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T
Chapter VIII: Sovereignty and Union
monopolies"197 and "aristocratical principles."198 Its charter lapsed in
1811 and was not renewed until 1816. During the first years of an infla-
tionary trend between 1815 and 1818 the Bank was inactive, and state
banks had emerged as the principal depositories of currency, issuing their
own bank notes. When the Bank of the United States began to do business
again in January 1817, it immediately established branches in numerous
states, issued national bank notes, loaned money on various pledges on
stock and state notes, and generally tried to compete with the state banks
in what was regarded as an active, thriving economy. When cotton prices
fell sharply in 1818 and depositors sought to redeem their notes in specie,
the speculative efforts of the branch banks—some of them corrupt, as in
Maryland—came to light. The results were a panic and general hostility
to the Bank. Between 1816 and 1818 several states enacted legislation
designed to regulate or to prohibit the operations of the national bank
offices within their borders.199 Maryland's version, passed in February
1818, created a stamp tax on all notes issued by banks "not chartered by
the legislature," ranging from ten cents to twenty dollars, depending on
the value of the note. The tax could be avoided only by an annual payment
of $15,000 by the affected bank. The statute, which went into effect in
May, was immediately challenged by the Baltimore branch of the Bank
of the United States; a case was arranged in which James McCulloch,
cashier for the Baltimore branch, circulated a bank note and refused to
pay the tax; and the Supreme Court, on a writ of error from a June 1818
decision by the highest court of Maryland, set the case on its docket on
September 18, 1818.
The great significance of the McCulloch case was evident from the
lawyers selected to argue it. Webster, fresh from his performance in the
Dartmouth College case, Wirt, who according to Albert Beveridge "had
arrived at the fullness of his powers,"20° and the legendary Pinkney rep-
resented the Bank; Martin, arguing his last important case, Joseph Hop-
kinson, and the ubiquitous Walter Jones represented Maryland.
The arguments of counsel in McCulloch made it clear that both
principal issues in the case were sovereignty issues. The first issue, the
constitutionality of the Bank itself, tested the ability of Congress to ex-
ercise powers that the Constitution had not expressly delegated to it.
197 The language of one of the judges
in Bulow v. City of Charleston, I Nott
and McCord 527 (1821).
198 Brutus in the Philadelphia Gen-
eral Advertiser, Mar. 26, 1819, react-
ing to the McCulloch decision.
199 On the origins of the First and
Second Banks of the United States, see
B. Hammond, Banks and Politics in
America (1957); on antibank legislation
between 1816 and 1820, see C. War-
ren, The Supreme Court in United
States History (3 vols., 1922), I,
505-507.
200 Beveridge, John Marshall, IV,
284.
543
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