- [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.