American Legal History

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Great Depression Gold Seizures and the Rule of Law

“Hell, there are no rules around here. We’re trying to accomplish something.” – Thomas Edison

I. Introduction

American legal history provides many examples of the U.S. government’s unfaithful relationship with the rule of law. While consistently proclaimed a cornerstone of liberty and often embraced when convenient, the rule of law has before lost its primacy in times of emergency or when merely inconvenient for certain political factions. Myriad examples of this include the often mentioned, such as the enslavement of African Americans, the internment of Japanese citizens during World War II, and the treatment of enemy combatants under the George W. Bush Administration, but a less discussed example is that of the gold seizures during the Great Depression. The seizure of gold by the federal government during the Great Depression provides yet another example of how the rule of law can be bent to the will of the majority during times of crisis.

II. The Acts

By March of 1933, the American people had suffered through more than three years of the Great Depression, and the U.S. economy had reached its nadir. The unemployment rate stood at 25 percent, output was only three-fourths of its 1929 level, and the banking system had collapsed.(1) Franklin Delano Roosevelt was sworn into office on March 4, 1933, with hopes of addressing the economic malaise and rebuilding the country’s confidence in the banking system. (2)

On March 9, 1933, Congress amended the Trading with the Enemy Act of 1917 by passing the Emergency Banking Act.(3) Under this amendment, President Roosevelt was empowered to issue Executive Order 6102 on April 5, 1933, which criminalized the possession of monetary gold by any person, which included individuals, partnerships, associations, and corporations.(4) In particular, Executive Order 6102 declared a national banking emergency, prohibited the hoarding of gold, and required that by May 1, 1933, all persons deliver to the Federal Reserve all gold coin, bullion, and certificates.(5) In exchange, the Federal Reserve was required to pay the equivalent value in dollars, which at the time was $20.67 per troy ounce, as set by the Gold Act of 1900.(6) Further, in the Joint Resolution of June 5, 1933, Congress nullified public and private contracts requiring payment in gold, including bonds issued by the U.S. government – leading to the Gold Clause Cases, which were all found in favor of the government and confirmed the federal government’s plenary power to regulate money.(7)

Subsequently, on January 30, 1934, President Roosevelt signed the Gold Reserve Act of 1934.(8) This act along with Proclamation 2072(9) prohibited the U.S. Treasury and financial institutions from redeeming dollars for gold, reduced the gold value of the dollar to $35 per troy ounce and transferred ownership of all monetary gold in the United States to the U.S. Treasury in exchange for the new rate of $35 per troy ounce.(10) The Act also established the Exchange Stabilization Fund with $2 billion of profits the government gained when it raised the price of gold after seizing it.(11)

III. The Rationale

There are a number of potential rationales for this series of acts that combined to enable the U.S. government to prohibit most private ownership of gold, take ownership of such gold, declare void public and private contracts in gold, and then revalue the dollar value of gold and use the profits to create a stabilization fund. Evidence of congressional intent is scant as there were few congressional hearings and congressional debate was perfunctory as often members did not even have a printed copy of the law they were voting on. More evidence is available revealing the intent of the Roosevelt administration.

Regarding Executive Order 6102, the Roosevelt White House stated that “the chief purpose of the order is to restore to the country’s reserves gold held for hoarding and the withholding of which under existing conditions does not promote the public interest.”(12) However vague, this indicates the primary purpose was to increase the government’s gold reserves so that it would simply be better able to exchange gold for dollars.

Further, the purpose may have been to increase gold reserves so that the government could issue more currency to fight deflationary pressures. The administration’s desire to re-inflate the currency to combat deflation is evidenced in President Roosevelt’s press conference from April 7, 1933, in which, while stating he would not be “starting the printing presses,” he thought that the government had to “offset [deflation] in some way,” and “had talked about methods to. . . raise commodity prices” and that the government had not gotten “to the point of equalizing [deflation]. . . we must do more.”(13) President Roosevelt’s intention to raise commodity prices is further evinced by his reported statement to James Warburg, a presidential adviser: “If we don’t keep the price of wheat and cotton moving up, we shall have marching farmers.”(14)

Another potential rationale, and at least an ancillary benefit, of this series of acts was the profit gained by the federal government. The premeditation of gaining this profit is revealed by a number of sources. Before transferring ownership to the U.S. Treasury and revaluing the dollar, President Roosevelt stated that the Gold Exchange Act would “place the right title and ownership to gold reserves in the Government itself; it makes clear the Government’s ownership of any added dollar value of the country’s stock of gold which would result from any decrease of the gold content of the dollar which may be made in the public interest.”(15)

Further, Attorney General Homer Cummings fully understood the implications of such acts when he provided his legal opinion, prior to the enactment of the Gold Exchange Act, on the government’s eminent domain power and what would constitute “just compensation” in this instance: “the requirement for just compensation is completely satisfied by the provision for payment in gold certificates in equivalent amounts of dollars. . . the amount of just compensation is determined as of the time of the taking and not as of any subsequent date. . . thus, in this instance, the value of the gold must be determined as of the moment that title passes to the United States. . . the mere fact that, if thereafter, the weight of the gold dollar should be reduced the value of the gold would become proportionately greater, does not serve to give the prior owner any right to secure increased reimbursement.”(16)

IV. Reactions

Three windows through which to view the reaction to these acts are those of politicians, the courts, and the American public, generally.

Politicians of the time seemed more focused on the details of implementing the legislative acts and the policy implications thereof, and less on any legal or ethical concerns regarding the confiscation of gold and subsequent devaluation. For example, Senator Carter Glass, one of the biggest critics of the legislation while expressing his disapproval of the means was most concerned with the stability of the currency: “I am not going to waste any time in protesting any further against the appropriation by the government of nearly $4,000,000,000 of gold, not one dollar of which it ever lifted its finger to honestly acquire. . . I want the miscalled ‘profit’ as well as the gold principal in the hands of the Federal Reserve Banks. . . because it would twice over again enable the Federal Reserve Banks – if we are going into this devaluation business – to more readily and at a lower interest charge respond to the requirements of business.”(17)

Further, many senators praised the acts given the circumstances. Senator Connally regarded the Gold Exchange Act as the “greatest measure yet proposed by President Roosevelt for the recovery of the nation.”(18) Senator Walcott’s praise highlighted the primacy of the national interest when he stated, “I’m not against the bill or any part of it. The currency situation abroad is so severe that any one who attacks the President’s policy at this time is nothing short of a traitor.”(19)

The Supreme Court, albeit in 5-4 votes and with trepidation, approved of the government’s actions in its rulings in the cases known as the “Gold Clause Cases.”(20) The Supreme Court’s clear disapproval of the policy but its approval of the means is worth noting. At their inception Justice Brandeis condemned them in writing to Justice Frankfurter:

“The action on the gold clauses is terrifying in its implications. A declaration of bankruptcy, or composition, is honorable if warranted by existing conditions. But the deliberate repudiation by the Government of its own obligations, entered into freely in contemplation of the contingency which has arisen and for the purpose of dealing with it, involves an alarming application of its power. If the Government wished to extricate itself from the assumed emergency, taxation would have afforded an honorable way out.”(21)

In Perry v. United States, which involved the issue of U.S. government bonds explicitly prescribing principal and interest payable to the holder in gold coin or bullion, Chief Justice Charles Evans Hughes in the majority opinion criticized the Roosevelt administration for the immorality of its conduct, but held that the plaintiff had no valid cause of action.(22) That is, on one hand the majority accused the government of repudiating its obligations and stated that Joint Resolution of 1933 “went beyond congressional power,” and on the other hand it refused to stand in the way.(23) In the dissent in Perry v. United States, Justice McReynolds? expressed his concerns: “If this power exists, Congress may readily destroy other obligations. . . this was plain usurpation. . .”(24) When the opinion was received in a hushed courtroom, McReynolds? reportedly added, “This is Nero at his worst. And as for the Constitution, it does not seem too much to say that is gone.”(25) However, in the end, the Gold Clause Cases sanctioned devaluation and the abrogation of government obligation; the right of Congress to devalue was taken for granted and only its effect on preexisting contracts was scrutinized.(26) President Roosevelt, however, later commented that “as a lawyer, it seems to me that the Supreme Court has at last definitely put human values ahead of the ‘pound of flesh’ called for by a contract.”(27)

The reaction of the American people to these acts is one that is difficult to ascertain but certainly not one that was monolithic in nature. It can be conjectured that a large portion of the voting populace approved of the measures, given that actors seeking re-election in the political branches were the main proponents. For example, President Roosevelt was under considerable pressure to pursue inflation, especially from farmers who wanted higher agricultural prices.(28) The American Federation of Labor rallied against the devaluation of the dollar while other groups rallied for it.(29) Moreover, a survey of newspapers at the time does not reveal any great disapproval among common citizens. The main evidence of disapproval or disobedience is found in the plaintiffs in the Gold Clause Cases and reports of citizens attempting to flout the law through means such as hiding and smuggling.(30)

V. Conclusion

The gold seizures during the Great Depression illustrate the lengths the executive, legislative, and judicial branches will go to accomplish and approve of ends that seem politically expedient during times of emergency. Today, many experts in the field of monetary affairs call for more strict rules-based monetary policy or even call for a return to a commodity standard – some type of mechanism that would tie politicians to the mast and more forcefully prevent the federal government from depreciating the value of the currency. This example should provide a warning to such exponents that even the power of rules is limited and perhaps weakest when needed the most.

-- KevinHennecken - 27 Dec 2016



1 : Hall, Thomas E. and Ferguson, J. David. The Great Depression: An International Disaster of Perverse Economic Policies. 2011 University of Michigan Press. (p. 113).

2 , 3 : Greene, Steven. Emergency Banking Act of 1933. Federal Reserve Bank of St. Louis. Available at:

4 , 5 : Executive Order 6102. April 5, 1933. Franklin D. Roosevelt. The American Presidency Project. Available at:

6 , 10 : Richardson, Gary, et al. Gold Reserve Act of 1934. Federal Reserve History. Available at:

7 : McKenna, Marian C. (2002). Franklin Roosevelt and the Great Constitutional War: The Court-pacing Crisis of 1937. New York, NY: Fordham University Press, at pages 56-66

8 : Gold Exchange Act of 1934. Hearings Before the Committee on Banking and Currency United States Senate. January 19-23, 1934. Available at:

9 : Franklin D. Roosevelt: "White House Statement on Proclamation 2072.," January 31, 1934. Online by Gerhard Peters and John T. Woolley, The American Presidency Project.

11 : Richardson, Gary, et al. Gold Reserve Act of 1934. Federal Reserve History. Available at:} This fund was established so the U.S. Treasury could buy or sell gold, foreign currencies, financial securities, and other instruments in order to control the dollar’s value.{{Richardson, Gary, et al. Gold Reserve Act of 1934. Federal Reserve History. Available at:

12 : Franklin D. Roosevelt: "White House Statement on Returning Gold to Federal Reserve Banks.," April 5, 1933. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. Available at:

13 : Franklin D. Roosevelt: "Press Conference," April 7, 1933. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. Available at:

14 : Powell, Jim. FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. 2003.p. 69

15 : Text of the President's Monetary Message. New York Times. Jan. 16, 1934.

16 : Text of Attorney General's Opinion on Gold Program. New York Times. Jan. 17, 1934. p. 14

17 , 18 , 19 : Inflationists Map Attempt to Write a Currency Expansion Mandate Into Measure. New York Times. Jan. 25, 1934.

20 : Norman et al. v. Baltimore & Ohio Railroad Company; U.S. v. Bankers’ Trust Company, 294 U.S. 240 (1935); Nortz v. United States 294 U.S. 317 (1935); Perry v. United States, 294 U.S. 317 (1935).

21 : Brandeis to Frankfurter, June 13, 1933, quoted in “Half Brother, Half Son”: Letters of Louis Brandeis to Felix Frankfurter, eds. Melvin Urofsky and David W. Levy (Norman: University of Oklahoma Press, 1991), 523.

22 , 23 , 24 : McKenna, Marian. Franklin Roosevelt and the Great Constitutional War:Court-Packing of 1937.(2002). P. 59

25 : McKenna, Marian. Franklin Roosevelt and the Great Constitutional War:Court-Packing of 1937.(2002). P. 61

26 : McKenna, Marian. Franklin Roosevelt and the Great Constitutional War:Court-Packing of 1937.(2002). P. 64

27 : FDR to Joseph P. Kennedy, February 19, 1935, in F.D.R.: His Personal Letters, 1928 – 1945, ed. Elliot Roosevelt, 4 vols. (New York: Duell, Sloan and Pearce, 1948-50).

28 : Powell, Jim. FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. 2003.p. 67

29 : Powell, Jim. FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression. 2003.p. 73

30 : "Gold Still Hidden Treasury Believes: Coins Valued at $279,000,000 Remain Unreturned, But Not All Are Hoarded. New York Times. February 23, 1936.

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