Salmon Portland Chase

The State of Texas received ten million dollars worth of bonds from Congress in 1851, which would be redeemable in 1864. In 1862 and during the Civil War, the rebel state legislature authorized the use of the bonds to purchase war equipment. In 1866, the new government tried to reclaim the bonds. The case went to the Supreme Court, which had to determine if Texas could reclaim the bonds. On April 12, 1869, the Supreme Court held, in a 5-3 decision, that Texas could bring suit against the rebels who did not have the right to use the bonds. Furthermore, the Court wrote that individual states could not secede from the Union and that despite the new government being ratified by the majority of Texans, it was not a legitimate or recognized government. Texas did, in fact, continue to be a state despite claiming to secede.^[3]

In 1866, Congress passed a ten percent tax on state bank notes. During that time, notes were given to customers only as a form of credit, so banks were extremely dissatisfied with this tax. Veazie Bank, which issued bank notes, refused to pay the tax, arguing that it was unconstitutional. Fenno, an IRS collector, took the case to court and Veazie payed the tax under protest. The bank next took Fenno to court, claiming he violated the Ninth section of the Act of Congress of July 13, 1866. The two parts of the case the Supreme Court considered were whether or not it was a direct tax and whether or not Congress had the power to levy the tax. In a 6-2 decision, the Court determined that Congress had the authority to tax the bank notes and that it was not a direct tax. Unrelated, but equally important, the Supreme Court ruled that the United States had the "power to provide a currency for the whole country."^[4]