Case that established the constitutionality of the Bank of the United States.
The constitutionality of the Bank of the United States was debated beginning when Treasury Secretary Alexander Hamilton first proposed the institution in 1790. Hamilton argued that Congress could create the bank under the “necessary and proper” clause of the Constitution. In contrast, Secretary of State Thomas Jefferson had argued against founding the bank because the Constitution did not specifically grant this power to Congress. President George Washington and the Congress agreed with Hamilton and approved the establishment of the Bank of the United States in 1791. Twenty years later, President James Madison allowed the charter of the bank to lapse. But after the War of 1812, Congress chartered the Second Bank of the United States in the hope it would stimulate a failing economy. The directors of the new bank called in many outstanding loans, which helped to bring about the panic of 1819. Several states including Maryland retaliated by levying taxes on the national bank. James McCulloch, the cashier of the bank’s Baltimore branch, refused to pay the $15,000 tax levied by Maryland and eventually took his case to the Supreme Court.
When Chief Justice John Marshall ruled in 1819 for a unanimous Court in favor of McCulloch, he made his strongest statement to date for the power of the nation over the states. He argued that the case posed the question of whether the bank was constitutional, and if yes, whether a state could tax the national bank. Closely following Hamilton’s original argument, Marshall agreed that although the Constitution did not specifically grant the Congress power to establish a national bank, it nevertheless implied it. As to the second question, Marshall argued that a state could not use taxation to destroy a power rightly given to the Congress.
