What Did the Legal Tender Act of 1862 Do

Despite evidence that the law was not necessary, many political leaders, who saw it as a desirable alternative to an unpopular tax increase, considered the measure justified in this state of war. Because the law was considered part of Congress` war powers, few questioned the constitutionality of legal tender. This issue was only raised after the war, when controversies over legal tender laws reached courts across the country. The views that emerge from the decisions on greenbacks, both for and against their tender status, show that the concept of legal tender is contrary to the spirit of the United States Constitution. These erroneous decisions to maintain legal tender, combined with reasoning from previous cases, suggest that legal tender laws lack a solid foundation in constitutional law. Even without this basis, Knox v. Lee and Juilliard v. Greenman served as a dangerous precedent for the government`s monetary monopoly. On the basis of these decisions, the legal obligation to use means of payment was approved by the judiciary of that country.

This approval began with the decision of five judges in Knox v. Lee. But “another day may come when five more justices will read the Constitution and come to a different conclusion.” [28] If that day were to come, these judges will find ample support to justify the various cases dealing with the issue of greenbacks. [] In his view, Chase searched in vain for a constitutional basis for legal tender. Article I, Section 10, clearly denied States the power of legal tender. However, this fact did not automatically mean that this authority rested with the federal government. Chase found no explicit congressional authority on legal tender in the text of the Constitution. It also stated that such actions cannot reasonably be implied as necessary and appropriate for the exercise of an expressed power. John A. Sparks noted in his essay “The Legal Standing of Gold – Contract Versus Status” that the Tenth Amendment was reserved for the powers of states that were not delegated to the United States.

The powers denied to states that were not delegated to the United States were therefore reserved for the people. [8] Since the declaration of legal tender was prohibited to the states and not delegated to Congress, the acceptance of a currency on the market should be freely determined. Another legal tender was adopted in 1863, and by the end of the war, nearly half a billion dollars had been spent on greenbacks. The law on legal tender laid the foundation for the creation of a permanent currency in the decades following the civil war. Let us now reflect on what has actually been done to provide a national currency. In July, August 1861, and February 1862, the issuance of sixty million dollars in American notes, payable on demand, was authorized. They were converted into receivables in payment, but were not declared legal tender until March 1862, by which time circulation had been considerably reduced by receipt and cancellation. In 1862 and 1863, the issue of four hundred and fifty million American notes, payable not on demand, but at the discretion of the government, was authorized, subject to certain restrictions concerning fifty million. These banknotes have been the subject of claims on domestic loan obligations, on all debts owed to or from the United States, with the exception of import duties and interest on government debt, and have also been declared legal tender. In March 1863, the issuance of banknotes for portions of a dollar up to an amount not exceeding fifty million dollars was authorized. These notes have not been declared legal tender, but have been made refundable in accordance with regulations to be issued by the Minister of Finance.

In February 1863, the issue of three hundred million dollars in bank notes from the national banking associations was authorized. These debentures were rendered receivable to the same extent as U.S. debt securities, and arrangements were made to guarantee their repayment, but they were not legal tender. [3] The federal government first issued paper money in 1861 to finance the Civil War. [10] Before that, all U.S. paper money was money issued by banks. For example, the paper notes were issued by the First Bank of the United States, a federally licensed private corporation. [11] Congress had also approved paper money (e.g., the Continentals) even before the Constitution was adopted. The Continental was issued both by the individual states and by the Continental Congress in accordance with the Articles of Confederation.

These sections expressly authorized the issuance of legal tender notes, which at the time were called “letters of credit”. [12] Gray did not just find a precedent for his decision in Knox v. Lee. He also looked beyond America`s borders for help with his argument. He cited a contemporary case in England that confirmed the exclusive authority of the Emperor of Austria to issue legal tender. [24] In doing so, Gray relied on the same mistake that Strong had already made. In American law, English common law has only been addressed when examining the origins of the Constitution. Current foreign procedures do not affect the constitutionality of U.S. law.

What happened?? On this day in 1862, U.S. President Abraham Lincoln signed the Legal Tender Act. What did the U.S. Department of the Treasury create when the Legal Tender Act of 1862 was passed? A common national currency. Der 37. Congress (1861–1863) faced a financial crisis in 1862 when rising war costs quickly depleted the Union`s reserves of gold and silver coins, the only legal tender in the United States. After intense debate, Congress authorized the issuance of U.S. paper notes (commonly referred to as “greenbacks”) and declared them legitimate currency for all payments, except interest on government debt and import duties. The Legal Tender Act, designed as an emergency measure, significantly expanded federal power and changed the country`s monetary standard. The expenses of the Civil War caused a shortage of coins – the only legal tender at that time.

With the Legal Tender Act of 1862, Congress revolutionized the U.S. monetary system by making paper notes legal and creating a national currency for the first time. concerned the constitutionality of the Legal Tender Act of 1862. The court, in a 5-3 vote (including a majority by the sick Grier), repealed the Legal Tender Act, denying Congress the power to issue fiat currency as legal tender. Strong then looked beyond necessity for other reasons why he could maintain legal tender. He hastened to establish that legal tender was “a power known to be possessed by any independent sovereignty other than the United States.” [18] Legal tender was therefore an inherent right in the sovereignty of all nations. However, such reasoning was not common in the Supreme Court. Except in international relations cases, “the Court has never since affirmed that the federal government enjoys powers derived simply because it is a sovereign nation.” [19] The Constitution, not the act of another nation, was the foundation upon which the U.S. government was built. The actions of this government must be judged according to the standards established by the Constitution. The so-called sovereign right to declare legal tender is not proof of constitutionality. Printed notes were called greenbacks, and their legal tender meant that creditors had to take them at face value.

The printing press worked much better than expected, helping the US government finance the war and stimulate the Union`s economy. By the end of the Civil War, the federal government had printed nearly $500 million in greenbacks. James Madison`s footnotes to the 1787 Constitutional Convention include a footnote in which he says that the Constitution would not allow the federal government to use paper as currency or legal tender, although there is no indication whether the contents of his footnote were spoken aloud at the convention. [19] Subsequently, during the ratification debates, the Federalist Papers No.