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Background Summary and Questions
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In 1791, the U.S. government created the first national bank for the country.
During this time, a national bank was controversial because people had different
opinions about what powers the national government should have. Alexander
Hamilton believed that the national government had the power to create a new
national bank. Thomas Jefferson believed that the national government did not
have such a power. When Thomas Jefferson was president, he did not renew the
national bank's charter. After the War of 1812, President James Madison decided
that the country needed a national bank, and he asked Congress to create a
Second Bank of the United States in 1816.
After President Madison approved the bank, many branches were opened
throughout the country. Many states did not want the new bank branches to
open. There were several reasons why the states opposed these national banks.
They competed with the state banks, many national bank managers were
thought to be corrupt, and the states believed that the national government was
getting too powerful.
Maryland tried closing down the Baltimore branch of the national bank by passing
a law that forced all banks that were created outside of the state pay a $15,000
tax each year. James McCulloch, who worked at the Baltimore Branch, refused
to pay the tax.
The State of Maryland took McCulloch to court saying that Maryland had the
power to tax any business in its state. Luther Martin, a lawyer for Maryland, said
that if the national government had the power to regulate state banks, then
Maryland had the power to regulate national banks. He also said that the
Constitution does not give Congress the power to create a national bank.
After McCulloch was convicted of violating the tax statute and fined $2,500, he
appealed the court's decision to the Maryland Court of Appeals. His lawyer
argued that creating a national bank was a "necessary and proper" job of
Congress. He stated that many of the powers of the national government are not
written in the Constitution, but are necessary for the national government to do its
job. Also, he claimed that Maryland could not place a tax on the national bank
because the tax would not let the national bank do its job.
The Maryland Court of Appeals agreed with the lower court's decision.
McCulloch then appealed to the Supreme Court of the United States, led by
Chief Justice John Marshall.
Questions to Consider:
- What are the advantages of establishing a national bank? Article I, Section 8, Clause 18 of the
Constitution to determine which functions
of Congress might be helped by such a bank.
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Why would the states feel uncomfortable with a national bank?
- In your opinion, does the U.S. government have the power to create a
national bank? Why or why not? Examine the enumerated powers in Article I,
Section 8, Clause 18 to support your answer.
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If the United States does have the power to create a national bank, does
Maryland have the power to tax the bank? Why or why not?
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Why do you think the Supreme Court of the United States heard the case?
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