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against the Constitution itself, and ought to be applied, not to prevent the passage of a law, but to produce an amendment.
Can a state of things ever be supposed to exist, more imperiously calling upon Congress for their interposition, with a view to the results which the power is to be considered as having been intended to produce? This question will be most satisfactorily answered, by considering, in the first place, for a few moments, the general provisions of the bill, as they relate to the interests of the creditor.
The bill proposes, in the first section, that, upon the proof of certain facts, indicating unequivocally that a merchant's or trader's concerns are in a state of irretrievable embarrassment and disorder, and that he is rapidly approaching to a state of insolvency, or already arrived at it, a creditor may cause a commission of bankruptcy to be issued against him. The effect of the proceeding is, to take out of his hands all the property he may have in his possession, or may be entitled to, and place it in the custody of persons appointed by the law for the purpose of equal distribution among all his creditors, without distinction, in proportion to the amount of their respective debts. Nothing can be fairer or more reasonable than this. The details of the bill, so far as they concern the creditors, are all directed to the object I have stated, to accomplish the honest surrender of property by the debtor, and the equal distribution among his creditors. Is not something of this kind required? Those members who represent commercial districts, are prepared to answer the question from experience; and those who have not had the same means of information, may, notwithstanding, arrive at the conviction of the necessity by the simple process of reason.
The state insolvent laws, (with, I believe, but one exception,) proceed only upon the application of the debtor. They do not operate till he himself thinks proper to petition, and then they give him relief in such manner as they
deem most advisable. Some, by general laws, commit the authority to judicial tribunals; some exercise it themselves by direct legislation upon existing cases; some have permanent regulations; others pass occasional laws; some few grant the most extended relief, discharging from the debt; the greater part, only the limited relief of immunity from imprisonment. Their views, in all these cases, are directed, as in other matters, by state, and not by national policy, and so they ought to be. This policy is different in different states, but in all it is liable to be embarrassed by the very omission of Congress to provide for the case which by the Constitution is committed to their care, inasmuch as it throws upon the states, individually, the almost invincible difficulty of endeavouring to conciliate interests and views that can scarcely be made to harmonize. NewYork, being highly commercial, may be very much influenced by commercial feeling in her local legislation on this subject. Pennsylvania, not long ago, passed a special insolvent law for the city and county of Philadelphia. This was an effort to describe commercial cases by local limits, and may be plainly traced to the same fruitful source of embarrassment—an embarrassment that would no longer have an existence if Congress would exercise their authority, and, by withdrawing from state legislation the subject of commercial bankruptcy, leave the states free to pursue each its own appropriate policy upon other cases of insolvency
-cases that, from their nature, are essentially dependent upon other and much less extensive considerations.
One great defect, however, of the state insolvent laws, is the one I have mentioned. They wait until the insolvent asks for relief. In the mean time he is consuming, or wasting, or mismanaging the property that ought to satisfy his debts, and, when he comes for relief, has nothing to surrender. The uncontrouled authority over his estate, too, occasions a resort to expedients, which, in a general view, ought not to be permitted—expedients that have become
almost consecrated by practice, but are not, on that account, the less exceptionable. The failing merchant is influenced in the distribution of his property, not by any general considerations of justice, but sometimes by feelings of regard for particular creditors, often by regard only for himself and his future hopes. He pays one, and leaves nothing to pay another. Why? Because one is a friend or neighbour, the other is not; one has lent him money, or endorsed his paper, the other has only sold him goods; one importunes him, the other has not the opportunity; making thus certain arbitrary distinctions, natural enough, but not defensible upon any just general principles. Sometimes, and not seldom, his distribution has reference only to himself. Is he most intimately connected with domestic creditors? He may secure their good will and future aid by giving them a preference to his foreign creditors. Is he most nearly connected with foreign creditors? He preserves their confidence, and lays a ground to hope for their future assistance, by giving the preference to them; and among creditors of the same kind he may adopt a similar distinction. The object of the bill is to prevent all such doings, and to bring back the distribution to the only fair rule, the rule of impartial equality. I do not pretend to pursue the mischiefs that exist in all their details—suffering a failing debtor to make his own assignees, permitting him to extort terms of composition from his creditors, and the like. I refer to these things briefly, to show, that circumstances call for the incorporation of a bankrupt law into the code of the United States, for the protection of the creditor, and the preservation of commercial integrity and commercial credit.
It would be a sufficient answer to the argument which supposes that the states may do all that is necessary, to say, that the Constitution does not permit us to think so, or why did it give the power to Congress? The states cannot make uniform laws on the subject, nor laws that will operate be
yond their own territory, much less that will have any foreign operation. The states, in their local legislation, must be chiefly governed by local views—this is the theory of the Constitution—and by the clause in question, they have, themselves, not only conceded the principle, but they have also conceded the fact that the power in question is one of national, and not of local concern. How can this argument be urged with any thing like even a plausible appearance, by those who, in another instance, endeavour to deduce the principle, not from the express words of the Constitution, but from the mere proof of the fact? You have upon your table a most important report upon the subject of internal improvement. Is there any express authority given to Congress by the Constitution, to legislate on this subject? The answer is plain; there is not. Whence is the authority derived ? From the fact merely that national improvements, by roads and inland navigation, may be necessary for the common defence and general welfare. And cannot this be done by the states? The answer again is, no. The states, individually, are not competent to the care of the national concerns. They may and do make roads for themselves, and it may happen that these will be so made in reference to each other, as to produce, by their combination, what is desired-national thoroughfares, for national convenience and national defence. But it may happen otherwise. I warn those who argue thus—who derive the power itself from the necessity and convenience of its exercise-against sending back to the states a power, which the states themselves, upon similar reasoning, have expressly granted to Congress.
The interest which the United States, as a creditor, have in this question, ought not to be overlooked. One of the communications made by the Secretary of the Treasury, during the present session, (I cannot lay my hand upon it) states, that the preference intended to be secured to the United States, is defeated by partial assignments and dispositions of property made by the public debtors. The
steady and regular collection of the public revenue, so important to the public service, is, at all times, worthy of the attention of Congress; and it must, therefore, be considered as a powerful recommendation of a bankrupt law, that it would effectually remedy the evil complained of. The wisdom of the legislature may be able, perhaps, to devise other remedies; I know of none, (and I do not say it without some reflection, that will be effectual, and not be liable to very great objections.
Upon the remaining part of the subject, that which relates to the condition of the debtor, I shall, at present, say but a very few words, not only because it has been fully and distinctly put before the committee by my honourable friend and colleague, (Mr. Hopkinson,) but because it will be more proper to consider it when we arrive at that part of the bill which contains the provisions for his relief. The general design is to discharge him altogether, provided two-thirds of his creditors shall agree. The commissioners are bound to sign his certificate, if he has been guilty of no fraud; but that will not discharge him. Two-thirds of his creditors must concur, and as they may either give or withhold their assent, at their discretion, without assigning any reason, they will, of course, be determined in their decision, by a general and comprehensive view of the whole conduct of the debtor. Has he been unfortunate? They will agree to his discharge. Has he been unjust, has he been careless, extravagant? They may, at their pleasure, refuse it. Is there any thing unreasonable in this? If, by a summary process, you take all from the debtor, if he has fairly surrendered every thing to his creditors, satisfied a large majority of them that he has been the victim of misfortune, not of misconduct, ought he to be held in subjection to the merciless resentments, or the merciless avarice of a few, and be condemned, at their pleasure, to idleness and despair? And for what purpose ? Society is deprived of the benefits of his exertions; he is himself deprived of