Resource: McCulloch v. Maryland

Print Background Essay

In 1791, the first Bank of the United States was established to serve as a central bank for the country. At the time it was created, the government was in its infancy and there was a great deal of debate over how much power the national government should have. Some people, such as Alexander Hamilton, argued for the supremacy of the national government and a loose interpretation of its powers, which would include the ability to establish a bank. Others, such as Thomas Jefferson, advocated states' rights, limited government, and a stricter interpretation of the national government's powers under the Constitution and, therefore, no bank.

While Jefferson was President, the Bank's charter was not renewed. After the War of 1812, President James Madison determined that the country could use the services of a national bank. In response to Madison's suggestion, Congress proposed a Second Bank of the United States. President Madison approved the charter and branches were established throughout the United States.

Many state leaders opposed opening branches of this bank within their boundaries for several reasons. First, the Bank of the United States competed with their own banks. Second, the states found many of the national bank managers to be corrupt. Third, the states felt that the federal government was exerting too much power over them.

One state opposed to the Bank of the United States was Maryland. In an attempt to drive the Baltimore branch of the Bank out of business, Maryland passed a law that forced all banks that were created outside of the state pay a $15,000 tax each year. James McCulloch, cashier of the Baltimore branch of the Bank of the United States, refused to pay the tax.

The State of Maryland took McCulloch to court, arguing that Maryland had the power to tax any business in its state. Luther Martin, one of the attorneys for Maryland, reasoned that if the national government had the power to regulate state banks, then Maryland had the power to regulate national banks. He also argued that the Constitution does not give Congress the power to create a national bank. McCulloch was convicted by a Maryland court of violating the tax statute and was fined $2,500.

McCulloch appealed the decision to the Maryland Court of Appeals. His attorneys asserted that the establishment of a national bank was a "necessary and proper" function of the Congress and that many powers of the government are implied rather than specifically stated in the Constitution. Furthermore, Maryland did not have the authority to levy the tax, because doing so interfered with the workings of the federal government. After the Maryland Court of Appeals upheld the original decision against McCulloch, he appealed again. The case was heard by the Supreme Court of the United States, then headed by Chief Justice John Marshall.

--adapted from the Web site Landmark Supreme Court Cases

Print Questions for Discussion

• What were the advantages for the federal government of establishing a national bank?
• Why did state leaders feel threatened by a national bank?