The Constitutionality of the Second Bank of the United States: Daily Economic History
Daily Economic History: From George Dangerfield: The Era of Good Feelings:
Indeed, when one attempts to restore [Chief Justice John Marshall] to the context of his times, it becomes exceedingly—difficult to separate the business—minded judge from the nationalist statesman.... In his decision on the case of Gibbons v. Ogden, Marshall struck down a steamboat monopoly, and did as much as any single man could do to make the steamboat free upon the western rivers; and the steamboat was not merely an essential factor in the development of the internal market, it was also the very symbol of democracy.... He gained much popularity from his decision, and he might have established the “dormant” power of the commerce clause—that is to say, its implicit veto upon state legislation—without too much disagreement from the rest of the Court. Instead, he merely suggested—and in terms that may have been deliberately confused—the existence of the dormant power.... “We must never forget,” he once said, “that it is a constitution we are expounding...” something organic, capable of growth, susceptible to change....
There are numberless stories attesting him the most democratic of men: stories of Marshall ambling to market with a basket on his arm and stopping to gossip at every stall; or riding out to his country farm with a stray child on his saddlebow, or with his thumb in a jug of whisky of which he had lost the cork; or crawling on the ground with a straw in his mouth to make some nice decision in a game of quoits; or shouting out a chorus at one of his famous suppers.... The contrast between the man and the judge is so extreme that one is almost forced into mythology for a similar metamorphosis....
Such was the Chief Justice who on March 6, 1819, in his little basement room, pronounced his judgment in the case of McCulloch v.Read....
Congress had authorized the incorporation of the Second Bank of the United States, and this great institution had set up a branch at Baltimore. In an Act of February 1 i, 1818, the legislature of Maryland required all banks doing business within her borders, and holding charters she had not granted, to pay an annual tax of fifteen thousand dollars, and to issue notes only of certain denominations.... The Treasurer of the Western Shore, John James, sued the cashier of the branch Bank, James W. McCulloch, for the recovery of the prescribed penalties.... The Baltimore County Court gave judgment for the state, as did the Maryland Court of Appeals, which then permitted the case to be brought to the Supreme Court of the United States upon a writ of error. Like many other cases involving a Constitutional issue, this was “arranged”; and it was even suggested that there was some collusion in it, and that the Maryland counsel had not presented their strongest arguments.....
If one construed the Constitution loosely, then Congress had the right to charter a bank; if one construed it strictly, then Congress had no such right. Obviously, the true significance of the controversy over loose and strict construction lay in the uses to which they could be put by economic interests. The new industrial capitalism needed, or thought that it needed, a national bank in order to send fresh money circulating through all the arteries and veins of trade; while the moneyed interests of New York and New England, though somewhat jealous of the national bank, would not frown on a judicial decision that threw around financial activity the protecting cloak of loose construction.
A national bank! The words had a distressing sound for all good agrarians, who believed that the industrialists and financiers were out to crush them with protective tariffs, and corrupt them with internal improvements. Had not Alexander Hamilton’s child, the First Bank of the United States, been a deliberate effort to ally the national government with the moneyed interests? And was there any reason to believe that James Madison’s child, the Second Bank of the United States, would be more pure? Mr. Madison, it is true, had fathered the bank with some reluctance, but the country’s fiscal needs were so pressing, and the currency was in such disorder, that the government had either to create a national institution or to throw itself on the mercy of the private bankers.
On April 10, 1816, therefore, the Second Bank of the United States came into existence. It was far more closely wedded to the government than was the Bank of England, the Bank of France, or any other similar contemporary institution. The federal government owned one fifth of its stock, whereas the capital of other central banks was wholly private. of the United States appointed five of the twenty—five directors. No man who disliked the connection between government and banking could possibly approve of such an institution.... But its utility as a keeper of the public deposits and a transferer of the public funds could hardly be denied; and it was probably true that it alone possessed the power of restoring some kind of order to the national currency....
Those who examine the doctrine of State Rights in the hopes of finding a rich deposit of idealism in it are generally obliged to confess that this deposit is extraordinarily elusive and sporadic. In the case of McCulloch v. Maryland did the state of Maryland propose to tax the branch bank at Baltimore out of existence because it believed such a bank to be a dangerous invasion of its sovereignty, or could the pressure of private bankers have been responsible? In any case, it is true that the private banks offered very little assistance to the Second Bank of the United States when it first came into being. Its purpose was to create a stable currency, and this in turn could only be effected if the private banks would agree to resume specie payments, if they would consent to contract their credit dealings sternly enough to support the fiction that their paper was convertible upon demand into gold or silver. Since they were making large profits out of inconvertible paper, they were naturally unwilling to make this contraction....
The strict members of the Republican Party could not forgive James Madison for signing the bill which incorporated the Second Bank of the United States. Had he not fought the first bank tooth and nail? And was there any difference between the first bank and the second? They could not see that, since the monetary policy was national, the means for putting it into effect must be national too.... What was dangerous about the Second Bank of the United States was that it was far too free from government control. The Republicans who created it in were themselves suspicious of strong government, and they allowed this suspicion fatally to weaken the relation between the government and the bank.... What might not be expected from a national bank that would follow the suggestions of the government only when these suggestions did not conflict with the interests of its stockholders?....
It was in this atmosphere that John Marshall was called upon to decide between the bank and the state of Maryland; and this decision permits us to hear, full and resonant, the strange and dangerous voice of early economic nationalism.... The Court was “Marshall’s Court,” it was said.... A Court thus dominated, and by a man who used the “people” as a conceptual means of defeating what little could be ascertained of the people’s will was naturally a dramatic affair.... Probably most people knew that the Chief Justice would declare for the bank and carry the Court with him; what took the country by surprise was the magistral fashion in which he did so....
For the acting out of McCulloch v. Maryland a most distinguished cast had been assembled: for the bank, Mr. William Pinkney, Mr. Daniel Webster, and Attorney—General Wirt; for the state of Maryland, Mr. Luther Martin, Mr. Joseph Hopkinson, and Mr. Walter Jones. Luther Martin, “the Thersites of the law,” short, broadshouldered, slovenly, seventy—one years old, whose wit had confronted the dull world with conviviality but not with gladness, and whose face was purple from fifty years of brandy-drinking, brought into that room the lurid memories of Justice Chase and of Aaron Burr.... But the most popular actors were Daniel Webster and William Pinkney. Mr. Webster had already made his reputation as a lawyer and an orator in his arguments before the Court in Dartmouth College v. Woodward.... “It is, Sir,” he faltered out at last, “as I have said, a small College. And yet, there are those who love it.” His voice choked with sobs; the audience reached for its handkerchiefs; and even Chief Justice Marshall began to cry.
“Business enterprise,” says one disillusioned commentator, “has never had more useful mercenaries than the tears Daniel Webster andR John Marshall are reputed to have shed that March day.” Such was Webster’s magic that the true issue—the demand of private corporations to be immune from legislative interference — temporarily disappeared, and the image of a small college, dedicated to the instruction of the sons of poor men, superimposed itself upon this huge pretension. Certainly, Mr. Webster would go far....
He was followed in due time by William Pinkney... with his corsets and his cosmetics and his preposterously youthful clothes.... When he spoke-which, on this occasion, he did for three days—the flowery tropes and hircine postures did not interfere with what was, first and last, a masterly exposition of Hamiltonian law. At the end of nine days the audience retired, well satisfied with the performance, and left the Chief Justice to recite, almost to an empty theater, his resounding epilogue....
It was easy for him to deduce from the “necessary and proper” clause of the Constitution the power of Congress to incorporate a bank, since this power was clearly “incidental” to the great enumerated powers: “to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies and navies.” It was, therefore, “the unanimous and decided opinion” of the Court that the Bank Act of February 10, 1816, was Constitutional. The establishment of a branch bank at Baltimore was also Constitutional.... John Marshall readily admitted that the power of taxation was retained by the states and not abridged by the grant of a similar power to the general government. But he went on to say, with all the emphasis at his command, that the Constitution was of so paramount a character that:
its capacity to withdraw any subject from the action of even this power, is admitted.
In other words, the national government might withdraw from state taxation any taxable subject, and not merely those subjects which the Constitution specifically withdraws. And this argument, or assertion, was sustained, not on the language of the Constitution, but on the:
great principle that the constitution and the laws thereof are supreme; that they control the constitution and laws of the respective states, and cannot be controlled by them.
Nationalism could go no farther.... Whether Congress should accommodate its legislation to the special needs of bankers and industrialists—that was the question. Marshall carried his generalization one step further. He announced that the framers of the Constitution, when they granted certain specific powers to Congress, did not intend to impede the exercise of those powers by withholding a choice of means. “Let the end be legitimate,” he said:
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.
In other words, while Marshall’s opponents contended that the national government might only do what it was expressly permitted to do, Marshall himself declared that it might do anything it was not expressly forbidden to do...
