ArtI.S8.C2.1 Borrowing Power

Article I, Section 8, Clause 2:

[The Congress shall have Power . . .] To borrow Money on the credit of the United States; . . .

The original draft of the Constitution reported to the convention by its Committee of Detail empowered Congress To borrow money and emit bills on the credit of the United States.1 When this section was reached in the debates, Gouverneur Morris moved to strike out the clause and emit bills on the credit of the United States. Madison suggested that it might be sufficient to prohibit the making them a tender. After a spirited exchange of views on the subject of paper money, the convention voted, nine states to two, to delete the words and emit bills.2 Nevertheless, in 1870, the Court relied in part upon this clause in holding that Congress had authority to issue treasury notes and to make them legal tender in satisfaction of antecedent debts.3

When it borrows money on the credit of the United States, Congress creates a binding obligation to pay the debt as stipulated and cannot thereafter vary the terms of its agreement. A law purporting to abrogate a clause in government bonds calling for payment in gold coin was held to contravene this clause, although the creditor was denied a remedy in the absence of a showing of actual damage.4

Footnotes

  1.  Jump to essay-12 Records of the Federal Convention of 1787, at 144, 308–09 (Max Farrand ed., 1937).
  2.  Jump to essay-2Id. at 310.
  3.  Jump to essay-3Knox v. Lee (Legal Tender Cases), 79 U.S. (12 Wall.) 457 (1871), overruling Hepburn v. Griswold, 75 U.S. (8 Wall.) 603 (1870).
  4.  Jump to essay-4Perry v. United States, 294 U.S. 330, 351 (1935). See also Lynch v. United States, 292 U.S. 571 (1934).