The Act of 1871, the Federal Reserve Act of 1913 and the 1933 Emergency: What Each Law Did

The Act of February 21, 1871

Lawtopolis publishes this discussion for informational and educational purposes, and as an exercise of the freedoms of speech, press, assembly, belief and religion protected by the First Amendment. It sets out what each statute and decision says and what courts have done with it. It is not legal advice and does not recommend any course of action.

… created into a government by the name of the District of Columbia, by which name it is hereby constituted a body corporate for municipal purposes, and may contract and be contracted with, sue and be sued, plead and be impleaded, have a seal, and exercise all other powers of a municipal corporation not inconsistent with the Constitution and laws of the United States …

Act of Feb. 21, 1871, ch. 62, § 1, 16 Stat. 419

The Act gave the District of Columbia a single territorial-style government with a governor and legislative assembly, replacing the separate city governments of Washington and Georgetown. It made the District — not the United States — “a body corporate for municipal purposes.” Congress abolished that government in 1874 and replaced it with appointed commissioners; the Organic Act of June 11, 1878 (20 Stat. 102) made that arrangement permanent.

The 1871 Act did not amend the Constitution, create a new national entity, or change the government of the states. The definition of “United States” as “a Federal corporation” in 28 U.S.C. § 3002(15) dates from the Federal Debt Collection Procedures Act of 1990 and applies only to that chapter; see “the United States is a corporation”.

The Federal Reserve Act of 1913

The Federal Reserve Act created a central banking system with two parts. The Board of Governors in Washington is a federal agency whose members are appointed by the President and confirmed by the Senate. The twelve regional Federal Reserve Banks are corporations whose stock is held by member banks. The Ninth Circuit held in Lewis v. United States, 680 F.2d 1239 (1982), that a regional Reserve Bank is not a federal agency for purposes of the Federal Tort Claims Act.

Federal Reserve notes are “obligations of the United States” (12 U.S.C. § 411). Congress, not the Federal Reserve, holds the constitutional power to coin money and regulate its value (art. I, § 8, cl. 5), and it delegated parts of that work by statute.

A frequently shared Woodrow Wilson quotation — “I am a most unhappy man. I have unwittingly ruined my country” — does not appear in Wilson’s writings. Its second half splices together two passages from Wilson’s 1912 campaign speeches, published as The New Freedom (1913), which were written before the Federal Reserve existed. One of them reads: “A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated.”

1917 and 1933: emergency powers and gold

• Trading with the Enemy Act (1917). Gave the President wartime power over trade and financial transactions involving enemy nations.
• Emergency Banking Act (March 9, 1933). Ratified the bank holiday and amended § 5(b) of the 1917 Act so the President could regulate gold and foreign exchange during “any other period of national emergency” and for transactions by “any person within the United States.” The definition of “enemy” in 50 U.S.C. § 4302 does not include U.S. citizens; the 1933 Act extended power over domestic transactions without designating citizens as enemies.
• Executive Order 6102 (April 5, 1933). Required delivery of most gold coin, bullion and certificates to the Federal Reserve system by May 1, 1933, with exceptions.
• H.J. Res. 192 (June 5, 1933). Declared gold clauses “against public policy” and made debts payable dollar for dollar in legal tender. The Supreme Court upheld it for private contracts in Norman v. Baltimore & Ohio R. Co. (1935).
• Later changes. Private gold ownership became legal again on December 31, 1974; gold clauses became enforceable again in contracts made after October 27, 1977 (Pub. L. 95-147); and in 1977 Congress limited the 1917 Act’s § 5(b) to wartime.

Was there a 1933 “bankruptcy”?

No statute declared the United States bankrupt, and federal bankruptcy law has never applied to the United States itself. The 1933 measures ended gold redemption and voided gold clauses. In Perry v. United States (1935), the Court held that Congress could not repudiate the gold clause in the government’s own bonds, while denying damages because the bondholder showed no actual loss. The phrase about pledging the people as collateral does not appear in H.J. Res. 192 or the Emergency Banking Act.

The IRS name and Trust Fund 62

Congress created the office of Commissioner of Internal Revenue by the Act of July 1, 1862 (12 Stat. 432). The Bureau of Internal Revenue was renamed the Internal Revenue Service by Treasury Order 150-06, dated July 9, 1953. Today’s statutes refer to the Internal Revenue Service by name, including 26 U.S.C. §§ 7802–7803 as revised by the IRS Restructuring and Reform Act of 1998.

The list of federal trust funds in 31 U.S.C. § 1321(a) does include item (62), “Puerto Rico special fund (Internal Revenue).” Under 26 U.S.C. § 7652, federal excise taxes on articles produced in Puerto Rico, such as rum, are “covered into the treasury of Puerto Rico.” The fund is an accounting classification for those payments to Puerto Rico; it does not move the IRS to Puerto Rico or make it a private trust.

How to check the Act of 1871 claim yourself

The best test of Act of 1871 is simple: look for a court that accepted it. We have not found one in the reported decisions. Next, read the actual law the claim points to. For example, check the statute, the UCC section or the constitutional text it cites. Then compare that text with what the claim says it means. For a real problem with a debt, a court case or a tax bill, a licensed attorney can explain your actual options. Our directory is a good place to start.

Sources and further reading

Official sources used on this page:

• law.resource.org
• law.cornell.edu
• law.cornell.edu
• home.treasury.gov
• law.cornell.edu

Related reading on Lawtopolis:

• "The United States Is a Corporation": 28 U.S.C. § 3002(15), 18 U.S.C. § 5 and Merriam's Estate
• Are Loans, Mortgages and Utility Bills "Government Obligations"? 18 U.S.C. § 8 and 31 U.S.C. § 1501
• House Joint Resolution 192 (1933)
• Every State Is a Corporation: States as Bodies Politic and Artificial Persons