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The ''Legal Tender Cases'' were two 1871
United States Supreme Court The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
cases that affirmed the constitutionality of
paper money A banknote—also called a bill ( North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issue ...
. The two cases were '' Knox v. Lee'' and '' Parker v. Davis''. The U.S. federal government had issued paper money known as United States Notes during the American Civil War, pursuant to the terms of the
Legal Tender Act Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...
of 1861. In the 1869 case of '' Hepburn v. Griswold'', the Court had held that the Legal Tender Act violated the due process clause of the Fifth Amendment to the
United States Constitution The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the nation ...
. In his majority opinion, Chief Justice
Salmon P. Chase Salmon Portland Chase (January 13, 1808May 7, 1873) was an American politician and jurist who served as the sixth chief justice of the United States. He also served as the 23rd governor of Ohio, represented Ohio in the United States Senate, ...
did not hold that Congress lacked the power to issue paper money, but rather ruled that the notes could not be used as
legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...
for ''pre-existing'' debts. The Supreme Court overruled ''Hepburn v. Griswold'' in the ''Legal Tender Cases'', holding that United States Notes could be used to re-pay pre-existing debts.


Legal Tender Act of 1862

The ''Legal Tender Cases'' primarily involved the constitutionality of the
Legal Tender Act Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...
of 1862, , enacted during the American Civil War. 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. Chief Justice Chase described the sequence of events:


''Hepburn v. Griswold''

In '' Hepburn v. Griswold'' (1870), Chief Justice
Salmon P. Chase Salmon Portland Chase (January 13, 1808May 7, 1873) was an American politician and jurist who served as the sixth chief justice of the United States. He also served as the 23rd governor of Ohio, represented Ohio in the United States Senate, ...
held for a 5–3 majority of the Court that the Act was an unconstitutional violation of the due process clause 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 The United States secretary of the treasury is the head of the United States Department of the Treasury, and is the chief financial officer of the federal government of the United States. The secretary of the treasury serves as the principal a ...
. On the same day that ''Hepburn'' was decided, President
Ulysses Grant Ulysses S. Grant (born Hiram Ulysses Grant ; April 27, 1822July 23, 1885) was an American military officer and politician who served as the 18th president of the United States from 1869 to 1877. As Commanding General, he led the Union A ...
nominated two new justices to the Court,
Joseph Bradley Joseph Philo Bradley (March 14, 1813 – January 22, 1892) was an American jurist who served as an associate justice of the Supreme Court of the United States from 1870 to 1892. He was also a member of the Electoral Commission that decided ...
and William Strong, although Grant later denied that he had known about the decision in ''Hepburn'' when the nominations were made.


''Knox v. Lee'' and ''Parker v. Davis''

Justices Bradley and Strong subsequently voted to reverse the ''Hepburn'' decision, in ''Knox v. Lee'' and ''Parker v. Davis'', by votes of 5–4..


''Juilliard v. Greenman''

The constitutionality of the Act was more broadly upheld thirteen years later in '' Juilliard v. Greenman''..


Background about constitutionality of paper money

Article I, Section 10 of the Constitution explicitly forbids the states from issuing "bills of credit" (promissory notes) or making anything but gold and silver coin legal "tender". There are no corresponding explicit prohibitions limiting the power of the federal government, nor are there any explicit authorizations. The Tenth Amendment refers to reserved powers that only the states can exercise, as well as powers not delegated that continue to reside in the people. "
Concurrent powers Concurrent powers are powers of a federal state A federation (also known as a federal state) is a political entity characterized by a union of partially self-governing provinces, states, or other regions under a central federal governm ...
" 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 of the Constitution specifically gives Congress power to "borrow money" and also power to "coin money and regulate the value" of both U.S. and foreign coins, and regulate interstate commerce, but does not explicitly and unambiguously grant Congress the power to print paper money or make it legal tender. The federal government first issued paper money in 1861 to fund the Civil War. Before that, all U.S. paper money was bank-issued money. For example, paper notes were issued by the
First Bank of the United States First or 1st is the ordinal form of the number one (#1). First or 1st may also refer to: *World record, specifically the first instance of a particular achievement Arts and media Music * 1$T, American rapper, singer-songwriter, DJ, and reco ...
, which was a private corporation chartered by the federal government. Congress had also authorized paper money (e.g.
Continentals Early American currency went through several stages of development during the colonial and post-Revolutionary history of the United States. John Hull was authorized by the Massachusetts legislature to make the earliest coinage of the colony (the ...
) even before the Constitution was adopted. The Continental was issued by both the individual states and the Continental Congress under the
Articles of Confederation The Articles of Confederation and Perpetual Union was an agreement among the 13 Colonies of the United States of America that served as its first frame of government. It was approved after much debate (between July 1776 and November 1777) by ...
. Those Articles specifically allowed the issuance of legal tender paper money, at the time called "bills of credit". In ''Hepburn'', Chief Justice Chase noted, "No one questions the general constitutionality, and not very many, perhaps, the general expediency of the legislation by which a note currency has been authorized in recent years. The doubt is as to the power to declare a particular class of these notes to be a legal tender in payment of pre-existing debts."


Original intent and original meaning

Originalists like
Robert Bork Robert Heron Bork (March 1, 1927 – December 19, 2012) was an American jurist who served as the solicitor general of the United States from 1973 to 1977. A professor at Yale Law School by occupation, he later served as a judge on the U.S. Cour ...
have objected to enforcing the 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." According to law professor Michael Stokes Paulson, "Among the most common canards in critiques of originalism is that, under the original meaning of the Constitution, the issuance of paper money as legal tender would be unconstitutional, sending our economy into disarray." Regarding paper money,
Nathaniel Gorham Nathaniel Gorham (May 27, 1738 – June 11, 1796; sometimes spelled ''Nathanial'') was an American Founding Father, merchant, and politician from Massachusetts. He was a delegate from the Bay Colony to the Continental Congress and for six months ...
explained at the Constitutional Convention that he "was for striking out" an explicit power of
Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...
to issue paper money, but Gorham was also against "inserting any prohibition".''The Debates in the Federal Convention of 1787''
, ed. Madison, James (August 16, 1787). Retrieved February 24, 2007. One delegate at the Constitutional Convention went so far as to say that an express power to emit paper money would be "as alarming as the mark of the Beast in Revelation".
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 .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 A banknote—also called a bill ( North American English), paper money, or simply a note—is a type of negotiable promissory note, made by a bank or other licensed authority, payable to the bearer on demand. Banknotes were originally issue ...
) has been justified by invoking the
Necessary and Proper Clause The Necessary and Proper Clause, also known as the Elastic Clause, is a clause in Article I, Section 8 of the United States Constitution: Since the landmark decision '' McCulloch v. Maryland'', the US Supreme Court has ruled that this clause gr ...
in combination with the other enumerated powers which include the power to borrow money. The power to "issue bills of credit" is explicitly mentioned in the Constitution as a prohibition on the States, and could therefore be interpreted as a power so momentous that it would have to be conferred explicitly on the federal government rather than inferred from 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 Jr. (March 16, 1751June 28, 1836) was an American statesman, diplomat, and Founding Father. He served as the fourth president of the United States from 1809 to 1817. Madison is hailed as the "Father of the Constitution" for hi ...
's notes, from the Constitutional Convention in 1787, include a footnote where he says that the Constitution would not allow the federal government to use paper as currency or legal tender, though there is no indication whether or not the contents of his footnote were uttered aloud at the Convention. Thereafter, during the ratification debates, the
Federalist Papers ''The Federalist Papers'' is a collection of 85 articles and essays written by Alexander Hamilton, James Madison, and John Jay under the collective pseudonym "Publius" to promote the ratification of the Constitution of the United States. The c ...
No. 44 (assumed to be authored by Madison) said that prohibiting states from emitting "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 by the states had 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."Madison, James.
''Federalist'' #44
(January 25, 1788).


See also

*
Legal tender Legal tender is a form of money that courts of law are required to recognize as satisfactory payment for any monetary debt. Each jurisdiction determines what is legal tender, but essentially it is anything which when offered ("tendered") in pa ...
*
Commodity money Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods. This is in contrast to representati ...
*
Demand Note A Demand Note is a type of United States paper money that was issued between August 1861 and April 1862 during the American Civil War in denominations of 5, 10, and 20 . Demand Notes were the first issue of paper money by the United States ...
*
Federal Reserve Note Federal Reserve Notes, also United States banknotes, are the currently issued banknotes of the United States dollar. The United States Bureau of Engraving and Printing produces the notes under the authority of the Federal Reserve Act of 19 ...
*
Fiat money Fiat money (from la, fiat, "let it be done") is a type of currency that is not backed by any commodity such as gold or silver. It is typically designated by the issuing government to be legal tender. Throughout history, fiat money was somet ...
*
List of United States Supreme Court cases, volume 79 This is a list of cases reported in volume 79 (12 Wall.) of ''United States Reports'', decided by the Supreme Court of the United States in 1871 and 1872, and one case from 1870. Nominative reports In 1874, the U.S. government created the ...
*
United States Note A United States Note, also known as a Legal Tender Note, is a type of paper money that was issued from 1862 to 1971 in the U.S. Having been current for 109 years, they were issued for longer than any other form of U.S. paper money. They were k ...


References


External links


Legal Tender Acts"Paper Money and the Original Understanding of the Coinage Clause"
by Robert Natelson, ''Harvard Journal of Law and Public Policy'' (2008).
Act to authorize the Issue of United States Notes, and for the Redemption or Funding thereof, and for Funding the Floating Debt of the United States. 37th Congress, 2d Session, Ch. 33, 12 Stat. 345. [Legal Tender Act]
{{Money and central banking within the contemporary United States (pre–1913) United States Constitution Article One case law United States Supreme Court cases Banknotes of the United States United States Supreme Court cases of the Chase Court United States Supreme Court cases of the Waite Court