Legal Tender Cases

Author:Stanley I. Kutler

Page 1581

The Legal Tender Cases include the decisions in Hepburn v. Griswold (1870), invalidating CIVIL WAR legislation authorizing paper money, and Knox v. Lee (1871) and Parker v. Davis (1871), sustaining postwar legal tender legislation. The various decisions reflect important developments in the nation's economic history, as well as in the Supreme Court's history, concerning the judicial role in questions of political economy, the nature and scope of judicial power, and the relation of politics to judicial opinions.

The greenback legislation of 1862 was designed to facilitate the financing of the Civil War, authorizing payments in demand notes, redeemable not in gold or silver but in interest-bearing twenty-year bonds. The notes were made "lawful money and a legal tender in payment of all debts, public and private, within the United States." The Treasury issued over $400 million in paper money during the war. After 1865, as inflation grew and greenbacks depreciated, creditors demanded payment in specie or at least in paper money equivalent to the rising premium on specie.

Secretary of the Treasury SALMON P. CHASE presided over the government's wartime greenback program. His outward support for paper money only masked his deep-seated hostility. In March 1864, he composed an epigram reflecting his true feelings: "When public exigencies require, Coin must become paper. When public exigencies allow, Paper must become coin." Six years later, as Chief Justice, he invalidated his previous policy.

Chase's role in the first legal tender case provoked intense partisan wrangling, both on and off the bench, and raised questions of the Chief Justice's behavior as the Court's administrative leader. The legal tender controversy had become entangled in partisan politics, as Republicans defended their greenback policy and the opposition Democrats attacked it as unconstitutional and improper. The Justices lined up on the same political grounds. (Chase and the Republicans by then were mutually alienated and the Chief Justice already was courting the Democrats in hopes of winning their presidential nomination.) In numerous state cases, judges similarly voted along party lines.

Chase apparently was determined to project the Court into the political maelstrom of monetary policy. But he did so with a precarious majority. Following the arguments in Hepburn v. Griswold in 1869, Republican Justices DAVID DAVIS, SAMUEL F. MILLER, and NOAH...

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