McCulloch v. Maryland (1819) and the Second Bank of the United States

Today, McCulloch v. Maryland (1819) is cited for its interpretation of Congress’ powers under the Constitution.  But the case actually involved the Second Bank of the United States, a contentious period in our history.

The first Bank of the United States was established in 1791 by Congress.  It had a 20-year charter.  Hamilton was a strong proponent.  It was not rechartered at the end of its 20-year term.

Then came the War of 1812.  The war triggered additional financial obligations by the United States government.

In 1816, Congress chartered the Second Bank of the United States.  McCulloch v. Maryland was a challenge to the legality of the bank.  Chief Justice Marshall ruled in favor the bank.  Today, the case is largely known for its discussion of Congress’s ability to enact “necessary and proper” legislation in furtherance of its powers.

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The specific legal issue in McCulloch v. Maryland involved a tax that the state of Maryland levied on the operations of all banks within the state, including the Second Bank of the United States.  McCulloch, head of the Baltimore Branch of the Second Bank of the United States, refused to pay the tax. McCulloch was sued by the state of Maryland, and found liable for the tax.

The Supreme Court held that the tax as levied on Second Bank of the United States was unconstitutional, using the famous phrase, “the power to tax involves the power to destroy.”  At the same time, the court upheld the constitutionality of the bank.

Then came Andrew Jackson, elected in 1828, and reelected in 1832.  Jackson was  strongly opposed to the bank.  He vetoed congressional legislation in 1832 in 1834 and would have extended the charter of the bank.  Thus, the national bank came to an end at the end of its 20-year term; the bank continued as a private corporation in Philadelphia, and was ultimately liquidated in 1841.

There is some speculation that Roger Taney wrote Jackson’s veto of the 1832 legislation.  Taney also served as Secretary of the Treasury and U.S. Attorney General.  Interestingly, Taney became Chief Justice in 1836 after Marshall’s retirement.  Taney is infamous for the Dred Scott decision.

Not that I really understand national banking law, just that I can see how some of the pieces fit together.

Randy Krbechek posted at 2016-6-11 Category: Legal history

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