What Was the Legal Tender Act of 1862

What Was the Legal Tender Act of 1862

On the same day the court ruled, President Ulysses S. Grant nominated two candidates to fill judicial vacancies. They were confirmed by the Senate. At its next session, the Tribunal agreed to reconsider the issue of the greenback. He reversed his earlier decision in a 5-4 decision that found the Legal Tender Act of 1862 to be a justified use of federal power during a national emergency. 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] Ironically, in his previous position as Secretary of the Treasury, Chief Justice Chase had played a role in drafting the Legal Tender Act of 1862. On the same day Hepburn was decided, President Ulysses Grant appointed two new justices to the court, Joseph Bradley and William Strong, although Grant later denied knowledge of the decision in Hepburn when the appointments were made. [7] The federal government first issued paper money in 1861 to finance the Civil War. [10] Before that, all U.S. paper money was bank money. 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] The 37th 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. What else was going on in the world? In 1862, the United States began construction of the Central Pacific Railroad. The Confederacy won the Second Battle of Bull Run at Manassas, Virginia. A dozen eggs costs 20 cents. The government passed the Legal Tender Act in 1862, which allowed the creation of paper money that was not exchangeable for gold or silver.

“Greenbacks” worth about $430 million were put into circulation, and this money had to be accepted by law for all taxes, debts and other obligations – including those born before. Originalists such as Robert Bork resisted imposing the intentions of editors who might have believed that paper money should be banned: “Science suggests that the editors intended to ban paper money. Any judge today who thought he was going back to the original intent should really be accompanied by a guardian instead of sitting on a bench. [14] According to law professor Michael Stokes Paulson, “one of the most common lies in criticizing originalism is that, according to the original meaning of the Constitution, issuing paper money as legal tender would be unconstitutional and throw our economy into disarray.” [15] The diary notes, called greenbacks, worked much better than expected.