Congress is expressly given by the constitution power to borrow money on the credit of the United States (Art. I, § 8, ¶ 2), and this it may do and frequently has done by the sale of bonds bearing interest, and also by emitting due-bills or promises to pay in the form of treasury notes, or so-called "greenbacks," intended for use as a circulating medium. There is no express provision in the constitution as there was in the Articles of Confederation for emitting bills of credit, but in the practical construction of the constitution it has been thought that the power to emit bills of credit is incident to the power to borrow money and involves the general power to regulate the currency of the country.

Congress has the implied power, which it exercised during two considerable periods of its early history, to charter a United States Bank with branches in order to facilitate the financial operations of the government, but under its general powers to regulate the currency and to borrow money, it has more recently provided for the incorporation of a group of national banks with authority to issue currency. This currency consists of the so-called national bank notes, which are promises of the banks to pay, guaranteed by the government itself; so that, in effect, this currency rests for its security on the credit of the government as well as upon the financial responsibility of the banks issuing it. The government secures itself, as against its guaranty of this paper, by requiring the banks to deposit with the federal government bonds which the banks are required to buy for that purpose, so that the national banking scheme was originally a means by which the United States borrowed money, although that is not now the ultimate object of conducting the national banking system.

One means, and a very important one, of securing the circulation of the paper money, or promises to pay, of the United States, was to make such promises to pay a legal tender for the payment of all public and private debts. In the absence of some such statutory provision, only coin would be a legal tender. When "greenbacks" were first provided for in 1862, it was a serious question whether Congress had any authority to make such paper money a legal tender, but it was finally decided in the Legal Tender Cases (1871) that the power to make it a legal tender was incident to the power to emit it, that is, incident to the express power to borrow money and the implied power to issue bills of credit. As stated in the preceding section, the states are prohibited from making anything but gold and silver coin a legal tender, but there is no such prohibition with reference to the power of Congress, and its exercise of the power to make its own obligations a legal tender in the payment of debts is now generally conceded. It has been held, however, in Lane County v. Oregon, that Congress cannot make its own obligations a legal tender for the payment of state taxes, for the power to tax is a necessary power of the states, and they may require their own taxes to be paid in whatever manner they see fit. Nor can Congress make legal tender notes receivable in payment of debts which by specific contract are payable in coin (Trebilcock v. Wilson and Bronson v. Rhodes).

Congress has also the constitutional power "to coin money, regulate the value thereof, and of foreign coin" (Art. I, § 8, ¶ 5)- In the exercise of this power, Congress has provided for the coining of various metals into money of different denominations, specifying the quantity of metal for each coin. In so doing the federal government does not merely indicate the quantity of each particular metal which is included in the coin piece, leaving the value to be determined by the current market value of such metal, but in the exercise of its sovereign power, it determines arbitrarily the money value of the coins issued, and by the fact of their issuance, makes them legal tender for their coin value as may be provided by statute, with a limitation as to the aggregate amount for which the minor coins may be used as a legal tender. The power to coin money does not, however, include the power of stamping a merely fictitious value on any material which may be selected for the purpose. It is doubtful whether Congress could, in the exercise of this power, stamp a piece of paper with the words "five dollars" and make such a piece of paper a legal tender for that amount of money. At any rate it has never attempted to do so, and has limited the issuance of legal tender paper money to obligations of the United States to pay money.

As pointed out in the chapter relating to taxation (see above, § 73), the states cannot tax the bonds or currency issued by or under the authority of the federal government except as Congress may authorize, and, conversely, the federal government cannot tax the bonds or warrants issued by or under authority of a state government, because for either to do so would be impossible without interfering with the proper exercise of power on the part of the other.