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The Gold Clause Cases and Constitutional Necessity

Gerard N. Magliocca

Indiana University Robert H. McKinney School of Law

January 11, 2012

Florida Law Review 64, no. 5 (2012): 1243-1278

This Article presents a case study of how constitutional actors respond when the rule of law and necessity are sharply at odds and provides some background on Section Four of the Fourteenth Amendment.

In 1935, the Supreme Court heard constitutional challenges to the abrogation of “gold clauses” in contracts and Treasury bonds. Gold clauses guaranteed that creditors would receive payment in gold dollars as valued at the time a contract was made. Due to the deflation that followed the Great Depression, this meant that debtors were being forced to pay back much more than they owed originally. To stop a looming wave of bankruptcies, Congress passed a Joint Resolution declaring all gold clauses null and void.

Following oral argument, President Franklin D. Roosevelt was concerned that the Court would invalidate the Joint Resolution. He concluded that he could not accept this result, and thus drafted a Fireside Chat announcing that he would not comply with such a decision. This unprecedented statement, which invoked the New Testament and necessity as the grounds for rejecting the Court's decision, has never been closely analyzed until now.

In the end, the Court did not hold that the gold clauses must be enforced. With respect to Treasury Bonds, however, a plurality of the Justices concluded that the Joint Resolution was unconstitutional but that the bondholders were not entitled to relief. This slippery reasoning (in Perry v. United States) harkened back to Chief Justice Marshall's approach in Marbury v. Madison – another case in which the Court was confronted with presidential defiance.

By recounting how President Roosevelt and Chief Justice Hughes – the author of Perry – sought to defuse (or, in some cases, exacerbate) the gold crisis, the dark arts of constitutional are exposed.

Number of Pages in PDF File: 36

Keywords: gold clauses

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Date posted: November 17, 2010 ; Last revised: May 6, 2014

Suggested Citation

Magliocca, Gerard N., The Gold Clause Cases and Constitutional Necessity (January 11, 2012). Florida Law Review 64, no. 5 (2012): 1243-1278. Available at SSRN: https://ssrn.com/abstract=1707175 or http://dx.doi.org/10.2139/ssrn.1707175

Contact Information

Gerard N. Magliocca (Contact Author)
Indiana University Robert H. McKinney School of Law ( email )
530 West New York Street
Indianapolis, IN 46202
United States
317-278-4792 (Phone)

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