Court’s Decisions of FRN’s

Understanding Federal Reserve Notes and Lawful Money

1. Money Is Property

Federal Reserve notes are liabilities, not assets. Cash, according to the book “The Federal Reserve Bank: Its Purposes and Functions”, is coin.

2. Current Money

Whatever is receivable and current by law as money. See: Henderson v. Farmers Savings Bank, 199 Iowa 496.

3. Precious Metals Are True Money

The precious metals alone are money, and whatever else is to perform the functions of money must be their representative and capable of being turned into them at will. So long as bank paper retains this quality it is a substitute for money; divested of this, nothing can give it that character. See: 3 Webster’s Works 41; Woodruff v. Miss, 162 U.S. Reports 307.

4. A Note Is Only a Promise to Pay

See: Fidelity Savings v. Grimes, 131 P.2d 894.

5. Legal Tender Notes Are Not Lawful Money

See: Rains v. State, 226 S.W. 189.

6. Checks, Drafts, Money Orders, and Bank Notes

These are not lawful money of the U.S. See: State v. Nealan, 43 Ore 158.

7. The Federal Government and Commercial Paper

Where the Federal Government is a party to commercial paper, it is bound by the same rules which govern private persons. See: Continental American Bank v. U.S., C.C.A. La. (1947) 161 F.2d 93.

8. Government Responsibilities When Issuing Paper

The government assumes all responsibilities of private persons when it issues commercial paper. See: U.S. v. First National Bank, 138 F.2d 681.

9. Federal Reserve Notes Are a Lien on Bank Assets

Federal Reserve Notes are a first and paramount lien on all the assets of the issuing Federal Reserve Bank. See: Moody’s Bank & Financial Manual, page 2105.

(If Federal Reserve notes are a lien on the banks, no wonder they want to eliminate the use of Federal Reserve notes and deal only with computer entries.)

10. Negotiable Instruments Law

Negotiable Instruments Law was designed to cover commercial paper and U.S. currency. See: LSA-R.S. 17; 1 et seq., LSA-C.C. art 2139.

11. Demand Deposits Are Not Legal Tender

The public’s use of demand deposits as money is not based on authorization by the Federal Government. Even today, legal tender—the kind of money in which debts are payable—does not include demand deposits. See: “An Introduction to Money and Banking” by Colin and Rosemary Campbell, Professors of Economics.

12. U.S. Currency Lacks Key Negotiable Instrument Elements

U.S. currency is the object for which negotiable instruments issue. The very first requirement of our negotiable instrument law is that the instrument be signed by the maker. The signatures on paper money are made by facsimile stamp put there by machine. See: Civil Code Art. 2139 La; 120 So. 2d 845.

13. Federal Reserve Notes Are Not Legal Money

See: Jerome Daly v. First National Bank of Montgomery, Minn.; Justice Martin v. Mahoney, Credit River Township, December 7–9, 1968. Ruled that Federal Reserve notes were fiat money and not legal tender.

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