US Government Debt Different - Finance Department - University of ...

192 United States Sovereign Debt: A Thought Experiment On Default And Restructuringvalue of money, has rendered itself immune from liability forits action. To that extent it has relieved itself of the obligationof its domestic bonds, precisely as it has relieved the obligors ofprivate bonds in Norman v. Baltimore & Ohio R. Co., decidedthis day . . . 45Taking into account as well the four Justices who joined in the dissentingopinion, five of the nine Justices explicitly acknowledgedthat the government had effectively modified its obligations. 46With the result in Perry in mind, could Congress find a way to effectivelyimplement Alternative 1 without running afoul of SectionFour and the non-abrogation principle? Following is a sketch of onepossible approach. It does not purport to be a definitive analysis buta point of departure for exploring this question.It was quite convenient for the plurality and concurrence in Perrythat the gold clause that Congress sought to override (albeit unconstitutionally,according to the plurality) was intimately relatedto the power over money that was lawfully exercised. Arguably, inthe context of restructuring under Alternative 1, there is a Congressionalpower that might play a role somewhat analogous to that ofCongressional power over money in Perry. It is the power conferredon Congress by the Bankruptcy Clause of the U.S. Constitution. 47The Bankruptcy Clause provides that Congress has the power “Toestablish . . . uniform Laws on the subject of Bankruptcies throughoutthe United States.” 48 Discussions of the Bankruptcy Clause often45 Perry, 294 U.S. at 359. Stone’s view was that it was sufficient to decide the caseon the basis that there were no damages. He saw no need to go further. Unlike theplurality, he would not have reached the constitutional issue.46 Id. at 377 (McReynolds, J., dissenting):The majority seem to hold that the Resolution of June 5th did not affect the goldclauses in bonds of the United States. Nevertheless we are told that no damageresulted to the holder now before us through the refusal to pay one of them in goldcoin of the kind designated or its equivalent. This amounts to a declaration thatthe Government may give with one hand and take away with the other. Default isthus made both easy and safe!47 U.S. Const. art. I, § 8, cl. 4.48 Id. As understood at the time of the Framing of the Constitution, “insolvencylaws under English law and the law of some colonies and states freed the debtor[from imprisonment] and distributed his assets among his creditors but did not re-