Final answer:
The U.S. can regulate banks under the Necessary and Proper Clause, also known as the elastic clause from Article I, Section 8, Clause 18 of the Constitution. This clause justifies Congress's implied powers and enables regulation of matters beyond the explicit text, such as banking. The clause key point for debates on the scope of federal authority and constitutional interpretation.
Step-by-step explanation:
The United States government said they could regulate banks under the Necessary and Proper Clause, also known as the elastic clause. This clause is found in Article I, Section 8, Clause 18 of the U.S. Constitution and grants Congress the authority to pass all laws deemed necessary and proper for carrying out its enumerated powers. The clause serves as the legal foundation for Congress's implied powers, allowing it to address matters that are not explicitly outlined in the Constitution. For instance, when the federal government changes its bank regulations to enable cheaper and easier ways for banks to make home loans, this action falls within the scope of the elastic clause.
The term 'elastic clause' suggests that this part of the Constitution can stretch to encompass a wide range of activities that the federal government considers necessary to perform its duties effectively. It has historically been used to justify the expansion of Congressional powers beyond the enumerated list, including in financial matters such as the regulation of banks or the establishment of the Federal Reserve System.
Debate often ensues between those who believe in a liberal interpretation of the clause, such as Alexander Hamilton and his supporters during the debate over the establishment of the Bank of the United States, versus those who take a more conservative view of the government's implied powers. Nonetheless, the necessary and proper clause remains a critical aspect of legal interpretation and the expansion of federal authority to adapt to the needs of a changing society.