Sen. Salmon Portland Chase, born in 1808, ran for President against Sen. Rep. Abraham Lincoln (R-IL) and lost. After his defeat, the Ohio legislature decided to return Chase to the U. S. Senate in 1861, where he served but two days before resigning to become Lincolnâ€™s Secretary of the Treasury.
During the Civil War, he faced the daunting task of financing the Union war effort and maintaining the nationâ€™s solvency.
Chase brought to the office his fear of monopolies, distrust of bankers, a preference for revenue tariffs and a belief in hard money. His principles would be tested by an empty treasury coffer and a long civil war that would cost the nation more than twenty billion dollars….Lincoln placed the entire problem of financing the Civil War to Salmon Chase. Against his beliefs, and believing that issuing greenbacks to be unconstitutional, but with the debts from the war mounting and not being paid, Chase lobbied the congress to pass the Legal Tender Acts of 1862 and 1863. This enabled the printing of paper money as a legal substitute for gold and silver for pre-existing debts including taxes, internal duties, personal debts, and excise taxes. debts.
‘In God We Trust’ was printed on every piece of U.S. currency for the first time in 1864 by order of the Secretary of the Treasury. The face of the Treasury Secretary graced the one dollar dominations. The most common of the bills, it was the one the public was most like to possess. Thereby keeping Mr. Chase’s image in the mind of the potential voters in the next presidential elections. He was nick named ‘Old Mr. Greenbacks.’
Chase was a constant critic of Lincolnâ€™s policies, inundating the President with unsolicited advice and proffering his resignation four times in fits of pique. In October 1864, Lincoln finally accepted the Secretaryâ€™s resignation, but in December appointed him as the new Chief Justice of the Supreme Court, a position he held until his death in 1873.
Five days after the Legal Tender Act was passed Susan P. Hepburn tried to settle a debt she owed to Henry Griswold of over $11,000 with governmental notes, notes which had depreciated more than fifty percent against gold and silver. She was sued by Griswold for payment in Gold and the suit made its way to the Supreme court. In 1870, Hepburn v. Griswold was decided in a 5-3 decision. Now Chief Justice Chase would disown his own offspring and declare the Legal Tender Acts unconstitutional. The Court until this time had rarely found an act of Congress unconstitutional. Chase wrote:
that such laws were inconsistent with the spirit of the Constitution, which prohibited the states from passing “any … law impairing the obligation of contracts.” Further, an act compelling holders of contracts that called for payment in gold or silver to accept as legal tender “mere promises to pay dollars” was unconstitutional because it deprived “such persons of property without due process of law” under the Fifth Amendment
In 1871, the Court, with two new justices on the bench, reversed itself with the legal tender cases, Knox v. Lee and Parker v. Davis, and declared the Legal Tender Acts constitutional. It said Congress had the power “to coin money and regulate its value” with the objects of self-preservation and the achievement of a more perfect union. As to the argument that the acts indirectly impaired the obligation of contracts, the Court said that “no obligation of a contract can extend to the defeat of legitimate government authority.” Since the acts were within the spirit of the Constitution, Congress had not exceeded its authority.
The two cases decided by the Supreme Court in 1871 upheld the constitutionality of paper money issued by the U.S. Treasury. The Legal Tender Acts of 1862 and 1863 made paper money a legal substitute for gold and silver, including for the payment of preexisting debts.
Stephen J. Field, was the most eloquent of the new dissenters:
… The power to commit violence, perpetrate injustice, take private property by force without compensation to the owner, and compel the receipt of promises to pay in place of money, may be exercised, as it often has been, by irresponsible authority, but it cannot be considered as belonging to a government founded upon law…. From the decision of the Court I see only evil likely to follow.”
It is amazing to me that Salmon P Chase would go against his principles and urge passing of the Legal Tender Act by Congress. The ends justify the means! Then have the courage to find the same law unconstitutional. It is amazing to me that the Fifth Amendment has been eroded even further in Kelo V New London.
I don’t blame Susan P. Hepburn for taking advantage of the depreciating currency, we all do it today. We go into debt and pay the lender off in cheaper dollars. Since 1973, when Nixon severed the last Gold connection, our currency has depreciated 95%! I don’t blame the Chinese for floating the Yuan. The dollar has fallen from 122 to 80 before this last small rally. In 1913, Congress passed a law establishing the Federal Resrve System, essentially our money system is now run by a cartel of banks. By passing the Federal Reserve Act, Congress gave up its power “to coin money and regulate its value”!