McCulloch v. Maryland

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1819 United States Supreme Court case

McCulloch v. Maryland,[a] 17 U.S. (4 Wheat.) 316 (1819), is a landmark decision of the Supreme Court of the United States that defined the scope of the U.S. Congress 's legislative power and how it relates to the powers of American state legislatures . The dispute in McCulloch involved the legality of the Second Bank of the United States and a tax that the state of Maryland imposed on it. In its ruling, the Supreme Court established firstly that the Necessary and Proper Clause of the U.S. Constitution gives the U.S. federal government certain implied powers necessary and proper for the exercise of the powers enumerated explicitly in the Constitution, and secondly that the American federal government is supreme over the states, and so states' ability to interfere with the federal government is restricted.[3] [4] Since the legislature has the authority to tax and spend , the court held that it therefore has authority to establish a national bank, as being "necessary and proper" to that end.

The state of Maryland had attempted to impede an operation by the Second Bank of the United States through a tax on all notes of banks not chartered in Maryland. Though the law, by its language, was generally applicable to all banks not chartered in Maryland, the Second Bank of the United States was the only out-of-state bank then existing in Maryland, and the law was thus recognized in the court's opinion as having specifically targeted the Bank of the United States. The Court invoked the Necessary and Proper Clause of the Constitution, which allows the federal government to pass laws not expressly provided for in the Constitution's list of enumerated powers of Congress if such laws are necessary and proper to further the powers expressly authorized.

McCulloch has been described as "the most important Supreme Court decision in American history defining the scope of Congress's powers and delineating the relationship between the federal government and the states."[5] The case established two important principles in constitutional law. First, the Constitution grants to Congress implied powers to implement the Constitution's express powers to create a functional national government. Prior to the Supreme Court's decision in McCulloch, the scope of the U.S. government's authority was unclear.[3] Second, state action may not impede valid constitutional exercises of power by the federal government.

Background

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A handwritten bank draft from the Second Bank of the United States, dated July 24, 1824, from Daniel Webster , who argued on behalf of McCulloch and the U.S. government in McCulloch v. Maryland

Almost immediately after the ratification of the U.S. Constitution in 1788, a major public debate arose over whether to establish a national bank for the United States.[6] Upon George Washington 's inauguration in 1789 as the first President of the United States , his Secretary of the Treasury , Alexander Hamilton , proposed creating a national bank to regulate American currency and deal with national economic problems.[6] Washington's Secretary of State , Thomas Jefferson , strongly opposed the bank's creation, fearing it would usurp power from the individual states and concentrate it to a dangerous degree in the central federal government.[6] Congress created the First Bank of the United States in 1791 with a 20-year charter, but the issue continued to be controversial. Those who supported Hamilton's vision of a stronger central government eventually formed the Federalist Party , while those who opposed him and supported Jefferson's vision of a decentralized government that focused on states' rights formed the Democratic-Republican Party .

The First Bank's charter expired in 1811 and was not renewed. However, national economic problems in the aftermath of the War of 1812 prompted Congress to pass similar legislation in 1816 to create the Second Bank of the United States .[7] The U.S. government only owned 20 percent of the bank's equity, and many state governments resented the bank for calling in loans it had made to them.[7] Consequently, some states passed laws designed to hinder the bank's operation, while others simply tried to tax it.[7] In 1818, the Maryland General Assembly —Maryland's state legislature —passed a law levying a $15,000 annual tax on any bank operating in Maryland that was issuing notes and bills that were not properly stamped by Maryland's Treasury, the Western Shore Treasury.[8]

James William McCulloh ,[b] a cashier of the Baltimore Branch of the Second Bank of the United States, issued unstamped bank notes to Baltimore resident George Williams.[10] The lawsuit was filed by John James, an informer who sought to collect half of the fine, as provided for by the statute.[8] The Bank was represented by Daniel Webster . The case was appealed to the Maryland Court of Appeals, where the state of Maryland argued that "the Constitution is silent on the subject of banks." It was Maryland's contention that without specific constitutional authorization for the federal government to create a bank, any such creation would be rendered unconstitutional .

The court upheld Maryland. The case was then appealed to the Supreme Court.

Decision

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The text of the McCulloch v. Maryland decision, as recorded in the minutes of the Supreme Court

The Court determined that Congress had the power to create the Bank. Chief Justice Marshall supported his conclusion with four main arguments:[11]

Firstly, he argued that historical practice established Congress's power to create the bank. Marshall invoked the creation of the First Bank of the United States in 1791 as authority for the constitutionality of the second bank.[11] The first Congress had enacted the bank after great debate

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