Lesson 2: James Madison: The Second National Bank—Powers Not Specified in the Constitution

• Review the lesson plan. Locate and bookmark suggested materials and other useful websites. Download and print out documents you will use and duplicate copies as necessary for student viewing.
• Download the Master PDF. Print out and make an appropriate number of copies of any handouts you plan to use in class.

Activity 1. What Was the Problem?

Raising funds for national defense or for an army in time of war is much easier if a national bank exists. For example, a bank can facilitate the acquisition of loans. In 1811 Congress had allowed the charter of the First National Bank, which Madison considered unconstitutional, to elapse. The War of 1812 created a new need for the bank, but the question remained whether a national bank was constitutional.

Give your class background on the First and Second National Banks from the class text or another source, such as U.S. Presidents from the Miller Center at the University of Virginia. See "James Madison: Domestic Affairs," which offers the following information about the political situation, with some background on the development of the two-party system and the policies of Alexander Hamilton:

"Among the domestic issues that did stand somewhat apart from the war itself was the struggle over the rechartering of the Bank of the United States, whose charter was scheduled to terminate in 1812. The move to recharter the Bank met stiff opposition from three sources: "old" Republicans who viewed the Bank as unconstitutional and a stronghold of Hamiltonian power, anti-British Republicans who objected to the substantial holdings of Bank stock by Britons, and state banking interests opposed to the U.S. Bank's power to control the nation's financial business. When the anti-Bank forces killed the recharter drive, the U.S. confronted the British without the means to support war loans or to easily obtain government credit. In 1816, with Madison's support, the Second Bank was chartered with a twenty-year term. Madison's critics claimed that his support for the Bank revealed his pro-Federalist sympathies."

Activity 2. What Does the Constitution Say?

Review with the class the relevant sections of the U.S. Constitution, available on the EDSITEment resource The Avalon Project. These include:

• The Preamble
• Article 1, Section 7 (especially #1)
• Article 1, Section 8 (especially #1, 2, 7, 8, and 18)
• Article 1, Section 9 (especially #6)
• Article 6, Section 2
• Tenth Amendment

Teachers who would like more background before leading this discussion about the Constitution can consult a reference such as Understanding the Constitution (Peltason, Davis, Peltason, and Corwin. Wadsworth Publishing, 15th edition. May 22, 2000. ISBN: 0155071920)

Does the Constitution say anything specific that would relate to the incorporation of a national bank? (No). Does the power to raise revenue (Article 1, Section 7, #1) imply the ability to incorporate a bank? Does the ability to borrow money (Article 1, Section 8, #2) imply the ability to incorporate a bank? Does a national bank promote the "general welfare" (Article 1, Section 8)? Would a national bank tend to benefit one state or region more than another, such as a state with many businesses dealing in finance as opposed to an agricultural state (Article 1, Section 9)? Should incorporating banks be the responsibility of the states (Article 6, Section 2, Tenth Amendment)? Some opponents argued that a national bank would infringe on state banks, making them ineffective. Students should think about this issue as they learn more.

Activity 3. A Brief Look at the Documentary Record

Distribute the handout “Excerpts from the Debate in the House over the National Bank” on pages 3–5 of the PDF (see Preparing to Teach This Curriculum Unit for download instructions). In it, parts of the debate On the Establishment of a National Bank (from Elliot’s Debates, available on the EDSITEment-reviewed website American Memory) have been extracted, simplified, and written in first-person in the form of a script. There are eight roles. Assign the parts to student volunteers who will read the script aloud.

Discuss the debate. To what parts of the Constitution do the speeches refer? What arguments are used to oppose the bank? What arguments are used in support of the bank? What is mentioned in the debate about the usefulness of a national bank? What do students think about the constitutionality of a national bank? Remind students that a law that produces a positive result is not necessarily constitutional.

Activity 4. What Did Madison Have to Say about the First National Bank?

Read with the class "Madison's Complete Remarks on the Constitutionality of a National Bank." To what parts of the Constitution does Madison refer? What arguments does he use to oppose the bank? What does Madison say about the usefulness of a national bank? Does Madison offer any suggestions as to what could make the bank constitutional?

Activity 5. What Did Madison Have to Say about the Second National Bank?

As President, James Madison signed the act establishing the Second National Bank. In 1831, he reflected on the debates over the Second National Bank. About 15 years later, he was still defending himself against the charge that he had been inconsistent in supporting the second bank when he had objected so strongly to the first. Here is the core of his remarks:

"The charge of inconsistency between my objection to the constitutionality of such a bank in 1791, and my assent in 1817, turns on the question, how far legislative precedents, expounding the Constitution, ought to guide succeeding legislatures, and to overrule individual opinions.

"… It was in conformity with the view here taken of the respect due to deliberate and reiterated precedent, that the Bank of the United States, though on the original question held to be unconstitutional, received the executive signature in the year 1817. The act originally establishing a bank had undergone ample discussions in its passage through the several branches of the government. It had been carried into execution through a period of twenty years, with annual legislative recognition,--in one instance, indeed, with a positive ramification of it into a new state,--and with the entire acquiescence of all the local authorities, as well as of the nation at large; to all of which maybe added, a decreasing prospect of any change in the public opinion adverse to the constitutionality of such an institution. A veto from the executive, under these circumstances, with an admission of the expediency, and almost necessity, of the measure, would have been a defiance of all the obligations derived from a course of precedents amounting to the requisite evidence of the national judgment and intention …"

—From Madison Letter of June 25, 1831, from the Constitution Society

Madison asserted that legislation passed by Congress and carried out successfully with the approval of the people over a significant period of time sets a precedent of constitutional interpretation for future legislation. Once Congress had established a national bank that worked reasonably well for 20 years and was approved by the general public, all subsequent debates on creating related laws had to take that law's success into account.

Students having completed the lesson should be able to respond effectively to the following:

• How did supporters believe a national bank could benefit the nation?
• How did detractors believe a national bank could hurt the nation?
• What were the constitutional arguments in favor of and against a national bank?
• What was Madison's position on the Second National Bank?
• Is Madison's position on the Second National Bank reconcilable with his position on the First National Bank? Or do students agree with critics who suggested that Madison had been inconsistent?

In 1819, the Second National Bank was at the center of one of the most important Supreme Court cases, McCulloch v. Maryland. Read with the class the following excerpt from Chief Justice James Marshall's decision, in which he addressed two questions: Whether the National Bank was constitutional and whether the State of Maryland had the authority to tax the branch of bank located within that state:

"The power now contested was exercised by the first Congress elected under the present constitution. The bill for incorporating the bank of the United States did not steal upon an unsuspecting legislature, and pass unobserved. Its principle was completely understood, and was opposed with equal zeal and ability. After being resisted, first in the fair and open field of debate, and afterwards in the executive cabinet, with as much persevering talent as any measure has ever experienced, and being supported by arguments which convinced minds as pure and as intelligent as this country can boast, it became a law. The original act was permitted to expire; but a short experience of the embarrassments to which the refusal to revive it exposed the government, convinced those who were most prejudiced against the measure of its necessity, and induced the passage of the present law. It would require no ordinary share of intrepidity to assert that a measure adopted under these circumstances was a bold and plain usurpation, to which the constitution gave no countenance.”

—From McCulloch v. Maryland (1819), available via the Legal Information Institute at Cornell Law School

Ask students, working alone or in small groups, to set up a Venn Diagram with two intersecting circles.

One circle is for Marshall's arguments in the section of his opinion quoted above, the other for Madison's. In the intersection between the two circles put those arguments that are essentially the same for both men.

Selected EDSITEment Websites

• American Memory
  • Elliot's Debates -- On the Establishment of a National Bank
  • Elliot's Debates
  • Renewal of the Bank Charter, Debates in the House of Representatives, April 13, 1810
• U.S. Presidents
  • James Madison
• The Avalon Project
  • United States Constitution
    • Article 1, Section 7
    • Article 1, Section 8
    • Article 1, Section 9
    • Article 1, Section 10
    • Article 2, Section 2
    • Article 6, Section 2
    • Tenth Amendment