• Last updated on November 11, 2022

With its decisions in these three cases, the Supreme Court clearly established the right of the U.S. government to pay its debts in paper money.

After a long tradition of rejecting the use of paper money as legal tender, the United States including former secretary of the treasury and later chief justice Salmon P. ChaseChase, Salmon P. found it necessary to use paper money temporarily during the Civil War. The Legal Tender ActLegal Tender Act of 1862 meant the paper money, called “greenbacks” had to be accepted in payment of debt, or debts could be forfeited. However, the paper currency depreciated compared with gold coins. In Hepburn v. Griswold, the Supreme Court, by a 4-3 vote, overturned the 1862 statute. Chase, who wrote the opinion for the Court, attempted with his decision to return to the earlier sound money era by holding that congressional enactment of the 1862 act violated the Fifth Amendment’s due process clause as a taking and also violated the “spirit” of the contract clause. This case was heard by less than a full Court as the result of the machinations surrounding the Civil War and its aftermath.[case]Hepburn v. Griswold[Hepburn v. Griswold][case]Parker v. Davis[Parker v. Davis][case]Knox v. Lee[Knox v. Lee]Contract, freedom of;Legal Tender Cases[Legal Tender Cases]Fiscal and monetary powers;Legal Tender Cases[Legal Tender Cases]

As a former secretary of the U.S. Treasury, Chief Justice Salmon Chase had strong views on the matter of paper currency.

(Collection of the Supreme Court of the United States)

After President Ulysses S. Grant was given an opportunity to appoint two members to the Court, the case was reheard. In Parker v. Davis and Knox v. Lee, decided a year later by a 5-4 vote, the Court reversed the Hepburn decision. Justice William StrongStrong, William;Legal Tender Cases[Legal Tender Cases] wrote the majority opinion with Justices Chase, Nathan Clifford, and Stephen J. Field dissenting. Important practical realities and the principle of avoiding retroactive changes in obligations led Justice Strong to write a decision that upheld congressional control of the currency as a legitimate implied power under the Constitution. Congressional power was upheld but the Court’s prestige suffered.

Contract, freedom of

Contracts clause

Fifth Amendment

Implied powers

Judicial review

Public opinion re the Court

Separation of powers

Categories: History