bligation to meet their
honest debts. Thus in 1931, during the Great Depression, New Jersey
created a Municipal Finance Commission with power to assume control over
its insolvent municipalities. To the complaint of certain bondholders
that this legislation impaired the contract obligations of their
debtors, the Court, speaking by Justice Frankfurter, pointed out that
the practical value of an unsecured claim against a city is "the
effectiveness of the city's taxing power," which the legislation under
review was designed to conserve.[1711]

Private Contracts and the Police Power

The increasing subjection of public grants to the State's police power
has been previously pointed out. That purely private contracts should be
in any stronger situation in this respect would obviously be anomalous
in the extreme. In point of fact, the ability of private parties to
curtail governmental authority by the easy devise of contracting with
one another is, with an exception to be noted, even less than that of
the State to tie its own hands by contracting away its own powers. So,
when it was contended in an early Pennsylvania case, than an act
prohibiting the issuance of notes by unincorporated banking associations
was violative of the obligation of contracts clause because of its
effect upon certain existing contracts of members of such associations,
the State Supreme Court answered: "But it is said, that the members had
formed a contract _between themselves_, which would be dissolved by the
stoppage of their business; and what then? Is that such a violation of
contracts as is prohibited by the Constitution of the United States?
Consider to what such a construction would lead. Let us suppose, that in
one of the States there is no law against gaming, cock-fighting,
horse-racing or public masquerades, and that companies should be formed
for the purpose of carrying on these practices; * * *" Would the
legislature then be powerless to prohibit them? The answer returned, of
course, was no.[1712]

The prevailing doctrine is stated by the Supreme Court of the United
States in the following words: "It is the settled law of this court that
the interdiction of statutes impairing the obligation of contracts does
not prevent the State from exercising such powers as are vested in it
for the promotion of the common weal, or are necessary for the general
good of the public, though contracts previously entered into between
individuals may thereby