ArtI.S8.C18.1.3 Chartering of Banks

Article I, Section 8, Clause 18:

[The Congress shall have Power . . .] To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

As an appropriate means for executing the great powers, to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies . . . , Congress may incorporate banks and kindred institutions. 1 Moreover, it may confer upon them private powers, which, standing alone, have no relation to the functions of the Federal Government, if those privileges are essential to the effective operation of such corporations. 2 Where necessary to meet the competition of state banks, Congress may authorize national banks to perform fiduciary functions, even though, apart from the competitive situation, federal instrumentalities might not be permitted to engage in such business. 3 The Court will not undertake to assess the relative importance of the public and private functions of a financial institution Congress has seen fit to create. It sustained the act setting up the Federal Farm Loan Banks to provide funds for mortgage loans on agricultural land against the contention that the right of the Secretary of the Treasury, which he had not exercised, to use these banks as depositories of public funds, was merely a pretext for chartering those banks for private purposes. 4

Footnotes

  1.  McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 407 (1819).
  2.  Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 862 (1824). See also Pittman v. Home Owners' Corp., 308 U.S. 21 (1939).
  3.  First National Bank v. Follows ex rel. Union Trust Co., 244 U.S. 416 (1917); Missouri ex rel. Burnes Nat'l Bank v. Duncan, 265 U.S. 17 (1924).
  4.  Smith v. Kansas City Title Co., 255 U.S. 180 (1921).