CANDID JUDGE.

Auckland Star, Volume LXVI, Issue 43, 20 February 1935, Page 7

CANDID JUDGE.

BLISTERING ATTACK.

Minority Opinion on Gold

Clause Case.

"CONSTITUTION HAS GONE." (United P.A.—Electric Telegraph—Copyright) NEW YORK, February 19. A message from Washington states that in delivering the majority opinion of the Supreme Court concerning the gold clause in Federal Government securities, in which the minority concurred in substance, Chief Justice Hughes said: — "We hold that the joint resolution of Congress of June 5, 1933, so far as it attempted to over-ride the obligation of the United States created by the bond suit, is invalid. It went beyond the constitutional authority of Congress. ''But .we hold that the action before the Court is for breach of contract and that the plaintiff failed to show cause of action for actual damages. "The State claimant, when he received 10,000 dollars for a Liberty bond in 1934, received dollars of a superior purchasing power than those invested in 1917. Therefore, he suffered no damages, and the Court has no authority to entertain the suit for 'added compensation.' We find that payment in actual gold dollars would be of ho value to the claimant, because the Government regulations, which are perfectly valid, prevented their transfer abroad." The Washington correspondent of the "New York Times" points out that this feature of the decision is the only one likely to cause the Administration any difficulty, for seemingly, in the event of future revaluation or international stabilisation on a gold basis, it would allow bondholders to reinstitute suits for damages through the abrogation of contract. As Mr. Justice Mcßeynolds rose to deliver the minority opinion, the spectators witnessed, perhaps, one of the most unusual incidents in the long and dignified history of the Supreme Court. Only occasionally looking at a prepared manuscript he delivered a blistering attack on the "new deal" currency policies. "Nero at His Worst." The judge declared that Nero undertook to use debased currency, and this was "Xero at his worst." He asserted that the Constitution had "gone." He expressed the "shame and humiliation" of the minority, and said that to share the view of the majority would mean repudiation of national obligations, and these things were abhorrent to him'self and his three colleagues. Mr. Justice Mcßeynolds scoffed at the idea that the framcrs of the Constitution would have sanctioned repudiation of the "solemn pledges" of the gold clauses, which Congress had "swept away with a word." He implied that the majority had used a "multitude of words" to distract the public mind from the basic issues.

While some commentators hold that the Court's decision regarding Government bonds is in some degree a moral stigma of repudiation of these gold eontracts, Government leaders appear simply to take the view that their position is legally secure. Although no immediate legislation is expected they make it clear that they will not hesitate to ask Congress expressly to invalidate these clauses if there appears to be any legal loop-hole for further Court action by bondholders to seek restitution. Though the minority opinion did not challenge the right of Congress to fix the gold content of the dollar, or to call in gold coin, bullion and gold certificates, it opposed devaluation as a means of repudiation. It pointed out that the Government, on the majority's ruling, could fix the dollar with one grain of gold and give the Treasury a huge profit —"enough to cancel the public debt." President Gratified. The Government's practical victory caused President Roosevelt and his aides gleefully to scrap their elaborate plans for counter-action if the decision had been against them. Briefly the Court ruled that Congress had power to nullify the promises to pay in gold contained in bonds of private corporation; that it had no such power where the Federal Government's own bonds are concerned; but that Federal bondholders had suffered no damage, and had no right at present to other than a dollar for dollar redemption, and that a gold certificate is worth only its face value in the present devalued currency. The majority opinion generally is interpreted as meaning that so long as the "new deal" dollar is worth as much in purchasing power as any dollars originally invested, there is no damage and no action for recovery can be brought. Speculation has turned to how that would apply if at some future time the purchasing power of the present dollar should shrink b-»low that of the dollar invested. There is no conclusive answer, but the inference is plain. FURTHER ACTION? Possible Loopholes Perturb Administration. ___ LONDON BONDHOLDERS. (Received 2.30 p.m.) NEW YORK, February 19. Both the security and commodity markets turned easy to-day after yesterday's enthusiastic reception of the Government's Supreme Court victory by traders. The volume of sales on the New York Exchange was greatly reduced. Steady, though orderly selling, gradually erased yesterday's price gains. It is reported that yesterday's frantic buying was largely by speculators who were caught "short" in commitments. The general elation in Administration circles in Washington changed to serious consideration to-day of possible loopholes in the decision as it pertauis to the gold clause in Government bonds. Reports from London that holders of such securities are preparing for a Court action to force payments in gold led some to believe that Congress would pass special legislation denying any or all bondholders under any consideration to have recourse to Court claims. Meanwhile the Administration is preparing to push ahead with its 4,000,000,-000-dollar financing programme when and if Congress passes the Enabling Act under the non-gold clause basis.