In May, 1818, James William McCulloch was a cashier at the Baltimore branch of the Second Bank of the United States. McCulloch issued a series of bank notes on which the bank did not pay a Maryland state tax. The state treasurer quickly sued to recover the money and won a judgment in Maryland’s highest court. The Supreme Court soon accepted the case, which would have a profound impact in defining the principle of federalism, the reading of the Necessary and Proper Clause in the Constitution, and the national vision of the Marshall Court.
The Bank of the United States was the brainchild of Treasury Secretary Alexander Hamilton who laid a foundation for a national economy. In 1791, the Congress easily passed the bank bill over the objections of James Madison, and it went to President George Washington to sign. Washington took Madison’s constitutional objections seriously and solicited opinions from his cabinet including Thomas Jefferson and Hamilton. The debate centered on the implied powers of the Constitution, whether the powers of the bank were sufficiently related to congressional powers under Article I, section 8 to be covered under the Necessary and Proper Clause, and whether the Constitution would be interpreted loosely or strictly. Washington sided with Hamilton and signed the bill into law with a twenty-year charter for the bank.
While President Thomas Jefferson continued to think the bank was unconstitutional, his Treasury Secretary Albert Gallatin thought great economic benefits were derived from the national bank. Gallatin later persuaded President Madison of its benefits, and Madison thought that the constitutional issues were “settled” by its passage in 1791 and use for twenty years. The Democratic-Republicans in Congress, however, were wary of national power and narrowly defeated the re-charter by one vote in each house. The absence of a national bank had disastrous financial consequences during the War of 1812, and Congress and the president consequently chartered the Second Bank of the United States in 1816.
The Second Bank, however, was more poorly managed than the first, and lent money in a cavalier fashion. It had difficulty meeting its obligations and was forced to tighten the money supply and credit. The Panic of 1819 rippled through the economy, and led to many bankruptcies and a sharp recession. The mismanagement tarred the reputation of the Bank, and hostility increased. New states such as Indiana and Illinois banned any branches in their constitutions, and Maryland was only one of several states that passed a tax on the bank. A congressional investigation followed. This was the atmosphere in which the Supreme Court would decide McCulloch v. Maryland in 1819.
Chief Justice John Marshall had been a Federalist who argued for ratification of the Constitution in Virginia in 1788, and later served as President John Adams’ Secretary of State. Marshall helped make the judiciary a co-equal branch with the legislative and executive branches, and enshrined the principle of judicial review in Marbury v. Madison (1803). The Marshall Court enhanced the power of the national government is several seminal precedents. That nationalist vision shaped the McCulloch decision.
The attorneys for both sides presented oral arguments—often in the form of lengthy orations—for nine days in late February and early March of 1819. Daniel Webster was one of the attorneys for McCulloch, while delegate to the Constitutional Convention and Maryland Attorney General, Luther Martin, helped represent the state. The justices virtually swooned at the “brilliant and sparkling” rhetoric on both sides.
A few days later, on Saturday, March 6, the Supreme Court rendered a unanimous decision. The chief justice wrote the opinion of the Court. Marshall asserted that the Bank of the United States was constitutional under the Necessary and Proper Clause which authorized Congress “To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.” Marshall argued that the powers of the Bank were related to its enumerated powers in Article I, Section 8.
“Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution,” Marshall wrote. He added that the Necessary and Proper Clause was “placed among the powers of Congress, not among the limitations of those powers.” He argued “its terms purport to enlarge, not diminish, the powers vested in the government.”
The Court then addressed the ability of a state to tax the national government. The Supremacy Clause in Article VI read, “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof…shall be the supreme Law of the Land.” Marshall argued that, “If any one proposition could command the universal assent of mankind, we might expect it would be this—that the government of the Union, though limited in its powers, is supreme within its sphere of action.” Marshall supported a constitutionally limited though energetic national government. He famously declared the principle that the power to tax was the power to destroy. Therefore, under the Supremacy Clause, the Maryland tax on the national bank was unconstitutional.
The bank continued to be controversial in the ensuing decades and subject to the partisan politics of the 1830s. President Andrew Jackson was guided by states’ rights and a strict interpretation of the Constitution when he vetoed an early congressional re-charter of the bank in 1832. Jackson’s veto rejected the precedent of previous congresses and presidents, and the legal precedent of McCulloch, which helped to define the constitutional principle of federalism. The twentieth century would see the expansion of the federal government and national power well beyond that envisioned by Marshall that upset the constitutional balance of federalism.
McCulloch v. Maryland (1819) Supreme Court decision:
Tony Williams is a Constituting America Fellow and the author of five books including Washington & Hamilton: The Alliance that Forged America.