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Clearfield Doctrine and the lies government tells us Clearfield Doctrine "Governments descend to the Level of a mere private corporation, and take on the characteristics of a mere private citizen...where private corporate commercial paper [Federal Reserve Notes] and securities [checks] is concerned. ... For purposes of suit, such corporations and individuals are regarded as entities entirely separate from government." – Clearfield Trust Co. v. United States 318 U.S. 363-371 (1942) What the Clearfield Doctrine is saying is that when private commercial paper is used by corporate government, then Government loses its sovereignty status and becomes no different than a mere private corporation. As such, government then becomes bound by the rules and laws that govern private corporations which means that if they intend to compel an individual to some specific performance based upon its corporate statutes or corporation rules, then the government, like any private corporation, must be the holder- in-due-course of a contract or other commercial agreement between it and the one upon whom demands for specific performance are made. And further, the government must be willing to enter the contract or commercial agreement into evidence before trying to get to the court to enforce its demands, called statutes. YOU LOST YOUR GOVERNMENT IN 1933 You were placed in a commercial jurisdiction under the law merchant and contracts So what are you a citizen of and to whom do you owe allegiance? [The Legitimate Political Power of a corporate entity is absolutely dependent upon its possession of Commercial Bonds against Public Hazard, because no Bond means no responsibility, means no power of Official signature, means no real corporate political power, means no privilege to operate statutes as the corporate vehicle. [this must be the adventures and perils clause in the maritime insurance the government carries for war on land...... The Corporate Legal Power is secondary to Commercial Guarantors. Case law is not a responsible substitute for a Bond. Municipal corporations which include cities, counties, states and national governments have no commercial reality without bonding of the entity, its vehicle (statutes), and its effects (the execution of its rulings). Clearfield Trust Co. v. United States 318 U.S. 363-371 (1942) What the Clearfield Doctrine is saying is that when private commercial paper is used by corporate government, then Government loses its sovereignty status and becomes no different than a mere private corporation. As such, government then becomes bound by the rules and laws that govern private corporations which means that if they intend to compel an individual to some specific performance based upon its corporate statutes or corporation rules, then the government, like any private corporation, must be the holder- in-due-course of a contract or other commercial

Clear Field Doctrine Debt and the Lies We Are Told

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"Governments descend to the Level of a mere private corporation, and take on thecharacteristics of a mere private citizen...where private corporate commercial paper [FederalReserve Notes] andsecurities [checks] is concerned. ... For purposes of suit, such corporations and individuals areregarded as entities entirely separate from government."

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Page 1: Clear Field Doctrine Debt and the Lies We Are Told

Clearfield Doctrine and the lies government tells us Clearfield Doctrine "Governments descend to the Level of a mere private corporation, and take on the characteristics of a mere private citizen...where private corporate commercial paper [Federal Reserve Notes] and securities [checks] is concerned. ... For purposes of suit, such corporations and individuals are regarded as entities entirely separate from government." – Clearfield Trust Co. v. United States 318 U.S. 363-371 (1942) What the Clearfield Doctrine is saying is that when private commercial paper is used by corporate government, then Government loses its sovereignty status and becomes no different than a mere private corporation. As such, government then becomes bound by the rules and laws that govern private corporations which means that if they intend to compel an individual to some specific performance based upon its corporate statutes or corporation rules, then the government, like any private corporation, must be the holder- in-due-course of a contract or other commercial agreement between it and the one upon whom demands for specific performance are made. And further, the government must be willing to enter the contract or commercial agreement into evidence before trying to get to the court to enforce its demands, called statutes. YOU LOST YOUR GOVERNMENT IN 1933 You were placed in a commercial jurisdiction under the law merchant and contracts So what are you a citizen of and to whom do you owe allegiance? [The Legitimate Political Power of a corporate entity is absolutely dependent upon its possession of Commercial Bonds against Public Hazard, because no Bond means no responsibility, means no power of Official signature, means no real corporate political power, means no privilege to operate statutes as the corporate vehicle. [this must be the adventures and perils clause in the maritime insurance the government carries for war on land...... The Corporate Legal Power is secondary to Commercial Guarantors. Case law is not a responsible substitute for a Bond. Municipal corporations which include cities, counties, states and national governments have no commercial reality without bonding of the entity, its vehicle (statutes), and its effects (the execution of its rulings). Clearfield Trust Co. v. United States 318 U.S. 363-371 (1942) What the Clearfield Doctrine is saying is that when private commercial paper is used by corporate government, then Government loses its sovereignty status and becomes no different than a mere private corporation. As such, government then becomes bound by the rules and laws that govern private corporations which means that if they intend to compel an individual to some specific performance based upon its corporate statutes or corporation rules, then the government, like any private corporation, must be the holder- in-due-course of a contract or other commercial

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agreement between it and the one upon whom demands for specific performance are made. And further, the government must be willing to enter the contract or commercial agreement into evidence before trying to get to the court to enforce its demands, called statutes. This case is very important because it is a 1942 case after the Erie RR v. Tomkins 304 U.S. 64, (1938) case in which the Legislatures and Judiciary changed from legislating under "Public Law", which was in consonance with the CONstitution, to legislating under "Public Policy" according to the wishes of the "Creditors of the US Corporation". "You take the blue pill, the story ends, you wake up in your bed, and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you just how deep the rabbit hole goes." Facts & procedural history On April 28, 1936, the Federal Reserve Bank of Philadelphia mailed a check for $24.20, drawn on the Treasurer of the United States, to Clair Barner. The check was Barner's paycheck from the Works Progress Administration (WPA). Barner never received the check, which was stolen by an unknown party. The thief forged Barner's signature and cashed the check at the J.C. Penney department store in Clearfield, Pennsylvania, where the thief assumed the identity of Mr. Barner. J.C. Penney then turned the check over to Clearfield Trust Co. as its collection agent. Clearfield Trust Co. collected the check from the Federal Reserve Bank, knowing nothing about the forgery. On May 10, 1936, Barner informed his supervisors at the WPA that he had not received his paycheck. His complaint made its way up the chain of command, and on November 30, 1936, Barner signed an affidavit alleging that the endorsement of his name on the check was forged. Neither J.C. Penney Co. nor Clearfield Trust Co. had any notice of the forgery until January 12, 1937, when the U.S. government sent its first notice about it. The United States sent its initial request for reimbursement on August 31, 1937, and filed suit against Clearfield Trust Co. in the United States District Court for the Western District of Pennsylvania on November 16, 1939. The government based its cause of action on the express guaranty of prior endorsements by Clearfield Trust Co. The District Court determined that the dispute should be governed by the state law of Pennsylvania. It then dismissed the government's complaint on grounds of laches, holding that because the United States unreasonably delayed in notifying Clearfield Trust Co. of the forgery, it was barred from recovery. The United States Court of Appeals for the Third Circuit reversed the dismissal. Decision Justice Douglas, writing for a unanimous court, first distinguished the case from Erie Railroad Co. v. Tompkins, holding that because the U.S. government was exercising a constitutionally-permitted function in disbursing its own funds and paying its debts, the commercial paper it issues should be governed by federal law rather than state law. Thus, the Erie doctrine rule that a United States District Court must apply the law of the state in which it is sitting did not apply, and that in absence of an applicable Act of Congress, a federal court had the right to fashion a governing common law rule by their own standards. While Douglas explicitly retained the option of applying state law in fashioning a federal common law rule, it chose instead to fashion its own rule based on prior decisions. He identified a major federal interest in permitting the court to fashion its own rule: namely, the

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issue of uniformity in dealing with the vast amount of negotiable instruments and commercial paper issued by the federal government. Douglas reasoned that if each transaction was subject to the application of a multiplicity of different state laws, it would lead to great confusion and uncertainty in the administration of federal programs. Douglas chose to follow the rule set forth in United States v. National Exchange Bank of Providence, 214 U.S. 302 (1909), in which the U.S. Supreme Court held that the U.S. government could recover on a check as a drawee from a person who had cashed a pension check with a forged endorsement, despite the government's protracted delay in giving notice of the forgery. The National Exchange Bank case held the government to conventional business terms, but said nothing about whether lack of prompt notice was a defense for nonpayment of a check. The Court held that the Pennsylvania state law requiring prompt notice from the drawee presumed injury to the defendant by mere fact of delay. In this case, not only did Clearfield Trust Co. fail to demonstrate that it had suffered a loss because of the delay in notice, it could still recover the amount of the check from J.C. Penney, because none of its employees detected the fraud. The court chastised both companies for their "neglect and error" in accepting the forged check, and suggested that they should only be permitted to shift the loss to the drawee only when he can demonstrate that the delay in notice caused him damage.


The Interdepartmental Committee for the Study of Jurisdiction over Federal Areas within the States was formed on December 15, 1954, on the recommendation of the Attorney General approved by the President and the Cabinet The basic purpose for which the Committee was founded was to find means for resolving the problems arising out of jurisdictional status of Federal lands.

Addressing itself to this purpose, the Committee; with assistance from all Federal agencies interested in the problems (a total of 33 agencies), from State Attorneys General, and from numerous other sources, prepared a report entitled Jurisdiction over Federal Areas Within the States Part I, The Facts and Committee Recommendations. This report, approved by the President on April 27, 1956, set out the findings of the Committee and recommended changes in Federal and State law, and in Federal agencies' practices, designed to eliminate existing problems arising out of legislative jurisdiction. It included two appendices.

The Committee's research involved a general survey of the jurisdictional status of all federally owned real property in the 48 States, and a detailed survey of the status of individual such properties in the States of Virginia, Kansas, and California.

These three named States were selected as containing Federal real properties representative of such properties in all the States. Information was procured concerning the practices and problems related to legislative jurisdiction of the 23 Federal Agencies controlling real property, and of the advantages and disadvantages of the several legislative jurisdictional statuses for the various purposes for which federally owned land is used. This information is reflected and analyzed in the several chapters of part I of the report, and is summarized in Appendix A of the same part,

The Committee's study included a review of the policies, practices, and problems of the 48 States related to legislative jurisdiction. Information concerning these matters similarly is reflected and analyzed in various portions of part I of the report, with chapter V of the part being entirely devoted to the laws and problems of States related to legislative jurisdiction. Also, the texts of State (and Federal) constitutional provisions and statutes related to jurisdiction in effect as of December 31, 1955, are gathered in appendix B of part I.

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The major conclusions of the Committee, set out in part I of the report, which, of course, are applicable only to the 48 States to which the Committee's study extended, and do not apply to present Territories or the District of Columbia, are to the effect that in the usual case the Federal Government should not receive or retain any of the States' legislative jurisdiction within federally owned areas, that in some special cases (where general law enforcement by Federal authorities is indicated) the Federal Government should receive or retain legislative jurisdiction only concurrently with the States, and that in any case the Federal Government should not receive or retain any of the States' legislative jurisdiction with respect to taxation, marriage, divorce, descent and distribution of property, and a variety of other matters, specified in the report, which are ordinarily the subject of State control.

The conclusions reached by the Committee were, of course, made only after an appraisal of the facts adduced during the study in the light of applicable law, including the great body of decisions handed down by courts and opinions rendered by governmental legal officers, Federal and State, interpretative of situations affected by legislative jurisdiction.

Recommendations made by the Committee, based on the conclusions indicated above and on certain subsidiary findings, now constitute the policy of the Executive branch of the Federal Government, and are being implemented by Federal agencies to the extent possible under existing law. However, full implementation of these recommendations must await the enactment of certain suggested Federal and State legislation.

In the course of its study the Committee ascertained the existence of serious lack of legal bibliography on the subject matter of its interest. With the concurrence of the Attorney General of the United States and the encouragement of the President, it has proceeded with the publication of this part II of its report, a compilation of the court decisions and legal opinions it weighed in the course of its study of the subject of Legislative jurisdiction.


Legal Problems many.--In view of the vastness of Federal real estate holdings, the large variety of activities conducted upon them, and the presence on many areas of resident employees and other persons, it is to be expected that many legal problems will arise on or with respect to these holdings. In addition to the problems normally encountered in administering and enforcing Federal laws, complicated by occasional conflict with over lapping State laws, the ownership and operation by the Federal Government of areas within the States gives rise to a host of legal problems largely peculiar to such areas. They arise not only because of the fact of Federal ownership and operation of these properties, but also because in numerous instances the Federal Government has with respect to such properties a special jurisdiction which excludes, in varying degrees, the jurisdiction of the State over them, and which in other instances is, to varying extents, concurrent with that of the State.

FEDERAL POSSESSION OF Exclusive JURISDICTION: By constitutional consent.-This special jurisdiction which is often possessed by the United States stems, basically, out of article I, section 8, clause 17, of the Constitution of the United States, which provides, in legal effect, that the Federal Government shall have exclusive legislative jurisdiction over such area, not exceeding 10 miles square, as may become the seat of government of the United States, and like authority over all places acquired by the Government, with the consent of the State involved, For various Federal purposes. It is the latter part of the clause, the part which has been emphasized, with which this study is particularly concerned. There is a general public awareness of the fact that the United States Government exercises all governmental authority over the District of Columbia, by virtue of power conferred upon it by a clause of the Constitution. There is not the same awareness that under another provision of this same clause the United States has acquired over several thousand areas within the States some or all of

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those powers, judicial and executive as well as legislative, which under our Federal-State system of government ordinarily are reserved to the States.

By Federal reservation or State cession. For many years after the adoption of the Constitution, Federal acquisition of State-type legislative jurisdiction occurred only by direct operation of clause 17. The clause was activated through the enactment of State statutes consenting to the acquisition by the Federal Government either of any land, or of specific tracts of land, within the State. In more recent years the Federal Government has in several instances made reservations of jurisdiction over certain areas in connection with the admission of State into the Union.

A third means for transfer of legislative jurisdiction now has come into considerable use, whereby in a general or special statute a State makes a cession of jurisdiction to the Federal Government. Courts and other legal authorities have distinguished at various times between Federal legislative jurisdiction derived, on the one hand, directly from operation of clause 17, and, on the other, from a Federal reservation or a State cession of jurisdiction. In the main, however, the characteristics of a legislative jurisdiction status are the same no matter by which of the three means the Federal Government acquired such status. Differences in these characteristics will be specially pointed out in various succeeding portions of this work.

Governmental Power merged in Federal Government.-- Whether by operation of clause 17, by reservation of jurisdiction by the United States, or by cession of jurisdiction by States, in many areas all governmental authority (with recent exceptions which will be noted) has been merged in the Federal Government, with none left in any State. By this means some thousands of areas have become Federal islands, sometimes called "enclaves," in many respects foreign to the States in which they are situated. In general, not State but Federal law is applicable in an area under the exclusive legislative jurisdiction of the United States, for enforcement not by State but Federal authorities, and in many instances not in State but in Federal courts.

Normal authority of a State over areas within its boundaries, and normal relationships between a State and its inhabitants, are disturbed, disrupted, or eliminated, as to enclaves and their residents. The State no longer has the authority to enforce its criminal laws in areas under the exclusive jurisdiction of the United States. Privately owned property in such areas is beyond the taxing authority of the State. It has been generally held that residents of such areas are not residents of the State, and hence not only are not subject to the obligations of residents of the State but also are not entitled to any of the benefits and privileges conferred by the State upon its residents. Thus, residents of Federal enclaves usually cannot vote, serve on juries, or run for office. They do not, as a matter of right, have access to State schools, hospitals, mental institutions, or similar establishments.

The acquisition of exclusive jurisdiction by the Federal Government renders unavailable to the residents of the affected areas the benefits of the laws and judicial and administrative processes of the State relating to adoption, the probate of wills and administration of estates, divorce, and many other matters. Police, fire-fighting, notarial, coroner, and similar services performed by or under the authority of a State may not be rendered with legal sanction, in the usual case, in a Federal enclave.

EXERCISE OF EXCLUSIVE FEDERAL JURISDICTION: Legislative authority little exercised.--States do not have authority to legislate for areas under the exclusive legislative jurisdiction of the United States, but the Congress has not legislated for these areas either, except in some minor particulars.

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Exercise as to crimes.--With respect to crimes occurring within Federal enclaves the Federal Congress has enacted the Assimilative Crimes Act, which adopts for enclaves, as Federal law, the State law which is in effect at the time the crime is committed. The Federal Government also has specifically defined and provided for the punishment of a number of crimes which may occur in Federal enclaves, and in such cases the specific provision, of course, supersedes the Assimilative Crimes Act.

Exercise as to civil matters.--Federal legislation has been enacted authorizing the extension to Federal enclaves of the workmen's compensation and unemployment compensation laws of the States within the boundaries of which the enclaves are located.

The Federal Government also has provided that State law shall apply in suits arising out of the death or injury of any person by the neglect or wrongful act of another in an enclave. It has granted to the States the right to impose taxes on motor fuels sold on Government reservations, and sales, use, and income taxes on transactions or uses occurring or services performed on such reservations; it has allowed taxation of leasehold interests in Federal property including property located on Federal enclaves; and it has retroceded to the States jurisdiction pertaining to the administration of estates of residents of Veterans' Administration facilities. This is the extent of Federal legislation enacted to meet the special problems existing on areas under the exclusive legislative jurisdiction of the United States.

RULE Of INTERNATIONAL LAW: Extended by courts to provide civil law.--The vacuum which would exist because of the absence of State law or Federal legislation with respect to civil matters in areas under Federal exclusive legislative jurisdiction has been partially filled by the courts, through extension to these areas of a rule of international law that when one sovereign takes over territory of another the laws of the original sovereign in effect at the time of the taking which are not inconsistent with the laws or policies of the second continue in effect, as laws of the succeeding sovereign, until changed by that sovereign.



Constitutional Consent.--The Constitution gives express recognition to but one means of Federal acquisition of legislative jurisdiction--by State consent under article I, section 8, clause 17. The debates in the Constitutional Convention and State ratifying conventions leave little doubt that both the opponents and proponents of Federal exercise of exclusive legislative jurisdiction over the seat of government were of the view that a constitutional provision such as clause 17 was essential if the Federal Government was to have such jurisdiction. At no time was it suggested that such a provision was unessential to secure exclusive Legislative jurisdiction to the Federal Government over the seat of government. While, as has been indicated in the preceding chapter, little attention was given in the course of the debates to Federal exercise of exclusive legislative jurisdiction over areas other than the seat of government, it is reasonable to assume that it was the general view that a special constitutional provision was essential to enable the United States to acquire exclusive legislative jurisdiction over any area. Hence, the proponents of exclusive legislative jurisdiction over the seat of government and over federally owned areas within the States defended the inclusion in the Constitution of a provision such as article I, section 8, clause 17. And in United States v. Railroad Bridge Co., 27 Fed. Cas. 686, 693, No. 16,114 (C. C. N. D. III., 1855), Justice McLean suggested that the Constitution provided the sole mode for transfer of jurisdiction, and that if this mode is not pursued no transfer of jurisdiction can take place.

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State cession.--However, in Fort Leavenworth R. R. v. Lowe, 114 U. S. 525 (1885), the United States Supreme Court sustained the validity of an act of Kansas ceding to the United States legislative jurisdiction over the Fort Leavenworth military reservation, but reserving to itself the right to serve criminal and civil process in the reservation and the right to tax rail road, bridge, and other corporations, and their franchises and property on the reservation.

In the course of its opinion sustaining the cession of legislative jurisdiction, the Supreme Court said (p. 540):

We are here met with the objection that the Legislature of a State has no power to cede away her jurisdiction and legislative power over any portion of her territory, except as such cession follows under the Constitution from her consent to a purchase by the United States for some one of the purposes mentioned. If this were so, it could not aid the railroad company; the jurisdiction of the State would then remain as it previously existed. But aside from this consideration, it is undoubtedly true that the State, whether represented by her Legislature, or through a convention specially called for that purpose, is incompetent to cede her political jurisdiction and legislative authority over any part of her territory to a foreign country, without the concurrence of the general government. The jurisdiction of the United States extends over all the territory within the States, and, therefore, their authority must be obtained, as well as that of the State within which the territory is situated, before any cession of sovereignty or political jurisdiction can be made to a foreign country.

* * *

In their relation to the general government, the States of the Union stand in a very different position from that which they hold to foreign governments. Though the jurisdiction and authority of the general government are essentially different from those of the State, they are not those of a different country; and the two, the State and general government, may deal with each other in any way they may deem best to carry out the purposes of the Constitution.

It is for the protection and interests of the States, their people and property, as well as for the protection and interests of the people generally of the United States, that forts, arsenals, and other buildings for public uses are constructed within the States. As instrumentalities for the execution of the powers of the general government, they are, as already said, exempt from such control of the States as would defect or impair their use for those purposes; and if, to their more effective use, a cession of legislative authority and political jurisdiction by the State would be desirable, we do not perceive any objection to its grant by the Legislature of the State. Such cession is really as much for the benefit of the State as it is for the benefit of the United States.

Had the doctrine thus announced in Fort Leavenworth R. R. v. Lowe, supra, been known at the time of the Constitutional Convention, it is not improbable that article I, section 8, clause 17, at least insofar as it applies to areas other than the seat of government, would not have been adopted. Cession as a method for transfer of jurisdiction by a State to the United States is now well established, and quite possibly has been the method of transfer in the majority of instances in which the Federal.......

Federal reservation.--In Fort Leavenworth R. R. v. Lowe, supra, the Supreme Court approved a second method not specified in the Constitution of securing legislative jurisdiction in the United States.

Although the matter was not in issue in the case, the Supreme Court said (p. 526):

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The land constituting the Reservation was part of the territory acquired in l8O3 by cession from France, and, until the formation of the State of Kansas, and her admission into the Union, the United States possessed the rights of a proprietor, and had political dominion and sovereignty over it. For many years before that admission it had been reserved from sale by the proper authorities of the United States for military purposes, and occupied by them as a military post.

The jurisdiction of the United States over it during this time was necessarily paramount. But in 1861 Kansas was admitted into the Union upon an equal footing with the original States, that is, with the same rights of political dominion and sovereignty, subject like them only to the Constitution of the United States. Congress might undoubtedly, upon such admission, have stipulated for retention of the political authority, dominion and legislative power of the United States over the Reservation, so long as it should be used for military purposes by the government; that is, it could have excepted the place from the jurisdiction of Kansas, as one needed for the uses of the general govern ment. But from some cause, inadvertence perhaps, or over- confidence that a recession of such jurisdiction could be had whenever desired, no such stipulation or exception was made.

Almost the same language was used by the Supreme Court of Kansas in Clay v. State, 4 Kan. 49 (1866), and another suggestion of judicial recognition of this doctrine is to be found in an earlier case in the Supreme Court of the United States, Langford v. Montieth, 102 U. S. 145 (1880), in which it was held that when an act of Congress admitting a State into the Union provides, in accordance with a treaty, that the lands of an Indian tribe shall not be a part of such State or Territory, the new State government has no jurisdiction over them. The enabling acts governing the admission of several of the States provided that exclusive jurisdiction over certain areas was to be reserved to the United States." In view of these developments, an earlier opinion of the United States Attorney General indicating that a State legislature, as distinguished from a State constitutional convention, had to give the consent to transfer jurisdiction specified in the Federal Constitution (12 Ops. A. G. 428 (1868)), would seem inapplicable to a Federal reservation of jurisdiction.

Since Congress has the power to create States out of Territories and to prescribe the boundaries of the new States, the retention of exclusive legislative jurisdiction over a federally owned area within the State at the time the State is admitted into the Union would not appear to pose any serious constitutional difficulties.

No Federal Legislative Jurisdiction without consent cession, or reservation.--It scarcely needs to be said that unless there has been a transfer of jurisdiction (1) pursuant to clause 17 by a Federal acquisition of land with State consent, or (2) by cession from the State to the Federal Government, or unless the Federal Government has reserved jurisdiction upon the admission of the State, the Federal Government possesses no legislative jurisdiction over any area within a State, such jurisdiction being for exercise entirely by the State, subject to non-interference by the State with Federal functions, and subject to the free exercise by the Federal Government of rights with respect to the use, protection, and disposition of its property.

Necessity of State Assent to Transfer of Jurisdiction to Federal Government: Constitutional Consent--The Federal Government can not, by unilateral action on its part, acquire legislative jurisdiction over any areas within the exterior boundaries of a State. Article I, section 8, clause 17, of the Constitution, provides that legislative jurisdiction may be transferred pursuant to its terms only with the consent of the legislature of the State in which is located the area subject to the jurisdictional transfer. As was indicated in chapter II, the consent

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requirement of article I, section 8, clause 17, was intended by the framers of the Constitution to preserve the States Jurisdictional integrity against Federal encroachment.

State cession or Federal reservation.--The transfer of legislative Jurisdiction pursuant to either of the two means not spelled out in the Constitution likewise requires the assent of the State in which is located the area subject to the jurisdictional transfer. Where legislative jurisdiction is transferred pursuant to a State cession statute, the State has quite clearly assented to the transfer of legislative jurisdiction to the Federal Government, since the enactment of a State cession statute is a voluntary act on the part of the legislature of the State.

The second method not spelled out in the Constitution of vesting legislative jurisdiction in the Federal Government, namely, the reservation of legislative jurisdiction by the Federal Government at the time statehood is granted to a Territory, does not involve a transfer of legislative jurisdiction to the Federal Government by a State, since the latter never had jurisdiction over the area with respect to which legislative jurisdiction is reserved. While, under the second method of vesting legislative jurisdiction in the Federal Government, the latter may reserve such jurisdiction without inquiring as to the wishes or desires of the people of the Territory to which statehood has been granted, nevertheless, the people of the Territory involved have approved, in at least a technical sense, such reservation. Thus, the reservation of legislative jurisdiction constitutes, in the normal case, one of the terms and conditions for granting statehood, and only if all of the terms and conditions are approved by a majority of the voters of the Territory, or by a majority of the Territorial legislature, is statehood granted.

NECESSITY OF FEDERAL ASSENT: Express Consent Required by R. S. 355.-- Acquiescence, or acceptance, by the Federal Government, as well as by the State, is essential to the transfer of legislative jurisdiction to the Federal Government. When legislative jurisdiction is reserved by the Federal Government at the time statehood is granted, to a Territory, it is, of course, obvious that the possession of legislative jurisdiction meets with the approval of the Federal Government. When legislative jurisdiction is to be transferred by a State to the Federal Government either pursuant to article I, section 8, clause 17, of the Constitution, or by means of a State cession statute, the necessity of Federal assent to such transfer of legislative jurisdiction has been firmly established by the enactment of the February 1, 1940, amendment to R. S. 355. While this amendment in terms specifies requirement for formal Federal acceptance prior to the transfer of exclusive or partial legislative jurisdiction, it also applies to the transfer of concurrent jurisdiction.

The United States Supreme Court, in Adams v. United States, 319 U. S. 312 (1943), in the course of its opinion said (pp. 314-315):

Both the Judge Advocate General of the Army and the Solicitor of the Department of Agriculture have construed the 1940 Act as requiring that notice of acceptance be filed if the government is to obtain concurrent jurisdiction. The Department of Justice has abandoned the view of jurisdiction which prompted the institution of this proceeding, and now advises us of its view that concurrent jurisdiction can be acquired only by the formal acceptance prescribed in the Act. These agencies cooperated in developing the Act, and their view's are entitled to great weight in its interpretation.

* * *

Besides, we can think of no other rational meaning for the phrase "jurisdiction, exclusive or partial" than that which the administrative construction gives it. Since the government had not accepted jurisdiction in the manner required by the Act, the federal court had no jurisdiction of this

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proceeding. In this view it is immaterial that Louisiana statutes authorized the government to take jurisdiction, since at the critical time the jurisdiction had not been taken.

Former Presumption of Federal acquiescence in absence of dissent.--Even before the enactment of the 1940 amendment to R. S. 355, it was clear that a State could not transfer, either pursuant to article I, section S, clause 17, of the Constitution, or by means of a cession statute, legislative jurisdiction to the Federal Government without the latter's consent Prior to the 1940 amendment to R. S. 355, However, it was not essential that the consent of the Federal Government be expressed formally or in accordance with, any prescribed procedure. Instead, it was presumed that the Federal Government accepted the benefits of a State enactment providing for the transfer of legislative jurisdiction.

As discussed more fully below, this presumption of acceptance was to the effect that once a State legislatively indicated a willingness to transfer exclusive jurisdiction such jurisdiction passed automatically to the Federal 'Government without any action having to be taken by the United States. However, the presumption would not operate where Federal action was taken demonstrating dissent from the acceptance of proffered jurisdiction.

Presumption in transfers by cession.--In Fort Leavenworth R.R. R. v. Lowe, supra, in which a transfer of legislative jurisdiction by means of a State cession statute was approved for the first time, the court said (p. 528) that although the Federal Government had not in that case equested a cession of jurisdiction, nevertheless, "as it conferred a benefit, the acceptance of the act is to be presumed in the absence of any dissent on their part."

See also United States v. Johnston, 58 F. Supp. 208, aff'd., 146 F. 2d 268 (C. A. 9, 1944), cert. den., 324 U. S. 876; 38 Ops. A. G. 341 (1935).

A similar view has been expressed by a number of courts to transfers of jurisdiction by cession. In some instances, however, the courts have indicated the existence of affirmative grounds supporting Federal acceptance of such transfers. In Yellowstone Park Transp. Co. v. Gallatin County, 31 F. 2d 644 (C. A. 9, 1929), cert. den., 280 U. S. 555, it was stated that acceptance by the United States of a cession of jurisdiction by a State over a national park area within the State may be implied from acts of Congress providing for exclusive jurisdiction in national parks. See also Columbia River Packers' Ass'n v. United States, 29 F. 2d 91 (C. A. 9, 1928); United States v. Unzeuta, 281 U. S. 138 (1930).

Presumption in transfers by constitutional consent.--Until recent years, it was not clear but that the consent granted by a State pursuant to article I, section 8, clause 17, of the Constitution, would under all circumstances serve to transfer legislative jurisdiction to the Federal Government where the latter had "purchased" the area and was using it for one of the purposes enumerated in clause 17.

In United States v. Cornell, 25 Fed. Cas. 646, No. 14,867 (C. C. D. R. I., 1819), Justice Story expressed the view that clause 17 is self-executing, and acceptance by the United States of the "benefits" of a State consent statute was not mentioned as an essential ingredient to the transfer of legislative jurisdiction under clause 17.

In the course of his opinion in that case, Justice Story said (P. 648):

The constitution of the United States declares that congress shall have power to exercise "exclusive legislation" in all "cases whatsoever" over all places purchased by the consent of the legislature of the state in which the same shall be, for the erection of forts, magazines, arsenals, dockyards and other needful buildings. When therefore a purchase of land for any of these purposes is made by the national government, and the state legislature has given its consent to the purchase, the land so purchased by the very terms of the constitution ipso facto falls within exclusive legislation of congress, and the state jurisdiction is completely ousted. [Italics added.]

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As late as 1930, it was stated in Surplus Trading Co. v. Cook, 281 U. S. 647, that (p. 652): It long has been settled that where lands for such a purpose [one of those mentioned in clause 17] are purchased by the United States with the consent of the state legislature the jurisdiction theretofore residing in the State passes, in virtue of the constitution provision, to the United States, thereby making the jurisdiction of the latter the sole jurisdiction. [Italics added.]

The italicized portions of the quoted excerpts suggest that Article I, section 8, clause 17, of the Constitution, may be selfexecuting where the conditions specified in that clause for the, transfer of jurisdiction have been satisfied.

In Mason Co. v. Tax Comm'n, 302 U. S. 186 (1937), however, the Supreme Court clearly extended the acceptance doctrine, first applied to transfers of legislative jurisdiction by State cession statutes in Fort Leavenworth R. R. v. Lowe, supra, to transfers pursuant to article I, section 8, clause 17, of the Constitution.

The court said (p. 207):

Even if it were assumed that the state statute should be construed to apply to the federal acquisitions here in volved, we should still be met by the contention of the Government that it was not compelled to accept, and has not accepted, a transfer of exclusive jurisdiction. As such a transfer rests upon a grant by the State, through consent or cession, it follows, in accordance with familiar principles applicable to grants, that the grant may be accepted or declined. Acceptance may be presumed in the absence of evidence of a contrary intent, but we know of no constitutional principle which compels acceptance by the United States of an exclusive jurisdiction contrary to its own conception of its interests.

* * *

What constitutes dissent.--Only in a few instances have the courts indicated what may constitute a "dissent" (see Fort Leavenworth R. R. v. Lowe, supra) by the Federal Government from a State's proffer of legislative jurisdiction. In Mason Co. v. Tax Comm'n, supra, the court concluded that a validation by Congress of contracts entered into by Federal administrative officials granting to State, officials certain authority with respect to schools, police protection, etc., reflected a Congressional intent not to accept the legislative jurisdiction offered to the Federal Government by the State by the latter's enactment of a consent statute.

In a State case (International Business Machines Corporation v. Ott, 230 La. 666, 89 So. 2d 193 (1956)), use by the Federal installation of similar State services, with no indication of Congressional knowledge in the latter, was held to have negatived Federal acceptance of jurisdiction proffered under a general consent and cession statute of the State. It may be noted that extension of this decision would put in doubt the status of many, if not most, Federal areas now considered to be under the legislative jurisdiction of the United States.

In Atkinson v. State Tax Commission, 303 U. S. 20 (1933), the court indicated that the enforcement of the Oregon workmen's compensation law in the Federal area was incompatible with exclusive Federal legislative jurisdiction, and, since the Federal Government did not seek to prevent the enforcement of this law, the presumption of Federal acceptance of legislative jurisdiction was effectively rebutted.

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Right of Defining and Punishing For Crimes: Exclusive Federal Jurisdiction.--Areas over which the Federal Government has acquired exclusive legislative jurisdiction are subject to the exclusive criminal jurisdiction of the United States. Bowen v. Johnston, 306 U. S. 19 (1939); United States v. Watkins, 22 F. 2d 437 (N. D. Cal., 1927). That the States can neither define nor punish for crimes in such areas is made clear in the case of

In re Ladd, 74 Fed. 31 (C. C. N. D. Neb., 1896), (p. 40):

The cession of jurisdiction over a given territory takes the latter from within, and places it without, the jurisdiction of the ceding sovereignty. After a state has parted with its political jurisdiction over a given tract of land, it cannot be said that acts done thereon are against the peace and dignity of the state, or are violations of its laws; and the state certainly cannot claim jurisdiction criminally by reason of acts done at places beyond, or not within, its territorial jurisdiction, unless by treaty or statute it may have retained jurisdiction over its own citizens, and even then the jurisdiction IS ONLY OVER THE PERSON AS A CITIZEN.

The criminal jurisdiction of the Federalize Government extends to private lands over which legislative jurisdiction has been vested in the Government, as well] as to federally owned lands. United States v. Unzeuta, supra; see also Petersen v. United States, 191 F. 2d 154 (C. A. 9, 1951), cert. denied 342 U. S. 885.

Indeed, the Federal Government's power derived from exclusive legislative jurisdiction over an area may extend beyond the boundaries of the area, as may be necessary to make exercise of the Government's jurisdiction effective; thus, the Federal Government may punish a person not in the exclusive jurisdiction area for concealment of his knowledge concerning the commission of a felony within the area. Cohens v. Virginia, 6 Wheat. 264, 426-429 (1821). In Hollister v. United States, 145 Fed. 773 (C. A. 8, 1906), the court said (p. 777):

Instances of relinquishment and acceptance of criminal jurisdiction by state Legislatures and the national Congress, respectively, over forts, arsenals, public buildings, and other property of the United States situated within the states, are common, and their legality has never, so far as we know, been questioned.

On the other hand, while the Federal Government has power under various provisions of the Constitution to define, and prohibit as criminal, certain acts or omissions occurring anywhere in the United States, it has no power to punish for various other crimes, jurisdiction over which is retained by the States under our Federal-State system of government, unless such crimes occur on areas as to which legislative jurisdiction has been vested in the Federal Government. The absence of jurisdiction in a State, or in the Federal Government, over a criminal act occurring in an area as to which only the other of these governments has legislative jurisdiction is emonstrated by the case of United States v. Tully, 140 Fed. 899 (C. C. D. Mont., 1905).

Tully had been convicted by a State court in Montana of first degree murder, and sentenced to be hanged. The Supreme Court of the State reversed the conviction on the ground that the homicide had occurred on a military reservation over which exclusive jurisdiction was vested in the Federal Government. The defendant was promptly indicted in the Federal court, but went free as the result of a finding that the Federal Government did not, have legislative jurisdiction over the particular land on which the homicide had occurred.

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The Federal court said (id. p. 905):

It is unfortunate that a murderer should go unwhipped of justice, but it would be yet more unfortunate if any court should assume to try one charged with a crime without jurisdiction over the offense. In this case, in the light of the verdict of the jury in the state court, we may assure that justice would be done the defendant were he tried and convicted by any court and executed pursuant to its judgment. But in this court it would be the justice of the vigilance committee wholly without the pale of the law. The fact that the defendant is to be discharged may furnish a text for the thoughtless or uninformed to say that a murderer has been turned loose upon a technicality; but this is not a technicality. It goes to the very right to sit in judgment.

* * *

These sentiments no doubt appealed with equal force to the Supreme Court of Montana, and it is to its credit that it refused to lend its aid to the execution of one for the commission of an act which, in its judgment, was not cognizable under the laws of its state; but I cannot bring myself to the conclusion reached by that able court, and it is upon the judgment and conscience of this court that the matter of jurisdiction here must be decided.

The United States and each State are in many respects separate sovereigns, and ordinarily one cannot enforce the laws of the other.

State and local police have no authority to enter an exclusive Federal area to make investigations, or arrests, for crimes committed within such areas since Federal, not State, offenses are involved. Only Federal law enforcement officials, such as representatives of the Federal Bureau of Investigation and United States marshals and their deputies, would be authorized to investigate such of offenses and make arrests in connection with them. The policing of Federal exclusive jurisdiction areas must be accomplished by Federal personnel, and an offer of a municipality to police a portion of a road on such an area could not be accepted by the Federal official in charge of the area, as police protection by a municipality to such an area would be inconsistent with Federal exclusive jurisdiction.

Concurrent Federal and State criminal jurisdiction.--There are, of course, Federal areas as to which a State, in ceding legislative jurisdiction to the United States, has reserved some measure of jurisdiction, including criminal jurisdiction, concurrently to itself. In general, where a crime has been committed in an area over which the United States and a State have concurrent criminal jurisdiction, both governments may try the accused without violating the double jeopardy clause of the Fifth Amendment. Grafton v. United States. 206 U. S. 333 (1907), held that the same acts constituting a crime cannot, after a defendant's acquittal or conviction in a court of competent jurisdiction of the Federal Government, be made the basis of a second trial of the defendant for that crime in the same or in another court, civil or military, of the same government. However, where the same act is a crime under both State and Federal law, the defendant may be punished under each of them.

Hebert v. Louisiana, 272 U. S. 377 (1922). (p.382):

It follows that an act denounced as a crime by both national and state sovereignties is an offense against the peace and dignity of both and may be punished by each. The Fifth Amendment, like all the other guaranties in the first eight amendments, applies only to proceedings by the Federal Government, Barron v. Baltimore, 7 Pet. 243, and the double jeopardy therein forbidden is a second prosecution under authority of the Federal Government after a first trial for the same offense under the same authority.

* * *

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It is well settled, of course, that where two tribunals have concurrent jurisdiction that which first takes cognizance of a matter has the right, in general, to retain it to a conclusion, to the exclusion of the other.

The rule seems well stated in Mail v. Maxwell, 107 Ill. 554 (1883), (p. 561):

Where one court has acquired jurisdiction, no other court, State or Federal, will, in the absence of supervising or appellate jurisdiction, interfere, unless in pursuance of some statute, State or Federal, providing for such interference.

Other courts have held similarly. There appears to be some doubt concerning the status of a court-martial as a court, within the meaning of the Judicial Code, however.

Law enforcement on areas of exclusive or concurrent jurisdiction.--The General Services Administration is Authorized by statute to appoint its uniformed guards as special policemen, with the same powers as sheriffs and constables to enforce Federal laws enacted for the protection of persons and property, and to prevent breaches of the peace, to suppress affrays or unlawful assemblies, and to enforce rules made by the General Services Administration for properties under its jurisdiction; but the policing powers of such special policemen are restricted to Federal property over which the United States has acquired exclusive or concurrent jurisdiction. Upon the application of the head of any Federal department or agency having property of the United States under its administration or control and over which the United States has exclusive or concurrent jurisdiction, the General Services Administration is authorized by statute to detail any such special policeman for the protection of such property and, if it is deemed desirable, to extend to such property the applicability of regulations governing property promulgated by the General Services Administration.

The General Services Administration is authorized by the same statute to utilize the facilities of existing Federal law-enforcement agencies, and, with the consent of any State or local agency, the facilities and services of such State or local law enforcement agencies. Although the Department of the Interior required protection for an installation housing important secret work, the General Services Administration was without authority to place uniformed guards on the premises in the absence in the United States of exclusive or concurrent jurisdiction over the property, and notwithstanding the impropriety of permitting the policing of the property by local officials, if they were willing, without necessary security clearances.

Civilian Federal employees may be assigned to guard duty on Federal installations, but there is no Federal statute (other than that appertaining to General Services Administration and three statutes of even less effect 16 U. S. C. 559 (Forest Service), and 16 U. S. C. 10 and l0a (National Park Service) conferring any special authority on such guards. They are not peace officers with the usual powers of arrest; and have no greater powers of arrest than private citizens. As citizens, they may protect their own lives and property and the safety of others, and as agents of the Government they have a special right to protect the property of the government. For both these purposes they may use reasonable force, and for the latter purpose they may bear arms irrespective of State law against bearing arms. Such guards, unless appointed as deputy sheriffs (where the State has at least concurrent criminal jurisdiction), or deputy marshals (where the United States has at least concurrent criminal jurisdiction), have no more authority than other private individuals so far as making arrests is concerned. State and local officers may, by special Federal statute, preserve the peace and make arrests for crimes under the laws of States, upon immigrant

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stations, and the jurisdiction of such officers and of State and local courts has been extended to such stations for the purposes of the statute.

Partial jurisdiction.--In some instances States in granting to the Federal Government a measure of exclusive legislative jurisdiction over an area have reserved the right to exercise, only by themselves, or concurrently by themselves as well as by the Federal Government, criminal jurisdiction over the area. In instances of complete State retention of criminal jurisdiction. whether with respect to all matters or with respect to a specified category of matters, the rights of the States, of the United States, and of any defendants, with respect to crimes as to which State jurisdiction is so retained are as indicated in this chapter for areas as to which the Federal Government has no criminal jurisdiction. In instances of concurrent State and Federal criminal jurisdiction with respect to any matters the rights of all parties are, of course, determined with respect to such matters according to the rules of law generally applicable in areas of concurrent jurisdiction. Accordingly, there is no body of law specially applicable to criminal activities in areas under the partial legislative jurisdiction of the United States.

State criminal jurisdiction retained.--State criminal jurisdiction extends into areas owned or occupied by the Federal Government, but as to which the Government has not acquired exclusive legislative jurisdiction with respect to crimes. And as to many areas owned by the Federal Government for its various purposes it has not acquired legislative jurisdiction. The Forest Service of the Department of Agriculture, for example, in accordance with a provision of Federal law (16 U. S. C. 480), has not accepted the jurisdiction proffered by the statutes of many States, and the vast majority of Federal forest lands are held by the Federal Government in a proprietorial status only. The Federal Government may not prosecute for ordinary crimes committed in such areas. Federal civilians who may be appointed as guards in the areas do not have police powers, but possess only the powers of arrest normally had by any citizen unless they receive appointments as State or local police officers.

additional documentation


and subtitled


"The White House,

Washington, April 27, 1956.

Dear Mr. Attorney General: I am herewith returning to you, so that it may be published and receive the widest possible distribution among those interested in Federal real property matters, part I of the Report of the Interdepartmental Committee for the Study of Jurisdiction over Federal Areas within the States. I am impressed by the well-planned effort which went into the study underlying this report and by the soundness of the recommendations which the report makes.

It would seem particularly desirable that the report be brought to the attention of the Federal administrators of real properties, who should be guided by it in matters related to legislative jurisdiction, and to the President of the Senate, the Speaker of the House of Representatives, and

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appropriate State officials, for their consideration of necessary legislation. I hope that you will see to this. I hope, also, that the General Services Administration will establish as soon as may be possible a central source of information concerning the legislative jurisdictional status of Federal properties and that that agency, with the Bureau of the Budget and the Department of Justice, will maintain a continuing and concerted interest in the progress made by all Federal agencies in adjusting the status of their properties in conformity with the recommendations made in the report.

The members of the Committee and the other officials, Federal and State, who participated in the study, have my appreciation and congratulations on this report. I hope they will continue their good efforts so that the text of the law on the subject of legislative jurisdiction which is planned as a supplement will issue as soon as possible.


Dwight D. Eisenhower.


The Honorable Herbert Brownell, Jr.,

The Attorney General, Washington, D. C."



The White House,

Washington, July 8, 1957.

Dear Mr. Attorney General: I have taken note of the final report (Part II) which you transmitted to me, rendered by the Interdepartmental Committee for the Study of Jurisdiction over Federal Areas within the States. It is my understanding that the report is to be published and distributed, for the purpose of making available to Federal administrators of real property, Federal and State legislators, the legal profession, and others, this text of the law of legislative jurisdiction in these areas. In view of the fact that the work of the Committee is completed, and since other Departments and agencies of the Government now have clear direction for turning this work into permanent gains in improved Federal-State relations, the Interdepartmental Committee for the Study of Jurisdiction over Federal Areas within the States is hereby dissolved.

Chairman Perry W. Morton and the members of this Committee have my congratulations and sincere appreciation of their service to our country in bringing to light the facts and law in this much neglected field. This monumental work, culminating three years of exhaustive effort, lays an excellent foundation for allocating to the States some of the functions which under our Federal-State system should properly be performed by State Governments.


Dwight Eisenhower

The Honorable Herbert Brownell, Jr.,

The Attorney General,

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Washington, D. C.



Office of the Attorney General,

Washington, D.C., June 28, 1957.

Dear Mr. President: The Interdepartmental Committee for the Study of Jurisdiction over Federal Areas within the States now has submitted the second, and final, part of its report, a text of the law of legislative jurisdiction over such areas. This exhaustive and analytical exposition of the law in this hitherto little explored field is a valuable supplement to the first part of the report, the compilation of facts, with recommendations, which received your commendation in April 1956, and constitutes a major addition to legal bibliography. Together, the two parts of this committee's report and the full implementation of its recommendations will provide a basis for reversing in many areas the swing of "the pendulum of power * * * from our states to the central government" to which you referred in your address to the Conference of State Governors on June 25, 1957.

The excellence of the work of the Committee reflects great credit upon its Chairman and members. Also especially noteworthy is the splendid assistance which the Committee received from the attorneys general of the several States, the general counsels of Federal agencies, and other State and Federal officials. With the submission of this second part of its report the Committee has completed its work and recommends that it be dissolved. Since the Departments and other permanent agencies of the Federal Government now can carry out directions which you have issued based upon the work of the Committee, I join in this recommendation.


Herbert Brownell, Jr.




June 17, 1957.

Dear MR. Attorney General: With the encouragement of the President, the understanding aid of you and the heads of the other Federal agencies represented on the Committee, and the invaluable assistance of the Attorneys General of the several States and of the principal law officers of nearly all Federal agencies, the Committee now has completed, and herewith submits, the final portion of its report, subtitled "Part II, A Text of the Law of Legislative Jurisdiction." This "Part II" supplements the portion of the Committee's report which you transmitted to the President on April 27, 1956. With its submission the work assigned to the Committee has been completed, and it is recommended that the Committee be dissolved.

Respectfully submitted,


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Assistant Attorney General (Chairman).


General Counsel, Department of Defense (Vice Chairman).


Associate General Counsel, General Services Administration



Legal Advisor, Bureau of the Budget.


Solicitor, Department of the Interior.


General Counsel, Department of Agriculture.


General Counsel, Department of Health, Education, and Welfare.


General Counsel, Veterans' Administration.



Federalism (a federation, a federal union, or a federal system) is a federated sovereign state formed by establishment of a closely-knit, or tightly-knit, union of two or more small- er political communities, which, after formation of the union, are no longer sovereign (com- pletely independent) but do retain a significant degree of autonomy (partial self-govern- ment). The smaller political communities that are members of the larger federal union pos- sess and exercise a substantial amount of home rule, but at the same time, are bound by the constitution and constitutionally valid laws of the national, or central, government--i.e., the general, or common, government over the entire federation and country.

The 50 smaller regional political communities comprising the membership of the federal union known as the "United States of America" are officially designated as "states." And so are the six constituent political units of the federation called the "Commonwealth of Australia." The ten regional political communities comprising the federation of Canada are officially designated as "provinces."

Federalism is distinguished by the following characteristics:

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(1) Only the national, or central, government of the federated sovereign state speaks and acts for the entire country its relations and dealings with foreign governments. In this sense, the national government is the sole possessor and exerciser of SOVEREIGNTY. Only the national government can operate as the government of a completely independent political community. The smaller regional political communities--the member "states" or "provinces" of the federal union--are not SOVEREIGN STATES. That is, they are neither complete ly nor virtually independent. Instead, they SEMIAU TONOMOUS--i.e., partially self-governing. They possess AUTONOMY, not sovereignty. However, the DEGREE OF AUTONOMY, or self-government, is SUBSTANTIAL. (2) The national constitution--the constitution over the whole country--divides and distributes the constitutional powers of government between the national government and the constituent political units. The national constitution recognizes the existence of two levels of government in the country: (a) The national, or central, government; (b) The governments of the smaller regional communities. And the national constitution grants SUBSTANTIAL AUTHORITY to each of the two levels of government--national and regional. Each level of government is given the right to make final decisions on at least some governmental activi- ties and services. (3) The national constitution protects the RIGHT OF EACH LEVEL OF GOVERNMENT TO EXIST. Legally, neither level of government can destroy the other level. The U.S.A., for example, has been referred to as "an indestructible union of indestructible states." (4) The national constitution gives the central government control over matters of GENERAL, or COMMON, concern to the country as a whole and permits the con- stituent political communities to regulate matters of more REGIONAL or LOCAL concern. (5) Neither level of government receives its powers from other. The constituent communities do not receive their powers from statutes enacted by the national legislature. And the national government does not receive its powers from decisions and actions of the regional legislatures. Both levels of government--national and regional--receive their respective sets of powers from a COMMON SOURCE--the NATIONAL CONSTI TUTION. (6) Both levels of government OPERATE THROUGH THEIR OWN AGENTS and EXERCISE POWER DIRECTLY OVER INDIVIDUALS.

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In a given geographic, or territorial, region within the country, two different governments--one national, and the other regional--simultaneously govern the same land and people. (7) Under ordinary conditions within the country, neither level of government is dependent upon the other for enforcement of its decisions within its own constitutional sphere of authority.


The U.S.A., Canada, Australia, Austria, and Switzerland.


UNITARY GOVERNMENT: FEDERAL SYSTEM: The national constitution The national constitution di- vests ALL the constitutional vides the constitutional pow- authority of government in ers of government between the the central government. central government and the constituent units. Regional or local political Regional political units re- units are created by acts ceive their powers from pro- of the national legislature visions of the national con- and receive their powers stitution. These powers can from national legislative be taken from the regional statutes. These powers can communities only by amending be withdrawn from the re- the national constitution. gional or local units by Both levels of government statutes of the national must consent to changes in legislature. the national constitution. The national legislature The national constitution can, by statute, abolish or protects the right of the completely reorganize the constituent communities to regional units, which exist exist. and operate at the suffer- ance of the national gov- ernment.


Britain; France; Japan; Spain; Italy; Ireland; Greece; Israel; Norway; Sweden; Finland; Denmark; Netherlands.

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CONFEDERATION: FEDERAL SYSTEM: The union is a loosely-held- The states joining together together league or associa- in the union yield to the tion of virtually sovereign central government a substan- states--a loose union or al- tial amount of political au- liance of almost completely thority. The constituent independent states. communities are no longer sovereign. They are now sem- iautonomous; they are par- tially self-governing, not completely self-governing. The central government does The national government exer- not have authority to regu- cises power directly over in- late the conduct of individ- dividuals. The central gov- ual persons. To impact on ernment operates through its individuals, the central own agents--not through the government must act regional governments, unless through the states. it chooses to do so. The central government has Under the national constitu- only ENUMERATED, or, tion, the central government EXPRESS powers--powers has broad power to decide and EXPRESSLY delegated (granted in so act on matters of general many words) to the central concern to the nation as a government by the constitu- whole. The central govern- tional compact or treaty. ment of the U.S.A., for ex= ample, is by no means limited to the enumerated (express) powers. It also possesses and exercises IMPLIED powers --powers which are not men- tioned in so many words in the national constitution as powers assigned to the cen- tral government, but which can be REASONABLY IMPLIED from the enumerated powers. The powers of the central The national government is government are severely granted substantial authority limited by the constitu- by the national constitution. tional compact or treaty.


The U.S.A. under the Articles of Confederation (1781-1789). Germany as the "Holy Roman Empire" (962-1806).


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The European Union.


"The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people." MEANING: The national government possesses and exercises those powers DELEGATED (i.e., granted, or assigned) to it by the U.S. Constitution. All other powers not prohibited by the U.S. Constitution to the states are left in the hands of the states, or the people.


THE BASIC PRINCIPLE OF AMERICAN FEDERALISM: The Tenth Amendment embodies the basic principle of American federalism--the basic principle governing the constitutional division and distribution of po- litical authority between the national government and the states. THE BASIC PRINCIPLE: The national government possesses all those powers delegated to it by the national con- stitution. The states possess all those powers which the U.S.-- Neither delegates to the national government; Nor prohibits the states from exercising. WHAT THE TENTH AMENDMENT MAKES EXPLICIT: The Tenth Amendment makes explicit what was implicit in the seven original articles of the U.S. Constitution: Under the Constitution, there are two levels of government-- Each with its own sphere of authority; Each enjoying constitutional protection of its right to exist. All powers neither delegated to the central government nor denied to the states remain within the sphere of state authority.


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THREE SPHERES OF POLITICAL AUTHORITY NATIONAL AUTHORITY SHARED AUTHORITY STATE AUTHORITY Delegated Concurrent Reserved Powers Powers Powers Enumerated (Residual Powers Powers) Implied [Original, Inherent, Powers & Largely Undefined] Inherent Powers in Foreign Affairs


The DELEGATED POWERS are the powers granted to the national government by the U.S. Constitution. The delegated powers are the powers of government which were--Surrendered by the states when they ratified the U.S. Constitution; Vested in the central government by the Constitution. There are two categories of powers delegated to Congress by the U.S. Constitution: (1) Enumerated, or express, powers; (2) Implied powers.


DEFINITION: The ENUMERATED, or EXPRESS, powers of Congress are those powers enumerated (listed or mentioned) in so many words in the Constitution as grants of authority to Congress. Particular clauses in the Constitution delegate these powers to Congress. LOCATION: Article I, Section 8, Clauses 1-18. Article IV, Section 3. Amendment 16.

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Enforcement Sections, Amendments 13, 14, 15, 19, 23, 24, and 26.


The IMPLIED POWERS of Congress are those powers which-- Are not listed or mentioned in the Constitution; But are deemed by Congress and the U.S. Courts to be REASONABLY IMPLIED from the enumerated, or expressly delegated, powers of Congress.


In a number of cases, the U.S. Supreme Court has ruled as follows: In the field of FOREIGN AFFAIRS, or INTERNATIONAL RELATIONS, the national government of the U.S.A. possesses INHERENT powers as well as DELEGATED powers. The INHERENT POWERS of the national government are powers that do not depend on the constitutionally delegated pow- ers, neither those delegated by enumeration nor those dele- gated by implication. The national government's inherent powers in foreign af- fairs inhere in the national government as the sole spokes- man and representative of a sovereign state, the U.S.A., in its dealings with other sovereign states in the world. These powers grow out of the very existence of the U.S. central government as the instrument of a sov- ereign nation-state. America's national government, in its dealings with the governments of other sovereign states in the world, has the same powers that the governments of all sovereign states have in the area of international relations. EXAMPLES OF THE INHERENT POWERS OF THE U.S. NATIONAL GOV- ERNMENT: (1) Authority to acquire by discovery and occupation territory outside the existing boundaries of the U.S.A. (2) Authority to make and enforce immigration laws regu- lating, limiting, and prohibiting the entrance of aliens into the U.S.A.


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DEFINITION: The RESERVED, or RESIDUAL, powers make up the sphere of political authority allocated to the states by the U.S. Constitution. The reserved powers of the states are the powers which the Constitution neither delegates to the na- tional government nor denies to the states. The Constitution reserves these powers to the states, or the people. The reserved powers are ORIGINAL, GENERAL, INHERENT, and largely UNDEFINED. EXAMPLES OF THE RESERVED POWERS OF THE STATES: Examples of the reserved powers include state author- ity to-- (1) Adopt and change state constitutions and organize state governments; (2) Organize and establish local governments; (3) Exercise the GENERAL POLICE POWER: The power to protect the PUBLIC HEALTH, PUBLIC SAFETY, PUBLIC MORALS, and PUBLIC WELFARE within the borders of a state-- The power to regulate the conduct of individuals within the borders of a state in order to protect the HEALTH, SAFETY, MORALS, AND WELFARE OF THE CITIZENS OF THAT STATE-- In short, to act in the PUBLIC IN- TEREST within the state--to regulate human conduct to safeguard and pro- mote the the GENERAL WELFARE, or COMMON GOOD, of the state; (4) Protect life and property and maintain order within a state--under ordinary con- ditions; (5) Set up tax-supported systems of public education, e.g., state-supported elemen- tary and secondary schools and state-sup- ported colleges and universities.


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DEFINITION: The CONCURRENT POWERS constitute the sphere of au- thority shared by the states and the national govern- ment under the U.S. Constitution. The concurrent powers can be exercised by the central government and the states CONCURRENTLY--i.e., SIMUL- TANEOUSLY (at the same time). EXAMPLES: Examples of the concurrent powers include authority to-- (1) Lay and collect taxes; (2) Spend public funds in the public interest --i.e., spend the taxpayers' money to pro- vide for the general welfare, or common good; (3) Borrow money on the public credit; (4) Charter banks and other corporations; (5) Make and enforce laws; (6) Establish courts; (7) Exercise the power of EMINENT DOMAIN-- i.e., the right to take private property for public purposes; (8) Regulate INTERSTATE COMMERCE--i.e., regu- late trade and other economic activities carried on within the borders of a state.


DEFINITION: The NECESSARY AND PROPER CLAUSE, or ELASTIC CLAUSE, is Article I, Section 8, Clause 18, of the U.S. Con- stitution. The clause provides as follows: "The Congress shall have power ... to make all laws which shall be necessary and proper for carrying into execution the foregoing [17 ex- press, or enumerated] powers, and all other powers vested by this Constitution in the gov-

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ernment of the United States, or in any depart- ment [branch] or officer thereof." LITERAL MEANING OF THE CLAUSE: Article I, Section 8, Clause 18--the NECESSARY AND PROPER CLAUSE--delegates to Congress authority to make any laws necessary and proper for-- Exercising its own enumerated powers; Putting into effect the constitutional powers of the other branches or organs of the national government. SIGNIFICANCE OF THE CLAUSE: The NECESSARY AND PROPER CLAUSE is the CONSTITUTIONAL BASIS of the IMPLIED POWERS of Congress. The implied powers of Congress derive from the very BROAD CONSTRUCTION--the very LOOSE AND GENEROUS IN- TERPRETATION--the U.S. Supreme Court has given to the authority of Congress under the NECESSARY AND PROPER CLAUSE. The clause is called the ELASTIC CLAUSE because it has been interpreted, or construed, in such manner as to allow the authority of Congress to be stretched far beyond the enumerated, or express, grants of pow- power by the Constitution.


DEFINITION & LOCATION: The NATIONAL SUPREMACY CLAUSE is Article VI, para- graph 2, of the U.S. Constitution: "This Constitution, and the laws of the United States which shall be made in pursuance there- of; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything the constitution or laws of any state to the contrary notwithstanding." WHAT THE CLAUSE PROVIDES: Article VI, paragraph 2, does two things: (1) The clause defines the content of the SUPREME LAW OF THE LAND in the U.S.A.--the law which is

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superior to and takes precedence over all other laws and public policies in the country. The supreme law of the land is defined to in- clude-- (a) The provisions of the U.S. Constitu- tion; (b) All national laws made in pursuance of the U.S. Constitution--i.e., all congressional statutes and federal- court decisions that are in harmony with the provisions of the U.S. Con- stitution; (c) All treaties made under the authority of the United States--i.e., all trea- ties made in accordance with the pro- cedure of treatymaking prescribed by the U.S. Constitution. (2) The NATIONAL SUPREMACY CLAUSE requires that all STATE JUDGES (as well as federal judges) be BOUND BY THE SUPREME LAW OF THE LAND, regardless of any contrary provisions in state constitu- tions or state statutes. Thus, any legitimate exercise of national au- thority under the U.S. Constitution supercedes any conflicting state action. CONTINUED ON SECOND PAGE, NOTES ON FEDERALISM & THE AMERICAN FEDERAL SYSTEM Irony: Andrew Jackson On a Federal Reserve Note

by John Rubino on January 9, 2010

Karl Golovin, a retired customs agent and security director for Ron Paul’s presidential campaign, just forwarded a transcript of Andrew Jackson’s farewell address. It’s pretty amazing. Here’s Karl’s intro, followed by an excerpt:

“During his presidency, Andrew Jackson viewed as his crowning achievement that he “Killed the Bank,” the 2nd Bank of the U.S. Our current ‘Federal Reserve,’ created in 1913, is the 3rd Bank of the U.S. Jackson was intent upon restoring an honest, Constitutional monetary system. There probably never has been written a more articulate, prophetic vision of what calamity would befall our nation if we did not diligently stay that course, as argued by Jackson in the following excerpt from his farewell address in 1837. It reads as if written this very day about our present financial circumstances:”

“. . . . In reviewing the conflicts which have taken place between different interests in the United States and the policy pursued since the adoption of our present form of Government, we find nothing that has produced such deep-seated evil as the course of legislation in relation to the currency. The Constitution of the United States unquestionably intended to secure to the

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people a circulating medium of gold and silver. But the establishment of a national bank by Congress, with the privilege of issuing paper money receivable in the payment of the public dues, and the unfortunate course of legislation in the several States upon the same subject, drove from general circulation the constitutional currency and substituted one of paper in its place.

It was not easy for men engaged in the ordinary pursuits of business, whose attention had not been particularly drawn to the subject, to foresee all the consequences of a currency exclusively of paper, and we ought not on that account to be surprised at the facility with which laws were obtained to carry into effect the paper system. Honest and even enlightened men are sometimes misled by the specious and plausible statements of the designing. But experience has now proved the mischiefs and dangers of a paper currency, and it rests with you to determine whether the proper remedy shall be applied.

The paper system being founded on public confidence and having of itself no intrinsic value, it is liable to great and sudden fluctuations, thereby rendering property insecure and the wages of labor unsteady and uncertain. The corporations which create the paper money cannot be relied upon to keep the circulating medium uniform in amount. In times of prosperity, when confidence is high, they are tempted by the prospect of gain or by the influence of those who hope to profit by it to extend their issues of paper beyond the bounds of discretion and the reasonable demands of business; and when these issues have been pushed on from day to day, until public confidence is at length shaken, then a reaction takes place, and they immediately withdraw the credits they have given, suddenly curtail their issues, and produce an unexpected and ruinous contraction of the circulating medium, which is felt by the whole community. The banks by this means save themselves, and the mischievous consequences of their imprudence or cupidity are visited upon the public. Nor does the evil stop here. These ebbs and flows in the currency and these indiscreet extensions of credit naturally engender a spirit of speculation injurious to the habits and character of the people. We have already seen its effects in the wild spirit of speculation in the public lands and various kinds of stock which within the last year or two seized upon such a multitude of our citizens and threatened to pervade all classes of society and to withdraw their attention from the sober pursuits of honest industry. It is not by encouraging this spirit that we shall best preserve public virtue and promote the true interests of our country; but if your currency continues as exclusively paper as it now is, it will foster this eager desire to amass wealth without labor; it will multiply the number of dependents on bank accommodations and bank favors; the temptation to obtain money at any sacrifice will become stronger and stronger, and inevitably lead to corruption, which will find its way into your public councils and destroy at no distant day the purity of your Government. Some of the evils which arise from this system of paper press with peculiar hardship upon the class of society least able to bear it. A portion of this currency frequently becomes depreciated or worthless, and all of it is easily counterfeited in such a manner as to require peculiar skill and much experience to distinguish the counterfeit from the genuine note. These frauds are most generally perpetrated in the smaller notes, which are used in the daily transactions of ordinary business, and the losses occasioned by them are commonly thrown upon the laboring classes of society, whose situation and pursuits put it out of their power to guard themselves from these impositions, and whose daily wages are necessary for their subsistence. It is the duty of every government so to regulate its currency as to protect this numerous class, as far as practicable, from the impositions of avarice and fraud. It is more especially the duty of the United States, where the Government is emphatically the Government of the people, and where this respectable portion of our citizens are so proudly distinguished from the laboring classes of all other nations by their independent spirit, their love of liberty, their intelligence, and their high tone of moral character. Their industry in peace is the source of our wealth and their bravery in war has covered us with glory; and the Government of the United States will but ill discharge its duties if it leaves them a prey to such dishonest impositions. Yet it is evident that their interests can not be effectually protected unless silver and gold are restored to circulation.

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These views alone of the paper currency are sufficient to call for immediate reform; but there is another consideration which should still more strongly press it upon your attention.

Recent events have proved that the paper-money system of this country may be used as an engine to undermine your free institutions, and that those who desire to engross all power in the hands of the few and to govern by corruption or force are aware of its power and prepared to employ it. Your banks now furnish your only circulating medium, and money is plenty or scarce according to the quantity of notes issued by them. While they have capitals not greatly disproportioned to each other, they are competitors in business, and no one of them can exercise dominion over the rest; and although in the present state of the currency these banks may and do operate injuriously upon the habits of business, the pecuniary concerns, and the moral tone of society, yet, from their number and dispersed situation, they can not combine for the purposes of political influence, and whatever may be the dispositions of some of them their power of mischief must necessarily be confined to a narrow space and felt only in their immediate neighborhoods.

But when the charter for the Bank of the United States was obtained from Congress it perfected the schemes of the paper system and gave to its advocates the position they have struggled to obtain from the commencement of the Federal Government to the present hour. The immense capital and peculiar privileges bestowed upon it enabled it to exercise despotic sway over the other banks in every part of the country. From its superior strength it could seriously injure, if not destroy, the business of any one of them which might incur its resentment; and it openly claimed for itself the power of regulating the currency throughout the United States. In other words, it asserted (and it undoubtedly possessed) the power to make money plenty or scarce at its pleasure, at any time and in any quarter of the Union, by controlling the issues of other banks and permitting an expansion or compelling a general contraction of the circulating medium, according to its own will. The other banking institutions were sensible of its strength, and they soon generally became its obedient instruments, ready at all times to execute its mandates; and with the banks necessarily went also that numerous class of persons in our commercial cities who depend altogether on bank credits for their solvency and means of business, and who are therefore obliged, for their own safety, to propitiate the favor of the money power by distinguished zeal and devotion in its service. The result of the ill-advised legislation which established this great monopoly was to concentrate the whole moneyed power of the Union, with its boundless means of corruption and its numerous dependents, under the direction and command of one acknowledged head, thus organizing this particular interest as one body and securing to it unity and concert of action throughout the United States, and enabling it to bring forward upon any occasion its entire and undivided strength to support or defeat any measure of the Government. In the hands of this formidable power, thus perfectly organized, was also placed unlimited dominion over the amount of the circulating medium, giving it the power to regulate the value of property and the fruits of labor in every quarter of the Union, and to bestow prosperity or bring ruin upon any city or section of the country as might best comport with its own interest or policy.

We are not left to conjecture how the moneyed power, thus organized and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands can not yet be forgotten. The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors? No nation but the freemen of the United States could have come out victorious from such a contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few, and this organized money power

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from its secret conclave would have dictated the choice of your highest officers and compelled you to make peace or war, as best suited their own wishes. The forms of your Government might for a time have remained, but its living spirit would have departed from it.

The distress and sufferings inflicted on the people by the bank are some of the fruits of that system of policy which is continually striving to enlarge the authority of the Federal Government beyond the limits fixed by the Constitution. The powers enumerated in that instrument do not confer on Congress the right to establish such a corporation as the Bank of the United States, and the evil consequences which followed may warn us of the danger of departing from the true rule of construction and of permitting temporary circumstances or the hope of better promoting the public welfare to influence in any degree our decisions upon the extent of the authority of the General Government. Let us abide by the Constitution as it is written, or amend it in the constitutional mode if it is found to be defective.

The severe lessons of experience will, I doubt not, be sufficient to prevent Congress from again chartering such a monopoly, even if the Constitution did not present an insuperable objection to it. But you must remember, my fellow-citizens, that eternal vigilance by the people is the price of liberty, and that you must pay the price if you wish to secure the blessing. It behooves you, therefore, to be watchful in your States as well as in the Federal Government. The power which the moneyed interest can exercise, when concentrated under a single head and with our present system of currency, was sufficiently demonstrated in the struggle made by the Bank of the United States. Defeated in the General Government, tho same class of intriguers and politicians will now resort to the States and endeavor to obtain there the same organization which they failed to perpetuate in the Union; and with specious and deceitful plans of public advantages and State interests and State pride they will endeavor to establish in the different States one moneyed institution with overgrown capital and exclusive privileges sufficient to enable it to control the operations of the other banks. Such an institution will be pregnant with the same evils produced by the Bank of the United States, although its sphere of action is more confined, and in the State in which it is chartered the money power will be able to embody its whole strength and to move together with undivided force to accomplish any object it may wish to attain. You have already had abundant evidence of its power to inflict injury upon the agricultural, mechanical, and laboring classes of society, and over those whose engagements in trade or speculation render them dependent on bank facilities the dominion of the State monopoly will be absolute and their obedience unlimited. With such a bank and a paper currency the money power would in a few years govern the State and control its measures, and if a sufficient number of States can be induced to create such establishments the time will soon come when it will again take the field against the United States and succeed in perfecting and perpetuating its organization by a charter from Congress.

It is one of the serious evils of our present system of banking that it enables one class of society–and that by no means a numerous one–by its control over the currency, to act injuriously upon the interests of all the others and to exercise more than its just proportion of influence in political affairs. The agricultural, the mechanical, and the laboring classes have little or no share in the direction of the great moneyed corporations, and from their habits and the nature of their pursuits they are incapable of forming extensive combinations to act together with united force. Such concert of action may sometimes be produced in a single city or in a small district of country by means of personal communications with each other, but they have no regular or active correspondence with those who are engaged in similar pursuits in distant places; they have but little patronage to give to the press, and exercise but a small share of influence over it; they have no crowd of dependents about them who hope to grow rich without labor by their countenance and favor, and who are therefore always ready to execute their wishes. The planter, the farmer, the mechanic, and the laborer all know that their success depends upon their own industry and economy, and that they must not expect to become suddenly rich by the fruits of their toil. Yet these classes of society form the great body of the people of the United States; they are the bone and sinew of the country–men who love

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liberty and desire nothing but equal rights and equal laws, and who, moreover, hold the great mass of our national wealth, although it is distributed in moderate amounts among the millions of freemen who possess it. But with overwhelming numbers and wealth on their side they are in constant danger of losing their fair influence in the Government, and with difficulty maintain their just rights against the incessant efforts daily made to encroach upon them. The mischief springs from the power which the moneyed interest derives from a paper currency which they are able to control, from the multitude of corporations with exclusive privileges which they have succeeded in obtaining in the different States, and which are employed altogether for their benefit; and unless you become more watchful in your States and check this spirit of monopoly and thirst for exclusive privileges you will in the end find that the most important powers of Government have been given or bartered away, and the control over your dearest interests has passed into the hands of these corporations.

The paper-money system and its natural associations–monopoly and exclusive privileges–have already struck their roots too deep in the soil, and it will require all your efforts to check its further growth and to eradicate the evil. The men who profit by the abuses and desire to perpetuate them will continue to besiege the halls of legislation in the General Government as well as in the States, and will seek by every artifice to mislead and deceive the public servants. It is to yourselves that you must look for safety and the means of guarding and perpetuating your free institutions. In your hands is rightfully placed the sovereignty of the country, and to you everyone placed in authority is ultimately responsible. It is always in your power to see that the wishes of the people are carried into faithful execution, and their will, when once made known, must sooner or later be obeyed; and while the people remain, as I trust they ever will, uncorrupted and incorruptible, and continue watchful and jealous of their rights, the Government is safe, and the cause of freedom will continue to triumph over all its enemies.

But it will require steady and persevering exertions on your part to rid yourselves of the iniquities and mischiefs of the paper system and to check the spirit of monopoly and other abuses which have sprung up with it, and of which it is the main support. So many interests are united to resist all reform on this subject that you must not hope the conflict will be a short one nor success easy. My humble efforts have not been spared during my administration of the Government to restore the constitutional currency of gold and silver, and something, I trust, has been done toward the accomplishment of this most desirable object; but enough yet remains to require all your energy and perseverance. The power, however, is in your hands, and the remedy must and will be applied if you determine upon it….”

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Chapter 15, whose official title is Chapter 15 - Ancillary and Other Cross-Border Cases, was added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Its purpose is to facilitate bankruptcies of companies that have assets in several countries.

One of the most important goals of chapter 15 is to promote cooperation and communication between U.S. courts and parties in interest with foreign courts and parties in interest in foreign proceedings involving assets and creditors in several countries. This goal is accomplished by, among other things, explicitly charging the court and estate representatives to "cooperate to the maximum extent possible" with foreign courts and foreign representatives and authorizing direct communication between the court and authorized estate representatives and the foreign courts and foreign representatives. 11 U.S.C. §§ 1525 - 1527

Foreign proceeding means a collective judicial or administrative proceeding in a foreign country, including an interim proceeding, under a law relating to insolvency or adjustment of debt in which proceeding the assets and affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganization or liquidation. 11 U.S.C. §§ 101(23)

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Foreign representative is a person or body, including a person or body appointed on an interim basis, authorized in a foreign proceeding to administer the reorganization or the liquidation of the debtor's assets or affairs or to act as a representative of the foreign proceeding. 11 U.S.C. §§ 101(24)

Chapter 15's purpose is realized through 5 objectives specified in 11 U.S.C. § 1501:

1. to promote cooperation between the United States courts and parties in interest and the courts and other competent authorities of foreign countries involved in cross-border insolvency cases;

2. to establish greater legal certainty for trade and investment; 3. to provide for the fair and efficient administration of cross-border insolvencies that protects

the interests of all creditors and other interested entities, including the debtor; 4. to afford protection and maximization of the value of the debtor's assets; 5. and to facilitate the rescue of financially troubled businesses, thereby protecting investment

and preserving employment.

Chapter 15 allows a debtor in another country, with assets in the United States, to file an ancillary case in the U.S. so that the debtor's assets and creditors can be administered as an ancillary case of the main proceeding in the debtor's home country.

Territorialism and Universalism

International bankruptcy proceedings could be characterized as either territorialism or universalism.

Territorialism (aka grab rule) was the most prevalent approach until recent times, where each country would grab all assets of the debtor and administer those assets under local law, including giving preference to local creditors.

Universalism reflects the ideals of comity better, by allowing a bankruptcy proceeding in 1 country to receive the assets located in other countries so that the assets or their proceeds can be distributed to all creditors, even international creditors, using whatever choice of laws that are considered most appropriate.

However, while pure universalism would seem ideal, political realities allow only a partial universalism, where established law designed specifically for transnational bankruptcies must be followed in the respective countries to deal with assets and creditors within the respective countries. To a large extent, Chapter 15 codifies this law, allowing other countries to use the U.S. court system to deal with assets and creditors located there.

Chapter 15 requires that U.S. courts give recognition to a foreign bankruptcy proceeding so that the foreign representative who files for Chapter 15 is given many of the same powers as a local bankruptcy trustee.

The court obtains jurisdiction over the debtor's assets located in the U.S. and the automatic stay prevents creditors from trying to collect on their debts. However, the court is not obligated to turnover assets to the foreign representative, but has some discretion to ensure that creditors located in the United States are sufficiently protected—local creditors should get at least as much under the foreign proceeding as they would under U.S. law based on the local assets. Another definition of sufficiently protected is that the foreign proceeding should be fair and does not discriminate against U.S. creditors to benefit creditors in the debtor's domicile.

Furthermore, §1506 gives courts the discretion to refuse to take any action that would be contrary to the public policy of the United States.

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Because a bankruptcy proceeding under universalism gives preference to the laws of the country in which the proceeding was initiated, foreign courts, including the United States may refuse to cooperate if the main proceeding is taking place in a country that is not deemed to be the most appropriate forum. The proper forum should be the country where the debtor has the center of main interests (COMI), often identified as the country in which the business is registered or where its main business is located.


Adopted from the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL) in 1997, Chapter 15 replaces section 304 of the Bankruptcy Code. Because Chapter 15 is based on a model law by UNCITRAL, the U.S. interpretation must be coordinated with the interpretation given by other countries that have adopted it to promote uniformity for cross-border insolvency cases. However, Chapter 15 excludes consumer debt; hence, this chapter is specifically to deal with the bankruptcies of multinational corporations.

This is still a rapidly evolving part of the law. So far, the following countries have adopted modified versions of the Model Law: Canada, Mexico, Japan, Great Britain, and Australia. The European Union has not adopted the UNCITRAL Model Law, but has enacted the Regulation on Insolvency in 2002 that governs bankruptcies with assets and creditors in different member countries, but not non-member countries.

Previous to cross-border regulations, most transnational bankruptcies were based on the judicial concept of comity, which is the deference of 1 nation to the legislative, executive, and judicial acts of another—not as an obligation, but as a courtesy serving international duty and convenience—so long as it doesn't deprive its own citizens of its rights.

As Chief Justice Taney of the U.S. Supreme Court has stated, comity is "by the general practice of civilized countries, the laws of the one will, by the comity of nations, be recognized and executed in another where the rights of individuals are concerned. . . . The comity thus extended to other nations is no impeachment of sovereignty. It is the voluntary act of the nation by which it is offered, and is inadmissible when contrary to its policy, or prejudicial to its interests. But it contributes so largely to promote justice between individuals, and to produce a friendly intercourse between the sovereignties to which they belong, that courts of justice have continually acted upon it as a part of the voluntary law of nations. . . ."

How Chapter 15 Works

Chapter 15 allows a foreign representative to seek injunctions, turnover assets, and seek other relief in the United States to prosecute its case. The Chapter 15 petition must be accompanied by documents that demonstrate the existence of the foreign proceeding and the authority of the foreign representative.

After notice and a hearing, the court may issue whether the foreign proceeding is a main proceeding or a non-main proceeding. A main proceeding is a bankruptcy case in the country where the debtor has most of its assets or does most of its business; otherwise, it is a non-main proceeding. If the judge declares that the proceeding is a main proceeding, then the automatic stay goes into effect; otherwise, the foreign representative must petition the court for a stay.

The federal representative is authorized to operate the debtor's business, to seek other relief either from the bankruptcy courts or from other state and federal courts, and can intervene in any other case where the debtor is a party, or be represented as a party in interest in insolvency proceedings affecting the debtor. However, what the foreign representative may do

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may be restricted by any treaties between the United States and the foreign representative's country.

The foreign representative can also initiate a full bankruptcy case under Chapter 7 or 11 if it would serve the best interests of the bankruptcy estate. However, if a case is commenced under Chapter 7 or 11, then only assets or creditors located in the United States are subject to the court's jurisdiction, with deference to the main proceeding for other aspects of the case.

Foreign creditors must receive notice of the Chapter 15 in the United States, they must be informed of their right to file a claim, and they have a right to participate in the case.

Alternatives to Chapter 15

A foreign debtor with business or property in the United States does not have to use Chapter 15 or commence a main proceeding in his country, but could file under Chapter 7 or Chapter 11. The debtor does not have to live in the United States to file under those chapters if the debtor has a business or property located in the United States.

However, if a main proceeding has already commenced in another country, the United States bankruptcy judge may decide to abstain from the case, if the foreign main proceeding has already been recognized by the U.S. court under Chapter 15 or if the debtor and its creditors would be better served by the dismissal or suspension of the case under a different chapter.

Repudiate the National Debt!

theCL 2010-01-21 Debt, Economic "I pledge allegiance to America’s debt, and to the Chinese government that lends us money. And to the interest, for which we pay, compoundable, with higher taxes and lower pay until the day we die."

Repudiating the National Debt

To think sensibly about the public debt, we first have to go back to first principles and consider debt in general. Put simply, a credit transaction occurs when C, the creditor, transfers a sum of money (say $1,000) to D, the debtor, in exchange for a promise that D will repay C in a year's time the principal plus interest. If the agreed interest rate on the transaction is 10 percent, then the debtor obligates himself to pay in a year's time $1,100 to the creditor. This repayment completes the transaction, which in contrast to a regular sale, takes place over time.

So far, it is clear that there is nothing "wrong" with private debt. As with any private trade or exchange on the market, both parties to the exchange benefit, and no one loses. But suppose that the debtor is foolish, gets himself in over his head, and then finds that he can't repay the sum he had agreed on? This, of course is a risk incurred by debt, and the debtor had better keep his debts down to what he can surely repay. But this is not a problem of debt alone. Any consumer may spend foolishly; a man may blow his entire paycheck on an expensive trinket and then find that he can't feed his family. So consumer foolishness is hardly a problem confined to debt alone. But there is one crucial difference: if a man gets in over his head and he can't pay, the creditor suffers too, because the debtor has failed to return the creditor's property. In a profound sense, the debtor who fails to repay the $1,100 owed to the creditor has stolen property that belongs to the creditor; we have here not simply a civil debt, but a tort, an aggression against another's property.

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Most people, unfortunately, apply the same analysis to public debt as they do to private. If sanctity of contracts should rule in the world of private debt, shouldn't they be equally as sacrosanct in public debt? Shouldn't public debt be governed by the same principles as private? The answer is no, even though such an answer may shock the sensibilities of most people. The reason is that the two forms of debt-transaction are totally different. If I borrow money from a mortgage bank, I have made a contract to transfer my money to a creditor at a future date; in a deep sense, he is the true owner of the money at that point, and if I don't pay I am robbing him of his just property. But when government borrows money, it does not pledge its own money; its own resources are not liable. Government commits not its own life, fortune, and sacred honor to repay the debt, but ours. This is a horse, and a transaction, of a very different color.

For unlike the rest of us, government sells no productive good or service and therefore earns nothing. It can only get money by looting our resources through taxes, or through the hidden tax of legalized counterfeiting known as "inflation." There are some exceptions, of course, such as when the government sells stamps to collectors or carries our mail with gross inefficiency, but the overwhelming bulk of government revenues is acquired through taxation or its monetary equivalent. Actually, in the days of monarchy, and especially in the medieval period before the rise of the modern state, kings got the bulk of their income from their private estates—such as forests and agricultural lands. Their debt, in other words, was more private than public, and as a result, their debt amounted to next to nothing compared to the public debt that began with a flourish in the late 17th century.

The public debt transaction, then, is very different from private debt. Instead of a low-time preference creditor exchanging money for an IOU from a high-time preference debtor, the government now receives money from creditors, both parties realizing that the money will be paid back not out of the pockets or the hides of the politicians and bureaucrats, but out of the looted wallets and purses of the hapless taxpayers, the subjects of the state. The government gets the money by tax-coercion; and the public creditors, far from being innocents, know full well that their proceeds will come out of that selfsame coercion. In short, public creditors are willing to hand over money to the government now in order to receive a share of tax loot in the future. This is the opposite of a free market, or a genuinely voluntary transaction. Both parties are immorally contracting to participate in the violation of the property rights of citizens in the future. Both parties, therefore, are making agreements about other people's property, and both deserve the back of our hand. The public credit transaction is not a genuine contract that need be considered sacrosanct, any more than robbers parceling out their shares of loot in advance should be treated as some sort of sanctified contract.

Any melding of public debt into a private transaction must rest on the common but absurd notion that taxation is really "voluntary," and that whenever the government does anything, "we" are willingly doing it. This convenient myth was wittily and trenchantly disposed of by the great economist Joseph Schumpeter: "The theory which construes taxes on the analogy of club dues or of the purchases of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind." Morality and economic utility generally go hand in hand. Contrary to Alexander Hamilton, who spoke for a small but powerful clique of New York and Philadelphia public creditors, the national debt is not a "national blessing." The annual government deficit, plus the annual interest payment that keeps rising as the total debt accumulates, increasingly channels scarce and precious private savings into wasteful government boondoggles, which "crowd out" productive investments. Establishment economists, including Reaganomists, cleverly fudge the issue by arbitrarily labeling virtually all government spending as "investments," making it sound as if everything is fine and dandy because savings are being productively "invested." In reality, however, government spending only qualifies as "investment" in an Orwellian sense; government actually spends on behalf of the "consumer goods" and desires of bureaucrats, politicians, and their dependent client groups. Government spending, therefore, rather than being "investment," is consumer

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spending of a peculiarly wasteful and unproductive sort, since it is indulged not by producers but by a parasitic class that is living off, and increasingly weakening, the productive private sector. Thus, we see that statistics are not in the least "scientific" or "valuefree"; how data are classified—whether, for example, government spending is "consumption" or "investment"—depends upon the political philosophy and insights of the classifier.

Deficits and a mounting debt, therefore, are a growing and intolerable burden on the society and economy, both because they raise the tax burden and increasingly drain resources from the productive to the parasitic, counterproductive, "public" sector. Moreover, whenever deficits are financed by expanding bank credit—in other words, by creating new money—matters become still worse, since credit inflation creates permanent and rising price inflation as well as waves of boombust "business cycles."

It is for all these reasons that the Jeffersonians and Jacksonians (who, contrary to the myths of historians, were extraordinarily knowledgeable in economic and monetary theory) hated and reviled the public debt. Indeed, the national debt was paid off twice in American history, the first time by Thomas Jefferson and the second, and undoubtedly the last time, by Andrew Jackson.

Unfortunately, paying off a national debt that will soon reach $4 trillion would quickly bankrupt the entire country. Think about the consequences of imposing new taxes of $4 trillion in the United States next year! Another way, and almost as devastating, a way to pay off the public debt would be to print $4 trillion of new money—either in paper dollars or by creating new bank credit. This method would be extraordinarily inflationary, and prices would quickly skyrocket, ruining all groups whose earnings did not increase to the same extent, and destroying the value of the dollar. But in essence this is what happens in countries that hyper-inflate, as Germany did in 1923, and in countless countries since, particularly the Third World. If a country inflates the currency to pay off its debt, prices will rise so that the dollars or marks or pesos the creditor receives are worth a lot less than the dollars or pesos they originally lent out. When an American purchased a 10,000 mark German bond in 1914, it was worth several thousand dollars; those 10,000 marks by late 1923 would not have been worth more than a stick of bubble gum. Inflation, then, is an underhanded and terribly destructive way of indirectly repudiating the "public debt"; destructive because it ruins the currency unit, which individuals and businesses depend upon for calculating all their economic decisions.

I propose, then, a seemingly drastic but actually far less destructive way of paying off the public debt at a single blow: out-right debt repudiation. Consider this question: why should the poor, battered citizens of Russia or Poland or the other ex-Communist countries be bound by the debts contracted by their former Communist masters? In the Communist situation, the injustice is clear: that citizens struggling for freedom and for a free-market economy should be taxed to pay for debts contracted by the monstrous former ruling class. But this injustice only differs by degree from "normal" public debt. For, conversely, why should the Communist government of the Soviet Union have been bound by debts contracted by the Czarist government they hated and overthrew? And why should we, struggling American citizens of today, be bound by debts created by a past ruling elite who contracted these debts at our expense? One of the cogent arguments against paying blacks "reparations" for past slavery is that we, the living, were not slaveholders. Similarly, we the living did not contract for either the past or the present debts incurred by the politicians and bureaucrats in Washington.

Although largely forgotten by historians and by the public, repudiation of public debt is a solid part of the American tradition. The first wave of repudiation of state debt came during the 1840's, after the panics of 1837 and 1839. Those panics were the consequence of a massive inflationary boom fueled by the Whig-run Second Bank of the United States. Riding the wave of inflationary credit, numerous state governments, largely those run by the Whigs, floated an enormous amount of debt, most of which went into wasteful public works (euphemistically

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called "internal improvements"), and into the creation of inflationary banks. Outstanding public debt by state governments rose from $26 million to $170 million during the decade of the 1830's. Most of these securities were financed by British and Dutch investors.

During the deflationary 1840's succeeding the panics, state governments faced repayment of their debt in dollars that were now more valuable than the ones they had borrowed. Many states, now largely in Democratic hands, met the crisis by repudiating these debts, either totally or partially by scaling down the amount in "readjustments." Specifically, of the 28 American states in the 1840's, nine were in the glorious position of having no public debt, and one (Missouri's) was negligible; of the 18 remaining, nine paid the interest on their public debt without interruption, while another nine (Maryland, Pennsylvania, Indiana, Illinois, Michigan, Arkansas, Louisiana, Mississippi, and Florida) repudiated part or all of their liabilities. Of these states, four defaulted for several years in their interest payments, whereas the other five (Michigan, Mississippi, Arkansas, Louisiana, and Florida) totally and permanently repudiated their entire outstanding public debt. As in every debt repudiation, the result was to lift a great burden from the backs of the taxpayers in the defaulting and repudiating states.

Apart from the moral, or sanctity-of-contract argument against repudiation that we have already discussed, the standard economic argument is that such repudiation is disastrous, because who, in his right mind, would lend again to a repudiating government? But the effective counterargument has rarely been considered: why should more private capital be poured down government rat holes? It is precisely the drying up of future public credit that constitutes one of the main arguments for repudiation, for it means beneficially drying up a major channel for the wasteful destruction of the savings of the public. What we want is abundant savings and investment in private enterprises, and a lean, austere, low-budget, minimal government. The people and the economy can only wax fat and prosperous when their government is starved and puny.

The next great wave of state debt repudiation came in the South after the blight of Northern occupation and Reconstruction had been lifted from them. Eight Southern states (Alabama, Arkansas, Florida, Louisiana, North Carolina, South Carolina, Tennessee, and Virginia) proceeded, during the late 1870's and early 1880's under Democratic regimes, to repudiate the debt foisted upon their taxpayers by the corrupt and wasteful carpetbag Radical Republican governments under Reconstruction.

So what can be done now? The current federal debt is $3.5 trillion. Approximately $1.4 trillion, or 40 percent, is owned by one or another agency of the federal government. It is ridiculous for a citizen to be taxed by one arm of the federal government (the IRS), to pay interest and principal on debt owned by another agency of the federal government. It would save the taxpayer a great deal of money, and spare savings from further waste, to simply cancel that debt outright. The alleged debt is simply an accounting fiction that provides a mask over reality and furnishes a convenient means for mulcting the taxpayer. Thus, most people think that the Social Security Administration takes their premiums and accumulates it,

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perhaps by sound investment, and then "pays back" the "insured" citizen when he turns 65. Nothing could be further from the truth. There is no insurance and there is no "fund," as there indeed must be in any system of private insurance. The federal government simply takes the Social Security "premiums" (taxes) of the young person, spends them in the general expenditures of the Treasury, and then, when the person turns 65, taxes someone else to pay the "insurance benefit." Social Security, perhaps the most revered institution in the American polity, is also the greatest single racket. It's simply a giant Ponzi scheme controlled by the federal government. But this reality is masked by the Social Security Administration's purchase of government bonds, the Treasury then spending these funds on whatever it wishes. But the fact that the SSA has government bonds in its portfolio, and collects interest and payment from the American taxpayer, allows it to masquerade as a legitimate insurance business.

Canceling federal agency-held bonds, then, reduces the federal debt by 40 percent. I would advocate going on to repudiate the entire debt outright, and let the chips fall where they may. The glorious result would be an immediate drop of $200 billion in federal expenditures, with at least the fighting chance of an equivalent cut in taxes.

But if this scheme is considered too Draconian, why not treat the federal government as any private bankrupt is treated (forgetting about Chapter 11)? The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing, and, once again, relieve him of $200 billion in annual interest payments. The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly. What government assets? There are a great deal of assets, from TVA to the national lands to various structures such as the Post Office. The massive CIA headquarters at Langley, Virginia, should raise a pretty penny for enough condominium housing for the entire work force inside the Beltway. Perhaps we could eject the United Nations from the United States, reclaim the land and buildings, and sell them for luxury housing for the East Side gliterati. Another serendipity out of this process would be a massive privatization of the socialized land of the Western United States and of the rest of America as well. This combination of repudiation and privatization would go a long way to reducing the tax burden, establishing fiscal soundness, and desocializing the United States.

In order to go this route, however, we first have to rid ourselves of the fallacious mindset that conflates public and private, and that treats government debt as if it were a productive contract between two legitimate property owners.

Murray N. Rothbard (1926–1995) was professor of economics at the University of Nevada, Las Vegas, and vice-president for academic affairs at the Ludwig von Mises Institute. This article ran in the June 1992 issue of Chronicles (pp. 49–52).