[Payments in gold within the United States were not resumed after the banking holiday. On April 19, 1933, the international gold standard was abandoned for an indeterminate period. Payment in gold could not be enforced therefore, even in case of gold clause contracts. By joint resolution of June 5, 1933, the Congress declared that the enforcement of gold clauses was contrary to public policy and that no such provision should be included in obligations thereafter incurred.
The Gold Reserve Act of January 30, 1934, enacted after Attorney General Cummings had given the Secretary of the Treasury an opinion upholding its constitutionality (see 37 Op. Atty. Gen. 403, January 17, 1934), authorized the reduction of the gold content of the dollar. Pursuant to this act, the gold content of the dollar was reduced to about 59 percent of its former amount. This action gave rise to important constitutional questions. The courts had to determine whether Congress had the power to compel the acceptance of the new currency, dollar for dollar, in satisfaction of private contracts antedating the legislation and containing gold clauses. They had also to decide whether the government could fulfill its own gold clause contracts in the same way.
The first important case dealing with gold clauses in private contracts, involving clauses in bonds issued by a subsidiary of the Missouri Pacific Railroad, was argued and won in the federal district court at St. Louis (see In re Missouri Pacific Railroad Company, 7 F. Supp. 1) and then taken to the Supreme Court of the United States, as were other cases. Attorney General Cummings, contrary to the custom of many years, decided to present in person the leading argument of the government before the Supreme Court.
By the narrow margin of five to four, the government won the first group of gold clause cases (see Norman v. Baltimore & Ohio Railroad Company, 294 U. S. 240; Nortz v. United States, 294 U. S. 317; Perry v. United States, 294 U. S. 330). In the cases dealing with private contracts, the points made by the Court were substantially those which had been presented by counsel for the government. In the case of Perry v. United States, involving the constitutionality of the repudiation of gold clauses in liberty bonds, the Chief Justice, speaking for himself and three others, took the position that the government could not constitutionally violate its own obligations, because such action would destroy faith in government promises and therefore obstruct the borrowing power. The opinion seemed a thinly veiled lecture to the administration on the moral-