trusted: while the reverse is the fate of those, who pursue an opposite conduct.’²⁰

One could argue, as Hamilton had, that payment of outstanding debts did not involve anything new. The creation of a ‘sinking fund’ under the act, by which the federal government continued to commit assets to the repayment of debts, was an idea introduced by English Prime Minister Robert Walpole in the early 1700s, and had become a fixture of English fiscal policy thereafter. Indeed, it was Madison’s plan for discrimination between original and subsequent holders of the debt that was novel. In his Federalist papers Hamilton had proposed that payment of the national debt was obligated in the text of the Constitution. But where in the letter of the law, or in its state foundations, was there a precedent for the precise repayment program? In other words, how could the text of the Constitution be read to look to the future of debt repayment?²¹

The ‘Second Report on the Debt’, presented to Congress at the end of 1790, contained three proposals. It asked Congress to establish a national mint and raise excise taxes. These were part of the enumerated powers given Congress in Article I of the federal Constitution. But the third of the new proposals, for a national bank, did not appear in the text of Article I, and could only be inferred from the Necessary and Proper Clause. The bulk of the message described the advantages of banks. ‘If the public good required it’, a term that Hamilton repeated, then there should be no reason for the Constitution to bar it. Still, there was no provision in Article I explicitly giving Congress the authority to establish a bank. However, section 8 of that article gave the House of Representatives the license to do what was ‘necessary and proper’ to facilitate the powers delegated in the rest of the article. To extend this to a bank required a kind of interpretation that looked to future goals. Called ‘loose construction’ by Jefferson, who preferred (at that time at least) a stricter construction of the text, and opposed by him, attorney general Edmund Randolph, and congressman Madison, Hamilton’s defense of the measure offered the fullest elaboration of his jurisprudence.²²

Unlike the studied vagueness of the January proposal, the bank proposal in December of 1790 would have created a corporation to hold federal securities, and to lend to individuals (never going beyond the bank’s reserves). It would be funded by a federal issue of $10 million of stock, the first two million purchased by the government itself; the rest sold to the public. The bank was chartered for 20 years, was not allowed to purchase government stocks or bonds, and the interest on the stocks would be paid by customs duty collections and excise taxes. The 24-member board of directors, elected by the stockholders of the bank, would rotate membership, and the president of the bank would be elected by the board. There would be branch banks, ultimately numbering eight, and they would operate as commercial banks as well as government bodies.²³

After his opposition to funding and assumption had pit him against Hamilton, Madison led the charge in Congress against founding the bank. He spoke on 2 February 1791. His opening remarks were directed to the plan itself. ‘It was proper to be considered also that the most important of the advantages would be better obtained by several banks properly distributed than by a single one.’ His second objection was a variation of his opposition to funding. ‘The plan was unequal to the public creditors—it gave an undue preference to the holders of a particular denomination of the public debt and to those at and within reach of the seat of government. If the subscriptions should be rapid, the distant holders of paper would be excluded altogether.’ His third argument was based on his authority as a framer:

In making these remarks on the merits of the bill, he had reserved to himself, he said, the right to deny the authority of Congress to pass it. He had entertained this opinion from the date of the Constitution. His impression might perhaps be the stronger because he well recollected that a power to grant charters of incorporation had been proposed in the general convention and rejected.

Finally, his case was strongly based on strict construction of the Constitution. He read the Necessary and Proper Clause narrowly, ‘its meaning must, according to the natural and obvious force of the terms and the context, be limited to means necessary to the end and incident to the nature of the specified powers’.

Were the clause read more broadly, or loosely, ‘If implications, thus remote and thus multiplied, can be linked together, a chain may be formed that will reach every object of legislation, every object within the whole compass of political economy…. The essential characteristic of the government, as composed of limited and enumerated powers, would be destroyed’. Madison was not a lawyer, and relied on his authority as a framer and on the plain sense of his reading of text. He failed to mention his comments on the clause in Federalist Number 44. As he summarized his opposition in a letter to Washington on the 21st:

because the power proposed by the Bill to be received is not expressly delegated … because it is in all cases the duty of the Government to dispense its benefits to individuals with as impartial a hand as the public interest will permit; and the Bill is in this respect unequal to individuals holding different denominations of public Stock and willing to become subscribers.

The opposition lost in the national legislature but Jefferson and Randolph as members of the cabinet had access to Washington and they pleaded with him not to sign the measure. He asked Hamilton to respond, and he did.²⁴

Hamilton was also a framer of the Constitution and was present for at least a part of the deliberation of the convention. He served on the Committee on Style and Arrangement that prepared the final version of the document. He could, if he wished, have made the same argument from participatory authority as Madison made. Today, this is comprehended within the doctrine of originalism. While that doctrine has gone through some emendations since it was first posed by attorney general Edwin Meese, in 1985, and expanded by US Supreme Court Justice Antonin Scalia, it still has its roots in the authority of the framers to say what they meant.²⁵

Instead, Hamilton embraced a forward-looking method for reading law, by now his own fully developed and consciously deployed jurisprudence. It was not an ‘aha’ moment for him. He had been inching toward the method since the War for Independence. Nor was it anything like an academic jurisprudence, with their long train of scholarly precedents and footnotes. I think for this reason, its practicality and simplicity, Hamilton’s constitutional jurisprudence may have slipped by us. Nevertheless, using it, he repeated and then countered every point that the three leading oppositionists made. He also used hypotheticals, factual examples, and close readings of law as evidence. Bear in mind that his intended audience, the president, was neither a lawyer nor a judge, but his two cabinet member opponents were both excellent lawyers in their own right and Hamilton’s competitive juices were flowing:

The Secretary of the Treasury having perused with attention the papers containing the opinions of the Secretary of State and Attorney General, concerning the constitutionality of the bill for establishing a National Bank, proceeds, according to the order of the President, to submit the reasons which have induced him to entertain a different opinion.

He did not make his reply personal, however, as that was a stance lawyers opposing one another in court adopted.²⁶

Hamilton began on an autobiographical note, though it was as much rhetorical pose as a genuine humility. ‘It will naturally have been anticipated, that in performing this task, he would feel uncommon solicitude. Personal considerations alone, arising from the reflection that the measure originated with him, would be sufficient to produce it.’ The core of his argument was simple: read the bill, and the clause, as prospective remedy, rather than (as Madison saw them) in retroactive terms. There was no need for the clause if all of the enumerated powers of Congress had within them the basis for solving future problems. But they did not—they were there to remedy the weakness of the Confederation.²⁷

More immediately, the treasury could not deal with the limitations of present finances and commerce shackled by a strict construction (aka Madison’s reading) of Article I:

The sense which he has manifested of the great importance of such an institution to the successful administration of the department under his particular care, and an expectation of serious ill consequences to result from a failure of the measure, do not permit him to be without anxiety on public accounts.

It was not his own reputation that was at stake, however, for ‘the chief solicitude arises from a firm persuasion, that principles of construction like those espoused by the Secretary of State and Attorney General, would be fatal to the just and indispensable authority of the United States’.²⁸

Madison’s objections thus swept away, Hamilton turned to his lawyer opponents. They were formidable adversaries, and thus worthy of detailed replies. Thus Hamilton shifted from directly speaking to Washington, to letting Washington judge Hamilton’s responses to Jefferson and Randolph. ‘The objections of the Secretary of State and Attorney General are founded on a general denial of the authority of the United States to erect corporations.’ Hamilton’s first response was a general one: the power to create inferior government bodies ‘is inherent in the very definition of government, and essential to every step of progress’. In short, if the government corporation was necessary and proper to the progress of the nation—the essence of instrumental jurisprudence—then the power to create the corporation was ‘vested in a government … a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power’. The caveat was that the inferior body was not ‘precluded by restrictions and exceptions specified in the Constitution, or not immoral, or not contrary to the essential ends of political society’. If sovereignty contained all the inherent powers necessary for its survival and prosperity, which was axiomatic for Hamilton, then ‘To deny that the government of the United States has sovereign power, as to its declared purposes and trusts, because its power does not extend to all cases’, would be contrary to the axiom. From the general principle Hamilton reasoned to its consequence: ‘This general and indisputable principle puts at once an end to the abstract question, whether the United States have power to erect a corporation; that is to say, to give a legal or artificial capacity to one or more persons, distinct from the natural’. And that finished the question of corporations. If the government needed to erect a corporation, then it had the power to do so.²⁹

Hamilton could have rested here, indeed he said that he could have rested here, but Hamilton’s mind was tireless and Jefferson’s and Randolph’s objections must be refuted in their particularity as well as their generality. Back and forth between the two Virginians’ comments Hamilton went, cutting and thrusting as if they were in the same room. ‘The arguments which they had used against the power of the government to erect corporations, however foreign they are to the great and fundamental rule which has been stated [that is, which Hamilton had stated], shall be particularly examined’. First was the delegation of powers in the Tenth Amendment—‘The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people’. This had been passed in Congress the previous year. (It was ratified a year after Hamilton wrote, however.) But citing the amendment did not answer the question of how much was delegated. If the clause was an open-ended delegation, then amendment did not limit its application. ‘It is not denied that there are implied well as express powers, and that the former are as effectually delegated as the latter’. The erection of a bank lay in the implied powers of government, and did not violate the amendment—according to Hamilton’s reading of the clause. This was a type of circular reasoning, and Hamilton turned implication into certainty by stating ‘It is conceded that implied powers are to be considered as delegated equally with express ones’. The instrumentalist understanding was that the proposed bank, ‘is truly to be considered as a quality, capacity, or mean[s] to an end’. If the end be worthy, then the creation of the bank was within the implied powers delegated to the government. Read the legislation in terms of its future contribution, Hamilton proposed.³⁰

Next he turned to an exercise in usage. ‘It is certain that … the grammatical … popular sense of the term … necessary often means no more than needful, requisite, incidental, useful, or conducive to’. That is, he urged Washington to read the law (here the clause of Article I) forward:

It is a common mode of expression to say, that it is necessary for a government or a person to do this or that thing, when nothing more is intended or understood, than that the interests of the government or person require, or will be promoted by, the doing of this or that thing.

This was the way to read the entirety of the Constitution, Hamilton implied, for ‘that it was the intent of the Convention, by that clause, to give a liberal latitude to the exercise of the specified powers’. Hamilton concluded that Jefferson apparently did not understand this (a reminder that Jefferson had not attended the convention), for ‘To understand the word as the Secretary of State does, would be to depart from its obvious and popular sense, and to give it a restrictive operation, an idea never before entertained’.³¹

The proper way to read the clause, and legislation enacted under it, was that government was limited to those ‘laws as are necessary and proper to accomplish the objects intrusted to it’. The government could not do what it pleased, without limits, for government was established to accomplish certain purposes, and these purposes supplied a limit on what the government could do. It might choose not to create a bank, but this did not mean government was barred from creating a bank if Congress (and the president) thought a bank would facilitate proper aims of government. ‘For it is certain that an incorporation may be dispensed with, though it is better to have one’. In other words, ‘The degree in which a measure is necessary, can never be a test of the legal right to adopt it’. For Hamilton, this logic led to the necessity and propriety of reading law forward. ‘The relation between the measure and the end; between the nature of the mean[s] employed toward the execution of a power, and the object of that power must be the criterion of constitutionality, not the more or less of necessity or utility.’ And, insofar as the laws were concerned:

the powers contained in a constitution of government, especially those which concern the general administration of the affairs of a country, its finances, trade, defense, etc, ought to be construed liberally in advancement of the public good … there must of necessity be great latitude of discretion in the selection and application of those means. Hence, consequently, the necessity and propriety of exercising the authorities intrusted to a government on principles of liberal construction.³²

Hamilton then returned to Randolph’s objections. ‘The Attorney General admits the rule, but takes a distinction between a State and the Federal Constitution. The latter, he thinks, ought to be construed with greater strictness, because there is more danger of error in defining partial than General powers.’ Randolph had been governor of Virginia and prior to that its attorney general. His objection was as rooted in his personal experience as Hamilton’s proposal was in his experience. States could (and did) have banks that were corporate entities, created by state charters for the public good. Nothing in that fact precluded the federal government from chartering a bank. Indeed, the same reasoning justifying the states’ banks justified the federal bank.³³

Randolph was worried (with some perspicacity as it turned out) that a federal bank would be a threat to state banks. Hamilton skirted the issue. ‘It is no valid objection to the doctrine to say, that it is calculated to extend the power of the government throughout the entire sphere of State legislation.’ Then he conceded, ‘The truth is, that difficulties on this point are inherent in the nature of the Federal Constitution; they result inevitably from a division of the legislative power’. In later years, the Second Bank of the United States would come into direct conflict with state banks, and state banking regulations, but the Hamiltonian view of the Clause would triumph.³⁴

Jefferson and Randolph had added to their general objections to the bank bill a list of specific cavils. Jefferson, whose own practice had included wills and estates, thought that the bank created certain kinds of property and legal capacities that violated state laws on similar subjects. Hamilton replied that state law was so varied, and changed so much on these questions (again a sly poke at Jefferson’s role in the modernization of Virginia law after the Revolution), that the objection could not be sustained by fact. What was more, all the states had chartered corporations whose charters gave them certain exemptions from other state laws. Hamilton then displayed his detailed knowledge of alienage and corporate law, bankruptcy and other commonly litigated subjects, a discussion which Washington may not have followed. Here, Hamilton was directing his comments once again to Jefferson.³⁵

Two of Jefferson’s objections could not be cavalierly dismissed:

There are two points in the suggestions of the Secretary of State, which have been noted, that are peculiarly incorrect. One is, that the proposed incorporation is against the laws of monopoly, because it stipulates an exclusive right of banking under the national authority; the other, that it gives power to the institution to make laws paramount to those of the States.

These seemed damaging objections, but Hamilton assured Jefferson, Randolph, and Washington, that ‘the bill neither prohibits any State from erecting as many banks as they please, nor any number of individuals from associating to carry on the business, and consequently, is free from the charge of establishing a monopoly; for monopoly implies a legal impediment to the carrying on of the trade by others than those to whom it is granted’. The second objection required a little more footwork, for Jefferson was right—when the proposed bank and state banks found themselves in conflict, the former was going to be the victor. Hamilton avoided the question of conflict by shifting the grounds: ‘The by-laws of such an institution as a bank can operate only on its own members, can only concern the disposition of its own property, and must essentially resemble the rules of a private mercantile partnership’. But of course, ‘if contrary to a law of a State, must be overruled as void unless the law of the State is contrary to that of the United States and then the question will not be between the law of the State and that of the corporation, but between the law of the State and that of the United States’. In summary, because federal law trumped state law, the bank’s dealings would be exempt from any state laws that hindered the new bank.³⁶

Jefferson continued, probably relying on Madison and Madison’s notes of the debates at the convention, that it had rejected ‘a proposition by the Convention to empower Congress to make corporations, either generally, or for some special purpose’. Were Hamilton confronting Madison directly on this point, the reply would have been harder, but Jefferson was not at the convention, Madison’s notes would not be published for another 40 years, and neither Jefferson nor Madison would have admitted that Madison had compiled the notes for Jefferson’s eye. In the present case, Hamilton simply relied on his own presence at the convention to assert that there was ‘no authentic document, or even … accurate recollection’ of such a vote. The only vote that came close was one on canals. ‘In this state of the matter, no inference whatever can be drawn from it’.³⁷

Once again, Hamilton offered a lesson in forward-looking jurisprudence. ‘The Secretary of State will not deny, that, whatever may have been the intention of the framers of a constitution, or of a law, that intention is to be sought for in the instrument itself, according to the usual and established rules of construction.’ Those rules looked to the purpose of laws rather than their limitations. If ‘a power to erect a corporation in any case be deducible, by fair inference, from the whole or any part of the numerous provisions of the Constitution of the United States arguments drawn from extrinsic circumstances regarding the intension of the Convention must be rejected’. The rule of interpretation should be to set aside the original intent of any or all of the framers and look instead to the fullest effectuation of the law.³⁸

The particular basis of Randolph’s concern was the same as he expressed at the constitutional convention. The capacity to expand on its own powers incorporation was not powers of Congress ‘expressly given to Congress’. True enough, Hamilton conceded, ‘but this cannot mean, that there are not certain express powers which necessary include it’. It was implied. By analogy, ‘Surely it can never be believed that Congress, with exclusive powers of legislation in all cases whatsoever, cannot erect a corporation within the district which shall become the seat of government, for the better regulation of its police’.³⁹

Madison’s role in opposition to Hamilton in the House was lurking in one corner of Randolph’s objection. ‘This may not be an improper place to take notice of an argument which was used in debate in the House of Representatives. It was there argued, that if the Constitution intended to confer so important a power as that of erecting corporations, it would have been expressly mentioned.’ That argument did not win in the House, and it should not be resurrected in Randolph’s brief. It is ‘founded upon an exaggerated and erroneous conception of the nature of the power. ‘In other words, there was no slippery slope, no likelihood that the admission of the necessary and proper basis of a bank would lead to ‘a doctrine so indefinite as to grasp every power’. Instead, ‘The proposition relied upon is, that the specified powers of Congress are in their nature sovereign. That it is incident to sovereign power to erect corporations, and that therefore Congress have a right, within the sphere and in relation to the objects of their power, to erect corporations’. The detail of Hamilton’s response, ticking off every point in Randolph’s argument, was exhausting, leaving nothing standing. He then added insult to injury. ‘Hence it appears, that the enumerations which have been attempted by the Attorney General, are so imperfect, as to authorize no conclusion whatever.’⁴⁰

Hamilton once again instructed his opponents on how to read the law. ‘This will be done by tracing a natural and obvious relation between the institution of a bank and the objects of several of the enumerated powers of the government; and by showing that, politically speaking, it is necessary to the effectual execution of one or more of those powers.’ Effectual execution was a synonym for instrumental value. Banks were necessary. This one was even more necessary. ‘The only question is, whether it has a right to incorporate this company, in order to enable it the more effectually to accomplish ends which are in themselves lawful’. Banks were simply more convenient agents for collection of taxes (another part of Hamilton’s fiscal program) and for loaning money than other institutions. The proposed bank would have the confidence and its directors the skills to manage both financial functions ‘completely within the province of the sovereign power of providing, by all laws necessary and proper’.⁴¹

Always preferring to read law forward rather than backward, Hamilton offered a series of hypotheticals to which the uniform answer was the new bank. Typically, ‘suppose a new and unexplored branch of trade should present itself, with some foreign country’. Supposed that as yet unencountered branch of trade required national response:

for the more convenient management of the business—what reason can there be to doubt that the national government would have a constitutional right to institute and incorporate such a company? This is a mean[s] which has been practiced to that end, by all the principal commercial nations.

The bank was a means to unforeseen ends.⁴²

Another hypothetical, an inherently future situation, made the point:

A nation is threatened with a war; large sums are wanted on a sudden to make the requisite preparations. Taxes are laid for the purpose, but it requires tine to obtain the benefit of them. Anticipation is indispensable. If there be a bank the supply can at once be had.

Such exigencies shifted from hypotheticals to realities all too easily in a new nation surrounded by potential enemies. Or, looking ahead to ‘the regulation of trade between the States’ the bank would perform an essential function not within the capacity of state banks. It would impose uniformity, regularity, and additional circulating currency. This was one of the core functions of the new federal government, and hence a constitutional ground for the bank.⁴³

As a matter of fact, the proposed bank might not turn out to be the best means to effect the desired ends, but ‘Whether it will really be a beneficial one or not … is no more a constitutional point, in the particular referred to, than the question, whether the western lands shall be sold for twenty or thirty cents per acre’. The test of constitutionality was not the same as the test of institutional efficacy:

The constitutional test of a right application must always be, whether it be for a purpose of general or local nature. If the former, there can be no want of constitutional power. The quality of the object as how far it will really promote or not the welfare of the Union must be matter of conscientious discretion, and the arguments for or against a measure in this light must be arguments concerning expediency or inexpediency, not constitutional right.⁴⁴

Hamilton’s final passages once again rejected reading law that looked only at ‘pre-existing’ rights and usages. ‘It has been stated as an auxiliary test of constitutional authority to try whether it abridges any pre-existing right of any State, or any individual.’ Instead, the value of the bank rested on its future use. Having repeatedly engaged in instrumentalist jurisprudence, Hamilton closed by denying that mere utility, ‘the quantum of necessity’ is the test of a constitutional exercise of power. It was the bank’s ‘more direct relation, as to its uses’ than state banks that justified its existence. Washington signed the bill into law on 25 February 1791, and named three commissioners for taking subscriptions for the new bank on 19 March of the same year.⁴⁵

I believe that the successful defense of the Bank bill was the high water mark of Hamilton’s fiscal reforms. He could not convince Congress to pass the rest of his comprehensive plan, he did make further incremental contributions to federal financial stability. He retired from the treasury post in 1793, returning to his law practice in New York City. In state politics, he was a supporter of the Schuyler faction that his wife Elizabeth’s father Philip led. In national politics, he was a founder of the Federalist Party, in opposition to the Democratic Republicans of Jefferson and Madison. He was never a monarchist, though accused of it by his political enemies, but he had no use for democracy. His attachment to England in international affairs and his support for the commercial and manufacturing interests in the new nation were constants in the turbulent politics of the 1790s. By the end of the decade, Hamilton no longer dominated national policymaking as he once had, and in the few years left to him, his political opponents denied him public office. But his intellectual achievements were fully established. Realistic, sometimes pessimistic, often impulsive, skeptical of conventional pieties until nearly the end of his life, but no one can deny his contributions to our constitutional regime.⁴⁶

Hamilton put his jurisprudence to use in the service of an energetic central government, but there is nothing inherently conservative about such a program. Although Hamilton is usually called a conservative, and he was certainly no friend to democracy, the modern doctrine of a ‘living constitution’ associated with liberal social and economic federal judicial policies has many close ties to Hamilton’s reading law forward. As I wrote in Reading Law Forward:

reading law forward was the default jurisprudence of the revolutionaries. Today, it keeps that revolutionary energy and purpose alive … The judge and the jurisprudence that only looks backward in a world that is moving rapidly forward may make the law seem irrelevant… . By linking current textual meanings to future opportunities and anticipated problems, then returning with enlightened vision to existing law, the lawmaker keeps law fresh. Then and perhaps only then can the law truly rest on the consent of the governed.⁴⁷

Footnotes