McCulloch v. Maryland - case facts

- [Instructor] In this video we are going to talk about one of the most important US Supreme Court cases that has helped determined the balance of power between the federal government and the states. And that's McCulloch versus Maryland. So the year is 1816, we're after the War of 1812. Wars are expensive. The United States, the federal government, wants to create the Second Bank of the United States. The charter for the First Bank of the United States had ended a few years ago and had not been extended. And the reason why a bank is useful for a federal government, a bank can be a place to store taxes that are collected from people. It could be a place to issue debts, to issue bank notes. Think paper currency. And so the Second Bank of the United States is created. It is headquartered in Philadelphia right over here in 1816 and then in 1817 they open up a branch in Baltimore right over there and this is where things get a little bit messy because it turns out that the Maryland legislature, Baltimore is in Maryland decides to pass a law to tax any banks that have charters from outside of Maryland. Well, it turns out that the branch of the Second Bank of the United States was the only bank in Maryland that was chartered outside of Maryland and the law itself seems to be targeted at that bank. The law taxes notes issued by the bank. The head of that branch of the Baltimore branch of the Second Bank of the United States James McCulloch, he refuses to pay this tax. He says hey, we are a federally chartered bank. You have no right to tax us. Eventually it gets appealed all the way to the United States Supreme Court. And there are two main questions that need to be answered. The first is, does the federal government have the power to charter a national bank? Where is that in the United States Constitution? By the time it got to the Supreme Court, Maryland was arguing that, hey, we don't even think that the federal government has the right to charter a bank. We don't see that enumerated in the Constitution and then if the bank can exist, can a state tax a national bank? The US Supreme Court at this time is headed by Chief Justice John Marshall, who was a federalist, and as we will see, they vote strongly in favor of the federal government. They decide unanimously that yes, the federal government does have the power to charter a bank and they say no, a state actually cannot tax it. And so, what do they cite in the Constitution to back up that decision? So this right over here is an excerpt of article one, section eight of the United States Constitution. We've covered it in other videos when we talk about enumerated powers and it lists a bunch of powers. Enumerated just means things that are very explicitly defined. They've been listed, they've been enumerated. Congress has the power to lay and collect taxes, duties, imposts and excises, borrow money, regulate commerce with foreign nations among the several states with the Indian tribes. And it goes on and on and on, but the 18th clause here is really interesting. It's known as the necessary and proper clause and we cover it in several other videos, but it says that Congress has the power to make all laws which shall be necessary and proper for carrying into execution the foregoing powers. And so John Marshall the chief justice in his decision says look, even though the power to create a national bank, to charter a national bank, even though it isn't enumerated here in article one section eight, this clause 18, this necessary and proper clause says that look, the federal government also can make laws that allow it, that are necessary and proper for doing the other things. For example, borrowing money or issuing currency and so they're saying that look, this bank is a means to an end. And because it is a means to an enumerated end, they're saying that there is an implied power here. And so the whole notion of implied powers that we talk about in other videos, it really strongly stems from this decision on McCulloch versus Maryland. Now, Maryland argued a narrow reading of this necessary and proper clause. They're like, well is a bank absolutely necessary? Couldn't you do some of these other things without having a bank? And the Supreme Court said, well, no, no, no, this isn't to limit the federal government, that this whole section is all about enumerating powers to say what the federal government can do, not what they can't do, so does not have to be absolutely necessary. And on the second question of, well, if this bank's going to exist can the state where the branch is, can the state tax it? That's where what's known as the Supremacy Clause came in to effect. This right over here is an excerpt. Article six, clause two, this Constitution and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made under the authority of the United States, the federal government, shall be the supreme law of the land and the judges in every state shall be bound thereby. And so the argument that the justice has made is, well if you don't like something, if we allow the states to tax this national bank, well, the power to tax is the power to destroy, then you could tax it so much that it can't even operate. But this is saying that the authority of the federal government, of the United States, shall be the supreme law of the land. So a state can't get in the way of the federal government and to hear it in John Marshall's own words, he wrote a very long decision about McCulloch versus Maryland, but here is just a few excerpts that speak to each of these points. So first of all, implied powers. Let the end be legitimate, let it be within the scope of the Constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the Constitution are constitutional, this is a big deal. He's saying look, if the end is legitimate and if the means is not prohibited. So nowhere in the Constitution does it say that the federal government can't start a national bank, so it's not prohibited, and if the end is to do some of the enumerated powers that are legitimate, then it is constitutional. So this is really a strong wording around implied powers and using the necessary and proper clause as the backing for it. And in terms of supremacy, it is of the very essence of supremacy to remove all obstacles to its action within its own sphere, and so to modify every power vested in subordinate governments, as to exempt its own operations from their influence. So it's saying, hey, we're not going to allow subordinate governments, the states, to get in the way. That's the essence of the Supremacy Clause. This effect need not be stated in terms. It is so involved in the declaration of supremacy, so necessarily implied in it, that the expression of it could not make it more certain. So once again, John Marshall clearly saying the Supremacy Clause, in order for it to make any sense, the subordinate governments, the states, should not be able to interfere with the operations of the federal government. If their ends are legitimate, it's constitutional and the states cannot get in the way. In the example of McCulloch versus Maryland by taxing. So as you can imagine, this decision clarified the shifting of a lot of power towards the federal government and away from the states.