The bill being on its passage,
Mr. Madison began with a general review of the advantages and disadvantages of banks. The former he stated to consist in, first, the aid they afford to merchants, who can thereby push their mercantile operations further with the same capital. Second, The aids to merchants in paying punctually the customs. Third, Aids to the Government in complying punctually with its engagements, when deficiencies or delays happen in the revenue. Fourth, In diminishing usury. Fifth, In saving the wear of gold and silver kept in the vaults, and represented by notes. Sixth, In facilitating occasional remittances from different places where notes happen to circulate.
The effect of the proposed Bank, in raising the value of stock, he thought had been greatly overrated. It would no doubt raise that of the stock subscribed into the Bank; but could have little effect on stock in general, as the interest on it would remain the same, and the quantity taken out of the market would be replaced by bank stock.
The principal disadvantages consisted in, first, banishing the precious metals, by substituting another medium to perform their office. This effect was inevitable. It was admitted by the most enlightened patrons of banks, particularly by Smith on the Wealth of Nations. The common answer to the objection was, that the money banished was only an exchange for something equally valuable that would be imported in return. He admitted the weight of this observation in general; but doubted whether, in the present habits of this country, the returns would not be in articles of no permanent use to it.
Second. Exposing the public and individuals to all the evils of a run on the Bank, which would be particularly calamitous in so great a country as this, and might happen from various causes, as false rumors, bad management of the institution, an unfavorable balance of trade from short crops, &c.
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. The aids to commerce could only be afforded at or very near the seat of the Bank. The same was true of aids to merchants in the payment of customs. Anticipations of the Government would also be most convenient at the different places where the interest of the debt was to be paid. The case in America was different from that in England: the interest there was all due at one place, and the genius of the Monarchy favored the concentration of wealth and influence at the metropolis.
He thought the plan liable to other objections. It did not make so good a bargain for the public as was due to its interests. The charter to the Bank of England had been granted for eleven years only, and was paid for by a loan to the Government on terms better than could be elsewhere got. Every renewal of the charter had, in like manner, been purchased; in some instances, at a very high price. The same had been done by the banks of Genoa, Naples, and other like banks of circulation. 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 evidences of debt would be excluded altogether.
In making these remarks on the merits of the bill, he had reserved to himself 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.
Is the power of establishing an incorporated bank among the powers vested by the constitution in the Legislature of the United States? This is the question to be examined.