Legal Tender Cases

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The Legal Tender Cases were a series of United States Supreme Court cases in the latter part of the nineteenth century that affirmed the constitutionality of paper money. In the 1870 case of Hepburn v. Griswold, the Court had held that paper money violated the United States Constitution. The Legal Tender Cases reversed Hepburn, beginning with Knox v. Lee and Parker v. Davis in 1871,[1] and then Juilliard v. Greenman in 1884.[2]

The Legal Tender Cases primarily involved the constitutionality of the Legal Tender Act of 1862 enacted during the Civil War.[3] In Hepburn, Chief Justice Salmon P. Chase, 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, although Grant later denied that he had known about the decision in Hepburn when the nominations were made.[4] 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.

Contents

[edit] Background about constitutionality of paper money

At the Constitutional Convention in 1787, James Madison said that the Constitution "would not disable the Govt from the use of public notes as far as they could be safe & proper...."[5] Article I, Section 10 of the Constitution explicitly forbids the states from making anything but coins "tender in payment," but there is no corresponding explicit prohibition against the federal government.

Another representative at the Constititonal Convention, Nathaniel Gorham, said that he "was for striking out" an explicit power of Congress to issue paper money, but Gorham was also against "inserting any prohibition."[5] That is what ultimately happened at the Convention. Article I, Section 8 of the Constitution enables Congress to "borrow money on the credit of the United States," and therefore Gorham envisioned that "The power [to emit paper money], as far as it will be necessary or safe, is involved in that of borrowing."[5] In other words, the power to emit paper money arises from the Necessary and Proper Clause in combination with the power to borrow money.

The federal government began issuing paper money long before the Legal Tender Act of 1862. In 1791, the First Bank of the United States began issuing paper bank notes.[6]

Nowadays, paper money is created in the United States when the federal government sells U.S. Government Securities to pay interest on the national debt; the Federal Reserve then buys some of those U.S. Government securities on the open market, by issuing new money. Article I, Section 8 of the Constitution explicitly contemplates U.S. Government "securities."

To the extent that there is any doubt about the constitutionality of paper money, traditional rules of constitutional interpretation argue for a presumption of constitutionality. When exercising judicial review, courts have historically used a standard of review that seeks to reconcile statutes with the Constitution whenever possible. That is what happened in the Legal Tender Cases.

[edit] Original intent

The idea that originalism would require courts to strike down paper money and send the economy into a tailspin is a very common misconception.[7] 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 agreed that the mere private intentions of the people who wrote the Constitution are not binding on the judiciary.[8] In other words, according to Story, the original meaning should prevail over the original intent.

Originalists like Robert Bork 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."[9]

[edit] Footnotes

  1. ^ Knox v. Lee, 79 U.S. 457 (1871).
  2. ^ Juilliard v. Greenman, 110 U.S. 421 (1884).
  3. ^ Act of Congress, Statutes at Large, Volume 12, 37th Congress, Session II, Chapter 33, pp. 345–348 (1862-02-25). This Act authorized issuance of $150,000,000 in United States notes, commonly referred to as greenbacks, plus $500,000,000 in interest-bearing bonds.
  4. ^ Pusey, Merlo. Matter of Delicacy: The Court Copes With Disability, Supreme Court Historical Society 1979 Yearbook.
  5. ^ a b c The Debates in the Federal Convention of 1787, ed. Madison, James (1787-08-16). Retrieved 2007-02-24.
  6. ^ Federal Reserve Bank of San Francisco, Fun Facts About Money. Retrieved 2007-02-24.
  7. ^ Paulsen, Michael. "How to Interpret the Constitution (and How Not To)," 115 Yale Law Journal 2037, 2061 n. 46 (2006): "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."
  8. ^ Story, Joseph. Commentaries on the Constitution (1833):

    But, whatever may have been the private intentions of the framers of the constitution, which can rarely be established by the mere fact of their votes, it is certain, that the true rule of interpretation is to ascertain the public and just intention from the language of the instrument itself, according to the common rules applied to all laws. The people, who adopted the constitution, could know nothing of the private intentions of the framers. They adopted it upon its own clear import, upon its own naked text. Nothing is more common, than for a law to effect more or less, than the intention of the persons, who framed it; and it must be judged by its words and sense, and not by any private intentions of members of the legislature.

  9. ^ Hearings Before Senate Committee on the Judiciary, 100th Congress, 1st Session, Nomination of Robert H. Bork to be Associate Justice of the Supreme Court of the United States (1987).

[edit] See also

[edit] External Links

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