Article I, Section 10, Clause 1: “No state shall...coin money; emit Bills of Credit; make
any Thing but gold and silver Coin a Tender in Payments of Debt...”State constitutions also may allow the states to regulate those banks and issues due to
their broad impact on their citizens. The proper handling of paper money issues by privatefractional-reserve banks remains an unresolved problem to this day.
The U.S. Constitution and Money: Cases on State Bills of Credit
by Michael S. Rozeff
This article is Part 3 in a series on Edwin Vieira Jr.’s two-volume book,
Pieces of Eight The Monetary Powers and Disabilities of the U.S. Constitution.
This part covers pp. 352-370 and391-454. As in Part 2, although the core effort is to summarize Vieira’s work, the result is arather free translation in which I do not attempt to capture, and probably could not do so if Itried, all of the many threads and emphases of Vieira’s arguments. Some of his work is omitted,other of it is amplified. I introduce arguments and integrating material of my own as well asarrange the result in a form that aims to make the arguments flow logically and understandably. Ihope that even those who have access to his work will find these articles useful as a supplement,containing an addition to the subject matter of the U.S. Constitution and money.
The individual states are explicitly disabled in the Constitution from emitting bills of credit(paper money). What are bills of credit? Chief Justice Marshall defined bills of credit as
follows:“To ‘emit bills of credit’ conveys to the mind the idea of issuing paper intended tocirculate through the community for its ordinary purposes, as money, which paper isredeemable at a future day. This is the sense in which the terms have been alwaysunderstood.”Justice Story wrote:“...when bills of credit are spoken of, the words mean negotiable paper, intended to passas currency or as money, by delivery or endorsement. In this sense, all bank notes, or, asthe more common phrase is, bank bills, are bills of credit. They are the bills of the partyissuing them, on his credit, and the credit of his funds, for the purposes of circulation ascurrency or money.”The states may constitutionally charter private-sector banks that issue bank notes (paper money). These private banks have always been termed “state” banks, due to the incorporation
coming from the state. However, they are not state-controlled, not state agencies, not entities of the state, not part of the state, and not departments of the state.