ON WHETHER THE FGN CAN LEGALLY CONVERT US$ IN DOMICILIARY ACCOUNTS INTO NAIRA— YES, IT CAN

By Wale Adeleke

MaTaZ ArIsInG
Texas

Regarding the above subject matter, I wish to respond to the legal, not the economics, but deliberately, solely the legal argument made on SM, specifically that:
Forex is money, money is property, and you just can’t confiscate private property, not even vide legislation.

I am going to address the issue above in three steps, starting with the confiscation argument and ending with the vide legislation issue.

First, let me address the confiscation part, which, in law, is defined as the permanent deprivation of the proceeds of crime or of property of corresponding value.

The key element of confiscation is deprivation, hence where there is no deprivation, it makes no sense to argue confiscation.

If the FGN directs the CBN to convert all the foreign currencies in individual domiciliary accounts into naira using the official rate, and credits the owners with the equivalent amount in naira, where is the deprivation. It is simply not confiscation.

I shall now address the issue of whether the government could actually compel someone to sell his property to it at or below market rate in pursuit of a public interest.

For starters, we do that routinely, every so often. What do you call when the government acquires private property to make way for public highways. What? If government can acquire parcels of land and fully developed property, and compel the owner to sell to it, and offer the owners, market rate, and turn the acquired land to highways, what is so special about doing the same for US$ in domiciliary accounts. Or, is one property sacrosanct and not subject to compelled sale to the government to advance a public interest. Really?

We now come to the issue of public interest. It is a simple, straightforward interest— the economy. That’s it.

Finally, the issue of whether government can compel sale of property to it “vide legislation” in liberal economies in a democracy with respect for property rights such as the US.

The answer, yes, as in YES.

In 1933, in the middle of the depression, it took Congress about a week, just a week, to pass the National Banking Act.

Pursuant to the Banking Act, which recognized that the nation was in a national emergency, President Roosevelt issued Executive Order 6102, relevant parts of which appears below:

Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal reserve bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933,…

Section 3. Until otherwise ordered any person becoming the owner of any gold coin, gold bullion, or gold certificates after April 28, 1933, shall, within three days after receipt thereof, deliver the same in the manner prescribed in Section 2; unless such gold coin, gold bullion or gold certificates are held for any of the purposes specified in paragraphs (a), (b) or (c) of Section 2; or unless such gold coin or gold bullion is held for purposes specified in paragraph (d) of Section 2 and the person holding it is, with respect to such gold coin or bullion, a licensee or applicant for license pending action thereon.

Section 4. Upon receipt of gold coin, gold bullion or gold certificates delivered to it in accordance with Sections 2 or 3, the Federal reserve bank or member bank will pay therefor an equivalent amount of any other form of coin or currency coined or issued under the laws of the United States.

(Emphasis supplied to draw attention to payment of equivalent amount in US currency.)

This executive order was issued on April 5, 1933, during the Great Depression, as part of Roosevelt’s New Deal economic policies. The purpose of Executive Order 6102 was to stabilize the value of the dollar by prohibiting the hoarding of gold and requiring individuals, partnerships, associations, and corporations to deliver their gold to the Federal Reserve in exchange for its value in U.S. dollars.

This was a significant move by the U.S. government, as it essentially took control of the country’s gold reserves and removed the gold standard, which had previously backed the value of the U.S. dollar. The order was intended to help stabilize the economy and mitigate the effects of the Great Depression.

Of course, what would the US be without litigation of such a crucial property rights issue. Roosevelt’s executive order was challenged in court.

Among many other court challenges, City of New York Campbell v. Chase Nat. Bank of City of New York, 5 F. Supp. 156 (S.D.N.Y. 1933), was a notable case involving the conflict between individual rights and government policy during the Great Depression, which eventually made it to the US Supreme Court.

The case centered around a bailment contract between Frederick Barber Campbell and Chase National Bank, where Campbell had deposited gold bullion with the bank for safekeeping.

However, when Campbell attempted to retrieve his gold, the bank refused to return it due to the restrictions imposed by Executive Order 6102, the summary of which I had previously mentioned.

Campbell sued the bank for breach of contract.

The case highlights the complex interactions between private property rights and government policy in times of national emergency. It’s an intriguing case study for anyone interested in constitutional law and the relationship between individuals and the state.

The Supreme Court, Campbell v. Chase National Bank of the City of New York, 306 U.S. 1 (1939), in a unanimous decision, upheld the lower court’s ruling in favor of the Chase National Bank and against Frederick Barber Campbell.

The Court held that the government’s policy, as implemented through Executive Order 6102, was a valid exercise of the government’s power to regulate economic activity during a national emergency.

In its decision, the Court emphasized that the gold clauses in the bailment contract between Campbell and the bank were invalidated by the government’s policy, and that the bank was not liable for refusing to return Campbell’s gold. The Court’s ruling affirmed the supremacy of government policy over individual contracts in times of national crisis.

Speaking of times of national emergency in the economics sphere, what’s the point in the FGN going cap in hand seeking $3B loan from the IMF, when there is $5—30B in domiciliary accounts within the country.

Finally, yes, this is the last finally, who in her or his right mind would argue that indeed we are not in a state of national emergency, in both security and economic matters. Who?

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