ONE OF THE MOST CONTENTIOUS political and constitutional battles in the early decades of the United States concerned a bank, and whether under the Constitution Congress had the power to charter banks and other institutions. The case that ultimately resolved these issues bore the name of James William McCulloh, a man of modest means, boundless energy and ambition, and few scruples. The decision by Chief Justice John Marshall is considered one of the foundation stones of American constitutional development.
The question of whether Congress had the power to charter banks had first arisen when Alexander Hamilton, secretary of the Treasury under George Washington, proposed a three-part plan to solve the nation’s economic woes. The Constitution had, in large part, come about because of the financial problems besieging the federal government under the Articles of Confederation. The Confederation Congress had had no independent taxing power, and so it had been unable to pay the mounting debt owed to European nations as well as to its own citizens.
Hamilton presented his “Report on the Public Credit” to Congress when it convened in January 1790. He proposed to convert more than $13 million in unpaid interest into principal, and then fund the entire debt at par—that is, one hundred cents on the dollar. A certain part of the government’s revenue from its new taxing power under the Constitution would be pledged to paying this debt, which would also include bonds issued by the states to help finance the Revolution. As Hamilton well understood, the plan would bring influential and wealthy citizens who held the debt into closer ties and greater support for the new national government.
Hamilton proposed using a tariff on imported goods to provide the revenue to pay the $80 million national debt, and the funding and assumption of prior state and federal debts would indeed bring order out of the government’s financial chaos. But the nation also lacked an adequate circulating currency and a central bank, and for the third part of his plan Hamilton looked to the model of the Bank of England, which served as the main depository of government funds, the issuer of currency, and a regulator of smaller banks. Hamilton’s proposed Bank of the United States would do all this and more; it would be the fiscal agent of the government, facilitate tax collection, and stimulate the flow of capital into and around the country. As he noted, the Bank, which would be privately owned but responsible to the government, would be “a political machine of the greatest importance to the State.”
Despite spirited opposition from southern representatives and senators who questioned whether the national government had this power, the bank bill easily passed both houses of Congress. Although President Washington felt disposed to sign the bill, some of the objections raised in the congressional debate about the constitutional power of Congress to charter a bank bothered him. So, as was his custom, he sought advice. He asked James Madison to prepare a veto measure should he decide against the measure, and also sought the views of Attorney General Edmund Randolph and Secretary of State Thomas Jefferson.
The views of Jefferson and Hamilton provided the first great debate on the meaning of the Constitution after it had been adopted and the new government established. Jefferson conceded that the proper construction of the Constitution “where a phrase will bear either of two meanings, [is] to give it that which will allow some meaning to the other parts of the instrument, and not that which would render all the others useless.” But, he argued, neither the taxing power nor the necessary and proper clause supported justification for a bank charter. Jefferson claimed that the Constitutional Convention had not intended to give Congress a free hand, but to “lace them up straightly within the enumerated powers.” The necessary and proper clause meant no more than that Congress could enact measures indispensable to carrying out the enumerated powers in a narrowly defined manner. In other words, Congress could do only what the Constitution expressly permitted it to do, and nothing else. He claimed that the convention had not given Congress the authority to grant charters because it feared that Congress would do just what Hamilton proposed—charter a bank.
(On this Jefferson was wrong. In the debates at the Philadelphia Convention delegates had rejected a proposal to put in a clause expressly giving Congress the charter power—not because it wanted to deny that power, but because it was assumed that any sovereign had the authority to issue a charter. It was not necessary to spell out a power already there.)
Washington then showed Hamilton the objections and invited a reply. The Treasury secretary quickly prepared a 15,000-word “Opinion on the Constitutionality of the Bank,” a document considered by scholars to be the most forceful argument ever written that the frugal words of the Constitution “ought to be construed liberally in advancement of the public good.” The necessary and proper clause meant that Congress had to have the fullest authority possible to carry out the general goals of the Constitution, such as the common defense and the general welfare, “by all the means fairly applicable to the attainment of those ends.”
Where Jefferson had argued that Congress could only do what the Constitution expressly permitted it to do, Hamilton claimed that Congress could do everything except what the Constitution specifically forbade. Rather than a statute, which is to be interpreted literally and applies to a specific matter, the men at Philadelphia had wanted to provide a broad framework for a government, and so had provided not only express powers but implied ones as well. Congress had the express power to lay and collect taxes, to coin money, and to regulate trade, so therefore it had to have the implied power to create an appropriate mechanism to exercise those functions—in this instance, a bank.
The debate between Hamilton and Jefferson represented far more than differing modes of textual interpretation. Jefferson and his fellow Virginian and ally, James Madison, feared a strong national government, and although they recognized the need for some central authority, they wanted that government to do no more than what was absolutely necessary lest it endanger the liberties of the individual. Hamilton did not want to restrict individual rights, but he had seen the chaos of the confederation, and believed that only a powerful central agency would ensure the economic stability on which the nation’s future prosperity and happiness depended. A government by its nature had to be able to govern, and while he recognized constitutional limits—he had, after all, helped to draft the document—he claimed for the government all other powers inherent in sovereignty.
Hamilton’s view prevailed; Washington signed the measure, and the Bank of the United States began business with a twenty-year charter. It proved very successful, and functioned exactly as Hamilton had hoped. But when its charter expired in 1811, James Madison occupied the White House, the Jeffersonian Republicans controlled Congress, and they refused to renew the charter. The nation’s finance grew muddled, and local state banks—free from the regulations enforced by a central bank—flooded the nation with cheap and sometimes worthless currency that fueled land speculation in the West.
Then came the War of 1812, and the Madison administration was embarrassed by the lack of a national bank, both as a source for borrowing and as a means of transferring funds from one part of the country to another. Whatever their earlier beliefs about the constitutionality of the bank, Madison and the younger Republicans faced up to its necessity. The issue, he told Congress, had been settled “by repeated recognitions . . . of the validity of such an institution in acts of the legislative, executive and judicial branches of the Government . . . accompanied by . . . a concurrence of the general will of the nation.” Congress agreed, and in 1816 issued a twenty-year charter for a new second Bank of the United States modeled after Hamilton’s original, but capitalized at $35 million instead of $10 million.*
Many of the older states’ rights Republicans still opposed a charter, as did New England Federalists, who did not want to see the nation’s banking center shift from Boston to Philadelphia. While no one had ever challenged the first Bank in the courts, no one doubted that there would be a suit this time, due in part to a growing fear in southern states about the increased power of the national government. Despite Madison’s assertion, the Supreme Court had never passed on the legitimacy of the bank or of congressional power to charter such an institution.
In 1818 the Bank, anticipating an economic downturn, began calling in loans, and in doing so caused a number of overextended local banks in the South and West to fail. The Panic arrived, but many people blamed the Bank for causing it, and under pressure from jealous local banks, seven states passed laws restricting the Bank’s operations within their borders; in some instances they taxed banknotes issued by non-state-chartered institutions. (Prior to the passage of the Federal Reserve Act in 1913, paper currency consisted primarily of denominational certificates, i.e., banknotes, issued by private banks.)
In February 1818 the Maryland legislature passed a measure that had but a single purpose—to banish from the state the “monstrous” second Bank of the United States—through the device of levying high taxes on the Bank’s notes. Such a tax would cost consumers far more to use Bank of the United States notes than those from local Maryland banks, which were untaxed. The law especially targeted the large Baltimore branch of the Bank, run by its president, James A. Buchanan, and its cashier, James William McCulloh. (As in a number of cases, the clerk of the Supreme Court misspelled the name, and the case has come down as M’Culloch v. Maryland.)
A native of Philadelphia, McCulloh had until this time lived primarily in obscurity. He may—or may not—have served with a group of Baltimore volunteers during the War of 1812, and appears to have been wounded when the British invaded Maryland. Returning to Baltimore, he entered the banking firm of Smith and Buchanan, and had progressed to the position of cashier, which paid him a salary of $4,000 a year. Although at the time a man of modest means, McCulloh had ambition and talents just waiting to be tapped. Rapid growth in postwar Baltimore provided opportunity not only for the hardworking, honest businessman, but also for those of another stripe. In Baltimore, John Quincy Adams noted, prosperity and profligacy had become intertwined, and when the Bank of the United States opened a Baltimore branch, Buchanan and McCulloh seized the opportunities to pursue personal enrichment at the expense of sound financial management.
Buchanan, McCulloh, and a third person, George Williams, formed a separate company in late 1816 or early 1817 for the sole purpose of acquiring and trading the Bank’s stock. They soon understood that the central office in Philadelphia had neither the interest nor the ability to curb their activity, and they used their positions as officers of the Baltimore branch to manipulate the price of the stock in the open market. They made substantial loans to themselves, sometimes secured by the stock but more often with no collateral at all.
McCulloh, as the Baltimore branch cashier, played the key role. In his official capacity as an officer of the Bank he spoke critically of the central management in Philadelphia, calling it too conservative. In a letter to the secretary of the Treasury in 1817, he spoke approvingly of a “system of permanent loans adopted toward individuals and likewise to banks.” He failed to mention, however, that most of these loans had been made without any collateral security, and to individuals like him and his partners whose sole purpose was secret profit. McCulloh had, in fact, approved unsecured loans to himself totaling $500,000, part of the $3 million he and his confederates eventually stole from the Bank.
Shortly after the Maryland tax law went into effect in early 1818, McCulloh approved the issuance of banknotes to George Williams on unstamped paper—that is, paper on which the state tax had not been paid. On May 18, 1818, John James, the Maryland state treasurer for the Western Shore, brought an action against the Bank to recover $2,500 in penalties owed on these notes. There is some evidence that McCulloh and James acted collusively in the matter, planning to set up a confrontation to test the legality of the second Bank. There had always been questions about constitutionality, but the second Bank, unlike the first, had become widely unpopular because of poor management almost from the time it had opened for business. McCulloh had no real interest in protecting the Bank; he had already stolen about as much as he could, and if the Bank were declared unconstitutional, he could walk away with his ill-gotten gains and no one would be the wiser.
The case proceeded quickly through the Maryland courts. In June the Baltimore County Court found that the Bank owed the tax, a judgment confirmed by the Maryland Court of Appeals. The Supreme Court placed the case on its docket on September 18, 1818, and set argument for the following February. During this time the schemers’ plans began to unravel, as the central bank began trying to get control over the loans issued by the branches. The head office demanded a list of all the stock loans made by the Baltimore branch. McCulloh, at his partners’ urging, stalled, only to have the officers in Philadelphia insist more forcefully. He began falsifying records and managed to hide his chicanery until January 1819, when one of his partners, William Jones, the president of the Baltimore branch, resigned. Soon news about the frauds became common knowledge, but that played no role when Daniel Webster rose before the Court to argue the constitutionality of the second Bank of the United States.
Oral argument lasted nine days before an attentive Court and an appreciative audience. Justice Joseph Story noted to a friend that the case involved a “great question” and was argued before “a crowded audience of ladies and gentlemen; the hall was full almost to suffocation, and many went away for want of room.” The Court itself, Story said, recognized that this was a “case involving a constitutional question of great public importance, and the sovereign rights of the United States and the State of Maryland.” Because of its significance, the Court did away with its usual rule of allowing only two lawyers to argue for each side, and so it heard a total of six people make their cases.
Certainly the best known of the advocates, and one who regularly drew a large crowd whenever he appeared before the Court, was Daniel Webster. Called by some the “Godlike Daniel” and by others “Black Dan,” the Boston attorney (he would later be a senator and also serve as secretary of state) was a physically commanding figure with black hair and a large head in which were set a pair of piercing eyes. Well conscious of his appearance, he always came before the Court impeccably attired in the latest fashion. But his greatest asset was his voice, which according to one Englishman who heard him speak, “when animated, it rings on the ear like a clarion.”
Webster framed the issues simply: Did Congress have the power to create the Bank? If so, could Maryland levy a tax on it? In those days the justices did not pepper attorneys appearing before them with questions, but sat silently listening to the arguments. So they listened attentively as Webster led them through the case for the Bank, claiming that by this time it ought to be beyond question that Congress had the power, and that the Bank itself was constitutional. Since neither the executive nor the legislative branch had ever expressed an opinion against the Bank’s constitutionality, then neither should the Court, “unless [the Bank’s] repugnancy with the constitution were plain and manifest.”
But even though he claimed that the constitutionality of the Bank and congressional power to create it were clear to all, he rehearsed those arguments again so as to make them even clearer to the justices. The Bank was a means, not an end—a mere adjunct to Congress carrying out powers given to it directly by the Constitution. That being the case, then the states could not tax the Bank: “An unlimited power to tax involves, necessarily, a power to destroy.” If the Court upheld the Maryland tax, then the taxing power could be applied by the states to all branches of the national government, including the courts. Such a power could not be countenanced.
Following Webster came the first attorney for Maryland, Joseph Hopkinson, a distinguished Philadelphia lawyer who in other cases had been Webster’s ally. A thoughtful and refined man, he was described by contemporaries as a skilled advocate, with a “beautiful and highly trained mind.” Hopkinson did not accept the argument that the constitutionality of the Bank had long been established. Indeed, there had been a running debate on that question almost from the time Alexander Hamilton had proposed it. But even if one accepted the argument that the government needed some agency to hold and disburse tax monies, that agency did not have to have branches. Those branches existed for one purpose only—to make money for the stockholders.
This brought him to the question of taxation, which Hopkinson declared implicated “the highest attributes of sovereignty, the right to raise revenue; in fact, the right to exist; without which no other right can be held or enjoyed.” Banks were not immune from taxation, and there was no reason the Bank of the United States should be. Even though it carried out certain tasks for the government, it was essentially a private corporation, a status that the great Hamilton himself had characterized as necessary. Take away the official-sounding name and it is “a mere association of individuals, putting their money into a common stock, to be loaned for profit, and to divide the gains.” Such a corporation deserved no special immunity from taxation.
Hopkinson did not shirk from the key constitutional issue, whether the “necessary and proper clause” expanded the reach of specific delegated powers or whether it was a mere truism. He condemned the very idea of a government of ill-defined but apparently all-encompassing authority, and declared that the only proper way to interpret the Constitution and the powers it gave Congress was as narrowly as possible.
Webster and Hopkinson laid out the major arguments for the Bank and for Maryland, and for the most part the other attorneys rang changes on these themes. William Wirt, the attorney general of the United States, also argued on behalf of the Bank. He explained that “necessary and proper” is equivalent to “needful and adapted.” This, he claimed, was consistent with both the common understandings of the terms and the manner in which the Constitution had intended them to be interpreted. Wirt also went into the history of the Bank, and noted the great distress faced by the government during the years between the expiration of the first Bank and the chartering of the second.
Wirt was followed by Walter Jones, a Washington attorney and the least known of the six advocates, who nonetheless enjoyed a reputation as a “legal genius.” He brought nothing new to the arguments, but expounded at length on the compact theory of government, by which he claimed that ultimate authority rested not in Congress but in the states who had joined together through the Constitution (a compact) and in which sovereignty rested with the states and not with the national government. (This theory would be a key feature in the Southern states’ rights argument leading up to the Civil War.)
The last two speakers between them took up five days—Luther Martin, the attorney general of Maryland, and William Pinkney, an acerbic but highly effective litigator. A later chief justice, Roger Brooks Taney, said, “I have heard all of the greatest advocates of the United States, but I have seen none equal to Pinkney.” Martin mounted an extensive attack on the very idea of implied powers, and that one could not, by a fair reading of the Constitution, find in it one power more than those expressly described. Pinkney declared that it was beneath his dignity, and that of the Court, to even waste time on such a claim, since both the text and experience had shown that the government not only had but needed the implied powers to carry out its duties. He attacked the claim that states could tax at their will, and closed the ninth day declaring that “no other alternative remains, but for this Court to interpose its authority, and save the nation from the consequences of this dangerous attempt.”
After the attorneys had finished, it seemed clear that the Court had to resolve two questions: Did Congress have the power to charter the Bank? And if so, did Maryland have the right to tax its operations within the state? Although the questions appeared simple enough, the answers—and the form they took—would have far larger implications. Few people expected the Court to rule against congressional authority to charter the Bank. In the arguments before the bench, counsel for both sides apologized about repeating contentions that had now grown “threadbare” since the debate between Hamilton and Jefferson more than a quarter-century earlier. Why should the Court adopt Jefferson’s views when even his own party had abandoned them? Madison had certainly been right when he noted the “concurrence of the general will of the nation” in the Bank’s legitimacy. For most observers, only the constitutionality of the state tax on a valid organ of the national government seemed in doubt.
The opinion came down quickly—so quickly that some people speculated that a draft had been prepared even before the Court heard oral argument. Chief Justice John Marshall’s opinion in M’Culloch v. Maryland went far beyond the two basic questions. His “state paper,” as it has been properly called, put forth theories of national sovereignty and federal power that over the next century and a half would be used to justify the growth of the central government and its involvement in nearly every aspect of national life. M’Culloch would help make the Constitution support the “great national interests,” in Justice Joseph Story’s words, “which shall bind us in an indissoluble chain.” Speaking for a unanimous Court, Marshall quickly demolished Maryland’s assertions of state sovereignty. While conceding that the federal government had limited powers in a federal union of divided sovereignty with the states, within its assigned spheres of power, the national government reigned supreme. Whenever legitimate federal power conflicted with state authority, the latter had to give way. The federal government took precedence over the state, because it derived its mandate from the people: “It is the government of all; its powers are delegated by all; it represents all, and acts for all.”
But if the state could not restrict a legitimate act of Congress, did Congress have the power to charter a bank in the first place? Such authority had admittedly not been included among the enumerated powers of Article I, Section 8, but Marshall still held that it came within the parameters of the Constitution. Relying on William Pinkney’s argument for the Bank, as well as Alexander Hamilton’s justification for the first Bank of the United States, Marshall set out a broad interpretation of constitutional power.
To begin with, he declared that “[w]e must never forget that it is a constitution we are expounding.” If every power necessary to the federal government had to be listed, the Constitution would be nothing more than a legal code, whose prolixity “could scarce be embraced by the human mind.” The enumerated powers merely pointed out obvious traits of government, but they had to be interpreted liberally, so that the government could act without undue restraint in any area of its responsibilities. The Framers had been too wise to anticipate all contingencies, and so they had provided, along with enumerated powers, the power to pass “all laws which shall be necessary and proper for carrying into execution the foregoing powers.”
The word necessary should not be construed, as Maryland urged, as a restriction, but rather as an addition to the enumerated powers. Congress thus had discretion over which means it would choose to implement “those great powers on which the welfare of the nation essentially depends.” Then, in one of his most oft-quoted passages, Marshall declared: “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.” Any other reading would reduce the Constitution to a “splendid bauble,” and not a great charter of government “intended to endure for ages to come, and, consequently, to be adapted to the various crises of human affairs.”
But could the Bank (which had barely been mentioned so far) be taxed? Marshall had made clear the supremacy of the national government when operating within its broadly defined parameters; now he set about preventing the state’s conceded sovereignty from clashing with that of the federal government. The Constitution, the chief justice noted, did not expressly limit the state’s power to tax, but by a series of inferences, he solved that problem. If the government had the power to create an agency, then it obviously had the means to preserve it. But “the power to tax involves the power to destroy . . . and render useless the power to create.” How could the federal government be supreme within its area of competency if another sovereign could exercise a power capable of reaching into and destroying creations authorized by the Constitution? Marshall did not discuss whether the Maryland tax actually threatened the Bank with destruction; the potentially injurious power of the tax alone invalidated it on constitutional grounds. Declaring it as a broad principle, Marshall concluded that “[s]tates have no power, by taxation or otherwise, to retard, impede, burden, or in any manner control the operation of the constitutional laws enacted by Congress to carry into execution the powers vested in the general government.”
The impact of M’Culloch lay less in its specific holding than in the bold and expansive manner in which the chief justice interpreted federal power. The decision heartened the Bank but did not prove decisive. Within a few years, the exact same issue came back before the Court in Osborn v. Bank of the United States (1824), when Ohio, in defiance of a circuit court injunction, levied and collected a tax on the Bank. Once again John Marshall, this time with Justice William Johnson dissenting, upheld the constitutionality of the Bank and gave another strong lecture on national supremacy. Moreover, despite the Eleventh Amendment, which had been passed to prevent private entities, such as people and companies, from suing states in federal courts, he ensured the Bank’s access to the federal courts to defend itself against similar attacks by a state. Even more important, he ruled that agents of the state were personally liable for damages inflicted while executing an unconstitutional statute.
There could not have been much surprise at the ruling. After all, the first Bank had lasted twenty years, and the second Bank, despite intense hostility from local interests, had already gained recognition as an important and useful feature of the nation’s economic life. Charges that the Bank had caused the Panic of 1819 had led to an attempt in the House of Representatives to revoke the charter, but a majority in Congress considered the Bank too valuable for such a severe action. So “the Bank Case” would never have become “the Great Case” just for its validation of the Bank’s legitimacy.
It became a great case—one of the most important in American constitutional development—because John Marshall justified the Bank’s legitimacy on the basis of a broad and flexible interpretation of the Constitution, arguing that a constitution could not be expected to list every power of government, and that Congress therefore enjoyed large discretion in determining the means it would use to achieve its ends. His analysis provided the foundation for broadly conceived national action that has been drawn upon ever since as the government expanded its activities. Moreover, Marshall’s decision came at a time of government retrenchment after a period of nationalistic expansion during and after the War of 1812; it did not serve to justify current activity so much as provide the jurisprudential basis for future growth.
To many Republicans, however, M’Culloch sounded an alarm, and their response triggered an event unique in American constitutional history—a justice defending a decision publicly albeit pseudonymously. William Brockenbrough attacked the decision in a series of essays in the Richmond Enquirer beginning at the end of March 1819, under the pseudonym “Amphictyon.” (As was common from colonial times through the early Republic, famous people writing essays on matters of public policy often took the names of ancient Greeks or Romans. Amphictyon had been king of Athens, and had created an alliance with neighboring city-states for common defense.)
Brockenbrough, a member of the Virginia elite, served on the circuit court in Richmond, an important tribunal just one step below the court of appeals. He belonged to the Richmond Junto, a powerful secretive group that controlled Virginia politics for many years, and he spoke for other states’ rights advocates who feared the Court under Marshall would build up the power of the national government to the point where it could conceivably attack the institution of slavery.
He began by criticizing the manner in which the Court had decided the case, through a “unanimous and decided opinion.” This echoed the longtime lament of Thomas Jefferson that under John Marshall the Court had abandoned the English practice of seriatim opinions, in which each justice spoke for himself. Brockenbrough believed the public should have the benefit of each member’s views, rather than just hearing from the arch-nationalist Marshall. Creating a more powerful national government, he charged, is “a subject which has employed [Marshall’s] thoughts, his tongue, and his pen, as a politician, and an historian, for more than thirty years.” No doubt the opinion was very able, “as everyone must admit,” for after all, it had come from a man of “gigantic powers.” But M’Culloch should be seen for what it really was—a political rather than a legal resolution of the important issues raised by the Bank.
The crux of the Amphictyon essays involved what Brockenbrough saw as the threat to states’ rights posed by the Court’s decisions under Marshall, and the great powers they confirmed in Congress that had not been given to that body in the Constitution. He saw two great dangers:
The first is the denial that the powers of the federal government were delegated by the states; and the second is, that the grant of powers to the government, and particularly the grant of powers “necessary and proper” ought to be construed in a liberal, rather than a restricted sense. Both of these principles tend directly to the consolidation of the states, and to strip them of some of the most important attributes of their sovereignty.
These arguments continued the constitutional debate that had occupied the country since 1787, and Brockenbrough charged that the Court had gotten it wrong when it declared that the powers of the national government came from the people rather than from the states.
The case, therefore, had not really been about the Bank; Brockenbrough conceded that the debates surrounding the establishment of the first Bank in 1791 and the Second Bank in 1815 had resolved the constitutionality of that institution. The core issue involved the powers of the states, and the notion that in a federal system all sovereignty flowed from the states. It would be a claim maintained by the Southern states until the Civil War bloodily resolved the matter, and even beyond.
Although Marshall had not responded to earlier criticisms of his decisions, he felt compelled to answer Amphictyon, and in many ways the nine essays he published as “A Friend of the Constitution” in the Philadelphia Union in late April were a continuation and expansion of his opinion in M’Culloch.
Unlike the states’ rights Republicans, Marshall believed that the power of the national government came from the people, not from the states, and the people bestowed on that government certain powers as well as certain limits—the powers to make sure that the government could function successfully in their best interests, and the limits so as to preserve their liberties. He addressed specifically the claim that the Constitution made the national government one of limited authority, delineated by those powers specifically listed, and nothing else. “The power to do a thing,” he claimed, “and the power to carry that thing into execution, are, I humbly conceive, the same power, and the one cannot be termed with propriety ‘additional’ or ‘incidental’ to the other.” This, of course, was the heart of both Hamilton’s defense of the Bank and the opinion in M’Culloch—a power, even if expressly declared, was of no value if it could not be implemented, and the implementation could take whatever form Congress chose.
The heart of his arguments, which drew from his opinion, dealt with the nature of the Constitution. It was not “a contract for a single object, every thing relating to which, might be recollected and inserted.” It is a constitution, a document that is
the act of a people. The powers of this government are conferred for their own benefit, are essential to their own prosperity, and are to be exercised for their good, by persons chosen for that purpose by themselves. The object of that government is not a single one which can be minutely described, with all its circumstances. The attempt to do so, would actually change its nature, and defeat its purpose. It is intended to be a general system for future times, to be adapted by those who administer it, to all future occasions that may come within its view. From its nature, such an instrument can describe only the great objects it is intended to accomplish, and state in general terms, the specific powers which are deemed necessary for those objects.
It would ultimately take a civil war to swing the argument in favor of Marshall’s nationalistic interpretation of the Constitution, but in the end his views—and those of Alexander Hamilton—prevailed.
Two months after the decision, news about the full extent of McCulloh’s fraud became widely known, and the Bank’s directors forced him to resign. The losses at the Baltimore branch eventually exceeded $1.5 million (equivalent to more than $26 million in current dollars), and while McCulloh and his cronies were not the only ones to abuse the Bank and manipulate the stock, their activities far outpaced those of other schemers. McCulloh, Buchanan, Williams, and Jones became emblematic of all the wrongs that people associated with the second Bank of the United States, including the belief that its policies had triggered the Panic of 1819.
The decision in the Supreme Court, of course, did not speak to the criminal culpability of Bank officers, and Nicholas Biddle, soon to become president of the Bank, worried about the possibility that McCulloh and others like him could “defraud the institution of millions and escape the criminal law of the United States.” His concerns proved justified. McCulloh, Buchanan, and Williams were indicted for conspiracy to defraud the Bank and its investors. At the initial trial in Hartford County Court in 1820, the judges dismissed the indictment after accepting defense arguments that conspiracy to defraud was neither a crime recognized by statute in Maryland nor an offense at common law. In December 1821 the Maryland Court of Appeals reversed and ordered that the case go to trial on the merits—that is, to determine the guilt or innocence of the defendants.
After a bench trial (one tried by a judge without a jury) in March 1823, McCulloh and Buchanan were acquitted and the indictment against Williams dismissed. As the historian Mark Killenbeck noted, “[T]he results almost certainly reflected a verdict against the Bank itself, rather than a judgment that the three had not engaged in massive fraud.” The three men had portrayed themselves as “victims,” caught up in the “hopes and calculations in which the whole community indulged.” Had the value of the Bank’s stock increased, they maintained, they would have been looked upon as “nobles, as the architects of their fortunes, by the very men who persecuted them, and lauded to the skies as possessing spirits fraught with enterprise.” This defense conveniently ignored the fact that much of the collapse in bank share values came about because of their failed speculation.
In the 1820s the second Bank of the United States prospered mightily, only to fall victim to Andrew Jackson’s ill-founded hatred of all banks. In 1832 he vetoed the recharter of the Bank, calling it a “monster” and a “hydra of corruption” that must be eliminated. The country found itself without an adequate central bank until 1913, when the modern Federal Reserve System began.
James William McCulloh also prospered. Condemned as a “destroyer of Widows and Orphans” in 1819, he won election to the Maryland House of Delegates from Baltimore County soon after his acquittal, and served as speaker of that house in 1826. In the 1830s, his past all but forgotten by contemporaries, he became an influential lobbyist, and worked assiduously for the Chesapeake and Ohio Canal Company in pursuit of government support for the canal and other such enterprises. He lived out his life as a successful businessman and lawyer and a respected citizen until his death in 1861.
M’Culloch v. Maryland, 17 U.S. (4 Wheat.) 316 (1819)
Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824)
The best books on the subject are Mark R. Killenbeck, M’Culloch v. Maryland: Securing a Nation (2006), and Gerald Gunther, John Marshall’s Defense of M’Culloch v. Maryland (1969). The first covers all aspects of the matter, including the activities of the Bank and the chicaneries of McCulloh and his fellow culprits; the second focuses more on the decision in the case, the series of articles attacking it, and the essays that John Marshall wrote anonymously in its defense. The classic work on banking in the early United States that explores both the first and second Banks is Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (1957), but it should be supplemented by Edward S. Kaplan, The Bank of the United States and the American Economy (1999), and by Robert V. Remini, Andrew Jackson and the Bank War (1967).
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* Jefferson had also been forced to adopt a Hamiltonian interpretation of the Constitution in 1803 when he purchased the Louisiana Territory from France, an action that could not be grounded in a specific clause of the Constitution but could be rationalized through use of the necessary and proper clause.