Court Decisions on FRN (Federal Reserve Notes)
This page reviews major court decisions on FRN (Federal Reserve Notes) and examines how courts have interpreted FRN status under negotiable instruments law, lawful money doctrine, and commercial paper principles.
Below are cited court decisions and legal references discussing Federal Reserve Notes, lawful money, negotiable instruments, and related principles.
Court Decisions on FRN (Federal Reserve Notes) – Key Court References
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. Court Decisions on FRN and Legal Money Status
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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