Scholars and courts have long viewed unenumerated powers and rights as constitutionally dubious. This skepticism has produced far-ranging effects: most recently, it has undergirded the Supreme Court’s invalidation of privacy rights. Many others have contested the presumption against unenumerated law, including a recent wave of scholarship which criticizes “enumerationism.” These efforts have been hampered, however, by the fact that they are unable to point to a concrete example of a tacit power or right that is entirely independent from and coequal with an enumerated power or right.
This Article demonstrates—for the first time—that at least one such power exists: the power to charter corporations. Trillions of dollars circulate through the federal corporate form. Yet scholars often assume that the Constitution has nothing to say about corporations. The doctrine of federal incorporation, meanwhile, is confused: courts analogize federal corporations to state corporations or federal agencies, despite obvious inconsistencies, or avoid them altogether. As this Article demonstrates, however, the Framers understood the power to charter corporations as an independent power with its own prerogatives and limits, and there was little doubt about the power’s constitutionality following ratification. In fact, as this Article shows, the Marshall Court constructed doctrine defining this preexisting power across three cases—Trustees of Dartmouth College v. Woodward, McCulloch v. Maryland, and Osborn v. Bank of the United States— establishing an independent threshold for the creation of federal corporations: “constitutional” purpose. Congress has effectively relied on this tacit, but independent, legal power for over two centuries.
This Article provides the first comprehensive account of the doctrine of federal incorporation and its current use, as well as an index of all federal corporations from the Founding to the present. In addition, this Article makes two important interventions. First, by clarifying the legal basis of federal incorporation, the existence of the charter power may offer alternative rationales for the constitutionality of federal legislation, alternatives to existing constructions of administrative law, and a coherent way to analyze large transactions which currently defy categorization. Second, as the current Court considers whether to invalidate existing jurisprudence which endorses “implied” rights, the existence of the charter power cuts against the theoretical case for doing so. Challenging the presumption against the legitimacy of unenumerated powers and rights, the charter power demonstrates that, in at least one case, a “silent” power is concrete, constrained, and original.
Introduction
This Article shows that Congress has an independent constitutional power to charter corporations. Because the word “corporation” is not in the Constitution, scholars have generally overlooked this power. The few that have noted the possibility of the corporate power’s existence have done so in passing, without developing why it is constitutional, describing what its legal parameters are, or explaining what it means today. Some go so far as to erroneously claim that “[a]s best we can tell, the people who wrote and ratified the Constitution simply never considered whether the Constitution applied to corporations.” This oversight has left fundamentally unstable a field of law that sits at the center of American economic life. Even more importantly, it has meant that both the practical and theoretical implications of an entire constitutional power have remained unexplored.
For over two hundred years, Congress has chartered corporate entities, from the Bank of the United States to the Union Pacific Railroad, from the Reconstruction Finance Company (“RFC”) to the National Railroad Passenger Corporation (“Amtrak”), and from the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) to the COVID-19 bailout—trillions of dollars circulate through the federal corporate form. Courts and scholars do not question whether or not federal incorporation is legal as a general concern, but there is a broad and long-standing consensus that the existing law of federal corporations is dysfunctional. Contemporary doctrine is either inconsistent, unstable, or avoidant. In fact, the doctrine of constitutional avoidance itself emerged out of a confrontation with a federal corporation—the Tennessee Valley Authority (“TVA”)—in Ashwander v. TVA.
The legal costs of leaving the law of federal incorporation incoherent are wide-ranging and systemically significant. Among other problems, this incoherence contributed to the fallout from the 2008 financial crisis: not only did federal incorporation imply federal backing which, in turn, encouraged financial institutions to incorrectly price mortgage-backed securities, but the lack of clear legal rules governing this area of law also exacerbated the failure of public confidence in government that followed.
As a matter of constitutional theory, the costs are arguably even greater. In overturning Roe v. Wade, the Court’s recent case law has raised the stakes of the perennial contest over whether constitutional law should recognize unenumerated rights and powers and on what basis. Thanks to the Ninth Amendment, no one formally disputes the possible existence of unenumerated rights—even Robert Bork’s famous “ink blot” statement about the Ninth Amendment conceded, hypothetically, that unenumerated rights might exist. And for much of the twentieth century, the expansion of Commerce Clause doctrine hardly made the search for more congressional power—enumerated or otherwise—seem urgent. Yet the relative absence of examples of unenumerated rights or powers that are not so heavily politicized has long cast a shadow over even those unenumerated rights and legislative or executive prerogatives that have, for long stretches of time, been doctrinally stable. While this disfavor has most visibly affected rights, there are signs that it has affected congressional power as well.
In recent years, scholars have discussed and debated unenumerated constitutional law in two ways. There is a growing school of thought that argues that it is a mistake to understand the Constitution as one of “enumerated powers.” Scholars have also identified or otherwise theorized the existence of silent or unnamed “backdrops” or “conventions” in the law. Neither group, however, has articulated what a concrete, entirely “silent” constitutional power might be.
This Article shows that although the word “corporation” is not in the Constitution, Congress has an independent constitutional power to charter corporations—and has since the ratification of the Constitution. Offering the first comprehensive excavation of the corporate power, I argue that like the powers to coin and tax, the corporate power is a distinct constitutional power, not a subset of the legislative power nor an administrative prerogative alone. In other words, the corporate power exists independently of the Necessary and Proper Clause, the Commerce Clause, and the spending power. Modern doctrinal indeterminacy and scholarly confusion about both federal corporate law and unenumerated constitutional powers and rights can be clarified by canonizing—or rather re-canonizing—the corporate power.
To demonstrate the existence of the corporate power, this Article relies on several interpretive modes of argument. Part I, which is discussed further in the Introduction, describes the twentieth-century case law of federal incorporation. Proceeding chronologically, Part II builds on recent advances in historical research, showing how the corporate power was drafted into the Constitution and illuminating the early legal parameters of the corporate power. As Part II shows, contemporaneous legal sources and the transcripts of the Constitutional Convention make clear that the Framers understood federal incorporation as a distinct legal power. There was no confusion that the power to incorporate was part of another field of law. Further, the fact that the word “corporation” was left out of the Constitution did not mean that the power was legally absent. Scholars have sometimes taken this omission to signal that the possibility of a corporate power was rejected. But as the Framers discussed themselves, they had specific reasons to omit the word for this corporate power. At the time the Constitution was drafted, anti-monopoly sentiment was high. The political climate meant that including the word “corporation” in the Constitution posed nothing less than a threat to ratification. The Framers discussed drafting strategies which explicitly took into consideration that the corporate power could be drafted into the Constitution—and predictably relied upon as such—even if it was not expressly labeled by name. The early Congress passed federal incorporation laws by an overwhelming majority. And for years after ratification, the legal matter was uncontested: until James Madison raised political objections to the first bank bill and then again after that bill was passed, architects of government action relying on the corporate power did not appear to have thought it was necessary to engage in any sustained legal defense of their project. As Part II explains, these facts together indicate that, as a legal matter, the corporate power was in the Constitution from the beginning.
Once the charter power was drafted into the Constitution in this manner, the Marshall Court built out the corporate power—again, as an independent power. Constitutional powers and rights generally have “paradigmatic” case law, or doctrinal foundations on which subsequent law is moored. Part III excavates this foundation for federal incorporation law. Scholars often read McCulloch v. Maryland for its holding that the Bank of the United States was constitutional. In doing so, they treat McCulloch as a singular case: the constitutionality of the Bank of the United States is a stand-alone issue—not about the legal form of federal incorporation which created the Bank, but about the Bank as a sui generis creation—and the constitutionality of the question ultimately turns on the Necessary and Proper Clause, more or less alone.
But as Part III shows, McCulloch was only one pillar on which the early “canonical” case law of federal incorporation rested. More importantly, in constructing the corporate power, the Court was not inventing the law of federal incorporation or simply resolving the question of the Bank’s constitutionality. To the contrary, the Court was solving secondary problems related to the preexisting constitutional power of incorporation. Offering new readings of McCulloch v. Maryland, Dartmouth College v. Woodward, and Osborn v. Bank of the United States, this Article shows how these cases operated as a trinity in which the Marshall Court organized how the national government’s power to create corporations—generally, not just the Bank specifically—would operate in the new federal system. In addition to other relevant rules governing federal incorporation, the Marshall Court articulated an independent threshold for when federal corporations were proper: “constitutional” purpose.
Parts II and III challenge long-standing assumptions common in constitutional legal scholarship that attribute unwarranted authority to James Madison’s famous denunciation of the Bank of the United States as unconstitutional on the grounds that it was not named in the Constitution. Thanks largely to Madison’s statement, it has become commonplace to assert that the Constitution is only one of “enumerated powers.” Building on advances in historical scholarship, this Article shows that Madison’s arguments were an early use of constitutional argument as political sally: articulated for a political audience, they did not unsettle the underlying legal consensus that the power enjoyed.
History and early doctrine are not the only modes of argument which demonstrate the existence of the corporate power. As this Article shows, the text of the Constitution, contemporary reliance, and doctrinal coherence all underscore that the corporate power is clearly present—though still unnamed—today. In other words, independent of one’s methodological commitments regarding the importance history has for law, the corporate power’s existence is clear. As Part II explains, the equal footing doctrine, the Territory Clause, the Patent Clause, and the First Amendment all bear the marks of the corporate power.
To show the contemporary existence of the corporate power—and thus, both reliance and coherence arguments for the power—this Article offers the first survey of the twentieth-century doctrine of federal incorporation. This survey appears in Part I, thereby setting the stage for Parts II and III. As Part I demonstrates, the use of federal incorporation by both Congress and the executive has been important and continuous: in relying on the corporate power to this extent, Congress and the executive have demonstrated its constitutional existence.
Simultaneously, however, in the absence of a clear understanding of the corporate power, judicial efforts to address federal incorporation have been incoherent. Part I shows why—despite the continuous reliance on the federal corporate form by Congress and the executive—existing legal understandings of that activity are inadequate. As Part I explains, the legal uncertainty that has defined federal incorporation in its modern form has, at times, made this device more valuable, not less. This Part shows how, as administrative- and private-law regimes grew increasingly organized and regulated in the twentieth century, the existence of a legal device which remained comparatively murky offered Congress and the executive branch valuable legal and financial flexibility. Not inconsequentially, this meant that a range of actors had little incentive to clarify this field of law.
The costs of leaving the corporate power inchoate counsel against leaving it as it stands. As Part I argues, the legal ambiguity around federal incorporation in the aggregate has come at a cost to constitutional coherence and legitimacy, outweighing the legal and financial flexibility that the uncertainty of the corporate power has sometimes enabled. Part I outlines those costs. First, the corporate power’s indeterminacy encourages large actors to use privatization or public backing to escape the constraints of either public or private law—encouraging financial boom-bust cycles and corroding public trust. Second, confusion about the status of federal incorporation may lead the current Court to mistake legitimate federal corporate activity for “illegitimate” administrative action as it continues to redefine various aspects of administrative law. Third, in the twenty-first century, Congress has increasingly engaged in large transactions, which are difficult to reconcile with and may disrupt existing fields of law, ranging from the 2008 financial bailout to the Puerto Rican debt crisis to the recent Oxycontin settlement. The lack of a legal category for understanding this activity arguably stems from—and might be alleviated by addressing—our failure to recognize the corporate power in the first instance. Part I argues that these transactions are the latest “generation” in federal corporate activity.
With the charter power thus established in Parts I, II, and III, Part IV makes two interventions. Section IV.A shows how we might develop an understanding of federal incorporation as positive law, independent from the administrative-, legislative-, and private-law categories scholars have previously struggled to reconcile out of necessity. Once we recognize that the corporate power is a stand-alone constitutional power, we can begin to describe its legal particulars, just like any other independent power or right. Federal corporations differ from state corporations and federal agencies in important ways. Among other things, federal corporations allow the federal government to craft a corporate form that includes the kind of substantive, not economic, rules that regulatory agencies are currently prohibited from imposing on state-chartered corporations. Federal corporations remain bespoke, are not governed by general incorporation laws, and support the production of goods and services—they are not just devices for federal spending. Along with Part I, Section IV.A helps to outline these activities and differences.
Drawing on Parts II and III, Section IV.A also offers three new tools for courts and scholars focused on contemporary doctrine: (1) clarity with respect to threshold questions such as when a federal corporation has “private” status; (2) an alternative justification for federal legislation that engages in financial activity, broadly defined; and (3) a category of analysis which remains bounded by constitutional restrictions but rests outside of usual administrative-law rules. As Part I details, the Court has signaled that it may revisit federal corporation law as part of its general reconsideration of administrative law. A clear understanding of federal incorporation may prove important if it does so, not least because federal corporate activity may intersect with the rapidly changing landscape of Appointments Clause jurisprudence.
Section IV.B discusses the theoretical implications of the corporate power, or where we might go “beyond” enumerationism. It is beyond the scope of this Article to answer whether or not there are more silent powers or rights in the Constitution. This Article also does not contend that the mere presence of one unenumerated power means that all other unenumerated rights or powers are suddenly doctrinally unimpeachable. Nevertheless, the fact of the corporate power has several important methodological implications for how we think about constitutional interpretation generally—and for how we address “silent” rights and powers in particular.
The corporate power’s existence challenges the current supremacy of certain styles of textualism and originalism, not least because the fact of the corporate power demonstrates how ineffective these approaches have been at ensuring either legal stability or democratic transparency. Even as Congress has become so reliant on this “silent” power that our economy is systemically interwoven with it, our law has been unable to effectively cognize it.
This oversight is, in part, due to a long textualist tradition of equating constitutional rights and powers with single-clause labels. This tradition has venerable roots: among other sources, it sprang from the transformative mid-century First Amendment fundamentalism of Justice Black. But the corporate power demonstrates that textualism—and indeed, interpretation that, like Black’s, takes rights and powers seriously—must be distinguished from mere taxonomy to remain coherent. Specifically, this Article shows that the tradition of unenumerated interpretation which the corporate power demonstrates cuts against the presumption against unenumerated rights that the Court relied on, for example, in Dobbs v. Jackson Women’s Health Organization. The corporate power also suggests that there is firmer existing interpretive ground for unenumerated law than we have previously considered possible. The drafting approaches of the Framers detailed here—what is usually referred to as the “structuralism” of the Marshall Court, and what we might term the “interprovision interpretation” of the Warren Court—indicate as much. This interpretive unity transcends disagreements about Federalist politics and the particular legal climate of the 1960s and deserves further attention on its own.
This Article also contributes to debate over how we should think about the relationship between history and law today. In part because of the increasingly long shadow originalism casts, legal scholars have recently tended in either originalist or realist directions when engaging with the history of the Constitution. This has had the side effect of causing legal scholarship to address the distinction between law and politics in one of two ways. Both approaches elide the law-politics distinction. Original meaning attempts to “democratize” originalism by assuming that there is no distinction between the two in a positive manner. Conversely, those favoring a realist approach—rightly refusing to ignore evidence of political disagreement in the past—often conclude from this disagreement that no clear legal meaning can be found. What is lost is the reality of historical friction between law and politics. This, in turn, endangers the possibility that accurate historical work might coexist with positive legal argument. The corporate power is evidence of the kind of collateral damage that can occur when we are limited to realist or originalist perspectives: if we fully commit to either at the expense of contradictory evidence, we would be unable to explain its presence.
Beyond the remit of these methodological considerations, contemporary doctrine and legal theory alike have important interpretive conventions which presume against the possibility that legal meaning might be hidden in some sense. These conventions spring from a deep-rooted understanding, shared by both the public and experts, that the legitimacy of American law depends upon it remaining democratically accountable. For this reason, more than any other, it may be tempting to assume that there cannot be a “silent” constitutional power. Part IV addresses possible criticisms of the interpretation this Article lays out, explaining how the fact that the corporate power exists does not legitimate “secret deals” or find “elephants in mouseholes.” To the contrary, it is not by recognizing, but by continuing to overlook the corporate power that legal analysis has failed to constrain it.
In sum, this Article offers important evidence that an interpretive approach focused on discrete, individual, yet unnamed powers (or rights) might lead to more robust and actionable insights than we have previously thought. It calls into question the ongoing presumption that unenumerated rights and powers are inherently suspect or political. And most importantly, it shows that such rights and powers are not merely “aspirational”—nor do they live only as lost historical alternatives. They are present in the law right now.
This Article proceeds in four parts. Part I lays out the existing law of federal incorporation, explains how transactions may also be understood as corporations, and shows how the indeterminacy created by the current law’s contradictions undermines the legitimacy of federal corporate activity, resulting in significant legal costs, not just political and financial costs. Part II describes the original drafting of the charter power, addressing the debate over whether the corporate power was originally in the Constitution and on what basis. Part III describes the Marshall Court doctrine that constructed the power: McCulloch, Dartmouth, and Osborn. Part IV first details what implications a revived corporate power has for both considering and constructing federal corporations today; second, it explains how understanding the corporate power affects wider constitutional debates about implied powers and rights.
This Article also provides a list of existing chartered corporations in the Appendix, something that has not been attempted in several decades. Due to the nature of existing records and legal ambiguity, this list cannot be definitive; it errs on the side of inclusivity. This list is a “living” one, designed to be updated periodically.