These prompt recognitions of the impassable gulf between a Promise and what is Promised, were confirmed by all that happened afterwards. The notes, notwithstanding they were legal tender and all bonds of the United States could at first be bought with them at par, almost immediately began to droop as compared with gold. The daily quotations showed a pretty steady decline for two years. On Jan. 15, '64, gold in greenbacks was 100:155; April 15, 100:178; June 15, 100:197; June 29, 100:250, that is, 40 cents to the dollar; and July 11, 100:285, or 35 cents to the dollar in gold, their lowest point. From this depth they slowly rose with many fluctuations back and forth from many causes for 14 years. Jan. 1, 1879, they became redeemable in gold, and have so continued till the present time.
When the Civil War was all over, and these startling vicissitudes of the paper money were measurably forgotten; though no prominent man, when they were passed, thought the Legal-Tender Acts constitutional; the paper money began to be popular; the distinction between a promise and its fulfilment began to fade out of the minds of the people; there had always been bank bills circulating as money in the country; these had been called "dollars" equally with the coin; and in December, 1869, a test case, Hepburn versus Griswold, was decided by the Supreme Court on the question, whether Congress had the constitutional authority to make anything but gold and silver lawful money in satisfaction of contracts entered into before the first legal-tender Act was passed. The question, Can Congress make such notes a legal tender for contracts made after the passage of the Act? was not involved in this case; but it was very clear from the Opinion of the court delivered by Chief Justice Chase, that the majority of the justices regarded the Act as being unconstitutional in its application to contracts made after as well as before the Act was passed. Upon the special question before the Court, the justices were divided in opinion; five, including the Chief Justice, agreed that the Act was invalid so far as it made the notes a legal tender on contracts executed prior to its enactment; and the three other judges were of the opinion that it was valid. Of course, the Decision of the Court was rendered by a majority of two, that the Act was unconstitutional. Chase, Nelson, Grier, Clifford, and Field constituted the majority; Miller, Swayne, and Davis, the minority.
Salmon P. Chase was one of the greatest men of the great period of the Civil War. He was Secretary of the Treasury at the time the greenbacks were issued, and they were issued at his instance and advice, but he was opposed to the clause that made the notes a legal tender. He never expressed the opinion that the Legal-Tender Acts were constitutional, nor did he expect that the notes, of which these authorized the issue, would ever become a permanent national money. This is evident from the fact that the notes were made fundable at his instance, not so much with the view of keeping up the value of the notes by giving them a present market in bonds, as with the view that they would help the sale of the bonds and would be absorbed by them as soon as the price of the bonds was above par in greenbacks. Afterwards Mr. Chase thought that this fundability of the notes into bonds would so far take up the notes as to stand in the way of the negotiation of further necessary loans to the Government, and at his instance this provision of the law was repealed. Consequently, there was nothing inconsistent between his position as Secretary and his later position as Chief Justice. He was undoubtedly right in both of these positions. The making the greenbacks legal tender did not probably add one particle to their purchasing-power, but rather the reverse, because that feature implied a doubt on the part of Congress itself as to the validity and currency of such national promises-to-pay. That he was also right in his judicial opinion and decision, however subsequently overruled in his own Court, may be safely left to the inevitable future appeal to common sense and to the common principles of constitutional interpretation.
This judgment in Hepburn versus Griswold was favorably received by the country at large, as being just in the line of the great decisions of Chief Justice Marshall, and as being exactly in accordance with Amendment X of the Constitution, namely, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." The State of Massachusetts particularly, which has always maintained and still maintains a strong doctrine of State Rights as over against, though in harmony with, the Rights of the United States under the Constitution, applauded this judgment as sound in law and politics, and as righteous altogether. But the then administration of General Grant, inexperienced alike in law and politics, and linked in entangling alliances with the great corporations of the country, received the Decision with marked dissatisfaction; and it was especially offensive to the huge railroad companies, whose bonds had been executed prior to Feb. 25, 1862, inasmuch as it made the principal and interest of these bonds payable in coin, which they had hoped to pay off in the depreciated greenbacks, made legal tender for all debts.
The Administration lost no time in trying to bring about by fair means or foul, a reversal of this unwelcome decision. E. R. Hoar of Massachusetts, at that time attorney-general in Grant's Cabinet, was the principal agent in accomplishing this end by means so discreditable that he lost in consequence his popularity in Massachusetts and all chance of further political preferment. The means chosen and put into effect was the appointment by the President of two new judges, Strong and Bradley, the first to take the place of Grier, resigned, and the second appointed under a law increasing the number of judges to nine, whose opinions on the point at issue were known beforehand, and who were selected to serve on that very account. "It was no secret, indeed it was a matter of public notoriety, that these justices were appointed in order that the decision of 1869 might be reversed. Their opinions in regard to the constitutionality of the Legal-Tender Acts had been clearly and publicly expressed. It was therefore pretty well known what the decision would be when the question was again presented." (Hugh McCulloch.)
The second Legal-Tender case, accordingly, that of Knox versus Lee, decided in December, 1870, reversed the judgment of a year before, no new points therefor being raised either by the new judges or by counsel in the new trial, the Chief Justice and his three former associates still adhering to their original opinions. It was then five judges to four, the special question being, Is it constitutional to make promises-to-pay a legal tender on contracts executed before the promises were issued? The judicial answer was in this case, Yes; provided Congress regarded such action as a necessary means of preserving the Government in time of War, or any other period of extraordinary emergency. That is to say, bona fide creditors were constitutionally bound to receive depreciated notes as legal tender in satisfaction of contracts entered into when no notes were in existence; to receive on contracts specifically calling for "dollars" the depreciated notes of the Government merely promising to pay "dollars," but on which the "dollars" could not be obtained! What is that, but the monstrous incongruity that a promise is the same thing legally as its fulfilment? What is that but judicial blindness as to the nature of Credit? What is it but the old confusion between names and things? What is it, finally, but the dazed and hazy vision, pardonable perhaps in the popular mind but half-opened to radical distinctions, but unpardonable in learned men professing to lay down the law in a civilized country?
It is scarcely needful to add, that the Supreme Court of the United States suffered in the judgment of good citizens by that transaction; that the best legal and financial opinion of the country yielded little respect to a decision thus secured; and that intelligent people do not believe that constitutional law can sanction what contravenes at once common sense and common morality.
Judge Field (and his memory the country will not willingly let die), one of the majority in the first decision, and writing the opinion of the dissenting minority in the second, used this strong but just language, "It follows, then, logically, from the doctrine advanced by the majority of the Court as to the power of Congress over the subject of legal tender, that Congress may borrow gold coin upon a pledge to repay gold at the maturity of its obligations, and yet in direct disregard of its pledge, in open violation of faith, may compel the lender to take, in place of the gold stipulated, its own promises; and that legislation of this character would not be in violation of the Constitution, but in harmony with its letter and spirit. What is this but declaring that repudiation by the Government of the United States of its solemn obligations would be Constitutional?"