Borrowing Power

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BORROWING POWER

Congress, under Article I, section 8, of the Constitution, may "borrow money on the credit of the United States." This power is ordinarily exercised through the sale of bonds or the issuance of bills of credit. The latter, sometimes called "treasury notes" or "greenbacks," are intended to circulate as currency and thus, in effect, to require the public to lend money to the government. In the gold clause cases (1935) the Supreme Court held that the government, in borrowing, is bound by the terms of its contracts, but Congress, by invoking sovereign immunity, denied its creditors any legal remedy.

Dennis J. Mahoney
(1986)