The Bank of the United States, as created by Alexander Hamilton during Washington’s Presidency, had to be re-approved—or re-chartered—periodically by Congress. While on its second charter, the state of Maryland passed a law taxing any out-of-state banks. The only one was a branch of the Second Bank of the United States.
James McCulloch, director of the Baltimore branch of the Bank of the United States, refused to pay the tax. In the ensuing court case, the Maryland court—using a strict interpretation of the Constitution—argued that Congress violated the Constitution by creating the bank. With that argument, the case also took on a new dimension as it argued that the States were more powerful than the national government.
The case was appealed to the Supreme Court. The Marshall Court ruled that the federal government did have the power to create the bank, citing the implied powers of the “necessary and proper” clause of the Constitution. The Court also ruled that the States could not interfere with an action of the federal government, asserting the supremacy of the national government over the states.
BEFORE: Marbury v. Madison (1803)
AFTER: Gibbons v. Ogden (1824)