Gold Clause Cases
The gold clause formerly contained in all public obligations (e.g., government bonds) and in many private long-term obligations (bonds, mortgage notes, and leases) called for payment in gold coin of, or equal to, the "present standard of weight and fineness." For example, the text of a typical gold clause bond, the U.S. Treasury 4.25% bonds of 1947/52, read: "The principal and interest hereof are payable in United States gold coin of the present standard of value." The particular standard referred to was the gold dollar of 25.8 grains 0.9 fine.
A gold clause was first included in the laws of the United States in 1869. As part of the effort to restore the credit of the government after Civil War greenbacks had depreciated in value, Congress enacted a law which pledged the payment of coin or its equivalent for greenbacks and also for interest-bearing obligations.
The Act of February 4, 1910, provided that "any bonds and certificates of indebtedness of the United States hereafter issued shall be payable, principal and interest, in the United States gold coin of the present standard of value." The second liberty bond act authorizing the issuance of bonds provided that "the principal and interest hereof shall be payable in United States gold of the present standard of value."
By the GOLD REPEAL JOINT RESOLUTION of Congress, approved June 5, 1933, "to assure uniform value to the coins and currencies of the United States," the gold clause in all federal and other public obligations as well as private obligations was canceled and limited, applicable both to outstanding securities and to those issued thereafter, and providing for payment in legal tender money. Specifically, the resolution accomplishes the following purposes: (1) it declares that the clauses in public and private obligations stating that they are payable in gold or a specific coin or currency are contrary to public policy; (2) it provides that obligations, public and private, expressed to be payable in gold or in a specific coin or currency, may be discharged dollar for dollar in legal tender (inclusion of a clause for payment of future obligations, public or private, in gold or in a specific coin or currency is prohibited); and (3) it clarifies a provision of the Thomas inflation amendment to the Agricultural Adjustment Act which stipulates that coins and currencies issued by the United States shall be legal tender for all debts, public and private.
The constitutionality of the Gold Repeal Joint Resolution was challenged in the U.S. Supreme Court in the gold clause cases, decided February 18, 1935: (!) Norman v. The Baltimore & Ohio Railroad Co., a suit brought upon a coupon of the railroad's issue of February 1, 1930, of 4½s due February 1, 1960; and two cases entitled United States of America, Reconstruction Finance Corporation et al. v. Bankers Trust Co. and William H. Bixby, Trustees, involving the gold clause in an issue of bonds of the St. Louis, Iron Mountain & Southern Railway Co. dated May 1, 1903, and due May 1, 1933 (these cases were decided together); (2) Nortz v. United States, concerning the gold clause in gold certificates, series of 1928; and (3) Perry v. United States, involving the gold clause in liberty bonds issued under the Act of September 24, 1917.In all of these cases, the U.S. Supreme Court upheld the constitutionality of the Gold Repeal Joint Resolution as a valid exercise of the power of Congress over the monetary system expressly delegated to it by the U.S. Constitution.
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