Bank of New York v. Supervisors
THIS case-brought here by the Bank of New York-differed from the preceding in two particulars: (1) That the board of supervisors, which in the other cases allowed and audited the claims of the banking associations, refused to allow the claim made in this case; and (2) That the exemption from State taxation claimed in this case, was of United States notes, declared by act of Congress to be a legal tender for all debts, public and private, except duties on imports and interest on the public debt, while in the other cases it was of certificates of indebtedness. These United States notes, as is sufficiently known at the present, had become part of the currency of the country. Their form (with certain necessary variations for different denominations, place of payment, &c.) was thus: The mandamus in the State court was directed, in the case now before the court, to the board of supervisors, instead of to the officers authorized to issue bonds, as in the cases just preceding.
The judgment in the Court of Appeals sustained the action of the board refusing to allow the exemption set up, and the case was brought here by writ of error to that court.
Messrs. O'Connor and O'Gorman, in support of the judgment below:
1. The exemption of the public debt of the United States from taxation by State authority, rests only upon that clause of the Constitution which authorizes Congress 'to borrow money on the credit of the United States.'
2. The purpose and effect of the acts authorizing the notes in question was to create a new kind of money in the United States paper money-which was to be a substitute for a metallic currency. The issuing of these notes was neither more nor less than the creation, by right or without it, of a conventional money. The notes were intended to be money, and in practice have become the only lawful money in use.
3. The government did not, really and in fact, contract by these notes to pay the bearer on demand or at any time. The notes were made by the act a legal tender in payment of all debts, including (with a small exemption) the government's own, and of course when presented for payment, similar notes being a legal tender in discharge of them, the debt would be discharged by a delivery of new notes of the same kind. The notes were promises to make other promises, to be renewed ad infinitum. There is really no debtor nor creditor in respect of them. There is no loan or evidence of loan.
As far as the credit of the United States was involved in the issue of these notes, no greater responsibility was assumed than is assumed by any government in coining or otherwise affixing a stamp to metal, and affixing to it a certain nominal value; although by mixing or debasing the metal, its real value, in use or exchange, may have been totally destroyed. The acts in question did but endeavor to confer a prescribed value on certain stamped paper, which they compelled the citizens of the United States to take in payment of all debts due, or to become due by the government to them, or by them to the government, or to one another.
By this means, instead of borrowing money, Congress made money, and rendered borrowing unnecessary.
The protection from State interference accorded by the Constitution to the exercise by the government of the power of borrowing cannot be invoked in such a case.
4. The acts of Congress relating to the financial operations of the government during the civil war, afford evidence that Congress did not intend that the notes in question should be exempt from State taxation. 
Messrs. Peckham and Burrill, contra.
The CHIEF JUSTICE delivered the opinion of the court.
^1 See 12 Stat. at Large, 345, §§ 1, 2; Ib. 709; 13 Id. 218-19-21-22.