The Legal Tender Cases

The following is an except from my book Monetarism and the Constitution: Making Paper Money Fit the Framers’ Intent:

The question at issue in the Legal Tender cases was whether Congress had the constitutional authority to issue legal tender notes (i.e., paper dollars) which were not redeemable for gold or silver.  These notes, as legal tender, could be used by debtors to pay off their private debts.  However, once debtors began paying creditors with green pieces of paper instead of gold and silver, creditors, with just cause, sought legal relief claiming that legal tender notes were unconstitutional.

In all of the Legal Tender cases both the majority and the dissent openly admit that issuing legal tender notes is not a power expressly granted to the Congress in the Constitution.  Therefore, the question turned to whether issuing such notes was justified by the “necessary and proper” clause in Article 1 Section 18.

The Court had interpreted the “necessary and proper” clause decades earlier in McCullough v. Maryland.  In McCullough, Chief Justice Marshall, on behalf of the majority, wrote “Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consistent with the letter and spirit of the constitution, are constitutional.”[1]  It is from this interpretation of the “necessary and proper” clause that Justice Chase begins his arguments against legal tender.

In Hephurn v. Griswold, the first Legal Tender case, Chase writes that “In the rule stated by Chief Justice Marshall, the words appropriate, plainly adapted, really calculated, are qualified by the limitation that the means must be not prohibited but consistent with the letter and spirit of the Constitution.  Nothing so prohibited or inconsistent can be regarded as appropriate, or plainly adapted, or really calculated means to any end.”[2] (Italics added)

Chase believed that the letter and spirit of the Constitution directly conflicted with legislation allowing Congress to issue legal tender notes.  To make his argument, Chase uses several sections of the Constitution and the Bill of Rights.  The sections included Article 1 section 10, which prohibits states from interfering in our right to form contracts, and the Fifth Amendment which was intended to prevent the federal government from taking our “life, liberty, or property without due process of law” or taking private property for public use “without just compensation.”

[1] McCulloch v. Maryland, 17 U.S. 316, 421 (1819)

[2] Hepburn v. Griswold, 75 U.S. 603, 622 (1870)

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