The Federal Reserve Bank of Atlanta has moved that the United States District Court for the Southern District of Florida dismiss my complaint against the Bank. In support of its motion, the Bank asserts that Federal reserve notes "are 'lawful money' as that term is used in Section 16 of the Federal Reserve Act" [emphasis in original]. However, Section 16 makes it very clear that Federal reserve notes are not "lawful money." The first sentence of the third paragraph of Section 16 reads, "Every Federal reserve bank shall maintain reserves in gold or lawful money of not less than thirty-five per centum against its deposits and reserves in gold of not less than forty per centum against its Federal reserve notes in actual circulation, and not offset by gold or lawful money deposited with the Federal reserve agent." (See page 17 of the Act, which is posted at http://www.llsdc.org/attachments/files/105/FRA-LH-PL63-43.pdf).
The Bank's assertion that Federal reserve notes are "lawful money" is specious. And I wonder if that assertion is designed to mislead the court because it does not look to me like an honest mistake.
The first paragraph of Section 16 of the "Federal Reserve Act" (December 23, 1913; H.R. 7837) provides that Federal reserve notes shall be "obligations of the United States". The Federal Reserve Act does not provide that Federal reserve notes shall be "lawful money of the United States", but the Act does make reference to "lawful money of the United States". The fifth paragraph of Section 16 reads, "Any Federal reserve bank may at any time reduce its liability for outstanding Federal reserve notes by depositing, with the Federal reserve agent, its Federal reserve notes, gold, gold certificates, or lawful money of the United States."
Section 3588 of the Revised Statutes of the United States provided that, "United States notes shall be lawful money, and a legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt" (Link).
In the case of Federal reserve notes, Congress could have provided that Federal reserve notes shall be "lawful money of the United States", but it did not do so. Instead, it provided that Federal reserve notes shall be "obligations of the United States" that are redeemable in "lawful money".
The Federal Reserve Bank of Atlanta has asserted that Federal reserve notes are lawful money. That assertion is not supported by the text of the law.
Just as A FYI please see the portion below in bold. Thanks!
United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes and dues. Foreign gold or silver coins are not legal tender for debts.
This statute means that all United States money as identified above is a valid and legal offer of payment for debts when tendered to a creditor in the U.S. There is, however, no Federal statute that requires private businesses, persons, or organizations to accept it as payment for goods and/or services.
A little more FYI...
Section 9 of Article I of the Constitution provides that, "The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a Tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person."
A foreign silver coin, the Spanish milled dollar, was at one time a legal tender for the payment of the aforementioned Importation Tax. The first United States dollars were not minted until 1794, five years after the Constitution became effective.
The Spanish milled dollar was a foreign coin, not lawful money of the United States, but it was a legal tender in the United States for many decades.
United States notes were defined in statute as "lawful money" and a "legal tender" for some purposes.
In summary, a coin that is legal tender is not necessarily lawful money and lawful money is not necessarily a legal tender. "Lawful money" and "legal tender" are not synonymous terms.
Scott K: Section 5118(b) of Title 31 of the United States Code provides that, "The United States Government may not pay out any gold coin." However, as far as I know, the Federal Reserve Banks are not prohibited from using any type of U.S. coin to redeem federal reserve notes. But they would certainly go bankrupt very quickly if they started redeeming federal reserve notes in gold U.S. legal-tender coins.