Saturday, August 4, 2012

Ron Paul's End the Fed 6: Is a National Bank Unconstitutional?

For my write-up today on Ron Paul's End the Fed, I'll talk some about Paul's discussion of the 1819 Supreme Court decision, McCulloch v. Maryland.  On page 167, Paul says the following:

"The War of 1812, with its high debts and extravagant spending, caused financial problems and deficits bad enough that we again faced the choice between centralization and liquidation...Madison, in 1816, created the Second Bank of the United States.  The constitutional argument over this bank in 1819 was of great significance...One side argued, as Jefferson did, that the Constitution gave no specific authority to Congress to establish a central bank.  The other side, the majority in the case, amazingly claimed that Congress had all the powers it wanted except for those specifically denied by the Constitution.  The whole idea of Article I, Section 8, and the Tenth Amendment was totally ignored.  If they are correct in this interpretation, there would have been no purpose whatsoever in putting these provisions in the Constitution."

You can read more about McCulloch v. Maryland here.  Some relevant passages from the Constitution are the Necessary and Proper Clause, and the Tenth Amendment.

The Necessary and Proper Clause is in Article I, Section 8 of the U.S. Constitution, and it states: "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."

And the Tenth Amendment states: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

I can see Ron Paul's point that the Constitution only allows the U.S. Government to have the powers that are enumerated by the Constitution, for why else would the Constitution enumerate those powers?  But I don't think that a central bank violates the Constitution, but rather is in the spirit of the Necessary and Proper Clause.  Article I, Section 8 gives Congress the power to pay debts, to borrow money, and to determine the value of money.  If Congress wants to establish a national bank to do these sorts of things, how's that unconstitutional? It's fulfilling its constitutional role!

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