Cornell University Library The original of tliis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924030065027 Cornell University Library HD2754.U5 W67 Should there be a federal incorporation olin 3 1924 030 065 027 PRSISXINTZ}]] TO THK UIBBABf OF THE OOKNELL UNIVERSITY WITH THE COIUPLIMBINTS OF THF PUBLISHER fl A.iTjn-b ii/vr/cj- Should there be a Federal Incorpora- tion Law for Commercial Corporations ? KEING AN ADDRESS DELIVERED BEFORE THE ANNUAL MEETINGS OF THE COMMERCIAL LAW LEAGUE OF AMERICA, AT WEST BADEN, IND., JULY 2b, 1904, AND THE STATE BOARD OF COMMISSIONERS FOR PROMOTING UNIFORM LEGISLATION IN THE UNITED STATES, AT ST. LOUIS, SEPTEMBER 29, 1904. BY HORACE L WILGUS GEORGE WAHR, Publisher ANN ARBOR, MICHIGAN, Copyrighted 1905, by Horace L. Wilgus SHOULD THERE BE A FEDERAL INCORPORA- TION LAW FOR COMMERCIAL COR- PORATIONS ?i I have been asked to talk to you upon the subject : Should there be a Federal Incorporation Law for Commer- cial Corporations? Of course, the National government must approach the matter from the side of interstate com- merce, and the answer depends in some measure upon the character of such a law; yet it seems t6 me almost any reasonable law would be an improvement over existing con- ditions. Assuming, therefore, that a fair law could be obtained, after considerable study I am in favor of such a policy, and mainly for two reasons : Such a law would be beneficial to the business interests of the country ; and such a law is necessary to the proper regulation of interstate coni- merce. I believe, further, that the Federal government has the power to enact such a law, without constitutional amend- ment, and that such a policy would not only be a wise one, ^ The Hon. Henry W. Palmer, Member of Congress from Pennsylvania, introduced into the House of Representatives, at the last session, a bill (58 Cong. H. R. 66, Nov. 9, 1903) for a National Incorporation Law. The writer also prepared a somewhat more elaborate bill, along the lines indicated in this paper, which was printed in full in the Michigan Law Review, April, 1904. Bibliography : For those interested in the matters discussed in this paper, the following short bibliography is given: Official papers: Arguments of Ham- ilton, Jeiferson, and Randolph; the speeches of Madison, Crawford, Clay and Calhoun ; the reports of Hamilton, Gallatin, and Dallas, and House and Sen- ate Committees, on a National Bank, all given in Clarke & Hall's Documentary Hist, of U. S. Bank (see index) ; Wilson's Arguments on Bank of N. A., i Wilson's Works, p. 558; Gallatin's Report on Internal Improvements, 1808, Am. State Papers, Miscellaneous; Reports Committees on Interstate Commerce, 1868 (Serial No. 1352, Doc. No. 57); 1874 (Windom, 1589-307); i87'8, Reagan, 1822-245); 1886 (CuUom, 2356-46); Bills and Debates in Congress relating to Trusts, 1885-1902, 57 Cong. 2d Sess., Sen. Doc. 147; Industrial Commission Reports, (index, and vol. 19:595-722); Richardson's Messages of the Presi- dents (index). Cases of special importance: McCulloch v. Maryland, 4 Wheat. 316; Os- born V. Bank, 9 Wheat. 738; Luxton ,. N. R. Bridge Co., 153 U. S. 525; Gib- bons V. Ogden, 9 Wheat, i; Lottery Cases, 188 U. S. 321; U. S. v. E. C. Knight Co., 156 U. S. I ; Addystone Pipe Co. v. U. S., 175 U. S. 211; Northern Securities Co. v. U. S. 193 U. S. 197- Magasine references: Albany L. J. 64:7, 170, 379. Amer. Ec. Assn. Pub. 2:236. Am. J. Sociol. 9:208. Am. Lawyer 8:111; 11:61. Am. Law Rev. — 4 — but one in complete accord with the fundamental ideas of our government. I shall therefore consider the utility of such a law ; the necessity for enacting such a law ; the power to enact such law ; the policy of such a step. I. UTILITY. It has been said that ninety per cent of our business is done through the agency of corporations ; whether this is true or not we all know that the vast bulk of the interstate and foreign commerce is carried on by corporations; our internal commerce amounts to $22,000,000,000 yearly, and is not only nine times that of our foreign, but in fact is equal to the entire international commerce of the world f as to our interstate commerce, we have in fact become one nation, though in the legal rules controlling it we are forty-eight independent states and territories. Our Federal government was formed largely to secure uniformity of commercial reg- ulations, both interstate and foreign ; for this purpose it was given the power to regulate commerce ; to establish post- offices and post roads ; to establish uniform rules on the sub- ject of bankruptcy; to coin money and regulate the value thereof in order to insure uniformity. It is unnecessary to argue the utility of uniformity in commercial regulations, to a body of lawyers, for it is the lawyers who have urged and secured such uniformity in the case of bankruptcies' 21:258; 24:25; 29:59, 889; 33:514; 34:186; 37:703; 38:209. Am. Legal News, Sept., 1904. Arena, 22:191, 412; 28:94, 449- Cent. L. J. 54:205: 55:144; 56:241, 349; 57:25, 145, 203; 58,241. Chautauquan, 36:3, 230. Chi. L. J. 19:379. 739- Chi. L. N. 35:213. Columbia L. R. 3:168 et seq., 4:83, 315. Com & F. C, July 2, 1904. Cosmopolitan, 36: Editorial. Forum, 11:524; 17:207; 18:704. Green Bag, 14:460; 16:80, 258. Harv. L. R. 4:221; 16:79, 476, 539; 17:20, 41, 83, 146, 151, 156, 217, 248, 289, 474, 533. Journal Poht. Ec. 12:79. Mich. L. R., 1:251; 2:358, 501. Nation, 77:337. Natl. Corp. Rep., 25:418; 27:376; 29:167 et seq. North Am. R., 175:877; 178:499. Nineteenth Cent., 35:1033. Outlook, 72:880. Polit. Sc. Q., 12:622; 18:1. 462. 599; 19:50, 376. Quart. J. Eg., 2:162. Rev. of Rev., 26:467; 27:266. Yale L. J. 11:273, 3S7; 12:117; 13:57, 578. Bar Association Reports: Ala., 1890:142. American, 1887:332: 1888:247. Illinois, 1888:41; 1890:67. New York, 4:207. Tenn., 1887:175. W. \a., 1895:140. Bibliographies of Trusts are published by Library of Cong. (Griffin), also in 9 Indus. Com. R. 1080; and 13 lb. 947. - Address Mr. O. P. Austin, Chief Bureau Statistics, Rochester, N. Y., Jany. 7, 1904; N. Y. Independent, Oct. 20, 1904, p. 936. 'Eastman, S. C, Bankruptcy, Preface; J. W. Olmstead, 15 Harv. L. R. S27. — 5 — and negotiable instruments." The questions relating to the business corporation, doing an interstate business, are of a similar kind. Uniformity here would be beneficial both to the corporation and to the one dealing with it. The charter of the corporation is a law of the state cre- ating it, and whoever deals with it is conclusively presumed to know its contents so far as they may affect any contract made with it ; for ignorance of the law excuses no one.^ If one buys a ticket from New York to San Francisco, his contract rights vary with the charters of the half dozen roads over which he passes ; if he contracts for steel in any state of the Union, his rights probably depend upon the New Jersey law ; if he contracts to buy oil, his rights will depend not wholly on the law of the state where the transaction occurs, but upon the provisions of the Standard Oil Com- pany's charter ; if he rides over the Southern Pacific Rail- road in California, his rights are measured largely by the laws of Kentucky f at least seven different views exist as to the extent of the duty to receive and transport freight safely from state to state,' without considering any qualifying char- ter provisions ; if a foreign corporation does business in a state without complying with the laws as to filing its articles or designating an agent upon whom service of summons may be made, the contract is valid as to both parties in some states, void as to both parties in others, — unenforcible by the corporation but enforcible by the other party in still other states;^ if one becomes an officer or director in foreign corporations, his rights, duties and liabilities will be as various as the laws of the states where formed, though they are engaged in the same busi- * L. D. Brewster, Am. Bar Assn. 1898, p. 315; J. W. Eaton, 21 N. Y. Bar Assn., 100; Huffcut's Neg. Ins., p. 117 et seq. ^ See Wilgus, Cases Corporations, Vol. i, p. 406; Vol. 2, p. 1179, 1209. Central Trans. Co. v. Pullman Pal. Car Co., 139 U. b. 24; Lucas v. White Line Trans. Co., 70 la. 541, 59 Am. R. 449; In re Assignment Mut. Ins. Co. 107 la. 143, 70 Am. St. R. 149, note 156. Elliott, § 212-3; Morawetz, § 591-2; Taylor §264; 5 Thompson §5973; 7 lb. §8309. " This is because these corporations are incorporated in the state indicated. ^ See article by E. P. Prentice, Origin of Right to Engage in Interstate Commerce, Harv. L. R. Nov. 1903, p. 32. s See 2 Wilgus, Corp. Cas. 1510, note 1512; Marshall, Corp. p. 1186 et seq.; Cook, Corp. 5th Ed. §§ 696-700, p. 1677. — 6 — ness;° if one is a shareholder in a Missouri corporation he may be called on to pay up his stock in full though it may be contrary to his contract, and to his principles, practices, and the law elsewhere.^" He is likely to find his shares taxed to him, and to the corporation also in some form or other, where it is incorporated ;^^ he will find, too, if he takes shares in some state-created corporations, that the directors can do nearly everything they are forbidden to do by the law of the state where he lives ;^^ if he holds stock in a California cor- poration he can inspect the books even for an im- proper purpose -j^^ while in others he cannot do so without the consent of directors." In some states the original holder of shares is relieved from liability on the shares by the transfer thereof ; in others he continues liable for debts incurred while a shareholder ; in others not only for these, but for future debts contracted within a year afterwards, or upon default of the transferee. ^^ If he is a creditor of a foreign corporation, he may find the directors, contrary to the law of his own state, have preferred themselves as creditors to his exclusion,^" or the shareholders have paid for their shares in grossly overvalued property, without ** Cook, Corp. §§704-712; 2 Wilgus, Corp. Cas. 1727 et seq.; Note 96 Am. St. R. 972, 989. ^^ Van Cleve v. Berkey, 143 Mo. 109, 42 L. R. A. 593, 2 Wilgus, Corp. Cas. 1953- ^^ Farrington v. Tennessee, 95 U. S. 679, 2 Wilgus, Corp. Cas. 1370; Tap- pan V. Merchants Bank, 86 U. S. 490, '• Wilgus, Corp. Cas. 1399; Corporation Tax Laws, part ii, Rept. Mass. Com. on Corp. Laws 1903. '^ For example, the New Jersey Law, § 8, par. 7, enables three incorpor- atoT3 (who may be mere dummies of the future directors) to create any power, with very few exceptions, and confer it upon the directors. Under this law, the U. S. Steel Corp. was organized with the maximum power given to direct- ors, and the minimum left to shareholders. See Wilgus, U. S. Steel Corp. pp. 53-7. 70-73- ^^ Johnson v. Langdon, 135 Cal. 626, 67 Pac. 1050, 87 Am. St. R. 156. ^* The U. S. Steel Corp. charter, Art. vii, provides that "the board of directors from time to time shall determine whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the corporation, or any of them, shall be open to the inspection of the stockholders," — Wilgus, U. S. Steel Corp. p. 53, 136. "" See the provisions of the statutes of the various states, collected in the Report of the Massachusetts Committee on Corp. Laws, 1903, pp. 194-9, show- ing ten different classes of provisions on this subject. i» As in Alabama, see Corey v. Wadsworth, 118 Ala. 488, 2 Wilgus, Corp. Cas. 1836, note 1841. — 7 — liability unless actual fraud is shown." All the foregoing, or nearly all, — all questions relating to the organization, amendment, internal control, rights, duties and liabilities of members and officers, the issue, payment and transfer of shares, duration, dissolution, and winding up, — affecting dealers, members and officers throughout the country, are determined by the law of the state where the corporation is formed, and may differ materially from what such dealers, members, and officers suppose is the law judging from that of their own state. ^^ All are susceptible of uniformity under one general law, which with a little care could embody the desirable points of each. How much confusion and uncer- tainty would thereby be avoided and with how much less effort and anxiety could business be done. The corporation, too, is often unduly hampered and greatly inconvenienced by conflicting state regulations. Its property and shares are taxed in as many ways as there are states in which it does business ; here the state officer values its property ; there, the local authorities do ; here it is taxed on its paid up stock ; there on its authorized stock ; there again on its stock and bonded debt; and elsewhere on its gross receipts ; in still other places on its net earnings, and elsewhere it pays specific taxes ; here it pays the same as domestic corporations; there more.^'* Its franchises and in- tangible property are not infrequently subject to double, triple or quadruple taxation, and under the decision in the Horn Silver Mining case'-" it is within the power of each state in which a foreign corporation does business to tax it, under the form of a license fee, upon the whole of its capital stock, and not merely on that part used in the state. In Ohio, ^^ See cases collected and classified in State Trust Co. v. Turner, 1 1 1 la. 664, 82 N. W. Rep. 1029, S3 L. R. A. 136, 2 Wilgus Corp, Cas. 1943. Compare' also Siiields v. Hobart, 172 iVIo. 491, 95 Am. St. R. 529, 72 S. W. 669, and Hall V. Henderson, 134 Ala. 455, 63 L. R. A. 673. "Marshall, Corp. §§435, 436; Cook, Corp. §§696-700; 2 Wilgus, Corp. Cas. 1480 et seq.; North State Copper & Gold Min. Co. v. Field, 64 Md. 151, 2 Wilgus, Corp. Cas. i.'iig; Guilford v. W. U. Tel. Co. 59 Minn. 332, 50 Am. St. R. 407, 2 Wilgus, Corp Cas. 1321. '° See Corporation Tax Laws of the States, Mass. Rept. Com. on Corp. Laws, 1903, pp. 206, 242-261, 295; 9 Indus. Com. R. 1006 et seq., 19 lb. 1058 et seq.; 2 Wilgus, Corp. Cas. 1370-1404. 2» People V. Horn Silver Min. Co., 105 N. Y. 76, 143 U. S. 305; 2 Thomp- son, Corp. §2900; 6 lb. §§8101, 8102. Indiana and elsewhere express horses and wagons are worth many times as much for taxation as the same things would be if owned by the farmers.-^ In one state in which corpor- ations do business they must designate a certain ofificer upon whom summons may be served ; in another, appoint the Sec- retary of State for this purpose; in another, agree not to remove a suit to the Federal court ; in another, pay a license fee, if not engaged in interstate commerce, for the privilege of doing business in the state, much higher than domestic corporations do ; in another, file their articles of agreement and become domestic corporations before they can even sue in the state;"- by doing this, however, their power to con- solidate with another company, or to hold stock therein, or to hold their own shares, may be the opposite on these points in the two states ;^^ so, too, the rights and liabilities of the shareholders in the two states may be seriously affected ; stockholders not originally liable when the corpor- ation was formed may find themselves individually liable in other states for the wages of employees, or even for the double or proportional statutory liability.^* Also as to reports and police supervision, these will be as various as the states, or nearh- so ; one state requires no report, and another requires even business secrets to be divulged; some make the officers liable for all the debts if false statements are knowingly made ; others make them liable to a fine and imprisonment.^^ If they violate anti-trust acts in some states it is called a tortious conspiracy; in others, a misdemeanor; in some states the officers are required annually to make affidavit that their corporation is not a member of any illegal com- bination ; in some states the agent's acts are prima facie ^^ Adams Express Co. v. Ohio, 165 U. S. 194, 166 U. S. 185, 2 Wilgus, Corp. Cas. 1381. ^'' Clark & Marshall, Corp., Vol. 3, §§ 844-9; 6 Thompson, Corp. §§ 7928-70. 23 Noyes' Incorporate Relations, §§99-107; i Thompson, Corp, §§319-23; 2 Clark & M., Corp. pp. 1094-1100; Marshall, Corp. pp. 491 et seq. ; Taylor, Corp. (5th Ed.) §§403-9; I Wilgus, Corp. Cas. 988; Note 89 Am. St. R. 604. ^■* Pinney v. Nelson, 183 U. S. 144; Staten Island R. R. v. Hinchliffe, 170 iN. Y. 473; Cook, Corp, 5th Ed., §213. -^ Compare the laws of New Jersey and Pennsylvania as to reports required from corporations for purposes of taxation; \Vilgus, U. S. Steel Corp. 69; Cook, Corp. 3d Ed., Ch. LVI. - 9 — proof of corporate guilt ; penalties for officers vary from thirty days' to ten years' imprisonment ; individual fines from $50 to $5,000; corporate fines, from $50 to 20 per cent of the capital, and penalty of forfeiture or ouster from the state ; in some states the prosecuting attorney gets part of the fine ; in others, the informer, and the state or county the balance ; in some of the states contracts are void ; in others not ; in some states a buyer of goods from such a combina- tion need not pay for them, and one damaged may recover the price he pays for the goods ; while others allow him treble damages.-^ And so on. There is no need of further enumeration of details with which you are probably familiar, and have often puzzled over for some anxious client and then given an opinion that you were very uncertain of yourself. There is scarcely any matter here that could not be uniform, and be better if uniform so far as affecting interstate commerce is concerned. But in these matters the policy of the states never will be in harmony. Situation, local pride, political bias, party politics, peculiar industries, or financial inter- ests produce and increase these differences. Upon the score of utility alone, I believe a National Law would be desirable. II. NECESSITY. The utility of uniformity in corporation laws, however desirable that may be, is not the main, nor, to my mind, a sufficiently important reason for a National incorporation law. There are reasons of a much more fundamental kind, — the necessity of such a law properly to regulate our interstate commerce "in order to promote the general welfare" of us all. Nearly everybody admits there is a trust problem, but there are divergent views as to what the problem is. With the trusts themselves the problem is, mainly, how to be let alone? With the hysterical, how to destroy them at once? With the more sober minded, what is good or bad in them, and how to devise means to preserve the former, and remove the latter? Some say there is nothing amiss. -" See charts, tabulating state Anti-trust Acts, 2 Indus. Com. R. — 10 — These are usually, though not always, the anointed ben- eficiaries of some trust whose cup runneth over; there is, upon the other hand, "the tale of woe" of thousands of suf- ferers throughout our land, coming from the depths of experience, that tells a very different story. Ever since the investigations following the granger agitations some years ago, legislative, and congressional committees, economic writers, political platforms, trust conferences, commerce commissions, industrial commissions, governors and presi- dents have with one accord testified and proclaimed that there exist vast and serious abuses in our industrial life." Numerous reports have made reasonably clear what these are, and how they have arisen, but have been indefinite and conflicting as to proper remedies. I happen to be among those who believe there is much amiss ; that this is due largely to certain legal conditions, present and past; and that these can be so changed as to give adequate remedy. The leading legal conditions under which the problem has developed have been : (i) The enormous growth of corporations and corpor- ate power. (2) Their power to engage in interstate commerce. (3) 'rhe inaction of Congress in regulating such com- merce. (4) The inability of the states to cope with the diffi- culty. I. As to the first, growth of corporations. It is necessary to recall a few facts to get our bearings properly. The material results of the past century are almost incredible. In it man has acquired greater control over the forces of nature than during all the ages preceding. Never, since he was given dominion over the whole earth, -^ See reports: H. R. Com. on Roads and Canals 1868, Serial Xo. 1352, Doc. No. 57; Windom's Report 1874, S. Xo. 1589, D. No. 307; Reagan's Reports 1878-86, 1822-245; 2047-55; 2069-1399; 2254-596; 2437-902; Cullom Report 1886, 2356-46; 2450-12; Hepburn Rept. X. V. 1879; N. Y. Repts., Sen- ate Docs. 1888, \'ol. 5, No. 50; 1889, Xo. 64; 1897, \'ol. 7, No. 40; U. S. House Rep. Rept. 1888, 3112; 1889, 4165; Chicago Trust Conference 1S99; Industrial Commission Reports 1900-1901; Interstate Commerce Commission Reports J888-1904; Party Platforms, World Almanac 1903, pp. 102-3; .\merican Almanac 1904, pp. 87-93. — 11 — _has he entered into the possession of his inheritance in the same way and to the same extent f^ in the last seventy years the wealth of this country has increased from less than four to over ninety-four bilHon dollars, — from less than three tc over twelve hundred dollars per head.^" So conservative a writer as Carroll D. Wright has said the wage earner has not received his equitable relative share; the safest author- ities agree that while all have grown richer, the rich have done so at a much faster rate than the poorer;''" a half cen- tury ago, the great individual fortunes were measured by a few hundred thousands ; for many years the millionaires have rapidly increased, and now there are probably billion- aires. It is not the state's function to produce or distribute wealth; but it is properly its function by just and equal laws to foster the economic production and equitable distribu- tion of wealth. ^^ In doing this it very properly creates, or authorizes the creation of, corporations ; and what steam and electricity have been to the material world, the corpora- tion has been to the business world, — the one greatest and most efficient machine yet devised to strengthen the hands of man and add energy to his capital. Its very nature and efficiency make it also peculiarly susceptible of abuse, and the state that gives the privilege should provide reasonable protection against, and adequate remedy for, such abuse. Before the formation of the Constitution there seem to have been only 21 business corporations incorporated in the United States. The Constitution put commerce on a solid footing, and before 1800, more than 200 more corporate charters had been granted. ^^ The Constitution provided "No state shall pass any law impairing the obligation of con- tracts." In 1819, the Dartmouth College Case^^ decided that 28 See Wilgus, The Trust Problem, in the Inter-Collegian, 1903, p. 146. -^^h. p. 147. ™ lb. p. 147-8; N. Y. Independent, May i, 1902; Mulhall, 140 N. A. R. 78; Century, January, igor (Wright); lb. February, 1901 (Thurston); Report Massachusetts Bureau of Labor 1894; The Distribution of Wealth, Dr. Chas. B. Spahr; 15 Arena, 654-64 (Waldron) ; 17 -Arena, 82-96 (Pomeroy); Who Owns the U. S., World's Work, Dec. 1903. 3^ Adams, H. C, Relation of the State to Individual Action, p. 8; Spencer, Herbert, "The Man versus the State." ^2 Baldwin, Hon. S. E., in Two Centuries of Growth of American Law, Yale Bicen. Pub., pp. 275, 296. " 4 Wheat. 518. — 12 — this applied to corporate charters, and the state could not afterward repeal or amend the same without it reserved the right, or the corporation, consented. Prior to about 1830 the improvident increase of corporations was looked upon as an evil. It had been the early policy of the Federal govern- ment from about 1800 to construct, or aid in the construc- tion of, ways of internal communication between the states ; in 1822 President Monroe vetoed this policy on constitu- tional grounds ; the states then immediately took up the mat- ter, and within fifteen years had utterly failed, and state repudiation followed ; for doing what the government could not do, and the states failed to do, the people turned to the private corporation ; the era of the corporation had begun f* to prevent the corruption attending the grant of special charters, and in order that all might share in the privileges granted, general incorporation laws were passed allowing a few persons in a very simple way to become incorporated with valuable franchises and privileges subject to very slight control or supervision ; liberal encouragement by tax exemp- tions, state aid, or land grants, was made f^ they immediately began the work of construction of our ways of internal com- munication, and though an endless amount of speculation, fraud, and loss accompanied the work, the benefits were so great and so apparent that most of the evil was palliated or excused. The war brought to the front men of great en- ergy, great capacity, great deeds, great daring, and great ambition. At its close, many of the greatest of these found a field for their energy and ambition in building up the railroad system of the country. Congress in 1866 enacted the law that has been called the "Charter of the American Railway System," authorizing every steam railroad "to connect with roads of other states so as to form continuous lines for the transportation" of freight and passengers from one state to another. Railroad consolidations immediately began;'" before 1870, scarcely any system was over 1,000 •'* Meyer, Railway Legislation in the U. S., pp. 25-8. 2" lb. pp. 71, 99, 108; Sanborn, J. B., Congressional Grants of Land in Aid of Railways, Bui. Univ. of Wis., Vol. 2, No. 3, in Econ. Pol. Sc. and Hist. Series. =°June 15, 1866, 14 St. at L. 66, R. S. §5258; Note 2 Wilgus Corp. Cas. 1507. — 13 — miles; between 1870 and 1890, 5,000 mile systems were formed ; between 1890 and 1900, systems became 10,000 miles or more; and now the five principal systems control 1 50,000 miles or more ; and a late authority says that prac- tically nine men control over 80 per cent of the total railroad mileage of the country.^^ The concentration in the indus- trial and financial fields, though it commenced later, has been even more rapid; prior to 1870 only two industrial trusts, formed by combination of formerly competing con- cerns, existed with a capital of $13,000,000; from 1870 to 1880, four more were added with $135,000,000 nominal cap- ital; 1880 to 1890, added 18 more with $228,000,000; the next ten years showed 183 with nearly $4,000,000,000 capi- tal ; and a recent authority says there are 850, not counting railroad mergers, with a nominal capitalization of $9,000,- 000,000.^* Mr. Moody in "The Truth About Trusts" enum- erates Industrial, Franchise, Transportation and Miscel- laneous, now operating, as numbering 445, formed out of 8,664 original companies, and having a capitalization of over $20,000,000,000, — nominally equal to about one-fifth of the total wealth of the United States. These vast sums are even less important than the concentration of control, and extent of operation. The 24 directors of the United States Steel Corporation control a sum nominally equal to one-twelfth of the total wealth of the United States in 1900. These same men are the influential directors in more than 200 affiliated companies that operate half the railroads of the country ; dig and carry most of its iron, coke, and coal ; they control the greatest oil, copper, sleeping car, telegraph, express, bridge, traction, and shipping interests of our country ; also the five greatest insurance companies, nine of the greatest banks, and sixteen of the largest trust companies, with their chains of affiliated banks throughout the country, — in all, corporations with nominal capitalizations of about $9,000,- =■ See Wilgus, U. S. Steel Corp., p. 107; Com. & F. Ch. Supp., April, 1901; Rev. of Revs., Aug., 1901; World's Work, April, 1901, p. 676; 19 Indus. Com. Rept. 306; Johnson, E. R., American Kwy. Transp. =' Wilgus, The Trust Problem, Inter-Collegian, 1903, pp. 136-9; Wilgus, U. S. Steel Corp., pp. ^, 5, 20; 2 Current Encyc, 1902, p. 1312; U. S. Census of Mfg. Abstract, 1900, p. 328; World Almanac, 1897-1903; American Almanac, 1904; Moody's Corp. iVlanual, 1903; Moody's Truth About Trusts. — 14 — 000,000 — and two men are said to be leading spirits in the control of much the larger part of this.'" Some of these industrial institutions operate plants in half the states, and the Standard Oil wagon is seen in every village and hamlet in the land ; through the interholdings of shares the most diverse interests are controlled in har- mom- ; by means of a holding corporation, combinations of combinations, unlimited in extent, operation, and duration are formed which may act with a directness, speed, and certainty greater, affecting a larger territory, in a shorter time, without warning, and with less responsibility, than the act of any legislature in the world.*" In short the main forces and instruments of commerce are vested in a few state-created corporations that are federal in operation, fed- erate in organization, and imperial in power. 2. Power of corporations to engage in interstate com- merce. The fact that they do engage in interstate commerce is no less certain than their legal right to do so. This right, however, they hold under the Federal government. V>\ the common law a corporation was a person, and though it could not migrate, it might by agents do business away from home, if its own charter did not forbid, or the state where it sought to do business did not object.''^ The right of a corporation to sue in the courts of another state was recognized in 1809,*- by our Supreme Court, and in 1839, the same court held that a bank organized in one state could discount bills in another state unless the latter objected f^ these onh- con- firmed what had long been the accepted doctrine and prac- tice. The power to regulate commerce was taken from the states and conferred upon the Federal government by the Constitution ; if a corporation had an inherent capacity to do business away from home, and the business to be done was '"World's Work, Dec, 1903, Who Owns the U. S.? *" Wilgus, The Trust Problem, Inter-Collegian, 1903, pp. 130-6, describing the various forms; Wilgus, U. S. Steel Corp., pp. 94-ioj, giving a diagram of the internal arrangements of the U. S. Steel Corp.; Xoyes' Intercorporate Re- lations. *i Cook, Corp. 5th Ed., §696; Tootle v. Singer, — la. — 88 N. W. 446; Lancaster v. Imp. Co., 140 N. Y. 576; People v. Fidelity Co., 153 III. 25; Merrick v. \''an Santvoord, 34 N. Y. 208. *- Bank of U. S. V. Deveaux, 6 Cr. 61. ^■' Bank of .Augusta v. Earle, 13 Pet. 519. — 15 — interstate commerce, then it could be done in any state with- out the state's consent ; this was acted upon from the begin- ning, and has been affirmed by the decisions which hold no state can prevent a corporation engaged in interstate com- merce from entering that state and carrying on that business therein,^'' or require it to pay for the privilege of doing so.*^ 3. Inaction of Congress. In 1824 in the case of Gibbons V. Ogden,*^ Chief Justice Marshall said the power to regulate commerce, "like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and ac- knowledges no limitations other than are prescribed in the Constitution." From this it followed as has been held time and time again that "where the subject is national in char- acter and admits or requires uniformity of legislation," "the absence of any law of Congress on the subject is equivalent to its declaration that commerce in that matter shall be free."*^ Prior to 1887, Congress had enacted pilot laws, made all railroads post roads in 1838, authorized the con- struction ot many interstate bridges, improved water courses, incorporated railroads, and passed the continuous line act of 1866, — all to facilitate interstate commerce — but not in any other way to regulate any abuses that had arisen. In 1887 the Interstate Commerce Commission was created, to be emasculated into an investigating and recommending body by decision in 1897. In 1890 the Anti-trust Act was passed to regulate the interstate industrial trusts ; but the lower courts in 1892 held it did not apply** and this was affirmed so far as manufacturing is concerned, by the Supreme Court in 1895.*" The Anti-rebate Act, and the Department of Commerce Act, passed last year complete the list of Con- gressional action. In 1899, after 12 years of the Interstate Commerce Act, the Commission said the railway "situation has become intolerable both from the standpoint of the pub- lic and the carriers. Tariffs are disregarded, discriminations ■'■' Crutcher v. Kentucky, 141 U. S. 47 {1891, Justice Bradley).. *^ Atlantic & Pacific Tel. Co. v. Philadelphia, 190 U. S. 162 (1902, Brewer, J.) «9 Wheat. I. *^ Cooley V. Port Wardens, 12 How. 299; Robbins v. Taxing Dist., r2o U. S. 4S9. "U. S. V. Greenhut, 51 Fed. 205, 213. " U. S. V. E. C. Knight Co., 156 U. S. 1. — 16 — constantly occur, the price at which transportation can be obtained is iluctuating and uncertain. "=" And last year the Commission said: "The means for giving practical effect to the mandate of the law are concededly imperfect. "^^ After 14 years of the Anti-trust Act, it has been held it does not prevent the combinations of manufacturers, as such, but only such contracts thereof, as directly affect their interstate commerce ; so far it does not seem to have hampered their existence or operation to any great extent. It was supposed, after the tralSc associations decisions that the law prevented the formation of railroad combinations ; these decisions, however, had the effect of driving them into the more stable forms of the holding corporation, or interholdings of shares.^- The Securities decision leaves the effect of the first uncertain, and does not touch upon the latter. The net re- sult of the 14 or 15 years of these methods of regulation by the government is to show that regulation through anti- trust, anti-contract-in-restraint of trade, anti-monopoly, anti- rebate, and interstate commerce, acts, is long, uncertain, inefficient, and inadequate in the end, — and may destroy the very thing, as in the case of railroad mergers, which if prop- erly regulated, is perhaps desirable and necessary for all. 4. Inability of the states to cope zvith the difficulty. 'i his follows from what has already- been said : commerce has become national in extent, and is conducted bv corpora- tions national in operation, and imperial in power. The states cannot control these, first, because the Constitution has taken away the power over the subject matter; second, because, if the states had the power, it would be impossible to secure the requisite uniformity ; and, third, if the legal authority existed in the states, the corporations are so big and powerful as to make it practically impossible to secure adequate control. ^^ As to the subject matter, — the commerce, — according to the decisions a state cannot exclude a corporation engaged ™ Interstate Commerce Com. Rept., 1898, pp. 5-6; lb. 1899, p. 8. ^^ lb. 1902, pp. 6-7. °= Wilgus, The Northwestern Railway Situation, i Mich. L. E Indus. Com. Rept. 329. '■=' 19 Indus. Com. Rept., pp. 642-3. — 17 — in interstate commerce/"' nor tax such commerce/'^ nor tax the agents engaged in it,"" nor fix the rates for carrying it," nor exclude articles of such commerce/^ or persons coming into^^ or going oiit of the state."" As to the uniformity necessary : Much has already been said as to the existing diversity of state provisions. ^"^ It is often said that a state can and does retain control over its own corporations. This is legally true, though in many cases practically impossible because of interstate affiliations and operations ; besides the state's authority over foreign corporations engaged in commerce in the state is practically nothing. The commerce that is national in extent requires uniformity of regulation to secure proper results for all. ihe commerce and the corporations that carry it on are so related that attempts by the national government to regulate the commerce, and by forty-five state governments to regu- late the corporations that carry it on, are by the nature of things, doomed to failure. These things though separable in the mind, are inextricably bound together in fact, — and what are so bound together man cannot put asunder, and yet properly regulate both. As Judge Grosscup says : "The problem before us is not how to destroy the corporation nor how to hamper it or to trip it up, but to make it a helpful servant to the uses of mankind. * * The first step to this end and the great step is to nationalize the corporation. Five and forty masters now ordain its policies. It should be gov- erned by one master and one policy. The corporation is no longer the sole concern of the state where its books happen to be kept or its directors meet ; it has become the concern of ''■' Pensacola Tel. Co. v. W. U. Tel. Co., 96 XJ, S. i; Cooper v. Ferguson, 113 U. S. 727. '•^ Brown V. Md., 12 Wheat. 419; Philadelphia Steamship Co. v. Penn., 122 U. S. 326. °® Robbins v. Shelby Taxing Dist., 120 U. S. 489. "Wabash &c. Ry. Co. .. Illinois, 118 U. S. 557. ^"Bowman v. Chicago & N. W. Ry., 125 U. S. 465; Collins v. New Hamp- shire, 171 U. S. 30. ^^ Chy Lung v. Freeman, 92 U. S. 275; Japanese Immigrant Case, i8g U. S. 86, 97. ™ Crandall v. Nevada, 6 Wall. 35. ^ In addition to references given above, see Meyer, Railway Legislation in U. S., Ch. iv; Rept. Mass. Com. on Corp. Laws, 1903, part ii. — 18 — the whole country over which its enterprises reach. The day of the New Jerse_\' policy is gone, and the New York policy, and the Iowa policy,— the day has come for an American corporate policy." Further, it is idle to believe that the requisite uniformity will ever be attained by leaving it to the states. Unanimity of state action is necessary in order to be effective ; never can nor will such action be had. If one state enacts proper laws and enforces them it only shuts itself out of benefits shared by others. If Minnesota had succeeded in her case against the Securities Company, and she had pushed her remedy to its limits of efficiency, she would only have succeeded in keeping the Great Northern and Northern Pacific separate in that state, and cutting these great Transcontinental lines into sections limited bv the state boundaries. The same would be true of other states and if they had full power, each acting for itself, the only remefh- one state could enforce without the cooperation of other states would be to break our interstate roads into state sections under separate state companies, — making the remedy worse than the disease. Still further, just as one state, before the constitution, could by its comir.ercial regu- lations disturb the harmony of the whole, so now one state, by creating a state corporation, clothed with the power to engage in interstate commerce everywhere, can disturb, or defeat, any uniform rule the other states might make. Again, the corporations have become too big, and too powerful for effective state control. The net earnings of the United States Steel Corporation in a year are more than the total sum raised by revenue taxation in our greatest states ; and in 1902, their gross receipts were more than the total ordinary receipts of the National Government in any year prior to 1899. As General Garfield said thirty years ago, the railroad and telegraph systems have passed from the control of the states ; their efforts have been little more than feeble annoyance, and have been treated as impertinent in- termeddling ; the corporations are conscious of their strength, and have entered upon the work of controlling the states."- Or, as a committee of the American Bar Associa- "^ The Future of the Republic, J. A. (larfield, 2 Works, p. 61. — 19 — tion said last year, "The only possible competitor for a bil- lion dollar trust is a hundred billion dollar State. ""^ All will admit that such conditions, to say the least, are not healthy ; and to most minds they appear to be fraught with danger to our common welfare. As has been aptly said: "Aden are mortal, and their combinations short lived, but corporations are immortal and their combinations and acquisitions may go on forever ; they may add field to field, wealth to wealth, and power to power, till they become too strong for the government itself; all experience shows that such accumulations of wealth and power are dangerous to the public welfare.""' There is no doubt that Judge Dil- lon, in commenting upon the Securities decision, voiced the feeling of the most conservative, when he said "Uncontrolled power in a few men by any form of corporate device to con- trol the railway systems of a great country is a power too great to be compatible with the public weal, and one which would not be permanently endured by the people.""'^ The methods whereby such institutions have been built up make the danger still more apparent and indicate the things to be regulated : from the investigations of our vari- ous commissions during the past twenty years it has been made certain that the particular devices whereby evil is wrought, or danger threatened, have been mainly five: (i) The acquisition, practically, of. monoply power either by grant of franchise of various kinds, or through discrimina- tion in transportation charges; (2) The destruction of legit- imate competition by the predatory competition of the hold- ers of monopoly power; (3) The acquisition of monopoly power through the interholding of corporate shares; (4) 'i'he over-capitalization of corporations; and (5) Dislwncst and irresponsible corporate promotion and management. The first two are matters of commerce, and the last three of corporation law, — and any regulation worthy of the name must include all and be a part of one system ; for the govern- ment to regulate, or attempt to regulate, the commerce of "^ Rept. Com. on Commercial Law, Am. Bar Assn., 1903, p. 18. «* Brunswick G. L. Co. v. U. S. Gas Co., 85 Me. 532, 35 Am. St. R. 385, I Wilgus Corp. Cas. 1071. "^ New York Herald, March 15, 1904. — 20 — any corporation, and the states its interholding of shares in other corporations, is worse than useless and only results in corporate regulation of commerce instead of either state or national regulation. If our diagnosis is correct, the National Government does not, the states cannot uniformly, and the big corporations do, control our industries and commerce ; the thing then to be regulated, but not necessarily destroyed, is the big thing, the big, menacing corporation ; its national commerce is to be regulated; its holding of stock in other companies is to be regulated; its power to consolidate is to be regulated ; its issue of shares is to be regulated ; its pro- motion and organization are to be regulated ; its capitaliza- tion is to be regulated ; its competition with others through- out the country is to be regulated. These are the things nec- essary to be done for the welfare of all. If done at all they can be done satisfactorily only through a uniform system dealing with the whole problem, enforced by adequate power. The states cannot do this. Can the National Gov- ernment ? III. POWER OF the; national government. This depends upon the power of Congress over com- merce, and the power to create corporations. The Constitution says Congress shall have power to reg- ulate commerce with foreign nations, and among the several states, and with the Indian tribes. Mr. Justice Harlan, in the Lottery Case,^'^ after an extensive review of the cases from Gibbons v. Ogdcn^'' to Hanlcy v. Kansas City Southern Ry.,"^ concludes that, "Congress alone has the power to oc- cupy, by legislation, the whole field of interstate commerce." Commerce includes the subject-matter of traffic and in- tercourse, the fact of traffic and intercourse, and the instru- mentalities by which it is carried on.''^ "» i88 U. S. 321 (190.-,). »' 9 Wheat. I (1824). ™ 187 U. S. 617. "» As to what is included in Interstate Commerce, see Note 2 Wilgus, Corp Cas., p. 1504- — 21 — The subject-matter may be "things, goods, chattels, mer- chandise, or persons," or telegraph messages.'" The fact of intercourse includes the negotiation of the sale of goods which are in other states whether by solicitor or sample,'^ the purchase of goods between citizens of dif- ferent states, made in either state, '^ communication between persons by the transmission of intelligence by telegraph'' or telephone,'* the transit of persons, '° or the transportation of persons, or of property, by boat, by rail,'" by express," or the piping of oil or gas," or driving of cattle,'^ in completion of a commercial transaction across state lines, and also the written documents*" whereby such transactions are effected. As to the instrumentalities Chief Justice Waite has said : "The powers granted are not confined to those known or in use when the Constitution was adopted, but they keep pace with the progress of the country, and adapt themselves to the new developments of time and circumstances. They ex- tend from the horse with its rider to the stage coach, from the sailing vessel to the steamboat, from the coach and steamboat to the railroad, and from the railroad to the tele- graph, as these new agencies come into use. They were in- ™McCaIl V. California, 136 U. S. 104; Lottery Cases, 188 U. S. 321; Tel- egraph Co. V. Texas, 105 U. S. 460, 2 Wilgus, Corp. Cas. 1397. / ^^ Cooper V. Ferguson, 113 U. S. 72y; Robbins v. Taxing Dist., 120 U. S. 489, 59 Am. R. 267; Addystone Pipe Co. v. U. S., 175 U. S. 211; Stockard v. Morgan, 185 U. S. 27; Caldwell v. North Carolina, 187 U. S. 622. ^^ Same cases; McNaughton v. McGirl, 20 Mont. 124, 63 Am. St. R. 610: Buttfield V. Stranahan, 192 U. S. 470. "Pensacola Tel. Co. v. W. U. Tel. Co., 96 U. S. », i Wilgus, Corp. Cas. 326; W. U. Tel Co. V. Pendleton, 122 U. S. 347; Rattan v. Tel. Co., 127 U. S. 411; Leloup V. Port of Mobile, 127 U. S. 640. "Matter Penn. Tel. Co., 48 N. J. Eq. 91, 27 Am. St. R. 462; Muskogee .Nfatl. Tel. Co. v. Hall, 118 Fed. R. 382. "Passenger Cases, 7 How. 283; Crandall v. Nevada, 6 Wall. 35; Coving- ton Bridge Co. v. Kentucky, 154 U. S. 204, 218. "Same cases; Hall v. De Cuir, 95 U. S. 48s; The Daniel Ball, 10 Wall. 557; State Freight Tax Cases, 15 Wall. 232; Philadelphia Steamship Co. v. Penn., 122 U. S. 326. '^ Crutcher v. Kentucky, 141 U. S. 47. " State v. Indiana &c. Co., 120 Ind. 575. '"Kelley v. Rhoads, 188 -U. S. .- '"Almy v. California, 24 How. 169; Fairbanks v. U. S., 181 U. S. 283; Norfolk & West. Ry. Co. v. Sims, 191 U. S. 441; Pennsylvania R. R. v. Hughes, 191 U. S. 477; Interstate Commerce Com. v. Baird, 194 U. S. 25, 24 S. C. Rep. 563. — 22 — tended for all times and all circumstances."^^ Chief Justice Fuller, in the Sugar Trust case, thus summed up the matter : '"Contracts to buy, sell or exchange goods to be transported among the several states, the transportation, and its instru- mentalities, and articles bought, sold or exchanged for the purpose of such transit among the states, or put in the way of transit, may be regulated, but this is because they form part of the interstate trade or commerce." This summary was adopted by Mr. Justice Harlan, in his dissenting opinion in the same case, and this has ever since been the accepted and repeated doctrine of the court. *^ The production or manufacture of things intended for interstate commerce,^' or gathering them together for the purpose of sending them to other states,^* or after sending them into another state, keeping them there for the purpose of use or sale,*^ if not in the original package,^" is not inter- state commerce. Insurance,*' loaning money, ^* dealing in foreign lands,'* dealing in bills of exchange,"" carrying on building and loan associations,"^ mining,"^ or carrying on the business of brok- ers or commission merchants,"^ is not interstate commerce so far as to prevent state regulation, or within the present anti- trust act. Under the power to regulate, the question naturally arises as to how far Congress can prohibit interstate com- merce. It has been said that"* "The power to regulate com- *^ Pensacola Tel. Co. v. W. U. Tel. Co.. 96 U. S. i, 9, 12, i Wilgus, Corp. Cas. 326. »2 156 U. S. I, :3, 36. "U. S. V. E. C. Knight Co., 156 U. S. ,. ^■^ Coe V. Errol, 116 U. S. 517; Diamond .Match Co. v. Ontonagon, 188 U. S. 82. ^'^ Brown v. Houston, 114 U. S. 622. ^^ SchoHenberger v. Pennsylvania, 171 U. S. i; May v. New Orleans, 178 Ll. S. 496. ^' Hooper v. California, 155 U. S. 648. ^■^ .\elms V. Mortgage Co., 92 Ala. 157. *^ Honduras Com. Co. v. State Board, 54 N. J. L. 278. °^ Bamberger v. Schoolfield, 160 U. S. 149. "^ Southern Building & L. Assn. v. Norman, 98 Xy. 294. '*- Utley V. Mining Co., 4 Col. 369. "U. S. V. Hopkins, 171 U. S. 578. "Brown V. Houston, 114 U. S. 622, 630; Pittsburg Coal Co. v. Bates, 156 (j- S. 577, 587. — 23 — merce among the several states is granted to Congress in terms as absolute as is the power to regulate commerce with foreign nations," or with the Indian tribes,"^ between which provisions it stands, in the Constitution, and as Chief Justice Marshall says it "must carry the same meaning * * * unless there be some plain intelligible cause which alters it.""" As to foreign commerce Alexander Hamilton said Con- gress may prohibit the exportation of commodities."^ Em- bargo acts were passed in 1794,'* 1807,'° and in iSia.^"" President Washington signed the first. President Jefferson signed the second, and President Madison the third. The second came before the Federal District Court in 1808, and it was held that Congress might establish an absolute em- bargo for an indefinite time ;'-'"^ Chief Justice Marshall took the same view in 1824,^"^ as did Justice White this year.^°^ The rule that applies to exports applies to imports,^"* and under our protective tariff laws based on the commerce clause, the importation of proper articles of commerce has been prevented from the beginning of the government ;^''^ and the Supreme Court, by Mr. Justice White, has just said: "As a result of the complete power of Congress over foreign commerce it necessarily follows that no individual has a vested right to trade with foreign nations, which is so broad in character as to limit and restrict the power of Congress to determine what articles of merchandise may be imported into this country. "^"^ The slave trade has been prohibited since "^ Buttfield V. Stranahan, 192 U. S. 470, 493. *" Gibbons V. Ogden, 9 Wheat. 1, Thayer's Gas. Const. Law, Part iv., pp. 1799, 1806. *^ Argument on Bank of U. S., Clarke & Hall's Hist., p. 100. ^ I U. S. Stat, at L. 372, 400, 401. '">2 U. S. Stat, at L. 451, 453, 454, 471. 473. 475, 490, 499. 50l. 502, 506, 510. S14, 531. 533. 547. "°2 U. S. Stat, at L. 700, 707, 708, 719. 763; 3 lb. 88, 94. 98, 123. "" U. S. V. Brigantine "William," 2 Hall's Am. L. J. 255, Thayer's Cases Const. Law, Part iv, 1786; 2 Kent. Com. 432. "2 Gibbons v. Ogden, 9 Wheat, i, Thayer's Cas. Const. L. 1799, 1805. "^ Buttfield V. Stranahan, 192 U. S. 470. "* lb. "'Lottery Cases, 188 U. S. 321, 34i: i Story, Const. §963; ^ lb. §1080 et seq.; Journals Conf. Cong., Vol. i, pp. 28, 175, 176; Vol. ^, 189, i Bige- low's Franklin, 478. 100 Buttfield ■!. Stranahan, 192 U. S. 470. — 24 — i8o8, and could have been before except for the express in- hibition of the Constitution.'^''^ The same rule applies to im- migration of persons, — they can be excluded."' As to commerce ivith the Indians, — the power is absolute and exclusive.^"" Franklin's proposed plan of perpetual union in 1754, gave the grand council power to regulate all the Indian trade. ^^° As early as 1786 the Confederate Con- gress prohibited all trading with the Indians, except under a license to do so ;^'^' and by an act of the first Congress in 1790 no one was allowed to carry on any trade or inter- course with the Indians, without a license. '^'^ Such has been the policy ever since, and such prohibitions have always been upheld by the courts."^ As to interstate commerce, it has already been held that Congress may prohibit combinations,^^^ or contracts, ^^^ in direct restraint thereof, or the transportation or introduction of diseased live stock into one state from another.^^' Al- though distilled liquors, oleomargarine, and game when killed, are "lawful articles of commerce,"''^ yet Congress can make them subject to the prohibitory laws of the state into which they have been shipped for sale from another state.^^' And finally Congress can prohibit the carriage of lottery "'Chief Justice Marshall in Gibbons v. Ogden, g Wheat, i, Thayer's Cas. Const. Law, 1799, 1815. ^°^ Japanese Immigration Cases, 189 U. S. 86 (1903). "• U. S. V. 43 Gallons of Whiskey, 93 U. S. 188; Buttfield v. Stranahan, 192 U. S. 470, 493. ^1" Fisher's Evolution of the Constitution, p. 293. •"Aug. 7, 1786, II Journals of Cong. 126; July 18, 1787, 12 Journals Cong. 66. "''July 22, 1790, I St. at L. 137-8; Mar. ,, 1793, i St. at L. 329; U. S. .. Mayrand, 154 U. S. 522. "' lb. "«U. S. V. Trans-Mo. Frt. Assn., 166 U. S. 290 (1897); U. S. v. Joint Traffic .\ssn., 171 U. S. 505 (1898); Northern Securities Co. v. U. S., 193 U. S. 197 (1904). ""Addystone Pipe Co. .. U. S., 175 U. S. 211 (1899); Montague v. Lowry, 193 U. S. 38 (1904). "" Reid V. Colorado, 187 U. S. 137 (1902). 93 Am. St. R. 69, 29 Colo. 333. "'Bowman v. Chicago &c. Ry. Co., 125 U. S. 465; Leisy ,. Hardin, 135 U. S. 100. "*In re Rahrer, 140 U. S. 545; Vance v. Vandercook, 170 U. S. 438, Act Aug. 8, 1890, t. 728, 26 St. at L. 313; .\ct May 25, 1900, t. 553, 31 St. at L 187; .'Vet May g, 1902, c. 784, 32 St. at L. 193. — 25 — tickets into one state from another,"" or the sending of let- ters or circulars relating to lotteries through the mails.^^" State laws forbidding the introduction of convict-made goods,^^^ or regulating interstate passengers/^^ or forbid- ding the introduction of articles proper for commerce/^^ are void because they infringe upon the exclusive power of Congress to regulate commerce. In addition to the foregoing, Congress has forbidden the transportation of negroes into a state,^^* or of live stock affected with contagious diseases, ^^'^ or the carrying or send- ing of any literature, picture, or article designed for indecent or immoral use,^^" or convict-made goods,^^^ or the sale of the dead bodies of wild animals or birds killed in violation of the laws of the state where the attempt is made."^ Con- gress has also made all railroads post roads;"" authorized them to connect so as to form continuous interstate lines j^'" authorized telegraph companies to construct their lines along such railroads;"^ regulated the transportation of live stock over interstate railroads ;^^^ provided for arbitration between interstate railroad companies and their employees ;^^^ and required the use of automatic couplers and appliances upon the cars and trains used in interstate commerce.^'* In short, from Gibbons v. Ogden in 1824, to the Securi- ties Case, in 1904, in the words of Marshall, "the power to regulate commerce among the several states is vested in Congress as absolutely as it would be in a single govern- ment, having in its Constitution the same restrictions on the ""Lottery Cases, i88 U. S. 321 (1903). ^-^ In re Rapier, 143 U. S. no. '21 People V. Hawkins, 157 N. Y. 1. "2 Hall V. De Cuir, 95 U. S. 485. 123 Brimmer v. Rebman, 138 U. S. 78. "4 2 U. S. Stat, at L. 205 (1803). ^'"^ Act May 29, 1884, 23 St. at L. 32. iMAct Feby. 8, 1897, 29 St. at L. 512. '2^ Act July 24, 1897, 30 St. at L. 211. § 31,. '-^ Act May 25, 1900, 31 St. at L. 187, §3. , and 17 St. at L. 308. , R. S. § 5258. , R. S. § 5263. 1873, R. S. §§ 4386-89. 1888, 25 St. at L. 501; also June 1, 1898, c. 370, 30 St. at 1893, 27 St. at L. 531. ll;9 Act of 1838, 130 Act of 1866, 131 Act of 1866, ]... Act Mar. 3, 133 Act. Oct. I, 424, 184 Act Mar. 2, — 26 — exercise of the power as are found in the Constitution of the United States.''^^^ The main constitutional limitations are the ordinary and necessary governmental powers reserved to the states, that no tax shall be laid on articles exported from any state, and that no person shall be deprived of life, liberty or property without due process of law. As to the bearing of these provisions on the commerce clause it has been held that exports here refer only to foreign com- merce, ^^^ and further, that neither the exclusive grant of New York to navigate the Hudson by steamboats,^^^ nor the exclusive grant of Florida to a telegraph company to build a telegraph line along a post road,"" nor the charter by Vir- ginia to the Wheeling Bridge Co., to bridge the Ohio,"^^^ nor the personal liberty of Mr. Debs,^*° nor the liberty to con- tract of the Addystone Pipe Company or the Joint Traffic Association,^*^ nor a New Jersey grant to own and vote shares in a holding company,^*- nor the right to trade with foreign nations'*^ is available against the governmental power to regulate commerce, but on the other hand, >ields to, and is limited by, that power. Or, in the language of Mr. Justice Bradley, "The power of Congress is supreme over the whole subject, unembarrassed b}- state lines or state laws; in this matter the country is one, and the work to be accom- plished is national ; state interests, state jealousies, and state prejudices do not require to be consulted.""^ And as said by Mr. Justice Brewer in the Debs case, the power goes to ^^"^ Gibbons v. Ogden, 9 Wheat, i, 196, 197; Northern Securities Co. v. U. S., 193 U. S. 197. ^^'^ I Tucker, Const, of L'. S. 660; Pace v. Burgess, 92 U. S. 372; Turpin V. Burgess, 117 U. S. 504; Woodruff v. Parham, 8 Wall. 540; Cooley v. War- dens of Philadelphia, 12 How. 299; Almy v. California, 24 How. 169. ^^^ Gibbons v. Ogden, 9 Wheat i. "STcnsacola Tcl. Co. .. W. U. Tel. Co., 96 U. S. i; \V. U. Tel. Co. v. Gottlieb, 190 U. S. 412. "'Wheeling Bridge Cases, 9 How. 647; 11 How. 528; 13 How. 518; 18 How. 421, 460. ""In re Debs, 158 U. S. 564. "lU. S. V. ,\ddystone Pipe Co., 175 U. S. 211 (1899); U. S. v. Joint Traffic Assn., 171 U. S. 505 (1898). ^*- Northern Securities Co. v. U. S., 193 U. S. 19 "= Buttfield V. Stranahan, 192 U. S. 470. •-« Stockton ». R. R. Co., 32 Fed. R. 9, 17. — 27 — the extent of "direct supervision, control, and manage- ment.""^ _— As to the power of the National Government to create a corporation it may seem useless to inquire, since we see i\ ational banks all about us. Its history is significant for . our purposes. :^In 1779 in the critical period of the revolu- tion Alexander Hamilton suggested that the creation of a bank by the revolutionary Congress was the method of es- cape from financial disaster.""* In 1781 the Articles of Con- federation, providing that each state retained every poiver not expressly delegated to Congress, went into operation. There was no express power to create a bank.^*' Robert Morris was asked to become Superintendent of Finances ; Mr. Hamilton urged him to accept and to establish a bank; he accepted, and three days later submitted to the Congress a plan drawn up by Governeur Morris for the Bank of North America;^** Mr. Madison opposed it as being uncon- stitutional; but an ordinance was passed to incorporate it, because "the exigencies of the United States made it indis- pensably necessary.""" Its validity was attacked in Penn- sylvania in 1785, and James Wilson defended it, laying down the doctrine of implied powers as follows : "Whenever an object occurs to the direction of which no particular state is competent, the management must of necessity belong to the United States in Congress assembled.""" The Federal convention met in 1787, in order to form a more perfect union. This convention four times unanimously resolved that the new government should have all the powers the Confederation had, and many others. The new government went into operation in 1789. In 1790, Mr. Hamilton, Secre- tary of the Treasury, reported that a National Bank was of primary importance for establishing the public credit ;'^°^ an act was passed in 1791 to incorporate the United States "=In re Debs, 158 U. S. 564, 578. ^'"' I Hamilton's Works, 116. ^*^ Articles of Confederation, Art. ii. "«See note, Clarke & Hall's Hist. Bank U. S., p. 14- ""Clarke & Hall's Hist. Bank of U. S., p. 11. 150 J Wilson's Works, Andrew's Ed., pp. 558, 561, 562. "1 Clarke and Hall's Hist. Bank U. S., 15. — 28 — Bank upon the plan Hamilton suggested/^^ It was opposed in the House by Mr. Madison/^^ President Washington asked the opinions of his cabinet, and Mr. Jefferson^^^ and Mr. Randolph^^^ put in written opinions opposing it. Mr. Hamilton answered them in one of his greatest state pa- pers. ^^° He argued : The Federal government as to its objects is sovereign; it is the nature of sovereign power to use all appropriate means to attain the end authorized ; as an appropriate means to an authorized end, the right to erect a corporation is inherent in, and inseparable from, the idea of sovereign power. Washington was convinced and signed the act.^^^ Its validity was recognized afterwards by the ^^- I St. at L. igi. i'^^ Clarke and Hall, p. 39; 6 Bancroft's Hist. U. S. (Cent. Ed.) 463- ^^* Clarke and Hall, 91; Ford's Federalist, Appendix. 1" Clarke and Hall, pp. 86, 89. ^°* lb. p. 95; Ford's Federalist, Appendix. 1"' In the Constitutional convention Mr. Pinckney once moved that the new government be given power "to charter corporations" (Madison Papers, p. 440, Aug. 18), and Mr. Madison twice moved that Congress be given power "To grant charters of corporations in cases where the public good may require them, and the authority of a single state may be incompetent" (lb. p. 439; Sept. 14, p. 543). These were both rejected and it often is urged that this shows the intention of the convention to deny to Congress the power to grant charters of incorporation. The course of events, however, shows that such was not the intention. The provision was rejected because unnecessary (Mr. King, Mad. P. 544), might lead to monopolies (Mr. King, Mr. Wilson, and Mr. Gerry, lb. pp. 544, 553), and as the question was finally put, was limited to canals (lb. 544). Mr. Wilson thought such a provision was necessary to prevent a state from obstructing the general welfare, and observed that mercantile monopolies are already included in the power to regulate trade (lb. p. 544). It is neces- sary to recall, in order to arrive at a fair understanding of the views of many of the leading men, their connection with the old Bank of North America, and the first U. S. Bank. The Bank of North America had been established under the Confederation, at the suggestion of Hamilton, by Robert Morris, and its charter was drawn up by Governeur Morris. It had been opposed by Madison, and its charter defended in court by James Wilson. When the government went into operation under the Constitution, Hamilton, acting largely on the advice of Robert Morris, became Secretary of the Treasury, and as such urged the creation of the First U. S. Bank, — the bill for which, opposed by Madison in Congress, was signed by Washington, after fully considering the objections thereto of Randolph, Attorney General, and Jefferson, Secretary of State, and the argument in favor thereof by Mr. Hamilton. All of these men, except Mr. Jeft'erson, had been active and influential members of the Constitutional convention, and Washington had been its president. In their arguments against the bank, neither Madison, Randolph, nor Jefferson, reHed on the fact that the convention had refused to grant Congress power to create a corpora- tion; and on the other hand, Mr. Hamilton was able to rely upon the strong inference that at least four of the state conventions understood that such power — 29 — courts^^* and by Presidents Adams and Jefferson, both of whom signed acts relating to it.^^° Its charter expired in 1811 ; a bill to renew, was lost in the House by one vote, and in the Senate by the casting vote of the Vice-President, — on constitutional grounds.^"" Three years later Mr. Dallas, Secretary of the Treasury, was asked to report a plan "to revive the public credit." He reported that a National bank was necessary. An act was passed in 1816, by large majori- ties; the constitutional objections were scarcely mentioned in the debates.^®^ Mr. Madison signed the bill, saying that the constitutional question was settled by repeated recogni- tions by all branches of the government. ^^^ In the meantime many state banks had been formed ; these and the states were hostile. Indiana and Illinois forbade the United States Bank to locate within their borders. Maryland proposed to tax the branches $15,000, Ohio $50,000, annually, and other states larger sums yet.^"' The Maryland tax came before the Supreme Court in 1819, in McCnlloch v. Maryland,^"* and was held void by Chief Justice Marshall, who declared Congress has power to incorporate a bank, and it has a right to establish a branch within any state. He said : "The gov- ernment is one of enumerated powers ; though limited in powers it is supreme within its sphere of action; a govern- ment with a right and duty to do an act, must be allowed to select the means; the power to create a corporation is not a substantive power which cannot be impHed ; it is never the resided in Congress, for they suggested amendments to limit the power, so Con- gress could not create monopolies (see Note 171 infra). All these men under- stood the new government was to have more extensive powers tnan the confed- eration, and all knew that the confederation had chartered the Bank of North America. 1=8 Bank of U. S. v. Deveaux, 6 Cr. 61 (1807). 1™ Acts June 27, 1798, Mar. 23, 1804, Feb. 24, 1807, providing penalty for counterfeiting the bank's securities, and for authorizing the establishment of branches in Louisiana. 1™ Clarke and Hall's Hist., pp. 274, 446. The debates here were confined almost exclusively to the constitutional question, — and are given in Clarke and Hall. "1 Clarke and Hall, pp. 481, 48", 539, 549. 579, 585, 594, 596. 60s, 609, 611, 612, 613, 619, 621, 681, 706, 713. '""•lb. 594- "s Catterall, The second Bank of U. S., pp. 62-64; 4 McMaster's Hist. People of U. S., 484-511- i"*4 Wheat. 316. — 30 — end, but the means by which other objects are accom- plished." And he laid down the rule followed ever since : "Let the end be legitimate ; let it be within the scope of the Constitution; and all means which are appropriate, which are plainly adapted to that end, which are not pro- hibited, but consistent with the letter and spirit of the Con- stitution, are constitutional." The Ohio tax case, Osborn V. U. S. Bank,'^^'^ came before the court in 1824; the consti- tutional question was reargued; Justice Marshall in affirm- ing his former decision held "the bank was an instrument necessary and proper for carrying on the fiscal operations of the government," though it did a private banking business also. The same doctrine has been applied to our present National banking system.^"" The constitutionality of the banks is beyond question. How about a corporation to engage in commerce? When the Constitution was formed a "large part of the commerce of the world was carried on by corporations."^"' The Hamburg Company of "Merchant Adventurers," dating back to 1248, and 1505, the Russian Compan}-, chartered in 1566, the East India Company in 1600, the Hudson Bay Company in 1670, were all trading companies, and were then or had been celebrated for their efficiency and the extent of their trading operations throughout the commercial world. In fact our colonial charters were formed on the model of these trading compan}- charters. ^''^ The literal meaning of commerce is an interchange of merchandise, — .or trading. Mr. Jefferson in his argument against the bank understood the commerce power authorized Congress "to prescribe reg- ulations for buying and selliiig.'""^" In Gibbons v. Ogden, Chief Justice Marshall said "Commerce, undoubtedly, is traffic, but it is something more, — it is intercourse." and in- cludes navigation."" Mr. Hamilton in his argument for the "' 9 Wheat. 738. "» Easton v. Iowa, 189 U. S. 220 (1903); Farmers' Nat'I Bank v. Bearing, gr U. S. 29. "'Field, J., in Paul v. Virginia, 8 Wall. 168 (1868); also quoted with approval by Justice Bradley in Stockton v. R. R. Co., 32 Fed. R. 9, 14, wa Angell & Ames Corp., §§ 52, 53; Fisher's Evolution of the Const, of the U. S., pp. 26, 29, et seq., 118-123. 100 Ford's Federalist, p. 652. "» Gibbons v. Ogden, 9 Wheat. 1 (1824). — 31 — bank said Congress may create a corporation "in relation to the trade with foreign countries, or to the trade between the states, or with the Indian tribes; because it is the province of the Federal government to regulate those objects, and because it is incident to a general sovereign or legislative power to regulate a thing to employ all the means which relate to its regulation to the best and greatest advantage. * * * They possess a general authority to regulate trade with foreign countries. This is a means which has been practiced to that end by all the principal commercial nations, who have trading companies to this day which have sub- sisted for centuries. * * ''' The state conventions pro- posed constitutional amendments expressed nearly thus : Congress shall not grant monopolies, nor erect any company with exclusive advantages of commerce.''-'''^ Thus at the same time expressing their sense that the power to erect trading companies or corporations was inherent in Congress and objecting to it no further than as to the grant of exclusive privileges. "^''^ This is the doctrine for which I contend in regard to trading companies, and was said by this far sighted states- man before the era of turnpikes, canals, railroads, or tele- graphs, and is a contemporary exposition of the meaning of the Constitution. There is authority, however, as to the government's direct power over the means of interstate communication. The Act of 1802 for the admission of Ohio to the Union provided that five per cent of the net proceeds of the sales of the public lands in the state should be applied by the Federal government to "laying out and making" public roads from the navigable waters of the Atlantic "to the Ohio River, to the said state, and through the same;" the same agreement ^'^ Massachusetts proposed as an amendment " i hat Congress erect no company with exclusive advantages of commerce." New Hampshire and North Carolina proposed "That Congress shall erect no company of merchants with exclusive advantages of commerce." New York: "That the Congress do not grant monopolies, or erect any company with exclusive advantages of com- meixe." The other states did not mention the subject. The necessary inference from the foregoing is that Congress had the power to create mercantile or trading companies. Ford's Federalist, pp. 632, 634, 643, 650, 6y6. ^^2 Clarke and Hall's Hist. Bank U. S., pp. 97, no, in; Ford's Federalist, rp. 657, 676. — 32 — was made with Indiana, Illinois, and Missouri, when they were admitted, and the acts were signed by Presidents Jef- ferson, Madison and Monroe. In 1806, President Jefferson signed the Act for the construction, by the National govern- ment, of the Cumberland road from the Potomac to the Ohio River, and which by subsequent acts was extended to Jeffer- son City, Mo. The consent of the states through which it passed was to be obtained before work began. ^'^ In 1822, an act authorizing the erection of toll gates, the collection of tolls, and providing penalties, without the state's consent, was vetoed by President Monroe on the constitutional view that to establish post roads meant simply to designate them, rnd that the National government had no right to acquire property or exercise any jurisdiction within a state without its consent,'" — all of which were overruled the first time they came before the courts.'"'' The same ideas continued during the Pacific Railroad agitation, yet the first charter "■' For short history of the .\'ational Road legislation see Indiana v. U. S., 148 U. S. 148. "• Kichardscn, Messages and Papers of the Presidents, Vol. II, p. 142. See also \ol. I, p. 418 (Jefferson); ib. 584 (Madison's veto); Vol. II, 483, 493, 638 (Jackson); Vol. Ill, 118 (Jackson's veto); Vol. IV, 330 (Tyler's veto); ib. 460 (Polk's veto); Vol. V, p. 256 (Pierce); Vol. VII, 382 (Grant); Vol. VIII, 120 (Arthur); Vol. IX (Cleveland's vetoes). "° In Dickey v. Maysville Turnpike Co., 7 Dana (Ky.) 113, 125, 128 (1838), the first objection of President Monroe was thus vigorously answered by Chief Justice Robertson: "We might present almost endless illustrations of the fact that the popular and philological, sacred and profane, oracular and political, import of 'establish' is not to designate, but to found, prepare, make, institute, and confirm," — and he held that the general government had power to make, repair, keep open, and improve post roads, whenever the exercise of any such independent national power shall be deemed proper for the satisfactory performance of its duties as to the mails. In Kohl V. U. S., 91 U. S. 367 (1875), it was held that the eminent domain power of the National government enabled it to secure property necessary for a post office within a state, without its consent. The same had been held in 1871 by Judge Cooley in Trombley v. Humphrey, 23 Mich. 471. And in Stockton v. R. R. Co., 32 Fed. R, 9, 15. 18 (1887), Mr, .Monroe's third objection was thus answered by Mr. Justice Bradley: "The constitution gives Congress power to exercise exclusive jurisdiction over all places purchased by consent ot the legislature of the state. This does not touch the question as to the power of the United States to acquire the mere use of land without exclusive jurisdiction therein. Nearly all the powers of government are exer- cised over territory in which the United States and the several states have con current jurisdiction. Consent and cession are necessary to extinguish state jurisdiction, and confer it exclusively on Congress,— but not necessary to the use of the land by the United States." The same had been held by Judec Cooley in Trombley v. Humphrey, supra. — 33 — granted by the United States, in 1862/^" authorized a Kan- sas corporation to build a part of the Union Pacific road in the State of Missouri, and authorized a California corpora- tion to build a line from San Francisco, instead of Sacra- mento, as its state charter provided, to the east state line and on to Ogden, Utah. Also these companies were both, without state consent, authorized to consolidate with the National corporation ;^" this they did in 1880 ; the Attorney General of Kansas attacked the validity of the consolidation, and the Supreme Court of the United States said "if the acts of Congress confer authority the consolidation is valid; if not, it is invalid."^" Uater, California undertook to tax both the state and Federal franchises. This was held void, Mr. Justice Bradley saying t^^" "The power to construct, or to authorize individuals or corporations to construct, na- tional highways and bridges from state to state is essential to the complete control and regulation of interstate com- merce." Otherwise "it would be without authority to regu- late one of the most important adjuncts of commerce." In 1871, the Texas and Pacific Railroad Company was incor- porated by the Federal government to construct and operate a railroad from Marshall, Texas, to San Diego, California, and nothing was said as to the state's consent. ^^" In 1886, Congress authorized a New York railroad corporation to build a bridge over navigable water between New York and New Jersey as a part of an interstate railroad line. The New Jersey law expressly forbade it, and the Attorney Gen- eral sought to enjoin, but Justice Bradley said "in the pur- suit of a business authorized by the government of the United States, the corporations of other states cannot be prohibited or obstructed by any state."^*^ The North River Bridge case went a step further in ^'^ Act July I, 1862, 12 U. S. Stat, at L. c. 120, p. 489, §§9, 10, 12, 14, IS, 16, relating to Leavenworth, Pawnee & W. R. R. of Kansas, and Central Pac. R. R. of California, and Hannibal & St. J. R. R. of Missouri. "' lb. ^^■^ Ames V. Kans., iii U. S. 449, 462; Pacific R, R. Removal Cases, 115 U. S. .. ^™ California v. Pacific R. R., 127 U. S. i; same quoted with approval by Mr. Justice Gray in Luxton v. North River Bridge Co., 153 U. S. 525 (1894). ""Act Mar. 3, 1871, 16 St. at L. 573, c. 122, §§4, 9, 10, 22, 23. "« Stockton V. B. etc. R. R. Co., 32 Fed. R. 9, 14. — 34 — 1894-'"" The bridge company was chartered by Congress alone to bridge the Hudson from New York to Hoboken. It brought suit to condemn the necessary land in New Jersey without that state's consent; it was resisted on the ground that Congress had neither the power to create the corporation nor authorize the condemnation of the land. Overruling both, Mr. Justice Gray says: "Congress may create corporations as appropriate means of executing the powers of government, as, for instance, a bank for the pur- pose of carrying on the fiscal operations of the United States, or a railroad corporation for the purpose of pro- moting commerce among the states." In the exercise of this power of promoting commerce, interstate and foreign. Congress has authorized the incor- poration of the present National banks,"'' the Union Pa- cific, '"■' Northern Pacific,"" Atlantic and Pacific,"" and the Texas and Pacific,"^ railways ; the Maritime Canal Co. of Nicaragua ;^*^ various bridge companies ;^*" the construction of the National road,"" and the Panama canal ;"^ subscrip- tions hx the government to shares in various canal compan- ies ;"^ and now, by authority of Congress the United States owns, and intends to vote, sixty-nine seventieths of the stock of the Panama Railwa}- Company. ^"^ Under the postal power, the "first telegraph line ever built was constructed between Washington and Baltimore, and the entire cost of its construction and operation for nearly two years was paid bv Congress."'"* State incorporated telegraph companies ^^2 Luxton V. North River Bridge Co., 153 U. S. 525. "■' ij Stat, at L. 66s (1862). '"lb. 489. "» 13 Stat, at L. 365 (1864). "« 14 Stat, at L. 292 (1866). ■■" 17 Stat, at L. 59 (T872). ""25 Stat, at L. 673 (1889). ""July II, 1890, 26 St. at L. 268, 153 U. S. 525. ""I 148 U. S. 148. '."'Treaties, Xov. 18, Dec. 16, i90i;"Jan. 22, 1903; Nov. 18, 1903; Feb. 23, 1904. '"'i ,\ct^ 1811 (Feb. 20), 1825 (.Mar. 3), 1826 (May 13 and 18), 1828 (May 4 and 24), 2 St. 643, 4 St. 124, 162, 169, 294, 305. 103 Detroit Free Press, Aug. 20, 1904. '»* Report Committee on Judiciary, Feb. 4. 1875, Series Xo. 1657, ttoc. \o. 125, 5 St. at L. 618. — 35 — have been authorized to construct their lines on all post- roads, even where a state had granted to another company the exclusive right to construct such line/"^ and all railroads are made post roads for this purpose.^"" But Congress has exercised its power to create corpora- tions not only to promote or facilitate commerce by creating or authorizing corporations to engage in interstate or foreign commerce, but also has created the Interstate Com- merce Commission, — which the Supreme Court has held to be a corporation, — not for the purpose of engaging in or carrying on interstate or foreign commerce but for the sole purpose of regulating such commerce.^"" The authority of Congress to create corporations in the District of Columbia, and in the Territories, has never been doubted, and is as extensive as the power of the legislature of any state to create corporations within the state. Chapter 15 of the Compiled Statutes of the District pro- vides for the formation of educational, religious, manufac- turing, agricultural,, mechanical, insurance, transportation, cemetery, and trust corporations, in the District. On March 13, 1901, Congress enacted a Code of Law for the District to go into effect January i, 1902. Section 605 of this pro- vides for the formation, by three incorporators, of corpora- tions to carry on any business that may be legally conducted by an individual, in the District, without any franchise or annual tax (except upon its tangible property in the Dis- trict), and with very little provision for supervision or con- trol. According to Professor F. Ly. Siddons, of the Law School of the National University, this law has been falsely exploited as a National Incorporation Law, and companies have been formed for the purpose of promoting incorpora- tion under it as such. During the first eighteen months of its existence, 1,427 companies with $2,903,415,900 author- ized capital stock, were organized for the express purpose, in most cases, of doing business outside of the District.^"* 105 July 24, 1866, 14 St. at L. 221, Rev. St. § 5263. ""Act July 7, 183S; also 17 St. 308, § 201; R. S., § 3964. ^^^ Texas & Pacific R. R. v. Interstate Commerce Com., 162 U. S. 197, Shiras, J. ^^^ Annual Address of Mr. Siddons, as President of Commercial Law League of America, July 26, 1904, Bulletin of League, Aug. 1904; Am. Legal News, Sept. 1904. — 36 — Congress has also authorized the incorporation "in the District of Columbia," of National Trades Unions, with power to ; establish branches in the states ; insurance com- panies to do business in the states with their consent ; the Freedmen's Trust Company, with authority to act within the states ; the General Education Board "for the promotion of education within the United States," with power to build and equip libraries, workshops, gardens, establish schools, and employ teachers, and to take and hold lands for such purposes anywhere ; the Centennial Board of Finance ; the American Historical Association ; the Association of Mili- tary Surgeons ; the National Asylum for Disabled Volun- teers ; the Florence Crittenden Mission ; and many other like institutions ; scarcely a session of Congress is held in which some such corporation is not created "in the District," to operate anywhere it may choose, so long as the state in which it operates does not forbid.^^" Congress has always exercised its powers to create cor- porations in the territories, or has authorized the territorial government, where there is an organized government, to do so ; the recent acquisition of territory has led to much late legislation of this kind. The Philippine Commission is au- thorized to grant corporate charters ; the Act of Congress of March 2, 1903, amending the Civil Code of Alaska, added Chapter 37 to Title 3, and provides for the formation of Pri- vate Corporations ; the Porto Rico and Oklahoma legislative assemblies have enacted corporation laws, under the author- ity of Congress. ^°° It is said that Professor Morse tried tested, and improved his invention of the telegraph at Ar- royo, in Porto Rico, before giving it to the world, and now, the whole telegraph system of the island is operated by the insular government, and has been since 1901.^°^ The fore- going power to create corporations in the territories, or to authorize the territorial legislatures to do so, is not denied ; "'» I Wilgus, Corp. Cas. 3J4; R. S. §546. i Supp. R. S. 425; 13 Stat, at L. 510; 15 St. at L. 184; 17 St. at L. 203; 24 St. at L. 86; i Supp. R. S. 498; 57th Cong., Jan. 12, 1903, p. 768; Jan. 30, 1903, 784; Feb. 11, 1903, 824. 2»» Civil Code, Porto Rico, Ch. iv, Bk. I (1902). Oklahoma Statutes, 1893; Session Laws, 1903, Ch. ix, p. 136. '"' Report of the Commr. of Interior, Porto Rico, to Secy. Interior, 1903, p. II. — 37 — such corporations, when states are formed out of the terri- tories become, without further action, corporations of the state so formed, with the standing of state-created corpor- ations.^o^ Mr. Hamilton considered that the creation of territorial governments was the erection of corporations by the Federal government; he says "such a power (the power to create corporations) has actually been exercised in two very emi- nent instances ; namely in the erection of two governments ; one northwest of the river Ohio, and the other southwest, — the last independent of antecedent compact."^"^ It has been pertinently suggested that if the Federal government can erect government corporations, with power to create corpor- ations generally, it has the power to do the same itself,^ otherwise the creature is greater than the creator. Such doctrine, however, is not necessary for the plan herein advo- cated. Such District or territorial corporations undoubtedly may be empowered by state comity to act outside of the dis- trict or territory in which they are created, but probably cannot, though authorized by their charter to do so, act in another state or territory without the consent, express or implied, of such .state or territory, unless engaged in the performance of some national function.^"* From the foregoing it seems certain that the power of the National government is ample to enable it to create what- ever trading, transmission, or transportation corporations to engage in, or to regulate, interstate or foreign commerce, it may deem wise to establish. But is this sufficient? The combinations of which complaint is made are not only en- gaged in the foregoing but in growing, mining, or making things, and none of these is commerce. Can the National government incorporate companies to do these things within the states ? Probably not, if the manufacturing is not strictly for a governmental purpose, or if the manufacturing, min- 202 Riddick v. Amelin, i Mo. 5, Wilgus, Cas. Corp. 302; Bank of Vincennes V. State, I Black (Ind.) 251; Kans. Pac. Ry. Co. v. A. T. & S. F. Ry. Co., 112 U. S. 414. 2»3 Ford's Federalist, p. 668. 20* Hadley v. Freedman's Trust Co., 2 Tenn. Ch. 122; W^illiams v. Cress- well, 51 Miss. 817. — 38 — ing, etc., is the primary or sole purpose for which the cor- poration is created, and the state in which it seeks to carry on its transactions objects. To do .this, without such con- sent, probably would require a constitutional amendment, which would be difficult to obtain, and in the writer's opinion would be an unwise extension of the Federal power. The writer believes each state would, and ought to, resent the exercise of any power authorizing any Federal or state corporation, to establish a private manufacturing in- stitution within its borders without its consent. But no such power or authority is needed. If the government can obtain control over the corporations that do the growing, mining, or making of things, it will have ample power to solve our difficulties. How can this be done? As things now are the manufacturing companies do the trading, interstate and foreign. The Federal government has control of the trading, but neither the manufacturing, nor the company that does it ; if the process can be reversed, so that the trading company, incorporated by the National government, will do the manufacturing, mining, etc.. then both the trading and the company doing it, can be directly controlled, and the manufacturing, mining, etc., incidentally only, but sufficiently for the proper regulation of interstate and foreign commerce. There is no need of the Federal government directly controlling the manufacturing and min- ing, if it can control, or regulate its corporations, so far as they engage in such operations. The question then is, can a National transmission, trans- portation, or trading corporation, be authorized or permitted by the Federal government to engage in growing, mining, or making things, — or in short, be authorized to engage in manufacturing, in the states, if they do not object? I think so : ( I ) Because making or producing things is necessary to each of the other operations. (2) Such has been the practice already. All the Pacific railroads carry intra as well as inter-stzte freight. In Osborn v. U. S. Bank, it was ex- pressly held, after elaborate argument, that the Federal gov- ernment had not exceeded its power in authorizing the bank and its branches to do a private loan and discount business within the states where located, and such branches could be — 39 — located in any state without its consent.-"^ National banks now do a private loan and discount business in the states where located as well as issue notes; some of the Pacific railroads are permitted to 7nine coal for their supply ; the Maritime Canal Company incorporated by the Federal government is authorized to construct and operate a canal, in a place where the United States has no jurisdiction. (3) If the states can give corporate capacity to do such things away from home, which by comity is sufficient for the company, there seems to be no reason to think the Federal government cannot give a Federal corporation the same capacity, which will also be effective through the comity of the state where exercised." (4) A Federal cor- poration may be created by Congress in a territory, or in the District of Columbia, to carry on manufacturing there; if its charter does not forbid, it may, by comity, engage in such manufacture in any state, the same as a state-created corporation ; if the national government also authorized it to engage in interstate trade or transportation this would not limit its power, by comity, to carry on its manufacture wher- ever it was not foi-bidden. (5) The power to engage in trade implies the power to secure something to trade ; the National Government could authorize a trading company to acquire these things by purchase in any state ; if such cor- poration could buy the things in which it deals, there is no good reason why it may not make them if the state where it does this, does not object. So I beHeve the National Gov- ernment can create a trading company, which the Nation, by the charter, can authorize, and the states by comity, will allow, to do manufacturing in any state. There seems to be no direct authority on the matter. Such intra state business probably is, and would be, subject to state laws.-"^ The distinction between making things, — manufactur- ing, — and commerce has long been recognized, and is funda- mental. It was clearly drawn by Mr. Jefferson in his argu- ment against the bank when he said "To make a thing ■'»= Osborn v. Bank of U. S., 9 Wheat. 73S. -»° Smythe v. Ames, 169 U. S. 466, 519-22; Reagan v. jlercantile & Trust Co., 154 U. S. 413; California v. Pacific R. Co., 127 U. S. i ; Central Pacific E. R. Co. V. California, 162 U. S. 91. — 40 — which may be bought and sold, is not to prescribe regula- tions for bu}ing and selling."-"' As Mr. Justice Lamar said in Ktdd v. Pearson,^"^ "If it be held that the term [regulation of commerce] includes the regulation of all such manufactures as are intended to be the subject of commercial transactions in the future, it is impossible to deny that it would also include all productive industries that contemplate the same thing. The result would be that Congress would be invested, to the exclusion of the states, with the power to regulate not only manufactures, but also agriculture, horticulture, stock raising, domestic fisheries, mining, — in short every branch of human industry. * * * A situation more paralyzing to the state governments * * and less likely to have been what the framers of the Con- stitution intended, it would be difficult to imagine." This is quoted by Chief Justice Fuller, with approval, in the Sugar Trust case, U. S. v. B. C. Knight Co.,'^°^ and to some these doctrines seem to be in irreconcilable conflict with the views above set forth. I do not think so, but believe, on the contrary, that these cases sustain, indirectly, the plan pro- posed herein. The Pearson case held that a state could prohibit the manufacture of intoxicating liquors within its borders, although the manufacturer intended to export the product ; this doctrine had already been applied to the manufacture of oleomargarine.^^" Such, prohibition does not directly interfere with interstate or foreign commerce. The Knight case was the first case that came before the Supreme Court involving the application of the Federal Anti- trust law. It was a suit brought to cancel certain written contracts whereb}- the American Sugar Refining Company, by a purchase of the shares of stock in four Philadelphia refineries, secured a practical monopoly of the sugar refining business throughout the United States ; the court below held that the proofs failed to make out a "contract, combina- tion, or conspiracy," contrary to the act; the Supreme Court, -^^ Ford's Federalist, p. 652. ™s 128 U. S. 1, 20, -'4, 32 L. Ed. 346, 351. ■""ise U. S. I, 14, 15, 39 L- Ed. 3^5. 330- 'i'" Powell V. Penn., 1J7 U. S. 678, 1257; Capital City Dairy Co. v. Ohio, 183 U. S. 238. — 41 — waiving the question whether the proofs estabHshed a combination, said, by Chief Justice Fuller, "Conceding the existence of a monopoly in vianiifacturc is established by the evidence, can that monopoly be directly suppressed * * * in the mode, attempted by this hillf" Held, it could not,^^^ the court saying: "That which belongs to commerce is within the jurisdiction of the United States, but that which does not belong to commerce is within the police power of the state. -^ ^' The power to control the manufacture of a given thing involves in a certain sense the control of its disposition, but this is a secondary and not the primary sense; and although the exercise of that power may result in bringing the operation of commerce into play, it does not control it, and affects it only incident- ally and indirectly. Commerce succeeds to manufacture and is not a part of it. The power to regulate commerce -^^ U. S. V. E. C. Knight Co., 156 U. S. i. This case seems to have been misunderstood, and many have considered it as holding that the Federal anti- trust act in no way reached the manufacturing monopolies that carry on com- merce throughout the United States, and further that the Federal government had exhausted its power over the subject by the provisions of the act. The case determined neither of these questions, as shown by the facts upon which the case \va§ decided: "By the purchase of the stock of four Philadelphia refineries, with the shares of its own stock, the American Sugar Refining Co. acquired nearly complete control of the manufacture of refined sugar within the United States. The bill charged that the contracts under which these purchases were made constituted combinations in restraint of trade, and that in entering into them the defendants combined and conspired to restrain the trade and com- merce in refined sugar among the several states" ; canceling the agreements, redeUvery of the stock, enjoining further performance of the agreements and further violations of the act, and general relief, were asked by the Attorney- General. Evidence was taken, and the decision was based upon the record made, — consisting mainly of the written contracts relating to the purcha;je. The trial court found that the shareholders of the four companies had sold their shares to the American Sugar Refining Co. in exchange for its shares; that there was "no understanding or concert of action between the stock- holders of the [four] companies respecting the sales, but that those of each company acted independently of those of the others, and in ignorance of what was being done by such others"; "that the contract of sale in each case con- tained no provision respecting trade or commerce in sugar"; "that the object in purchasing the four refineries was to obtain a greater influence or more perfect control over the business of refining and selling sugar in this country." This court held "the facts did not show a contract, combination, or conspiracy to restrain or monopolize trade or commerce among the several states," — i. e., the proof failed to show a combination to monopolize, etc. Chief Justice Fuller, in pronouncing the opinion affirming the decision of the lower court says: "In the view we take of the case we need not discuss whether because the tentacles which drew the outlying refineries into the — 42 — is the power to prescribe the rule by which commerce shall be governed, and is a power independent of the power to suppress monopoly. But it may operate in repression of monopoly whenever that comes within the rules by which commerce is governed, or whenever the transaction is itself a monopoly of commerce/^ How are these doctrines in connection with the settled rules of corporation law to be applied to the matter in hand ? Every corporation, as such, is subject to the control of the government creating it;^^^ the business it does is subject to the control of the government having jurisdiction over the business done. Each state has exclusive jurisdiction over the mamifactiiring done within its borders, by whom- soever done; the Federal government has exclusive juris- diction over interstate commerce, by whomsoever done. Any state can create a manufacturing corporation, and pre- scribe the terms and conditions upon which it will allow it to engage in interstate commerce, — it may allow or forhid it to engage in such commerce; this is not because dominant corporation were separately put out, therefore there was no combina- tion to monopolize"; "the conclusion on this record is that the result of the transaction complained of was the creation of a monopoly in the nianufactiirc of a necessary of life"; "the contracts and acts of the defendants related exclusively to the acquisition of the refineries and business of sugar reiining, and bore no direct relation to commerce between the states. The object was manifestly private gain in the manufacture of the commodity, but not through control of interstate or foreign commerce"; "there was nothing in the proofs to indicate any intention to put restraint upon trade or commerce," — so con- ceding the existence of a monopoly in manufacture is established by the evi- dence, can that monopoly be directly suppressed under the Act of Congress "in the mode attempted by this bill?" Held, it could not. The case is justly subject to the vigorous criticism made by Mr. Justice Harlan in his dissenting opinion; there was no allegation in the bill that the American Sugar Refining Co. "monopolizes or attempts to monopolize interstate commerce," contrary to Sec. 2, of the Act, and the proofs put in failed to establish a combination or conspiracy, contrary to Sec. i, and also failed to show that interstate commerce was directly affected. Had there been proper allegations and proofs, as there undoubtedly might have been, the decision probably would have been different. Subsequent decisions have kept it rigidly within tiic record then before the court, — as for instance Mr. Justice Peckham, in pronouncing the unanimous opinion of the court in the Addystone Pipe case (175 U, S. 211, p. 240), says: "The direct purpose in the Knight case was the control of the manufacture of sugar. There was no combination or agreement, in terms, regarding the future disposition of the manufactured article; nothing looking to a transaction in the nature of interstate commerce." See also, Montague v. Lowry, 193 U. S. 38; The Northern Securities Case, 193 U. S. 197. "2 State v. Curtis, 35 Conn. 374, 95 Am. D. 263, Wilgus, Corp. Cas. 258. — 43 — the state has any jurisdiction over interstate commerce, but because it has complete authority over its own corporation ; neither permitting, nor forbidding such corporation to engage in interstate commerce is regulating such commerce by the state ; but if it permits its corporation to engage in interstate commerce, the permission cannot be inconsistent with the paramount authority of the Federal government to prescribe the terms upon which it may carry on inter- state commerce. Upon the other hand, the Federal government may create a corporation to engage in interstate commerce, and may prescribe the terms and conditions upon which it will permit such corporation to engage in manufacturing ; it may either permit or forbid it doing so, not because the Federal government has any jurisdiction over manufacturing, but because it has jurisdiction over its own corporation, as such; neither allowing nor forbidding such corporation to engage in manufacturing is to regulate manufacturing in the state; the manufacturing, if allowed, is still subject to the paramount control of the state where it is done. The control of the manufacturing corporation that engages in interstate commerce, by the state creating it, is not con- trolling such commerce directly, but only incidentally ;, so also the control of the trading corporation that engages in manufacturing, by the Federal government that creates it, is not controlling manufacturing directly, but only inci- dentally. The former does not violate the Federal power; and the latter does not infringe state authority. Another step, perhaps, is necessary as a last resort, in order to insure effective governmental control, — and that is the power to prohibit state corporations from engaging in commerce, in order to require them to organize as Fed- eral corporations. The power of prohibition under the com- merce clause has been considered. Probably the power to tax can be used to the same end. This power has con- stantly been used for the purpose of regulating foreign commerce, in order to protect home manufactures, and to prevent the introduction of foreign goods except upon the terms named in the tariff laws ; such laws, where goods are excluded directly or by a prohibitory tariff, are not — 44 — revenue laws, but are taxes laid "in order to promote the general welfare." From the earliest times tariff laws have been as much, if not more, for regulating commerce, than for raising revenue. When laid for this purpose their validity is no longer questioned. The taxing power was so used to destroy the issue of notes by the state banks, and was held to be constitutional. The true bearings of this decision were pointed out at the time in the dissent of Justice Nelson who said "The present decision strikes only at the power to create banks, but no person can fail to see that the principle involved affects the power to create any other description of corporation, such as railroads, turn- pikes, manufacturing companies, and others. "'"^^ The same device has been used to protect the farmers by a tax upon oleomargarine; the object of the law is not revenue, but the destruction of, or making unprofitable, the oleomargarine industry, and it has just been pronounced constitutional}'^'^ The government undoubtedly could also classify cor- porations that engage in interstate commerce, and require such as were deemed dangerous because of size, powers, or method of organization to incorporate under Federal laws, — leaving others, or individuals engaged in interstate com- merce to do as they chose. ^^^ If what has been said is correct, then it is believed that the Federal government has ample power to deal in an effective, comprehensive, yet simple and direct, way, with the difficulties and dangers besetting us, and in a way flexible enough to meet the growing demands of business, and at the same time in a way that does not infringe upon the proper power of the states nor require any constitu- tional amendment that undertakes to redistribute Federal and state powers in an unknown and uncertain way.-^° -'^ Veazie Bank v. Fenno, 8 \^'all. 533; Casey v. Galli, 94 U. S. 673; National Bank v. U. S., loi U. S. i. ^" Act May 9, 1902, c. 784, 32 St. at L. 193, Supp. U. S. Comp. St. 1901, p. 265. McCray v. U. S., Adv. Sh. July 15, 1904, p. 769. ^^° Farmers' and M. Ins. Co. v. Dabney, 189 U. S. 301, 23 Sup. Ct. R. 565, 97 Am. St. R. 624. 631. ^'^ Since the above was written the Committee on Jurisprudence and Law Reform of the American Bar Association have reported: "i. That under the clause of the Constitution to regulate commerce Congress has no power to create corporations except those which have for their object the carrying on of — 45 IV. POLICY. In discussing this, there is no better order than to keep close to Marshall's great rule, already quoted: "Let the end be legitimate; let it be within the scope of the con- stitution ; and all the means which are ' appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the Constitution are constitutional.""' I believe what is proposed comes clearly within all these tests. Is the end, — the proposed proper regulation of the great manufacturing, trading, transportation and transmis- sion companies, — legitimate? Let holders of U. S. Steel common shares answer; let the investor in the shipbuilding trust, exhibit his freehold in moonshine; let the careful investor even, that gets the privilege of paying creditors when a bubble bursts, answer; let the victims of Whitaker Wright, who learned his trade in America, answer; let the ghosts of Lawson's forty Amalgamated Copper suicides testify; let the creditor who can find nothing more than the shadowy form of an imaginary franchise to levy on when the evil day comes, answer ; let those who here pay $24 for steel made here and sold in Europe for $18, answer; let the thousands who have been pushed to the wall by a predatory competitor that observes none of the rules of civilized warfare, answer; let all who regularly, though reluctantly, by a sort of vicarious atonement, contribute to noble charities, not of their own selection, by paying an additional cent, every month or two, for oil, reply ; let the honorable railroad manager, forced to meet the cut rate of the dishonest, make answer ; let those who eat meat or burn exclusively interstate business." The report was laid on the table. No author- ity was given in support of the report. So far as my investigation has gone, I have found no court that states the power of the Federal government in the same or similar words. Neither have I found any court that seems to take so restricted a view. It seems to me that the words I have italicised should be stricken out, and others substituted so as to read; "i. That under the clause of the Constitution to regulate commerce Congress has power to create corpora- tions which have for their object the regulation of interstate commerce." This is certainly in accord with the decisions, and also with the reports made to Congress from time to time by committees composed of the most eminent con stitutional lawyers. 2" McCulloch V. Maryland, 4 Wheat. 316. — 46 — anthracite coal, answer; let all everywhere, who pay tribute to swell the dividends paid by the overcapitalized and inflated fiddlers, answer.^^" Are there any except the bene- ficiaries to answer, Nay? Is the end within the scope of the Constitution? The ver}- end for which the Constitution was framed, was to form a more perfect Union, in order to promote the general welfare ; if the conditions above set forth disturb the general welfare, and disturb legitimate commerce, as I believe they do, then to remove or remedy them is an end within the scope of the Constitution, and I have tried to show not that the ends justify the means, but that the means proposed are fairly and clearly within the Constitution also. Are the means appropriate, adapted to and adequate to the end, and not prohibited? They certainly are not pro- hibited ; if what I have before said is correct, practically none but the general government has adequate power. Are they then appropriate? We have good reason to think so. Our commercial condition is now analagous to that existing before the formation of the government, and to the condition of our money system several times since. Before the Constitution commerce was disturbed by conflicting state regulations ; now it is disturbed by conflicting and inadequate state regulations of state created commercial corporations ; then there was no government that could regulate the matter ; now the onl}- one that can, does not ; then the disturbing element was the caprice of interested states; now it is not onl}- that, but also the greed and avarice of their irresponsible and unregulated progeny, spawned for the purpose, that disturb our whole system. In short our affliction is now a conflicting, unregulated, -^^ See Reports of Industrial Commission generally, and in addition articles. Cosmopolitan, Aug. 1904, Wall Street's Wild Speculation 1900-1904, Henry Clews; Pearson's Magazine, 1904, Modern Methods of Finance, series of articles by Henry George, Jr.; Everybody's Magazine (1904), series of articles on Frenzied Finance, by Thomas Lawson; McClure's Magazine, 1903-4, Miss Tar- bell's History of the Standard Oil Co.; L. W. Sammis, Relation of Financial Trust Co. to the Industrial Trust, address, 1904, to Am. Acad. Polit. and Soc. Sc.; Report of James Smith, Receiver of Shipbuilding Trust, Oct. 13, 1903; World's Work, Nov. 1903, p. 4064, The Lesson of U. S. Steel Corporation; ib., Jan. 1904, p. 4287, Monopoly of Natural Products; ib., Feb. 1904, p. 4445, One Trust and What Became of It. — 47 — irresponsible corporate regulation, so far as there is any, instead of a uniform, sane, safe, fair, just, and adequate National regulation; to meet the conditions 115 years ago, a new government, amounting to a revolution in form, was created. Shall we not, to meet present conditions, adopt the most direct and simple means, the wisdom of the founders of that government gave us, for the very pur- pose P^"^" Can anything be more appropriate? Our commercial condition now is also analagous to the money condition several times in the past. , Congress is given power to regulate the value of money, as it is to regulate commerce, — the reason being the same in both cases — to secure uniformity for the welfare of all. In the debate on chartering a bank in 1816, John C. Calhoun, who will not be charged with xtltra Nationalism, significantly said: "The state of our circulating medium is opposed to the principles of the Federal Constitution. The power is given to Congress in express terms to regulate the currency of the United States. In point of fact, that power, given to Congress, is not in their hands. The power is exercised by 260 banking institutions, with $80,000,000 capital no longer responsible for the correctness with which they manage it. * * * By a sort of undercurrent the power of Congress to regulate the money of the country has caved in, and upon its ruin has sprung up those institutions which now exercise the right of making money for, and in the United States. * =1= * A change, * '■' * which divests you of your rights, and turns you back to the condition of the Revolutionary war, in which every state issued bills of credit, which were legal tender and of various value."^^" Like men of sense, to meet the conditions. Congress immediately chartered the second Bank of the United States, of which the Committee of the House of Representatives in an exhaustive report, said in 1830: "The present bank has actually furnished a circulating medium more uniform than specie, a currency of absolute uniform value in all 210 See McMaster's Hist, of U. S., Vol. I, pp. 204-8, 360-70, 390-9. 404-6; Ford's Federalist, pp. 36 (No. 7), 37n, 131-3 (No. 22), 275 (No. 41 or 42), 400 (No. 59 or 60). ■'■'« Clarke and Hall's Hist. U. S. Bank, p. 631. — 48 — places; * * * no country of anything like the same geographical extent has a currency at all comparable to that of the United States on the score of uniformity. "^^^ This bank, however, by the help of President Jackson's veto, went out of business when its charter expired in 1836, the era of state banking again began, and straightway we had as bad a currency as ever afflicted a suffering people. So far as the currency could be said to be regulated, at all, it was practically relegated to the private interests of 1600 "wild cat banks," created in the several states, with an infinite variety of special powers, under charters largely "based on ignorance, intrigue, favoritism, or corruption," without uniformity of creation, management, operation, liability, responsibility, or regulation, and issuing 10,000 different kinds of notes. ^^^ There was no national currency again until the National banking act was passed in 1863 and no uniform one until the state bank issues were taxed out of existence in 1865. Do not these point to the direction in which our real and adequate remedies lie? Perhaps it is proper here to note shortly some minor objections to the proposed plan ; some of these may be stated : Danger of corruption. — If we have to stop because of this, then we will stop in the legislatures also, for all will agree they are more susceptible to such influence than the United States Congress. Perhaps a single annual dividend of the Standard Oil Company is sufficient to purchase all purchasable quantities in any or all legislative bodies ;-^' but the detection of the stealthy hand in Congress arouses the whole country, and the whole country has its repre- sentatives there to right the wrong; although a corporate charter granted by a single state legislature may be as potent as an Act of Congress to disturb all the states, whether it shall be remedied depends upon the interest of the state alone from which it emanated. What reason is there for believing that the Federal ="'Ib., p. 746, Report of Com. of H. of R., 1830. 2^^ History of American Banking, Encyclopedia Americana; Johnston's Hist, of U. S. in Encyc. Brit. 223 These, for the last four or five years, have been from $40,000,000 to $48,000,000 per year. — 49 — Senate would be more prompt than the New Jersey legis- lature to adopt some new and needed check upon corporate- power, asks the Commercial and Financial Chronicle. Perhaps none. Yet it is not generally supposed that New Jersey is in the corporation business entirely for the public health and welfare of the people outside that state; and it is generally believed that the Senate does have a decent respect for the remainder of the country ; and if not the people have an adequate remed}-. A single New Jersey corporation can block any adequate remedy possible by the other states acting alone ; but two New Jersey Senators can do only one forty-fourth of the damage in the United States Senate, — and her representatives much less. Again, the same authority asks would Congress be better fitted than the Massachusetts legislature to serve the legitimate corporate industry? It is not this kind that afflicts us, but the illegitimate corporate industry. Whoever heard of the simon pure trusts running to Massachusetts to get incorporated? And if they did, how could they com- pete with others? The true and simple answer to these three objections is that the good law of one state affects only that state ; the bad corporation law affects all the states, — yet none but the state enacting it can remedy it ; a good national law would protect all ; a bad one affect all, but all would be interested, and have the power, to remedy it. Another says that ninety pe-t cent of the business of the people would be taken from the control of their own states and courts. This is pure assumption. The National Bank- ing law has had no such effect, and there is no reason that a Federal Corporation Law need have. It is a matter that can be regulated by the provisions of the law as experience shall dictate. The object of such a law would be to dis- place diversity and uncertainty by uniformity and certainty. This decreases instead of begets litigation. ^^^ If state courts were relieved for this reason, taxpayers, at least, 22^ It is stated that within the ten years after the enactment of the English Neg. Ins. Law, only two cases of importance had been brought before the English courts. J. W. Eaton, The Neg. Ins. Law, 21 N. Y. Bar Assn. 100, 103; Chalmers' Bills and Notes, 4th Ed. Preface. — 50 — would not look upon it as a calamity. The federal courts are the courts of the people as much as the state courts, and adding to or taking from the jurisdiction of either, is no reason for not enkcting a law necessar\- and adequate to remedy well attested evils. Other and more serious objections are considered under the next topic. Is the plan proposed consistent with the letter and the spirit of the constitution? I believe it is, or I should not advocate it for a moment. We however are met here with objections which, if well founded are serious. It is said : (i) Substantially all our Civil rights would be brought under the control of the National government. (2) It would destroy wholesome checks and balances. (3) It would lead to enormous centralization of power. (4) State's rights would be riddled; and finally (5) It would change the fundamental nature of our government. These indeed are serious, and time does not suffice to answer them fully. I can only indicate the direction wherein it seems to me, correct answers lie. In order to answer sanely, how- ever, I believe it better to be historical rather than to get hysterical. Most of the same objections have been raised and disposed of in forgotten debates on Internal Improve- ments, Pacific Railroads, National Banks, Interstate Com- merce, or Anti-Trust laws. As to the first, — bringing all our civil rights under the control of the National government ; if what I have said before is true their efficient control has already passed from the states, into the irresponsible dominion of state created corporations. I submit, it is safer and wiser to place them under the responsible control of the Federal government. I do not, however, believe there would be any shifting of civil rights that are legitimate from state to Fed- eral control ; we live under a dual government : we have civil rights under state laws, and under national laws; the field of interstate commerce belongs to the Federal government, not to the states; our civil rights in that field are heliivnd^r- "=» Slaughter House Cases, i6 Wall. 36; Hall v. Ue Cuir, 95 U. S. 4S5; Civil Rights Cases, 109 L'. S. 3. — 51 — the National laws ;-2° because the National government has seen fit to leave it unfenced till this time, does not alter the fact that it belongs to that government ; neither is it altered by the fact that the states have, in the meantime assumed jurisdiction over it, and authorized their corporations to occupy it ; the states are not adverse tenants, they surren- dered all their title to the ground,--' — and it was so nomi- nated in the bond, — more than one hundred years ago; the states and their grantees have occupied the field since not by right, but by sufiferance, — as licensees only. For the government to occupy the field, and till .it properly for the welfare of all, may inconvenience some usurping squatter, but will not shift any one's civil rights. Does any one now argue that his civil rights are improperly shifted from state to Federal control, because a Federal quarantine law, for the protection of all, displaces local regulations inconsist- ent therewith? The states cannot give a vested right to occupy the government territory. (2) Destroy checks and balances. — My view is just the reverse, and instead of destroying, it would restore them. The fundamental idea of checks and balances in our gov- ernment was that equal state representation in the Senate would check any undue domination of the large states over the small ; and upon the other hand proportional represen- tation in the House would prevent a few of the small states from securing special advantages to themselves to the detri- ment of the large body of the people. If what I have said before is true, a thrifty state can do a paying business by issuing corporate charters, which, because of the inaction of Congress, disturb the balance of the other states, with- -™ In Crutcher \. Kentucky, 141 U. S. 47 (1891), Mr. Justice Bradley said: "To carry on interstate commerce is not a franchise or privilege granted by the state; it is a right which every citizen o£ tlie United States is entitled to exercise under the Constitution and laws of the United States." To the same effect are the words of Mr. Justice Harlan in Reid v. Colorado, 187 U. S. 137, 151. "'' Mr. Justice Johnson, in Gibbons v. Ogden, 9 Wheat. 1, 227, said: "The power to regulate commerce here meant to be granted was that power which previoustv existed in the states. But what was that power? The states were unquestionably supreme; and each possessed that power over commerce which is acknowledged to reside in every sovereign state." The same views were set forth by Mr. Calhoun in 1846, in Senate Doc. ist Sess. 29 Cong., Vol. 8, p. 410. — 52 — out adequate remedy. To check this objectionable practice only restores the proper balance. Neither the big nor the little states could impose upon the others, if the Federal government properly performs the duty left to it, in the only effective way. (3) Centralization of poiver. — This is due to miscon- ception of the real nature of our government. The exer- cise of power alread}' existing in a central government is not a centralization of power ; it all comes from the people ; a hundred years ago, the whole governmental power was distributed by them between the Federal and State govern- ments to be used by each, when occasion arose; in the words of Chief Justice Marshall, "The Government of the Union is emphatically and truly a government of^' the People. In form, and in substance, it emanates from them. Its powers are granted by them, and are to be exercised directly on them, and for their benefit. * * * It is a government of all ; its powers are delegated b}' all ; it rep- resents all ; and acts for all."--^ And further, as he said, the constitution was "intended to endure for ages to come, and consequentl)' to be adapted to the various crises of human affairs."^-" In a matter then, entrusted to its care, which affects all, and endangers all, and which no other can remedy, wh) should it not act ? For a suffering people to ask the onl\' agent to whom the}- have given adequate authority, to exercise it for their protection and welfare, is not dangerous centralization of power, in any other sense than delegating adequate po\ver to do anything necessary is dangerous concentration. (4) States' rights would he riddled. — How, let me ask? What rights of the states were riddled by the National banking act? It is certain that many state-created hum- bugs were punctured by the National banking law, but I know of no one who now maintains staters rights were destroyed. Let us analyze the matter. Before the consti- tution was framed, Minnesota could have prevented abso- lutely and in any way it chose, any state-created Northern Securities Co., from violating its anti-consolidation, or anti- *-'-'* McCuIloch V. Maryland, 4 Wheat. 316, 404-5. =™Ib., p. 415. — 53 — trust laws. But now, armed with the privilege of engaging in interstate commerce, such a company defies the state and the Nation ; when Minnesota complains, it says we are engaged in interstate commerce, and have the right under the Federal government ; when the Federal government attacks it, it says we are simply and innocently owning our property bv the authority of New Jersey. Whatever may be the correct disposition of these cases under existing laws, it is certain that the Federal government was not created for the purpose of enabling Xew Jersey to violate, or author- ize any one else to violate, Minnesota laws. The states and the people granted to the Federal government, so far as interstate commerce is concerned, the power to interfere with state regulations that injuriously affected all, or when- ever conditions required uniformity, for the protection of all ; in fact the Constitution was framed for the very purpose of shielding one state from the disturbing practices of another. For the National government, under power dele- gated to it for that purpose, to protect Minnesota in her rights under Federal laws, is not to shatter the rights of any other states, but onh- to shatter their presumption or temerity, or that of their creatures. (S) Lastly it is said it would change the fundamental nature of our government. Let us see. It was Washington's dream to bind the east and west together by a highway for traffic and intercourse, and in 1774, he brought a bill before the House of Burgesses of Virginia to create a corporation for this purpose ; a like bill was brought before the Maryland assembl}' ; both were killed by existing jealousies regarding Western trade f^° in 1777 New Jersey resolved that the sole and exclusive power of regulating foreign trade should be in the Continental Congress: -"^ in 1785, that body also, so resolved; in 1785, Washington suggested to the Joint Commission to regulate the navigation of the Chesapeake, that they should settle upon a uniform system of duties, commercial regulations and currency; these were sent to the legislatures of the states, and by resolution of the Virginia legislature the ="» Historic Highways, A. B. Hulbert, Vol. 3, pp. 108, 189-97. =31 Secret Journals Cong. 1, 359; Ford's Federalist, note p. 239. — 54 — Annapolis convention of 1786 was called "To take into con- sideration the trade of the United States, to consider how far a uniform system in their commercial regulations may be necessary to their common interest and their permanent harmony."-^- Five states only responded to the call, but the New Jerse}- delegates were authorized to consider "other important matters" than regulating commerce. This convention did nothing except to recommend the calling of the Federal convention, saying in their call "they have been induced to think that the power of regulating trade is of such comprehensive extent, and will enter so far into the general system of the Federal government that to give it efficacy and to obviate questions and doubts concerning its precise nature and limits may require a correspondent adjustment of the other parts of the Federal system."-^' This call was drawn up by Alexander Hamilton, and the Federal convention met in 1787 to take into consideration the trade of the United States and other important matters, and to create a government "adequate to the exigencies of the Union."^^'^ Whatever else may be said, this is certain, in the language of Webster, our present government "had its origin in the necessities of commerce, and for its imme- diate object the relief of those necessities, by removing their causes and by establishing a uniform and steady system,"-''''^ and as Justice Miller has said, it "was brought about by a desire to be released from the cz'ils of an unregulated and burdensome commercial intercourse both with foreign nations and between the several states."-''" Such history- alone justifies a liberal construction of the power entrusted to the National government, whenever the exigency arises. But we can go a step further in finding the true rule of interpretation of this power, based upon the expressed intention of the founders : the 6th resolution of the Virginia plan of Union submitted to the convention by Mr. Randolph immediately upon its organization reads : The National -^-1 Doct. Hist. Const., p. ^, Journal Constl. Conv., p, 36. -33 Journal of Conv., p. 39. 33^ Journal of Conv., p. 41. -3' Windom's Report, 1874, p. 85. -30 Centennial Oration, Washington, Sept. 17, 1887. — 55 — legislature ought to be empowered "to legislate in all cases to which the separate states are incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual legislation."-^'' This was not the mere expression of the sentiment of one man, but was the deliberate, reiterated and unanimous opinion of the Con- vention ; agreed to at least five different times.^"^ The rule of construction and the rule of policy therefore, are the same, — whenever the states are incompetent, or the harmony of all is disturbed by the individual legislation of one, the Federal government should act, in a matter entrusted to its care. Rhode Island or New York tariffs then disturbed the harmony of all the states, as New Jersey Charters do now. For the national government thus to use a necessary and proper means of adequately regulating commerce according to existing exigencies, instead of changing, would be only carrying out the fundamental idea of our government as it existed in the minds of its founders. The policy of complete federal control is not without support in our history: For fifty years it was the reiterated policy of Jefferso- nian democracy to urge the construction by the Federal government of extensive works of internal improvements. Mr. Jefferson and several members of the party, believed that a constitutional amencjment was necessary, and they constanth' urged that the Constitution be so amended as to enable the government to adopt such a policy. ^^° The most elaborate report upon an extensive system of internal improvements by the construction of highways and canals, ever made in this country was made by Albert Gallatin, -37 Madison Papers, p. 127. -'*'* lb., pp. 127, igo, 374, 375, — Proceedings May 25, 29, June 13, 15, 19, July 23 and 26. 23e President Jefferson, in his inaugural address in 1806, proposed to have the surplus revenues of the U. S. partitioned among the states and applied "to rivers, canals, roads, arts, manufactures, education, and other great objects within each state" ; in his annual message he recommended that the Federal governm&i^, continue to use its taxing power to raise revenue, not needed for the Federal' government, but to be divided among the states to be applied to the purposes above stated. Naturally he thought this stretched the "general wel- fare" clause to such an extent that an amendment was necessary, and he repeatedly urged Congress to submit one. See 3 Abr. Debates, pp. 170-1, 485-7; Jefferson's Works, 8 Vol. 494 (Putnam's Ed.). — 56 — President Jefferson's Secretary of the Treasury, in 1808.^*" Presidents Madison, Monroe, and Jackson, all vetoed bills for extensive internal improvements, on constitutional grounds, but at the same time expressed a wish that the Constitution might be amended so such a policy could be adopted."" It was not the policy of the government under- taking these matters, but the lack of power, that troubled these fathers of democracy, for the first 25 years of the agitation for a Pacific railroad, it seemed to be assumed by all that it should be constructed by the government, as was the National road ; and the elaborate surveys therefor were made by the Federal government in 1853-5, under the supervision of Jefferson Davis, President Pierce's Secretary of War.^*- The first Pacific railroad Charter provided that in certain contingencies, the government might enter and take possession of the road for itself.-*^ The Federal law authorizing a telegraph company that accepts its pro- visions to build its lines along any post road in the country provides that the government ma}- at any time acquire such line by paying its value ;-** and for forty years many of the Postmasters-General and several congressional committees have urged the government to do this.-^' The Interstate Commerce Act, is a positive expression of a policy to con- trol the internal transportation system of the country, as was also the Anti-trust Act : and as to the latter, no one who reads the debates can doubt that the intention of Congress in 1890 was to control the industrial and trading as well as the transportation trusts and combinations. -*'' Both laws have been found defective. A few years ago, Presi- dent Roosevelt, after the method of President Jefferson, advocated a constitutional amendment in order to meet our ''■'" Keport .\pril 6, 1808, Am. St. Papers, Class X. (Miscellaneous, \'ol. I.) -'*' See Vetoes, in Richardson's Messages and Papers of the Presidents. 2*2 Pacific R. R., History of, Encyc. P>rit. XIX, 913; Jiavis. Hist, of Union Pacific Ry., pp. 35. 59, 96. =" See Charter, 12 St. at L. 489 (1862). ■-" Act of July 24. 1866, c. 230, § 3, 14 St. at L. 221, R. S. § 5267. ^^"^ 9 Indus. Com. Rept., pp. 243, 890; Report Post Master General, 1892, p. 23 et seq. See also, 4 Indus. Com. R. 24, 129-31, 724; 7 lb. 204, 286-9; 9 lb. 179, 193, 206, 241, 266, 884, 890. '■" r.ills and Debates in Congress on Trusts, 1885-1902, 57 Cong. 2d Sess., Sen. Doc. 147. — 57 — difficulties. On the other hand, the descendants of the Jefifersonian democrac}', both in the direct and collateral lines, have just united in resolving that monopolistic trusts should be forbidden the privileges of engaging in interstate commerce. The plan I urge strikes a middle ground, — it is not so inflexible as the first, nor so drastic as the latter ; it proposes to use a constitutional power, by the only com- petent and responsible government, in a way flexible enough to meet the varying conditions that may arise, and, if properly worked out and administered, adequate to the end to be accomplished. A still broader view is possible. The German Imperial Legislature creates, under a constitutional power to regulate commerce among the commonwealths, corporations to operate throughout the empire ;-*' the new Australian Con- stitution, confers upon the Parliament, power in respect to trade among the states, and authorizes the creation of trading corporations to operate in all.^** The Canadian Dominion Parliament exercises a like power under the British North American act.-*" The English Companies Act authorizes the formation of companies to operate in the colonies.^'"' What the greatest trading peoples of the world have found necessary and desirable, is not an unwise policy nor an idle dream ; what the most centralized, and the most democratic governments have found useful, is not a dangerous policy ; still less will it be dangerous where the people, inheritors of all the great guaranties of liberty, from Magna Charta to our Constitutions, imbued with their spiri>t, govern themselves under the forms and substance of a Constitution framed by themselves, in order to promote the general welfare, and to secure the blessing of liberty to themselves and their posterity. Horace L. Witcus. Ann Arbor, Michigan, September, 1904. 2*^2 Burgess, Political Science, pp. 169-70. "' Clark, Australian Constl. Law, pp. 88, 405. ^-t^ The Const, of Canada, J. E. C. Munro, p. 256; Hassard, Canadian Constl. Law and Hist., p. 139. A. G. for Quebec v. Colonial Bldg. & Loan Assn., 9 App. Cas. 157. 250 Gore-Browne, Handy-Book of Joint Stock Companies, 24th Ed., p. 73.