Right to Keep and Bear Arms
Freedom of Speech, Religion and Press
Declaration of Independence - 1776
Articles of Confederation - 1777
The Constitution for the United States, Its Sources and Its Application
Our Enemy, The State
It Is Our Choice Who We Will Serve!
Who is Running America?
A Special Report on the National Emergency in the United States of America

Undermining The Constitution


By Thomas James Norton



following the Packers and Stockyards Act of 1921, the next important venture of Congress way in creating (June 22, 1932) the Reconstruction Finance Corporation, after the panic of 1929.

It was fashioned after the War Finance Corporation of the Wilson administration. But the War Finance Corporation had been founded on the principle laid down in 1819 (4 Wheaton, 316) by Chief Justice Marshall with regard to a banking corporation. That is, to meet its own necessities: -- collecting taxes, transmitting money, issuing bonds -- the United States can create a corporation. Maryland, which was taxing the issues of the United States Bank, contended that as neither bank nor corporation is mentioned in the Constitution, it was beyond the power of Congress, to set up either.

Bank Act under Sweeping Clause sustained

The last clause in the grants of power to Congress authorizes it to make all laws which shall be "necessary and



proper for carrying into execution the foregoing powers, and all other powers vested" in any department or officer of the Government. Under that language the Court held that it was for Congress to determine whether it needed the assistance of a bank in performing its governmental functions.

So it was for Congress daring World War I to determine whether a War Finance Corporation was "necessary and proper" to the war effort under the war powers.[1]

Operations of Corporation not governmental

But the Reconstruction Finance Corporation does not in any sense come within the requirements stated. It was un constitutionally created and it has pursued an unconstitutional course.

The first and most important activities of the Corporation were in reconstructing the financial status of banks, railroads, and other corporations threatened with collapse. Loans of the money of the taxpayees to banks, railroads and other big concerns ran into the billions. But thousands of individuals and businesses of small class had to suffer unaided the consequences of the panic. Whether that distinction or discrimination was warranted by a consideration of the relative importance to national stability of the

1. The argument of counsel for Maryland against the constitutionality of the act creating the Bank of the United States was very learned. The question was discussed pro and con by able men long after the decision, In Jackson's administration a recharter was refused and the validly of the decision by Marshall rejected. Senator Benton of Missouri leading the opposition. In the light of the history of banking by the National Government, with its failures, with its inflations and deflations, and with its operating as the machine for manufacturing debt, one is justified in lamenting that it did not from the first do its fiscal business with bankers, restricting its activity in the field of finance closely to its granted power, "to coin money and regulate the value thereof."


applicants for loans is not known. It probably was, for money enough did not exist to "bail out" all that thus became involved in the catastrophe, for which the practices of many banks were much blamable.

A dispatch from Washington in April, 1949, said that the Committee on Organization of the Executive Branch of the Government, headed by ex-President Hoover, had asked Congress "to put the Government out of the money-lending business and eliminate 30 Federal agencies engaged in lending, including the Reconstruction Finance Corporation." Some months later another dispatch said that the proposal had been attacked by the Corporation as an "excursion into the controversial field of political economy." Of course, no bureau will "consent to death."

Reconstruction Finance Corporation departed from purpose

After the Corporation had enabled many forms of big money to recover their financial balance, it went out through the wide world scattering the savings of the people. Loans were made in South American countries and others for the construction of highways, railroads, and public utilities.

Under the National Defense Clause it lies in the judgment of Congress, the General Manager of the United States, as to whether the preservation of small nations friendly to us and favoring the governmental philosophy for which we stand, warrants the expenditure of American money for the protection of them from subjugation by Communism, the openly avowed and aggressive enemy of capitalism.

But the use of money for the uplift of lowly countries,


and for the other purposes mentioned, is without constitutional authority.

From time to time it was reported that a bank or a railroad or some other borrower had paid its loan, but there were many that never settled. In the report of the Corporation for 1948, the 17th year of operation, it is shown that $85,000,000 was held to meet "estimated losses in collection." If that estimate was calculated on the record of previous years, then its losses of the money of the taxpayers have been colossal.

The spender going stronger than ever

The United States News of October 7, 1949, reported from Washington that, instead of going out of action, as the Hoover Committee believed it should do, the Corporation disclosed that "its loans to business have reached an all-time high, and applications still are being received in increasing number." It reported, on October 21, loans to business -- not to aid Government in its functioning -- as $416,000,000 to 5,400 borrowers, with 1,200 new applications a month.

"The trend is sharply upward," says the report, because the commercial banks are becoming "choosey." That is, they are backing out of the field which they should have fought from the beginning to hold, and leaving it to the unconstitutional occupancy of Government.

The Associated Press reported on November 9, 1949, that Senator Fulbright of Arkansas, chairman of a subcommittee of the Senate on Banking, investigating policies of the Reconstruction Finance Corporation, said in a conference with the applicant for a loan of $44,000,000 that such a transaction would not be "in accord with RFC ob-


jectives." To newsmen after the conference he said that he did not think it "proper to hand out public money to private industry." He named three companies which had borrowed of the Reconstruction Finance Corporation and "now are being run by the Government."

That is what the corporation of Fascism is for -- to take over private business.

Another press report said that the applicant had already borrowed from the Corporation $197,000,000.

In May, 1950, the Associated Press reported from Houston, Texas, that Jesse Jones, who had for many years managed the Reconstruction Finance Corporation, said in his newspaper:
"If you have any old loans that you would like to get rid of, you may sell them to the RFC -- that is, if they are big enough and not sound enough."

And in the next month a corporation to which RFC had loaned $37,500,000 defaulted, was put in receivership by a Federal court in Columbus, Ohio, and at the receiver's sale the RFC made a bid of $6,000,000 more of the money of the taxpayers to get control of the assets of the borrower.

At the same time a committee of the Senate was looking into the loan record of the RFC, basing its action on reports of lendings "to new ventures speculative in character." It is for banks, not government, to lend money. Every youth coming out of school, and every graduate from the assembly lines of the universities, must be made to comprehend that the grant of power to Congress by the Constitution "to lay and collect taxes ... to pay the Debts and provide for the common Defence and general Welfare of the United States" does not authorize (1) the creation of


a corporation or ( 2) the lending of the money of the taxpayer.

Government out of bounds will not return

Thus, when Government has once fixed its foot in the door, it does not withdraw. That is a fact to cause grief in the mind of the constitutionalist. But greater grief comes from beholding the complete lack of understanding in the man of business of what is being done to him and to his country! The Government at Washington, having multiplied by bureaus the number of its feet until it is a centipede, now has a foot in the door of many commercial and industrial concerns; of agriculture, of banking, of building, of housing, of relief, of the schools, and of many other interests not within its constitutional field.

Will their ignorance entitle men of business to pardon for having contributed to the wreck of the Republic?

The 80th Congress, after lopping off some of the activities of the Reconstruction Finance Corporation, continued it "to aid in financing agriculture, commerce, and industry" -- which are not of any constitutional concern of the National Government.

How one Bank grew to thousands

It has been a long progress -- or descent -- from that first bank for the needs of Government to all sorts of commercial banks in competition with citizens in the banking fields -- to 7,000 National Banks, to the Farm Loan Banks, the Home Loan Banks, the twelve Federal Reserve Banks, the Export-Import Bank, the World Bank, and others.

From what has been shown, it is dear that the Recon-


struction Finance Corporation has not been engaged in helping to carry "into execution the foregoing powers" of the Government, as the bank was held to be doing in the case decided by Marshall.

As statesmen and scholars and citizens long ago ceased to question whether any act of Government is "in pursuance" of the Constitution, the validity of the Act of 1932 creating this Corporation never was tested.

Irrigation by money of the taxpayers

In 1946 Federal aid was poured out in a flood to States and individuals; 50 million for milk and luncheons to schools; over 10 million for vocational rehabilitation; 57 million for soil conservation (the cover of aid to agriculture); 20 million for cooperative agricultural extension; over 10 million for general public health; over 9 million to control venereal diseases; and 5 million to control tuberculosis.

Those subjects are under the police power of the States, no part of which they yielded to the National Government, as they gave over coinage, treaty making, and some other nonlocal subjects by section 10 of Article I. As elsewhere shown by authority, the police power cannot be abdicated by the States nor usurped by the Nation. In the instances just before given, the course taken by Washington was usurpation and therefore unconstitutional.

Following the Reconstruction Finance Corporation came the Tennessee Valley Authority, the first step in "the electrification of America," a string of loan banks and credit corporations, and many other corporations having not the remotest relation to the constitutional functioning of the Government of the United States.


How invalid legislation infects the courts

"For the purposes of this case," said Justice Stone, writing the decision of the Supreme Court (306 U. S. 466) on a question whether the salaries of employees of the Home Owners Loan Corporation were taxable by the State of New York, "we may assume [italics inserted] that the creation of the Home Owners Loan Corporation was a constitutional exercise of the powers of the Federal Government." A text writer has already taken that decision as settling the proposition that all those corporations were constitutionally set up!

In creating the Home Owners Loan Corporation, Congress declared that it "shall be an instrumentality of the United States." But it could not be made so by a declaration if its functions were not to be governmental, as the functions of the banking corporation were in the case arising in Maryland. Congress gets power, not from its own declarations, but from the Constitution only. Nor can its proclamation of an "emergency," like that in the National Labor Relations Act, endow it with power not specified in the Constitution.

This brief account of the origin and works of the Reconstruction Finance Corporation shows the great danger of any break in the levee of the Constitution. The flood will go beyond control. The damage to taxpayers and the Republic by that Corporation is beyond estimate.

Continue to Chapter VIII

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