be discovered that the operation presents, in its outset, a very considerable advantage to those who may become subscribers; and from the influence which that rise would have on the general mass of the debt, a proportional benefit to all the public creditors, and, in a sense which has been more than once adverted to, to the community at large.

There is an important fact which exemplifies the fitness of the public debt for a bank fund, and which may serve to remove doubts in some minds on this point: it is this, that the Bank of England, in its first erection, rested wholly on that foundation. The subscribers to a loan to Government of one million two hundred thousand pounds sterling, were incorporated as a bank, of which the debt created by the loan, and the interest upon it, were the sole fund. The subsequent augmentations of its capital, which now amounts to between eleven and twelve millions of pounds sterling, have been of the same

nature.

The confining of the right of the bank to contract debts to the amount of its capital, is an important precaution, which is not to be found in the constitution of the Bank of North America, and which, while the fund consists wholly of coin, would be a restriction attended with inconveniences, but would be free from any, if the composition of it should be such as is now proposed. The restriction exists in the establishment of the Bank of England, and, as a source of security, is worthy of imitation. The consequence of exceeding the limit, there, is, that each stockholder is liable for the excess, in proportion to his interest in the bank. When it is considered that the directors owe their appointments to the choice of the stockholders, a responsibility of this kind, on the part of the latter, does not appear unreasonable; but, on the other hand, it may be deemed a hardship upon those who may have dissented from the choice. And there are many among us whom it might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the responsibility upon the directors by whom the limit prescribed should be transgressed.

The interdiction of loans on account of the United States, or of any particular State, beyond the moderate sum specified, or of any foreign Power, will serve as a barrier to Executive encroachments, and to combinations inauspicious to the safety, or contrary to the policy of the Union.

The limitation of the rate of interest is dictated by the consideration, that different rates prevail in different parts of the Union; and as the operations of the bank may extend through the whole, some rule seems to be necessary. There is room for a question, whether the limitation ought not rather to be to five than to six per cent., as proposed. It may, with safety, be taken for granted, that the former rate would yield an ample dividend, perhaps as much as the latter, by the extension which it would give to business. The natural effect of low interest is to increase trade and industry; because undertakings of every kind can be prosecuted with greater advantage. This is a truth generally admitted; but it is requisite to have analyzed the subject in all its relations, to be able to form a just conception of the extent of that effect. Such an analysis cannot but satisfy an intelligent mind, that the difference of one per cent. in the rate at which money may be had, is often capable of making an essential change for the better in the situation of any country or place.

Every thing, therefore, which tends to lower the rate of interest, is peculiarly worthy of the cares of legislators. And though laws, which violently sink the legal rate of interest greatly below the market level are not to be commended, because they are not calculated to answer their aim, yet, whatever has a tendency to effect a reduction, without violence to the natural course of things, ought to be attended to and pursued. Banks are among the means most proper to accomplish this end; and the moderation of the rate at which their discounts are made, is a material ingredient towards it; with which their own interest, viewed on an enlarged and permanent scale, does not appear to clash.

But, as the most obvious ideas are apt to have greater force than those which depend on complex and remote combinations, there would be danger

that the persons, whose funds must constitute the stock of the bank, would be diffident of the sufficiency of the profits to be expected, if the rate of loans and discounts were to be placed below the point to which they have been accustomed; and might, on this account, be indisposed to embarking in the plan. There is, it is true, one reflection, which, in regard to men actively engaged in trade, ought to be a security against this danger; it is this: that the accommodations which they might derive in the way of their business, at a low rate, would more than indemnify them for any difference in the dividend, supposing even that some diminution of it were to be the consequence. But, upon the whole, the hazard of contrary reasoning among the mass of moneyed men, is a powerful argument against the experiment. The institutions of the kind already existing add to the difficulty of making it. Mature reflection, and a large capital, may, of themselves, lead to the desired end.

The last thing which requires any explanatory remark is the authority proposed to be given to the President to subscribe the amount of two millions of dollars on account of the public. The main design of this is to enlarge the specie fund of the bank, and to enable it to give a more early extension to its operations. Though it is proposed to borrow with one hand what is lent with the other, yet the disbursement of what is borrowed will be progressive, and bank notes may be thrown into circulation instead of the gold and silver. Besides, there is to be an annual reimbursement of a part of the sum borrowed, which will finally operate as an actual investment of so much specie. In addition to the inducements to this measure, which result from the general interest of the Government to enlarge the sphere of the utility of the bank, there is this more particular consideration, to wit: that, as far as the dividend on the stock shall exceed the interest paid on the loan, there is a positive profit.

The Secretary begs leave to conclude with this general observation: That, if the Bank of North America shall come forward with any propositions which have for their object the engrafting upon that institution, the characteristics which shall appear to the Legislature necessary to the due extent and safety of a national bank, there are, in his judgment, weighty inducements to giving every reasonable facility to the measure. Not only the pretensions of that institution, from its original relation to the Government of the United States, and from the services it has rendered, are such as to claim a disposition favorable to it, if those who are interested in it are willing, on their part, to place it on a footing satisfactory to the Government, and equal to the purposes of a Bank of the United States, but its co-operation would materially accelerate the accomplishment of the great object; and the collision, which might otherwise arise, might, in a variety of ways, prove equally disagreeable and inju. rious. The incorporation or union here contemplated, may be effected in different modes, under the auspices of an act of the United States, if it shall be desired by the Bank of North America, upon terms which shall appear expedient to the Government.

All which is humbly submitted.

ALEXANDER HAMILTON,
Secretary of the Treasury.

TREASURY DEPARTMENT, December 13, 1790.

IN SENATE, December 23, 1790. On the reception of the copy of the said report, in the Senate, it was, on motion,

Ordered, That Messrs. Strong, of Massachusetts, Morris, of Pennsylvania, Schuyler, of New York, Butler, of South Carolina, and Ellsworth, of Connecticut, be a committee to take into consideration the report of the Secretary of the Treasury, upon the plan of a national bank, and to prepare a bill upon that subject.

On the 3d of January, 1791, Mr. Strong, from the said committee, reported a bill "to incorporate the subscribers to the bank of

The history of this bill, on its passage through the Senate, is to be learnt from one source only-the journals of that body. Its debates and proceedings were not then, as now, open to the public.

From the journals, however, we learn that, on the 6th, 10th, 11th, and 12th days of January, 1791, the bill was under consideration, and on the 13th of January it was agreed to fill the blank in the title with these words: "the United States of America."

A motion was made to limit the term of incorporation to seven years, and another to extend it to March 4th, 1815. On this latter motion, the yeas and nays were:

YEAS-Messrs. Bassett, Dickinson, Ellsworth, Elmer, Johnson, King, Langdon, Morris, Read, Schuyler, and Strong-11.

NAYS-Messrs. Butler, Few, Foster, Hawkins, Henry, Johnston, Izard, Maclay, Monroe, and Wingate-10.

So it passed in the affirmative.

A motion was made to subjoin to the last clause agreed to, as follows: "Provided, nevertheless, that nothing herein contained shall be construed to exclude the right of amending the same, on giving twelve months' notice, from and after the first of January, 1800."

On the 14th of January, the question being taken on this amendment, it passed in the negative.

On motion, it was agreed to reconsider the term of incorporation agreed to yesterday, and to limit it to the 4th of March, 1811.

On the 18th of January, the bill being under consideration, it was ordered that it be recommitted for further amendments; and Mr. Strong, from the committee to whom it was referred, reported sundry amendments; which were agreed to.

On the 19th, a motion being made to expunge the 12th section, to wit: "And be it further enacted, That no other bank shall be established, by any future law of the United States, during the continuance of the corporation hereby created, for which the faith of the United States is hereby pledged," it passed in the negative.

20th January, 1791. "On motion to reconsider the term of incorporation, and limit it to the year 1801, instead of 1811," the vote was as follows:

YEAS-Messrs. Butler, Few, Gunn, Hawkins, Izard, and Monroe-6.

NAYS-Messrs. Bassett, Dalton, Dickinson, Ellsworth, Elmer, Foster, Johnson, King, Langdon, Maclay, Morris, Read, Schuyler, Stanton, Strong, and Wingate-16. On motion to expunge the twelfth section, quoted above, it passed in the negative.

Whereupon,

Resolved, That this bill do pass; that the title of it be, " An act to incorporate the subscribers to the Bank of the United States."

The bill was then transmitted to the House of Representatives for concur

rence.

HOUSE OF REPRESENTATIVES.

The bill to incorporate the subscribers to the Bank of the United States was, on the 21st of January, read a first and second time, and committed to a Committee of the Whole House.

On the 31st, the House resolved itself into a Committee of the Whole, (Mr. Boudinot in the chair) and the bill was read by paragraphs; and no amendments being offered, the chairman reported it to the House, which voted that it should be read the third time on the succeeding day.

FEBRUARY 1, 1791.

After the bill was read the third time, Mr. Smith, of South Carolina, having moved that the bill be recommitted to a Committee of the Whole House, it was determined by ayes and noes, in the negative, and it was

Ordered, That the bill do lie on the table.

DEBATE ON THE MOTION OF MR. SMITH, OF SOUTH CAROLINA, TO RECOMMIT THE BILL.

FEBRUARY 1, 1791.

Mr. SMITH, of South Carolina, observed, that the bill being taken up rather unexpectedly yesterday, gentlemen did not appear prepared to discuss the subject; it, therefore, was suffered to be read in Committee of the Whole, and passed to the third reading, in his opinion rather informally, as the members were, thereby, deprived of giving their sentiments in the usual manner, on a bill of the greatest importance.

He thought it susceptible of various amendments. [The SPEAKER having observed that the bill, agreeable to the rules of the House, could not be amended without being recommitted,] Mr. Smith moved that the bill should be recommitted for the purpose of making sundry alterations and removing objections which he thought the bill liable to. He then enumerated several objections. Those who are to receive the subscriptions, he said, are not obliged to give any bonds for their fidelity. He thought the clause which excluded foreigners from voting by proxy exceptionable. And the time in which subscriptions are to be received, he thought too contracted.

Mr. JACKSON said he was in favor of the motion for a recommitment, but not for the reasons offered by the gentleman from South Carolina. He was, he said, opposed to the principles of the bill altogether. He then adverted to the situation of the United States, and observed that it was so different from that of Great Britain, at the time the bank was established in that country, that no reason in favor of the institution could be deduced from thence. He adverted to the argument arising from the facility which banks afford, of anticipating the public resources in cases of emergency. This idea of anticipations he reprobated, as tending to involve the country in debt, and an endless labyrinth of perplexities. This plan of a National Bank, said he, is calculated to benefit a small part of the United States-the mercantile interest only; the farmers, the yeomanry of the country, will derive no advantage from it, as the bank bills will not circulate to the extremities of the Union. He said he had never seen a bank bill in the State of Georgia; nor will they ever benefit the farmers of that State, or of New Hampshire. He urged that there was no necessity for instituting a new bank; there is one already established in this city, under the style of the Bank of North America. This proposed institution is an infringement of the charter of that bank, which cannot be justified. He urged the unconstitutionality of the plan; called it a monopoly, such an one as contravenes the spirit of the constitution-a monopoly of a very extraordinary nature-a monopoly of the public moneys for the benefit of the corporations to be created. He then read several passages from the Federalist, which, he said, were directly contrary to the assumptions of the power proposed by the bill. He hoped, therefore, it would be recommitted, and he could not help hoping, also, that it would be deferred to the next

session.

Mr. LAWRENCE observed, that the friends of the institution proposed, had been unjustly charged with precipitating the bill; but, he said, it had long been in the hands of the members; they have had time to consider it; the usual forms have been observed in its progress, thus far, and if those who are opposed to the bill did not see proper to come forward with their objections, it surely is their own fault, and the advocates of the bill are not justly chargeable with precipitancy. He then particularly replied to the objections offered by Mr. Smith, of South Carolina, and after considering them, said that those objections did not, in his opinion, constitute sufficient reasons to induce a recommitment of the bill. He then noticed the constitutional objections of Mr. Jackson, and said the Government of the United States is vested, by the constitution, with the power of borrowing money, and, in pursuance of this

idea, they have a right to create a capital by which they may, with greater facility, carry the powers of borrowing, on any emergency, into effect. Under the late confederation, the Pennsylvania bank, called the Bank of North America, was instituted. He presumed that it would not be controverted, that the present Government is vested with powers equal to those of the late confederation. He said that he had no doubt its operations would benefit, not only the centre, but the extremities also, of the Union. The commer cial, mechanical, and agricultural interests of the United States, are so combined, that one cannot be benefitted without benefitting the other. He concluded by observing that he thought the Legislature of the United States could not better answer the purposes of their appointment, than by passing this bill. He hoped, therefore, it would not be recommitted, but that it would now

pass.

Mr. LEE observed, that, having been confined by sickness, he was precluded from attending the House yesterday; but, sick as he was, had he supposed there was a prospect of a bill of such magnitude and importance passing, without a discussion of its principles, he certainly would have attended, and offered his objections to various parts of it, which he thought very exceptionable. He hoped, therefore, it would now be recommitted, that a bill which is so unequal and so partial may undergo a thorough discussion.

Mr. TUCKER was in favor of recommitment. He acknowledged that those who had their objections to the bill were certainly blameable for not coming forward with them yesterday. He then stated sundry objections to the bill. The time allowed to receive the subscriptions, he said, is too short, and will benefit those only in the vicinity of the bank. The clause which authorizes the loaning $100,000 to the Government, without express provision by law, he thought exceptionable, as the Executive will be able, by this means, to borrow, at any time, without being authorized, to almost any amount, of the bank. The loan of $2,000,000, by the United States, to the bank, he objected to, as diverting that sum from the particular object for which it was borrowed. There is no appropriation, said he, of the half yearly dividend of profits accruing to the United States, which, he observed, was a very essential defect. Mr. Tucker stated other objections as reasons for a recommitment.

Mr. WILLIAMSON was in favor of the recommitment, to give those who say they have not had an opportunity of offering their objections, time to do it; and if the motion is not agreed to, he should not give his vote for the bill. He then adverted to the objections deduced from the constitution, and explained the clause respecting monopolies, as referring altogether to commercial monopolies.

Mr. SHERMAN objected to the recommitment. He said, that, though the bill could not be amended without its being recommitted, yet it was open to discussion and objection, previous to taking a vote on its passing. He did not think the objections offered, afforded sufficient reasons for a recommitment. He replied to the observations offered by several gentlemen who had spoken in favor of the motion.

Mr. GERRY expressed his surprise at the observations of the gentlemen who had neglected to offer their objections to the bill before, and said it could only be imputed to their own neglect, and not to any precipitancy on the part of the friends of the bill. Mr. Gerry noticed the several objections which had been offered, and said, if nothing more important could be offered, he thought it unjustifiable in the House to go into a committee.

Mr. MADISON observed, that at this moment it was not of importance to determine how it has happened that the objections which several gentlemen now say they have to offer, against the bill, were not made at the proper time; it is sufficient for them, if the candor of the House should lead them now to recommit the bill, that, in a Committee of the Whole, they may have an opportunity to offer their objections.