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.”659 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.”660 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.661
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.662
659 2 M. Farrand, The Records Of The Federal Convention Of 1787 144, 308–309 (rev. ed. 1937).
660 Id. at 310.
661 Knox v. Lee (Legal Tender Cases), 79 U.S. (12 Wall.) 457 (1871), overruling Hepburn v. Griswold, 75 U.S. (8 Wall.) 603 (1870).
662 Perry v. United States, 294 U.S. 330, 351 (1935). See also Lynch v. United States, 292 U.S. 571 (1934).