MR. MADISON TO MR. INGERSOLL.
Montpelier, Feb. 2, 1831.
I have received your letter of January 21, asking
1. Is there any state power to make banks?
2. Is the federal power, as it has been exercised, or as proposed to be exercised by President Jackson, preferable?
The evil which produced the prohibitory clause in the Constitution of the United States, was the practice of the states in making bills of credit, and in some instances appraised property, "a legal tender." If the notes of state banks, therefore, whether chartered or unchartered, be made a legal tender, they are prohibited; if not made a legal tender, they do not fall within the prohibitory clause. The number of the "Federalist" referred to, was written with that view of the subject; and this, with probably other cotemporary expositions, and the uninterrupted practice of the states in creating and permitting banks without making their notes a legal tender, would seem to be a bar to the question, if it were not inexpedient now to agitate it.
A virtual and incidental enforcement of the depreciated notes of state banks, by their crowding out a sound medium, though a great evil, was not foreseen; and if it had been apprehended, it is questionable whether the Constitution of the United States, which had so many obstacles to encounter, would have ventured to guard against it by an additional provision. A virtual, and it is hoped, an adequate remedy, may hereafter be found in the refusal of state paper when debased, in any of the federal transactions, and in the control of the federal bank, this being itself controlled from suspending its specie payments by the public authority.
On the other question, I readily decide against the project recommended by the President. Reasons more than sufficient appear to have been presented to the public, in the reviews and other comments which it has called forth. How far a hint for it may have been taken taken from Mr. Jefferson, I know not. The kindred ideas of the latter may be seen in his Memoirs, &c., vol. iv., pages 196, 207, 526, and his view of the state banks, vol. iv., pages 199, 220.
There are sundry statutes of Virginia prohibiting the circulation of notes payable to bearer, whether issued by individuals or unchartered banks.
These observations, little new or important as they may be, would have been promptly furnished, but for an indisposition in which your letter found me, and which has not yet entirely left me. I hope this will find you in good health, and you have my best wishes for its continuance, and the addition of every other blessing.
Charles J. Ingersoll, Esq., Harrisburg, Pa.
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