In the previous post, Keyser alluded to an event in US history that has always struck him as funny, but there wasn’t time for it then, so here it is now.
One of Abraham Lincoln’s competitors for the Republic presidential nomination in 1860 was Salmon P. Chase, who was one of the most prominent figures in the party, but also not much of a politician. Right after assuming office as president, Lincoln appointed Chase to the sensitive position of secretary of the treasury.
Basically, the upcoming war cost a lot of money, money that the government didn’t have. At the time, “money” basically meant gold. The dollar was supposed to be worth a specific weight in gold, but the political crisis of the war meant that people were unwilling to spend gold (or loan to the government). The obvious solution was to issue paper currency that was declare legal tender (that is, people were legally obligated to accept it in payment of debts). The only problem was that the Constitution pretty clearly prohibited the issuance of paper money by the Federal government:
Congress shall have the power… to coin money, regulate the value thereof, and of foreign coin, and fix the standard of weights and measures. (Art. 1, sec. 5)
Basically, the rebellious states had issued vast quantities of paper money, which swiftly deteriorated in value. (In setting up the US treasury back in 1790, Hamilton took over the outstanding state debts. This basically favored the irresponsible states that had reneged on their debts at the expense of those that had made an effort to pay their debts. Bailouts have a long history!) For this reason, the Constitution overly prohibits the states from
emit[ting] bills of credit [or] mak[ing] anything but gold and silver coin a tender in payments of debts.
Now, you’ll note that the Federal government isn’t actually prohibited from making “bills of credit” (a fancy term for paper currency not backed by precious metal) legal tender, but the fact that the document actually says only that the Congress can “coin money” seemingly extended the prohibition to the national government.
Down to 1862, nobody much doubted that the right to “coin money” meant that such was the only right of issuing money that the Federal government had, and so no national paper currency had been issued before (only dubious private bank notes circulated). But he needs must go whom the devil drives, as the saying goes, so if there huge armies to be provided for, gold had been driven out of circulation by the uncertain, and there weren’t enough people willing to lend the government the money, then there really wasn’t much choice by to issue legal tender notes that weren’t redeemable in gold. Hence, the Legal Tender act of 1862. $300,000,000 of them were issued back in the day when that was a huge sum of money. These were simply called “United Staes Notes,” and as the back was printed in green ink, they came to be known as “greenbacks.” And who should be on the first one-dollar bill but none other than our friend, the secretary of the treasury, Salmon P. Chase:
(As an aside, what impression do you think it would have if we continued to have the visage of current secretary of the treasury on the currency? Would you have much confidence in a Geithner Dollar?
Hmmm. Kind of has a “sell! sell!” vibe about it, no?)
Anyway, Chase was something of a prima donna, and kept offering his resignation to get his way with Lincoln, who couldn’t risk upsetting Chase’s supporters. Well, once Lincoln secured renomination in 1864, he didn’t need to put up with that shit any more, so to Chase’s surprise Lincoln accepted his fourth tender of resignation. But in order to maintain peace among the Republicans, Lincoln appointed Chase first to the supreme court and then to the position of chief justice.
Well, after a while, people began to remember what the Constitution actually said. Seems a Mrs. Hepburn owed some money to Henry Griswold. She attempted to repay him with legal tender notes, to which Mr. Griswold said, “Fuck that. I want real money, and Congress has no right to make me take that shit. I’ve read the Constitution.” So when he took her to chancery court, the judgment was, “Sorry, dude. The Legal Tender Act of 1862 says you got no choice, so if you won’t take the greenbacks, tough shit.” The Court of Errors (what a name!) in Kentucky then ruled in his favor, and in 1870 the case reached US Supreme Court. Now what was poor Mr. Chase supposed to do?
Well, being a member of the Supreme Court means never having to say you’re sorry, so Chief Justice Chase joined a majority in saying that back in 1862, Congress had had no right to authorize him to foist his ugly mug off on an unwilling Mr. Griswold.
Holy shit! The US had a large quantity of those notes still extant, and there was a lot of clamoring by idiots who thought that the paper money actually represented wealthy and imagined that everyone would be poorer if the notes were retired (and oddly enough, the remainder of the Civil War debt actually circulated in the form of “United States Notes” until the 1960s!). The financial world will come to an end if the legal tender status of those notes was revoked.
Conveniently enough, the Hepburn ruling had a majority of only one, and even more conveniently, there were two vacancies on the court. So President Grant quickly filled the vacancies with appointees who (oddly enough) thought that Legal Tender Acts (there were later modifications) were okey-dokey. So in two cases in 1871, the Hepburn case was overtly overturned. Needless to say, Chief Justice Chase was now among the dissenters.
So the very man who had overseen the first issuance of US currency (graced with his own image!) later declared that act unconstitutional. Oddly enough, Salmon P. Chase also graces the highest denomination of US paper money issued for public circulation, namely a $10,000 bill (last issued in 1945):
Perhaps the decision to put him on such a high note was made by someone without a sense of humor in the Treasury Department who only knew that Chase had appeared on the first US currency. Then again, maybe that person was aware that Chase would consider the bill on which he appeared a violation of the Constitution, and this was something of a banker’s joke.
As a final bit of currency lore, the $10,000 isn’t actually the highest note issued by the US government. Back in 1934, when Franklin Roosevelt confiscated publicly held gold in the form of currency, they issued $100,000 Gold Certificates that were given to banks in return for their gold. These notes weren’t meant for circulation (note the disingenuous statement “payable to the bearer on demand as authorized by law,” which of course meant that it wasn’t payable on demand!). Perhaps as another Treasury joke, the person on these notes was Woodrow Wilson, who was sort of the Jimmy Carter of his day.