All Topics  
Legal Tender Cases

 

   Email Print
   Bookmark   Link






 

Legal Tender Cases



 
 
The Legal Tender Cases were a series of United States Supreme Court
Supreme Court of the United States

The Supreme Court of the United States is the highest judicial body in the United States, and leads the federal United States federal courts. It consists of the Chief Justice of the United States and eight Associate Justice of the Supreme Court of the United States, who are nominated by the President of the United States and confirmed with th...
 cases in the latter part of the nineteenth century that affirmed the constitutionality of paper money. In the 1870 case of Hepburn v. Griswold
Hepburn v. Griswold

Hepburn v. Griswold, Case citation , was a Supreme Court of the United States case in which Chief Justice of the United States Salmon P. Chase, speaking for the Court, declared certain parts of the legal tender acts to be unconstitutional....
, the Court had held that paper money
Paper Money

Paper Money is the second album by the band Montrose . It was released in 1974 and was the last album to feature Sammy Hagar as lead vocalist....
 violated the United States Constitution
United States Constitution

The Constitution of the United States of America is the supreme law of the United States. It is the foundation and source of the legal authority underlying the existence of the United States of America; the Federal Government of the United States; and all the State & local governments and Territorial Administrative bodies contained therein....
. The Legal Tender Cases reversed Hepburn, beginning with Knox v. Lee and Parker v. Davis in 1871, and then Juilliard v. Greenman in 1884.

The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862 enacted during the Civil War.






Discussion
Ask a question about 'Legal Tender Cases'
Start a new discussion about 'Legal Tender Cases'
Answer questions from other users
Full Discussion Forum



Encyclopedia


The Legal Tender Cases were a series of United States Supreme Court
Supreme Court of the United States

The Supreme Court of the United States is the highest judicial body in the United States, and leads the federal United States federal courts. It consists of the Chief Justice of the United States and eight Associate Justice of the Supreme Court of the United States, who are nominated by the President of the United States and confirmed with th...
 cases in the latter part of the nineteenth century that affirmed the constitutionality of paper money. In the 1870 case of Hepburn v. Griswold
Hepburn v. Griswold

Hepburn v. Griswold, Case citation , was a Supreme Court of the United States case in which Chief Justice of the United States Salmon P. Chase, speaking for the Court, declared certain parts of the legal tender acts to be unconstitutional....
, the Court had held that paper money
Paper Money

Paper Money is the second album by the band Montrose . It was released in 1974 and was the last album to feature Sammy Hagar as lead vocalist....
 violated the United States Constitution
United States Constitution

The Constitution of the United States of America is the supreme law of the United States. It is the foundation and source of the legal authority underlying the existence of the United States of America; the Federal Government of the United States; and all the State & local governments and Territorial Administrative bodies contained therein....
. The Legal Tender Cases reversed Hepburn, beginning with Knox v. Lee and Parker v. Davis in 1871, and then Juilliard v. Greenman in 1884.

The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862 enacted during the Civil War. In Hepburn, Chief Justice
Chief Justice of the United States

The Chief Justice of the United States is the head of the United States federal courts and the chief judge of the Supreme Court of the United States....
 Salmon P. Chase
Salmon P. Chase

Salmon Portland Chase was an United States politician and jurist in the American Civil War era who served as United States Senator from Ohio and List of Governors of Ohio of Ohio; as United States Secretary of the Treasury under President of the United States Abraham Lincoln; and as Chief Justice of the United States....
 held for a 4-3 majority of the Court that the Act was an unconstitutional violation of the Fifth Amendment. Ironically, Chief Justice Chase had played a role in formulating the Legal Tender Act of 1862, in his previous position as Secretary of the Treasury. On the same day that Hepburn was decided, President Ulysses Grant nominated two new justices to the Court, Joseph Bradley and William Strong
William Strong

William Strong may refer to:*William Strong , a member of the United States House of Representatives from Vermont*William Strong , a congressman and judge who served on both the Supreme Court of Pennsylvania and the U.S....
, although Grant later denied that he had known about the decision in Hepburn when the nominations were made. Bradley and Strong subsequently voted to reverse the Hepburn decision, in Knox v. Lee and Parker v. Davis, by votes of 5-4. The constitutionality of the Act was more broadly upheld thirteen years later in Juillard v. Greenman.

Legal Tender Act of 1862


The Legal Tender Act of 1862 was enacted to issue paper money to finance the Civil War without raising taxes. The paper money depreciated in terms of gold and became the subject of controversy, particularly because debts contracted earlier could be paid in this cheaper currency.

Background about constitutionality of paper money


Article I, Section 10
Article One of the United States Constitution

Article One of the United States Constitution describes the powers of the legislature of the Federal government of the United States, known as United States Congress, which includes the United States House of Representatives and the United States Senate....
 of the Constitution explicitly forbids the states from issuing "bills of credit" (paper or "fiat" money) or making anything but gold and silver coin "legal tender", whereas there are no corresponding explicit prohibitions against the federal government, nor any explicit authorization. The Tenth Amendment
Tenth Amendment to the United States Constitution

The Tenth Amendment of the United States Constitution, which is part of the United States Bill of Rights, was ratified on December 15, 1791. The Tenth Amendment restates the Constitution's principle of Federalism by providing that powers not granted to the National government nor prohibited to the states are reserved to the states and to the...
 refers to reserved powers
Reserved powers

Reserved powers can refer to several powers of a central authority:*Reserved powers, or Reserved matters, those subjects still dealt with by the United Kingdom Parliament, and not devolved to the Scottish Parliament, National Assembly for Wales or the Northern Ireland Assembly...
 that only the states can exercise, as well as powers not delegated that continue to reside in the people. "Concurrent powers
Concurrent powers

In the United States and many other Federalist Nations, powers are held by both the states and the federal government and may be exercised simultaneously within the same...
" also exist, which may be exercised by either the states or the federal government, such as the power to repel invasions, and arguably including power to make legal tender (e.g. in federal territories or elsewhere). Article I, Section 8
Article One of the United States Constitution

Article One of the United States Constitution describes the powers of the legislature of the Federal government of the United States, known as United States Congress, which includes the United States House of Representatives and the United States Senate....
 of the Constitution specifically gives Congress power to "coin" and "regulate the value" of both U.S. and foreign coins, but does not explicitly grant Congress the power to print paper money or make it legal tender.

The federal government began issuing paper money long before the Legal Tender Act of 1862. In 1791, the First Bank of the United States
First Bank of the United States

The First Bank of the United States was a bank chartered by the United States Congress on February 25, 1791. The charter was for 20 years. The Bank was created to handle the financial needs and requirements of the central government of the newly formed United States, which had previously been thirteen individual colonies with their own ban...
 began issuing paper bank notes, and Congress had also authorized paper money (e.g. continentals
Continental (currency)

Continental currency was a paper currency issued by the Continental Congress, after the American Revolution began in 1775. Eric P. Newman, a leading authority on the early paper money of America, distinguishes between Continental Currency, issued by the authority of the Continental Congress, Colonial Scrip, issued by the colonies before the r...
) even before the Constitution was adopted.

In 1798, Vice President Thomas Jefferson
Thomas Jefferson

Thomas Jefferson was the List of Presidents of the United States President of the United States , the principal author of the United States Declaration of Independence , and one of the most influential Founding Fathers of the United States for his promotion of the ideals of republicanism in the United States....
 wrote that the federal government has no power “of making paper money or anything else a legal tender,” and he advocated a constitutional amendment to enforce this principle by denying the federal government the power to borrow. Even if Jefferson's suggested amendment had been successful, still (as mentioned above) Article I, Section 8 of the Constitution gives Congress the additional power to "regulate the value" of both U.S. and foreign coins. According to Justice Stephen Field, dissenting in the Legal Tender Cases, Congress had no power to make paper money a legal tender, but he believed "the Constitution says that Congress shall have the power to make metallic coins a legal tender."

Original intent and original meaning

The idea that originalism
Originalism

In the context of United States constitutional interpretation, originalism is a family of theories central to all of which is the proposition that the Constitution has a fixed and knowable meaning, which was established at the time of its drafting....
 would necessarily require courts to strike down paper money is a matter of controversy. Even if some (or most) of the framers may have privately intended to prohibit paper money, judges look primarily to the actual words used in the Constitution. As long ago as 1833, constitutional scholars like Joseph Story
Joseph Story

'Joseph Story' was an United States lawyer and jurist who served on the Supreme Court of the United States from 1811 to 1845. He is most remembered today for his opinions in Martin v....
 agreed that the mere private intentions of the people who wrote the Constitution are not binding on the judiciary. In other words, according to Story, the original meaning
Original meaning

Original meaning is the dominant form of the law of originalism today. It was made popular by Supreme Court Justice Antonin Scalia. It contends that the terms of the United States Constitution should be interpreted as meaning what they meant when they were ratified, which is to say, it asks the question: "What would a reasonable person living...
 should prevail over the original intent
Original intent

Original intent is a theory in law concerning constitutional and statute interpretation. It is frequently?and usually spuriously?used as a synonym for originalism generally; while original intent is indeed one theory in the originalist family, it has some extremely salient differences which has led originalists from more predominant schools o...
.

Originalists like Robert Bork
Robert Bork

Robert Heron Bork is a conservative United States legal scholar who advocates the judicial philosophy of originalism. Bork formerly served as United States Solicitor General, acting United States Attorney General, and judge for the United States Court of Appeals for the District of Columbia Circuit....
 have disclaimed any desire to enforce the private intentions of those framers who may have believed that paper money should be prohibited: "Scholarship suggests that the Framers intended to prohibit paper money. Any judge who thought today he would go back to the original intent really ought to be accompanied by a guardian rather than be sitting on a bench."

Regarding paper money, Nathaniel Gorham
Nathaniel Gorham

Nathaniel Gorham was the eighth President of the United States in Congress assembled, under the Articles of Confederation. He served from June 1786 to November 13, 1786....
 explained at the Constitutional Convention that he "was for striking out" an explicit power of Congress
United States Congress

The United States Congress is the Bicameralism legislature of the Federal government of the United States of the United States of America, consisting of two houses, the United States Senate and the United States House of Representatives....
 to issue paper money, but Gorham was also against "inserting any prohibition." That is what ultimately happened at the Convention: language explicitly giving the federal government power to issue legal tender paper money was removed on a vote of 9-2, but an option allowing the issuance together with a prohibition against making it legal tender was not acted upon. Article I, Section 8 of the Constitution gives Congress power to "borrow money on the credit of the United States," and therefore Gorham envisioned that "The power [e.g. to emit promissory paper], as far as it will be necessary or safe, is involved in that of borrowing." The power to emit paper money (e.g. bank notes
Banknote

A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender....
) has been justified by invoking the Necessary and Proper Clause in combination with the other enumerated powers which include the power to borrow money. The power to "issue bills of credit" (paper money) is mentioned in the Constitution as a prohibition on the States, and could therefore be interpreted as a constitutional-level power and not a "lesser" power that can be authorized under the Necessary and Proper Clause, although it is not entirely clear whether or not the framers intended such an interpretation, nor did the Supreme Court adopt such an interpretation in the Legal Tender Cases or subsequently.

James Madison
James Madison

James Madison was an American politician and political philosopher who served as the List of Presidents of the United States President of the United States , and one of the Founding Fathers of the United States....
's notes, from the Constitutional Convention
Philadelphia Convention

The Philadelphia Convention took place from May 25 to September 17, 1787, in Philadelphia, Pennsylvania, to address problems in governing the United States of America, which had been operating under the Articles of Confederation following independence from Kingdom of Great Britain....
 in 1787, include a footnote where he says that the Constitution would allow the federal government to make "use of public notes as far as they could be safe & proper", but would not allow the federal government to use paper as currency or legal tender, though there is no indication whether or not all the contents of his footnote were uttered aloud at the Convention.

Thereafter, during the ratification debates, the Federalist Papers
Federalist Papers

The Federalist Papers are a series of List of Federalist Papers advocating the History of the United States Constitution#Ratification of the United States United States Constitution....
 #44 (assumed to be authored by James Madison) discussed Article I, Section 10 of the Constitution
Article One of the United States Constitution

Article One of the United States Constitution describes the powers of the legislature of the Federal government of the United States, known as United States Congress, which includes the United States House of Representatives and the United States Senate....
 which limits the powers of the states. Madison stated that "the prohibition to bills of credit must give pleasure to every citizen, in proportion to his love of justice and his knowledge of the true springs of public prosperity." He further stated that the issuance of paper money has resulted in "an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice of the power which has been the instrument of it."

How money is issued in the U.S. today


Paper money
Paper Money

Paper Money is the second album by the band Montrose . It was released in 1974 and was the last album to feature Sammy Hagar as lead vocalist....
 is a form of currency
Currency

A currency is a Medium of exchange, facilitating the trade of goods and/or Service s. It is coins and paper bills used as money. It is one form of money, where money is anything that serves as a medium of exchange, a store of value, and a standard of value....
 that is physically printed by the Bureau of Engraving and Printing
Bureau of Engraving and Printing

The Bureau of Engraving and Printing is a government agency within the United States Department of the Treasury that designs and produces a variety of security products for the Federal Government of the United States, most notable of which is FRN for the Federal Reserve....
, under authority of the Federal Reserve. The Bureau of Engraving and Printing is part of the U.S. Treasury Department, whereas the Federal Reserve is not. In contrast to paper money, coins are physically produced by the U.S. Mint, within and under authority of the U.S. Treasury. The Federal Reserve can authorize as much paper money as it sees fit, but the U.S. Treasury is restricted by law to a certain maximum amount of coinage in circulation.

The Federal Reserve can increase the money supply
Money supply

In economics, money supply, or money stock, is the total amount of money available in an economy at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation and demand deposits....
 by creating money to purchase U.S. Government securities on the open market. These U.S. Government securities have been issued by the federal government
Bureau of the Public Debt

The Bureau of the Public Debt is an agency of the United States Department of the Treasury. The Bureau's headquarters are located in Washington, DC, but most employees are located in Parkersburg, West Virginia....
 to finance deficit spending. Article I, Section 8 of the Constitution explicitly contemplates U.S. Government "securities."

The Federal Reserve can also increase the money supply by allowing banks to issue more loans, which is accomplished by reducing the reserve requirement ratio. Such regulation of banks is pursuant to the Commerce Clause
Commerce Clause

The Commerce Clause is an Enumerated powers listed in the United States Constitution . The clause states that Congress has the power to regulate commerce with foreign nations, among the states, and with the Indian tribes....
.

Conversely, the Federal Reserve can reduce the money supply, by selling securities or by increasing the reserve requirement ratio.

Footnotes


See also

  • United States note
    United States Note

    A United States Note is a Fiat currency Banknote that was issued directly into circulation by the United States Department of the Treasury. These Bills of Credit were also known as Legal Tender Notes because of the inscription on each obverse face stating "This Note is a Legal Tender." Unlike other U.S....
  • Demand note
    Demand Note

    A Demand Note is a type of United States banknote that was issued between August 1861 and April 1862 during the American Civil War in denominations of United States five-dollar bill, United States ten-dollar bill, and United States twenty-dollar bill United States dollar....
  • List of United States Supreme Court cases, volume 79
    List of United States Supreme Court cases, volume 79

    This is a list of all the Supreme Court of the United States cases from volume 79:External links...


  • Fiat money
  • Commodity money
    Commodity money

    Commodity money is money whose Value comes from a commodity out of which it is made. It is objects that have value in themselves as well as for use as money....


External links