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.
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.
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?
Why do you think the Supreme Court of the United States heard the case?