Madison and Jefferson’s Strict Construction Versus Hamilton’s Implied

Powers: A Study of Constitutional Interpretation

By Aaron Nathaniel Coleman

On June 21, 1788, New Hampshire became the ninth state to ratify the Constitution which had been written at the Philadelphia Convention in the previous year. With ratification complete (although the key states of Virginia and New York had yet to ratify), a barrage of fresh obstacles challenged the new republic. Among the dilemmas confronting the republic, none was greater than financing. Seeking to resolve the matter was Alexander Hamilton, first Secretary of the Treasury.

Following his Senate confirmation on September 11, 1789, Hamilton began constructing a fiscal plan to establish the credit of the United States. Answering the House of Representatives’ request to submit an economic plan for the country, Hamilton delivered four of the most canonized state papers in the history of the United States: “The Report on Public Credit” (submitted January 9, 1790), “The Report on the Bank” (submitted on December 13, 1790), “The Establishment of a Mint” (submitted January 1791) and “The Report on Manufactures” (submitted December 5, 1790). Each report was controversial and “The Report on Public Credit” was so severely attacked by southern congressmen that a political compromise was necessary for approval.

The Hamilton report most attacked, however, was the “Report on the Bank.” With little opposition based on policy differences, condemnation of the establishment of the Bank of the United States rested on the constitutional ambiguity of whether Congress possessed the authority to establish corporations. Congressional and Executive Cabinet debates illustrate how Hamilton’s loose interpretation of the Constitution’s “necessary and proper” clause, and not the strict construction argument championed by Virginia Representative James Madison and Secretary of State Thomas Jefferson, persuaded President George Washington to sign the act establishing the Bank of the United States.

The “Report On a National Bank” was both an extension of Hamilton’s report on public credit and a key component of the Treasurer’s economic vision. Hamilton hoped to demonstrate how a national bank would be “an indispensable engine in the administration of the finances.” While performing traditional bank services, the proposed bank would also serve the government by being a “…greater facility…[by] obtaining the pecuniary aids, especially in sudden emergencies” because capital would be centralized and easily available, thus creating an “intimate connection of interest between the government and the Bank of a nation.” Aside from these functions, the bank would issue universally accepted notes and, most importantly, act as a vital base for the mercantile community by providing much needed credit.

To insure the stability of the bank, Hamilton recommended to Congress that the United States government own one-fourth of the bank’s stock. The total sum of capital spent establishing the Bank would be $10 million, of which the general government would pay $2 million, with the remaining $8 million coming from private investment. With the power to appoint five of the twenty-five members of the Bank’s Board of Directors, the federal government would share in the institution’s profits but would not be involved in the daily management of its operations. Concerned more with the harm the federal government might do to the bank than the bank to the federal government, Hamilton believed governmental restraint was important because of its inability to guarantee a “…constant succession of upright and wise Administrators” for managing the bank. If governmental corruption did occur, the Bank and its purposes could be perverted to serve only the “momentary exigencies” of the corrupter.

House of Representatives Speaker Jonathan Dayton communicated the report the day after its submission, when it was unceremoniously conveyed to the Senate for initial consideration. Once in the Senate, a committee consisting of Caleb Strong of Massachusetts, Robert Morris of Pennsylvania, Pierce Butler of South Carolina, Oliver Ellsworth of Connecticut, and Hamilton’s father-in-law, Phillip Schuyler of New York, was established for consideration of the proposal. On January 3, 1791, the committee presented a bill that followed the recommendations established by Hamilton’s report. After many postponements and re-readings, the Senate finally began debate regarding the establishment of the Bank on January 13.

According to Pennsylvania Senator William Maclay it would “be in vain to oppose” the bill, because it was so well conceived and managed. There was so little opposition that after two weeks of lackluster parleying, the bill was approved by a voice vote only. It was only when the bill returned to its original starting point, the House of Representatives, that it faced the question of whether the establishing of the Bank of the United States was constitutional.

On February 2, the debates over establishing the Bank began when Virginia Representative James Madison obtained the floor. Though offering a brief overview of the utility of banks, Madison based his attack on the premise of strict Constitutional construction, the belief that a “…broad construction of federal powers…[would deliver] a powerful blow at the barriers against an indefinite expansion of federal authority.” Madison argued that Congress lacked the authority to establish the Bank or any other corporation because of limited manner in which the federal government was constructed. The Constitution was not written, nor was it to be interpreted, as a general grant of power without specified limitations. In fact, claimed Madison, it was the reverse. The Constitution was “…a grant of particular powers,” meaning that none of the clauses stated in Article I, Section 8 of the Constitution could pretend to lend justification to establishing a bank. The clauses allocating the power to “lay and collect taxes” that would “…pay the Debts…to provide for the common Defense and General Welfare,” and “borrow money on the credit of the United States” or that to make all laws “necessary and proper” were not applicable because the enumerated powers were not subjoined to the power of creating a bank. Madison continued by stating that the Bank Bill consigned no taxes nor borrowed any money; neither did the “necessary or proper” clause tolerate Congressional assumption of powers not already conferred by the Constitution. Thus, the Bank Bill was “condemned by the silence of the Constitution.”

            Professing that a doctrine of implication was dangerous to the Union, Madison claimed that if such interpretation were adopted, a chain of implication would reach all objects, leaving nothing outside the scope of federal power. “The latitude of interpretation required by the bill is condemned by the rule furnished by the Constitution itself,” because the Constitution specifically elucidates each power of the Congress, leaving no important power for interpretation. Trying to explain where interpretation would be necessary, Madison discussed how armies were more an incident to the prescribed congressional power of declaring war than the incorporation of a Bank was respecting the power to borrow money. The point was essentially moot, Madison added, because, under Congressional war powers, raising armies, creating rules for military governance, and calling out and regulating militias were not just implied but concretely expressed in the Constitution. The proposed bank, asserted Madison, was not even necessary; “at most it could be but convenient.”

According to Madison, measures requiring the “necessary and proper” clause must be limited to the means necessary to produce an end incidental to the nature of the enumerated powers of Article I, Section 8. The “necessary and proper” clause, Madison informed Congress, was created only for the “…declaratory [purpose] of what would have resulted by unavoidable implication, as the appropriate and, as it were, technical means of executing those powers.” To construe this clause to authorize any means, even outside the extent of constitutional authority, would only usurp the purpose of the Constitution, establishing a dangerous precedent. If the logical outcome of applying a loose interpretation of the “necessary and proper” clause came to fruition, the outcome would destroy all limits placed upon the general government.

            In a desperate effort to represent the act of incorporation as unconstitutional, Madison attempted to use the “original meaning” of the Constitutional Convention by recounting an incident that occurred during the waning days of the Philadelphia assemblage. Before the Constitution underwent its final revision and subsequent draft, Madison moved to include the power of incorporation to the Congressional list of powers. If adopted, an explicitly stated authority to “…grant charters of incorporation in cases where the public good may require them and the authority of a single State may be incompetent” would have been granted to Congress. Referred to the Committee of Detail, the motion, for whatever motives, was not reported nor can it be found in any drafts left by the Committee. Madison conceived the committee’s failure to act as being proof that the act of incorporation was fundamentally unconstitutional.

            On February 3, Massachusetts Representative Fisher Ames charged that Madison’s argument was “steeped in ‘causary and sophistry’.” Ames then began his assault on the doctrine of strict construction. Stating, just as Madison did, the usefulness of banks, Ames immediately attacked Madison’s constitutional interpretation.

            If Congress could employ no powers except for those precisely and exactly expressed in the Constitution, then it was, Ames contended, “rather late in the day to adopt it [strict construction] as a principle of conduct.” If this style of interpretation became the norm, “a great part of our two years labor is lost…for we have scarcely made a law in which we have not exercised our discretion.” Not being able to visualize why a negative construction would be safer than a positive one, Ames declared that it was just as much a sin to not exercise the enumerated powers given than usurping those not expressed.” Using Madison’s example of armies as pertaining to the necessary and proper clause, Ames challenged Madison’s moot point stance on the grounds that if the Constitution did not state the authority to raise armies, the power would be deemed “necessary and proper” due to the necessity of raising an army when the need arose. This supposedly all-powerful clause did not grant any new powers, but established a doctrine of implied powers. Hence, it was “necessary and proper” to establish a national bank because a bank was “a necessary incident to the entire powers to regulate trade and revenue, and to provide for the public credit and defense.”

            Following Ames, Massachusetts Representative Theodore Sedgwick reminded Madison that it was he [Madison] who advocated the Executive’s power of removing Cabinet appointees. That power was, in Madison’s own words, “by construction and implication, vested in the President.”

            If Madison found this reminder embarrassing or ironic he made no showing of it. He must have been caught unaware, however, when Elias Boudinot, another Massachusetts Representative, stood and read to the House the forty-fourth epistle of the Federalist, authored by the great Constitutional sage, Publius. In this letter, Publius discusses at length the premises of the “necessary and proper” clause.

            “Publius” maintained that had the Convention, when constructing this clause, attempted to enumerate all powers foreseen as necessary and proper, “the attempt would have involved a complete digest of laws on every subject.” This list of powers would have required an exposé on the current state of law and to all the possible changes which futurity may produce. Thus with this general clause, “every new application of a general, listed, power, the particular powers, which are the means of attaining the object of the general power, must necessarily vary with that object; and be often properly varied whilst the object remains the same.” Forbidding Congress from utilizing any power not expressly granted would be disarming the government from exercising any real authority. The Constitution, contended “Publius,” was never intended to create the problem of deciding between public interest or doing nothing; nor violating the Constitution through the exercise of powers that are indispensably necessary despite the fact that they are not expressly granted. Concluding his treatise on the “necessary and proper” clause, “Publius” added the sweeping contention that “no axiom is more clearly established in law, or in reason, than that wherever the end is required, the means are authorized; wherever a general power to do a thing is given, every particular power necessary for doing it, is included.”

            After Boudinot’s reading, the main points had been made, though debate continued for six more days. Finally, on February 8, the House voted 39-20 to establish the Bank of the United States. On February 14, the House forwarded the bill to President George Washington.

            Perplexed and persuaded by Madison’s arguments, Washington consulted his fellow Virginian to gain a better understanding of his constitutional arguments. Reflecting on the meetings, Madison recalled that Washington held “several free conversations with me on this subject,” where he “listened favorably…to my views of it [the unconstitutionality of the bank],” but never committing to Madison’s argument. To further satisfy his understanding of the constitutional question, Washington consulted the opinions of his interested Cabinet members. He sought the advice of Attorney General Edmund Randolph, Secretary of State Thomas Jefferson, and Secretary of the Treasury Alexander Hamilton. Submitted in the form of written opinions, these arguments, though similar to Congressional debates, elevated the Congressional debates to a higher degree of importance.

            The first written opinion came from Attorney General Randolph. In two incoherent opinions, Randolph advised Washington that establishing a bank was unconstitutional, due to the lack of an expressed power of incorporation. Reiterating Madison’s argument, Randolph stated that if this doctrine of interpretation was left unchecked, the federal government would acquire enough strength to allow the grasping of every power.

            Soon after Washington received Randolph’s reports, Secretary of State Jefferson presented his opinion on the constitutionality of the Bank. Though failing to express any previous reservations on the bank bill, Jefferson nevertheless seized the opportunity to criticize Hamilton’s program. Reaching the same constitutional conclusion as Madison, Jefferson urged Washington to exercise his veto power.

            Jefferson focused his “legal fundamentalist” argument by stating the language of the soon to be Tenth Amendment, that “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.” Considered by Jefferson to be the cornerstone of the Constitution, this amendment reiterated the general principles of a limited, power-expressed government and the belief that legislative power should remain confined to those powers “herein granted” by the Constitution. If Congress proceeded to charter the bank, Congress would step “beyond the boundaries specifically drawn around the powers of Congress,” and would possess a “boundless field of power, no longer susceptible to any definition.”

            The remainder of Jefferson’s opinion represented his interpretations of the Congressional limitations established by the Constitution within the wording its first Article. The enumerations of congressional power are to be construed according to plain and ordinary meaning of the language used by those who framed it. In no way, or proper interpretation, had the power to incorporate a bank been constitutionally delegated. This was true, argued Jefferson, because incorporation was not among the specially enumerated powers nor does it happen to fall within the general phrases of the first Article.

            Turning his argument towards the first three clauses of Article I, Section 8 of the Constitution, Jefferson stated that the bank bill levied no taxes, borrowed no money, and regulated no commerce. The last of these clauses received particular attention when Jefferson related the creation of a bank to that of creating a bushel of wheat or mining precious metals. Both of these actions were only creations, not regulations. Creating an item that may be bought and sold is not prescribing regulations for the actual transaction of buying and selling. Furthermore, even if the bank did regulate commerce the point would be silenced because congress does not possess the power to regulate the internal commerce of a state.

            Jefferson next considered the two general phrases of Article I, along with the “general welfare” and “necessary and proper” clauses. Continuing his literal, strict interpretation of the constitution, Jefferson interpreted the power to “lay…taxes…to…provide for the…general Welfare” to mean, to lay taxes for the purpose of providing for the general welfare. According to Jefferson, this clause was a statement of purpose, not a general grant of independent powers allowing Congress to pass any act it pleased. If interpreted in this manner, as the bank bill was, the clause reduced the Constitution to a single phrase.

            Two grounds served as the foundation of Jefferson’s attack against the broad construction of these clauses. First, a loose interpretation ran afoul of the established rules of basic grammar. Where a phrase bore two meanings, “that which will allow some meaning to the other parts of the instrument, and not that which would render all the others useless” should be used. Second, and most importantly, a loose interpretation is contradictory to the intent of the Constitution as is evidenced by the document’s text and the circumstances of its framing. It was obvious, he stated, that no universal power was intended for Congress; quite the contrary, the Constitution “was intended to lace them [Congress] up straitly [sic] within the enumerated powers, and those without which, as means, these powers could not be carried into effect.” To strengthen his argument, Jefferson reminded Washington that the power of incorporation was in fact rejected by the Philadelphia Convention.

            Turning his attention to the much-discussed “necessary and proper” clause, Jefferson argued that all the “foregoing powers” in which this clause was intended did not require a bank. A bank was not, therefore, necessary and consequently was not authorized by the phrase. After announcing his understanding of the clause, Jefferson moved to the actual meaning of the word necessary, which he contrasted with the word convenient. Jefferson acknowledged the convenience of establishing a bank, but a bank was still unnecessary. To give the same meaning to the words “necessary” and “convenient” would create a degree of construction that would be applied to non-enumerated powers, because “there is no one…ingenuity [that] may not torture into a convenience, in some way or other.” The Constitution fundamentally restrained Congress to those necessary means “without which the grant of power would be nugatory.”

In summation, Jefferson urged President Washington to wield his “shield provided by Constitution,” the veto. Vetoing the bill was the only protection against the “error, ambition, or interest” found in a loose interpretation of the “necessary and proper” clause. In a strange finale, Jefferson advised the President that if he were uncertain whether to approve or veto the measure then “respect for the wisdom of the legislature would naturally decide the balance in favor of their opinion.” Thus, this “generally dogmatic paper ended on an undogmatic note.”

After reviewing both Randolph and Jefferson’s opinions, Washington dispatched them to Hamilton. While awaiting Hamilton’s report, the President once again called on Madison. Instead of discussions that focused on the constitutionality of the bank, Washington had a different request: a veto message in case he decided to exercise that power. Soon after receiving Madison’s veto draft, Washington received Hamilton’s “Opinion on the Constitutionality of an Act to Establish a Bank.”

Demonstrating what Jefferson biographer Dumas Malone called an “extraordinary skillful defense of his own position,” which resulted in a “masterpiece of exposition,” Hamilton’s opinion was based upon the fundamental belief that “every power vested in a government is in its nature sovereign.” This sovereignty includes “… a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power,” as long as those powers are not constitutionally restricted, immoral, or contrary to the needs of political society. From this position, the power to create corporations becomes an incident of sovereign power. Thus, the criteria determining the constitutionality of a power not specified was whether the end justified the means. Continuing on this point, Hamilton stated that if the end is clearly comprehended within any of the specified powers, and an obvious relationship to the end exist then it falls within the parameters of national authority. When applying this ideology to the Bank Bill, Hamilton found a natural correlation to the powers of collecting taxes and the regulation of national commerce. To believe otherwise was “ill-founded” logic.

Hamilton proceeded to attack Jefferson’s “erroneous” argument of the meaning of the word “convenient.” “Necessary,” Hamilton argued, means nothing more than “needful, requisite, incidental, useful, or conducive to,” because no government possessed the right to enact any law it desired. To understand the meaning Jefferson attached it would give the same force as if the word “absolutely” or “indispensably” were prefixed to it. Hamilton accurately noted that few governmental measures would withstand such a test. Such a litmus test of the “necessary and proper” clause would force its application only in cases of extreme necessity. Hamilton proceeded to cite a number of instances where legislation, though clearly outside the enumerated powers, was enacted. The Congressional acts establishing lighthouses, beacons, buoys, public piers and allowing presidential removal of appointees, though deemed necessary, would have been rejected if Jefferson’s definition were applied.

Responding to Jefferson’s citation of the Tenth Amendment, Hamilton admitted that the federal government possessed only those powers delegated to it, but he proceeded to identify other areas of power delegated to the federal government. In addition to the enumerated powers of Article I, there existed “implied powers,” the power used to carry out specified powers such as the establishment of a bank. Also existing were “resulting powers,” that were the product of “the whole mass of the powers of the government, and from the nature of political society” which were exemplified by the ability to possess sovereignty over conquered territory.

Summarizing his overall propositions, Hamilton reiterated how the incorporation of a bank was necessary for the execution of the powers of taxation, borrowing money, trade regulation, providing for the common defense, and regulation of governmental property. Thus, having picked Randolph’s “logic apart point by point, as if plucking a chicken” and demonstrating how Jefferson’s argument was nothing more than a “mixture of bad law, nonlaw, and irrelevant law” Hamilton concluded his opinion.

With all debates and written opinions concluded, the decision rested upon the shoulders of President Washington. Taking all the time allotted him by the Constitution (ten days, save Sunday), Washington carefully weighed all options. Not firmly convinced by the argument offered by the Secretary of the Treasury, but believing a strict construction of the Constitution would cripple the government, Washington signed the act establishing the Bank of the United States on February 25, 1791. Thus Washington made “the most important decision on domestic policy” of his presidency.

Reflecting over a year later on the entire incorporation episode, Hamilton noted how “a mighty stand was made on the affair of the bank. There was much commitment in that case. I prevailed.”

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