Andrew Jackson's Veto Message
Washington, July 10,1832
To the senate:

 

The bill " to modify and continue " the act, entitled, "an act to incorporate the subscribers, to the bank of the United States, "was presented to me on 4th July, instant.  Having considered it, with solemn regard, to the principles of the Constitution, which the day was calculated to inspire, and come to the conclusion that it not to become a law, I herewith return it to the senate, in which it originated, with my objections.

A bank of the United States is, in many respects, convenient for the Government and useful to the people. Entertaining this opinion, and deeply impressed, with the belief that some of the powers and privileges possessed, by the existing bank, are unauthorized by the Constitution, subversive to the rights of the States, and dangerous to the liberties of the people, I felt it my duty, at an early period of my administration, to call the attention of congress, to the practicability, of organizing an institution, combining all its advantages, and obviating these objections. I, sincerely, regret, that in the act before me, I can perceive none of those modifications, of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the constitution of our country.

The present corporate body, denominated the president, directors, and company of the bank of the United States, will have existed, at the time, this act is intended to take effect, twenty years. It enjoys an exclusive privilege of banking, under authority of the general Government, a monopoly of its favor and support, and, as a necessary consequence, almost, a monopoly of the of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it, in the original charter, by increasing the value of the stock, far above its par value, operated a gratuity of many millions, to the stockholders.

An apology may be found, for the failure to guard against this result, in the consideration that the effect of the original act of incorporation could not be certainly foreseen, at the time of its passage. The act, before me, proposes another gratuity, to the holders of the same stock, and, in many cases, the same men, of at least, seven millions more. This donation finds no apology in any uncertainty, as to the effect of the act. On all hands, it is conceded that its passage will increase, at least, twenty or thirty per cent more, the market price of the stock, subject to the payment of the annuity, of $200,000, per year, secured by the act, thus, adding, in a moment, one fourth to its par value.

It is not our own citizens, only, who are to receive the bounty of our Government. More than eight millions of the stock of this bank are held by foreigners, by this act the American Republic proposes virtually to make them, a present of some millions of dollars. For these gratuities to foreigners and some of our own opulent citizens the act secures no equivalent whatever. They are the certain gains the present stockholders under the operation of this act, after making full allowance for the payment of the bonus.

Every monopoly and all exclusive privileges are granted at the expense of the public, which ought to receive a fair equivalent. The many millions which this act proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earning of the American people.

It is due to them, therefore , if their Government sell monopolies and exclusive privileges, that they should at least exact for them as they are worth in the open market. The value of the monopoly in this case may be correctly ascertained. The twenty eight millions of stock would probably be at the advance of 50 per cent, and command in market at least $42,000,000, subject to the payment of the present bonus. The present value of the monopoly, therefore, is $17,000,000, and this the act proposes to sell for three millions, payable in fifteen annual installments of $200,000 each.

It is not conceivable how the present stockholders can have any claim to the special favor of the Government. The present corporation has enjoyed its monopoly during the period stipulated in the original contract.

If We must have such a corporation, why should not the Government sell out the whole stock and thus secure to the people the full market value of the privileges granted?

Why should not Congress create and sell twenty eight millions of stock, incorporating the purchasers with all the powers and privileges secure in this act and putting the premium upon the sales into the treasury?

But this act does not permit competition in the purchase of this monopoly.

It seems to be predicated on the erroneous idea that the present stockholders have a prescriptive right not only to the favor but to the bounty of the Government.
It appears that more than a fourth part of the stock is held by foreigners and the residue is held by a few hundred of our own citizens, chiefly of the richest class.
For their benefit does this act exclude the whole American people from competition in the purchase of this monopoly and dispose of it for many millions less than its worth. This seems the less excusable because some of our citizens not now stockholders petitioned that the door of competition might be opened, and offered to take a charter on terms much more favorable to the Government and Country.

But this proposition, although made by men whose aggregate wealth is believed to be equal to all the private stock in the existing bank, has been set aside, and the bounty of our Government is proposed to be again bestowed on the few who have been fortunate enough to secure the stock and at this moment wield the power of the existing institution.
I can not perceive the justice or policy of this course. If our Government must sell monopolies, it would seem its duty to take nothing less than their full value, and if gratuities must be made once in fifteen or twenty years let them not be bestowed on the subjects of a foreign Government, nor upon a designated and favored class of men in our country. It is but justice and good policy, as far as the nature of the case will admit, to confine our favors to our own fellow citizens, and let each in his own term enjoy an opportunity to profit by our bounty. In the bearings of the act before me upon these points I find ample reasons why it should not become law.

 

It has been urged as an argument in favor of rechartering the present bank that the calling in its loans will produce great embarrassment and distress. The time allowed to close its concerns is ample, and if it has been well managed its pressures will be light, and heavy only its management has been bad, if theretofore, it shall produce distress, the fault will be its own and it would furnish a reason against renewing a power which has been so obviously abused.
But will there ever be a time when this reason will be less powerful?
To acknowledge its force is to admit that the bank ought to be perpetual, and as a consequence the present stockholders and those inheriting their rights as successors to established a privileged order, clothed both with great political power and enjoying immense pecuniary advantages from their connection with the Government.

 

The modifications of the existing charter proposed by this act are not such, in my view, as make it consistent with the rights of the States or the liberties of the people. The qualification of the right of the bank to hold real estate, the limitation of its power to establish branches, and the power reserved to Congress to forbid the circulation of small notes are restrictions comparatively of little value or importance. All the objectionable principles of the existing corporation, and most of its odious feature, are retained without alleviation.

The fourth section provides " that the notes or bills of the said corporation, although the same be, on the faces thereof, respectively made payable at one place only, shall nevertheless be received by said corporation at the bank or at any of the offices of discount and deposit thereof if tendered in liquidation or payment of any balance or balances due to said corporation or to such office of discount and deposit from any other incorporated bank."
This provision secures to the State banks a legal privilege in the bank of the United States which is withheld from all private citizens. If a State bank in Philadelphia owe the bank of the United States and have notes issued by the St. Louis branch it can pay the debt with those notes, but if a merchant, mechanic, or other private citizen be in like circumstances he can not by law pay his debt with those notes, but must sell them at a discount or send them to St. Louis to be cashed.
This boon conceded to the State banks, though not unjust in itself, is most odious because it does not measure out equal justice to the high and the low, the rich and the poor.
To the extent of its practical effect it is a bond of union among the banking establishments of the Nation, erecting them into an interest separate from that of the people, and its necessary tendency is to unite the bank of the United States and the State banks in any measure which may be thought conducive to their common interest.

 

The ninth section of the act recognizes principles of worse tendency than any other provision of the present charter.
It enacts that " the cashier of the bank shall annually report to the secretary of the treasury the names of all stock holders who are not residents citizens of the United States, and on application of the treasurer of any State shall make out and transmit to such treasurer a list of stockholders residing in or are citizens of such State, with the amount of stock owned by each."
Although this provision, taken in connection with a decision of the supreme court, surrenders by its silence, the right of the State to tax the banking institution created by this corporation under the name of branches throughout the union, it is evidently intended to be construed as a concession of their right to tax that portion of the stock, which may be held by their citizens and residents.
In this light, if the act becomes law, it will be understood by the States, who will probably proceed to levy a tax equal to that paid on the stock of banks incorporated by themselves.  In some States that tax is now 1%, either on the capital or on the shares, and that may be assumed as the amount which all citizens or resident stockholders would be taxed under the operation of this act.
As it is only the stock held in the States and not that employed within them which would be subject to taxation, and as the names of foreign stockholders are not to be reported to the treasurer of the United States, it is obvious that the stocks held by them will be exempt from this burden. Their annual profits will therefore be 1 per cent more than the citizen stockholders and as the annual dividends of the bank may be safely estimated at 7 per cent, the stock will be worth 10 or 15 per cent more to foreigners than to citizens of the United States.
To appreciate the effects which this state of things will produce, we must take brief review of the operations and present condition of the bank of the United States.

 

By documents submitted to congress at the present session, it appears that on the first of January, 1832, of the twenty-eight millions of private stock in the corporation, $8,405,500 were held by foreigners, mostly of Great Britain, the amount of stock held in the nine Western and Southwestern States is $140,200, and in the four Southern States is about $13,522,000.
The profits of the bank in 1831, as shown in the statement to Congress, were about $3,455,598; of this there accrued in the nine Western States about $1,640,048; in the four Southern States about $352,507, and in the middle and Eastern States $1,463,041. As little stock is held in the West, it is obvious that the debt of the people in that section to the bank is principally a debt to the Eastern and foreign stockholders; that the interest they pay upon it is carried into the Eastern States and into Europe, and that it is a burden upon their industry and a drain of their currency, which no country can bear without inconvenience and occasional distress.
To meet this burden and equalize the exchange operations of the bank, the amount of specie drawn from those States through its branches within the last two years, as shown by its official reports, was about $6,000,000.
More than half a million of this amount does not stop in the Eastern States, but passes on to Europe to pay the dividends of the foreign stockholder. In the principle of taxation recognized by this act the Western States find no adequate compensation for this perpetual burden on their industry and drain of their currency.
The branch bank at Mobile made last year $95,140, yet under the provisions of this act the State of Alabama can raise no revenue from these profitable operations, because not a share of the stock is held by any of her citizens.
Mississippi and Missouri are in the same condition in relation to the branches at Natchez and St. Louis, and such, in a greater or less degree, is the condition of every Western State.
The tendency of the plan of taxation which this act proposes will be to place the whole United States in the same relation to foreign countries, which the Western States now bear to the Eastern. When by a tax on resident stockholders the stock of this bank is made worth 10 to 15 per cent more to foreigners than to residents, most of it will inevitably leave the Country.

Thus will this provision in its practicable effect deprive the Eastern as well as the Southern and Western States of the means of raising revenue from the extension of business and great profits of this institution. It will make the American people debtors to aliens in nearly the whole amount due this bank, and send across the Atlantic from two to five millions of specie every year to pay the bank dividends.

In another of its bearings this provision is fraught with danger; of the twenty-five directors of this bank five are chosen by the Government and twenty by the citizen, stockholders. From all voice in the elections the foreign stockholders are excluded by the charter. In proportion , therefore, as the stock is transferred to foreign holders the extent of suffrage in the choice of directors is curtailed. Already, there is almost a third of the stock in foreign hands and not represented in elections. It is constantly passing out of the country, and this act will accelerate its departure.
The entire control of the institution would necessarily fall into the hands of a few citizen stockholders, and the ease with which the object would be accomplished would be a temptation to designing men to secure that control in their own hands by monopolizing the remaining stock. There is danger that a president and directors would then be able to elect themselves from year to year, and without responsibility or control manage the whole concerns of the bank during the existence of its charter.
It is easy to conceive that great evils to our country and its institutions might flow from such a concentration of power in the hands of a few irresponsible to the people.

 

Is there no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?
The president of the bank has told us that most of the State banks exist by its forbearance. Should its influence become concentrated, as it may under the operation of such an act as this, in the hands of the self- elected directory, whose interests are identified with those of foreign stockholders, will there not be cause to tremble for the purity of our elections in peace and for the independence of our country in war?
Their power would be great whenever they might choose to exert it; but, if this monopoly were regularly renewed every fifteen or twenty years on terms proposed by themselves, they might seldom in peace put forth their strength to influence elections or control the affairs of the nation. But, if any private citizen or public functionary should interpose to curtail its powers or prevent a renewal of its privileges, it can not be doubted that he would be made to feel its influence.

 

Should the stock of the bank principally pass into the hands of the subjects of a foreign country, and We should unfortunately become involved in a war with that country, what would be our condition?
Of the course, which be pursued by a bank almost wholly-owned by the subjects of a foreign power, and managed by those interests, if not affections, would run in the same direction, there can be no doubt. All its operations, within, would be in aid of the hostile fleets and armies without.
Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence; it would be more formidable and dangerous than the naval and military power of the enemy.

 

If We must have a bank with private stockholders, every consideration of sound policy, and every impulse of American feeling, admonishes that it should be purely American. Its stockholders should be composed exclusively of our own citizens, who at least ought to be friendly to our Government and willing to support it in times of difficulty and danger. So abundant is domestic capital that competition in subscribing for the stock of local banks has recently led almost to riots.
To a bank exclusively of American stockholders, possessing the powers and privileges granted by this act, subscriptions for $200,000,000 could be readily obtained. Instead of sending abroad the stock of the bank, in which the Government must deposit its funds, and on which it must rely to sustain its credit in times of emergency, it would rather seem to be expedient to prohibit its sale to aliens under penalty of absolute forfeiture.

 

It is maintained by the advocates of the bank that its constitutionality, in all its features, ought to be considered settled by precedent and by the decision of the supreme court.
To this conclusion I can not assent. Mere precedent is a dangerous source of authority, and should not be regarded as deciding questions of Constitutional power, except where the acquiescence of the people, and the States, can be considered as well settled.
So far from this being the case on this subject, an argument against the bank might be based on precedent.
One Congress in 1791, decided in favor of a bank; another in 1811, decided against it. One Congress, in 1815, decided against a bank; in 1816, decided in its favor. Prior to the present Congress, therefore, the precedents drawn from that source were equal.
If We resort to the States, the expressions of legislative, judicial, and executive opinions, against the bank, have been probably to those in its favor as 4 to 1. There is nothing in precedent, therefore, which, if its authority were admitted, ought to weigh in favor of the act before me.

 

If the opinion of the supreme court covered the whole ground of this act, it ought not to control the coordinate authorities of this Government. The Congress, the Executive, and the court must, each for itself, be guided by its own opinion of the Constitution.
Each Public Officer who takes an oath to support the Constitution swears that he will support it, as he understands it, and not as it is understood by others. It is as much the duty of the house of Representatives, of the Senate, and of the President, to decide upon the Constitutionality of any bill or resolution, which may be presented to them for passage or approval, as it is of the supreme judges, when it may be brought before them for judicial decision. The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both. The authority of the supreme court must not, therefore, be permitted to control the Congress. or the Executive, when acting in their legislative capacities, but to have only such influence as the force of their reasoning may deserve.

But in the case relied upon, the supreme court have not decided that all the features of this corporation are compatible with the Constitution. It is true that the court have said that the law incorporating the bank is a Constitutional exercise of power by Congress;  but taking into view the whole opinion of the court and the reasoning by which they have come to that conclusion, I understand them to have decided that inasmuch as a bank is an appropriate means for carrying into effect the enumerated powers of the general Government, therefore the law incorporating it is in accordance with that provision of the Constitution which declares that Congress shall have power to make all laws which shall be necessary and proper for carrying those powers into execution.
"Having satisfied themselves that the word" necessary" in the Constitution means " needful," "requisite," "essential," " conducive to," and that a bank is a convenient, a useful, and essential instrument in the prosecution of the Governments " fiscal operations " they conclude that to use one must be within the discretion of Congress" and that " the act to incorporate the bank of the United States is a law made in pursuance of the Constitution;" " but ", "say they," " where the law is not prohibited and is really calculated to effect any of the objects entrusted to the Government, to undertake here to inquire into the degree of its necessity would be to pass the line which circumscribes the judicial department and to tread on legislative ground."

 

The principle here affirmed is that the" degree of its necessity," involving all the details of a banking institution, is a question exclusively for legislative consideration. A bank is constitutional, but it is the province of the legislature to determine whether this or that particular power, privilege, or exemption is" necessary and proper " to enable the bank to discharge its duties to the Government, and from their decision there is no appeal to the courts of justice. Under the decision of the supreme court, therefore, it is the exclusive province of Congress and the President to decide whether the particular features of this act are necessary and proper in order to enabled the bank to perform conveniently and efficiently the public duties assigned to it as a fiscal agent, and therefore Constitutional, or unnecessary and improper, and therefore unconstitutional.

 

Without commenting on the general principle affirmed by the Supreme Court, let us examine the details of this act, in accordance with the rule of legislative action, which they have laid down. It will be found that many of the powers and privileges conferred on it can not be supposed necessary for the purpose for which it is proposed to be created, and are not, therefore, means, necessary to attain the end in view, and consequently not justified by the Constitution.

 

The original act of incorporation, section 21, enacts " 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: provided Congress may renew existing charters for banks within the District of Columbia not increasing the capital thereof, and may also establish any other bank or banks in said district with capitals not exceeding in the whole $6,000,000, if they shall deem it expedient. "
This provision is continued in force, by the act before me, fifteen years from the third of March, 1836.

 

If Congress possesses the power to establish one bank, they had power to establish more than one, if in their opinion two or more banks had been" necessary" to facilitate the execution of the powers delegated to them in the Constitution. If they possessed the power to establish a second bank, it was a power derived from the Constitution to be exercised from time to time, and at any time when the interest of the country or the emergencies of the Government might make it expedient. It was possessed by one Congress as well as another, and by all Congresses alike, and alike at every session. But the congress of 1816 have taken it away from their successors for twenty years, and the congress of 1832 proposes to abolish it for fifteen years more.
It can not be" necessary or proper " for Congress to barter away or divest themselves of any of the powers vested in them by the Constitution to be exercised for the public good. It is not " necessary " to the efficiency of the bank, nor is it " proper " in relation to themselves and their successors. They may properly use the discretion vested in them, but they may not limit the discretion of their successors. This restriction on themselves and grant of a monopoly to the bank is therefore unconstitutional.

 

In another point of view this provision is a palpable attempt to amend the Constitution by an act of legislation. The Constitution declares that the " Congress shall have power to exercise exclusive legislation in all cases whatsoever" over the district