During March 2023, two large banks in the United States with significant exposure to the technology sector or to cryptocurrency failed, while another entered liquidation under financial distress.^[1][2]

The first bank, cryptocurrency-focused Silvergate Bank, announced it would wind down on March 8 due to losses suffered in its loan portfolio. Two days later, upon announcement of an attempt to raise capital, a bank run occurred at Silicon Valley Bank, causing it to collapse and be seized by regulators that day. Signature Bank, a bank that frequently did business with cryptocurrency firms, was closed by regulators two days later on March 12, with regulators citing systemic risks. The collapses of Silicon Valley Bank and Signature Bank were the second- and third-largest bank failures in the history of the United States, smaller only than the 2008 collapse of Washington Mutual during the then-ongoing financial crisis.

In response to banking failures, the Federal Reserve Board of Governors, Federal Deposit Insurance Corporation, and the United States Department of the Treasury announced in a joint communiqué that extraordinary measures would be taken to ensure that all deposits at Silicon Valley Bank and Signature Bank would be honored, with the Federal Reserve separately announcing the creation of the Bank Term Funding Program (BTFP), a program that would offer loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.

Silvergate Bank

Silvergate Bank is a California-based bank that began operations in 1988 as a savings and loan association. In the 2010s, the bank began to provide banking services to players within the cryptocurrency market. The bank sought regulatory approval in the summer of 2014 to do business with cryptocurrency firms. The bank expanded the assets on its balance sheet significantly—doubling its assets in its 2017 fiscal year to $1.9 billion—by servicing cryptocurrency exchanges and other companies who were involved in the cryptocurrency business that could not secure financing from larger, more conservative banks. Despite its rapid growth, the company maintained a small physical footprint; in 2018, the bank had only three branches, all located in Southern California.[10] By the fourth quarter of 2022, 90% of the bank’s deposits had become cryptocurrency-related, with over $1 billion in deposits being tied to Sam Bankman-Fried.

In addition to providing traditional banking services to its cryptocurrency clients, the bank operated as a clearinghouse for its banking clients; it involved itself in the business of resolving and settling transactions in real-time through its proprietary Silvergate Exchange Network. The network allowed a client to send payments in U.S. dollars from its accounts with Silvergate to those of another client of the bank without requiring an interbank wire transfer. Due to the relative quickness of the transaction settling achieved on Silvergate’s network, a large number of cryptocurrency companies set up accounts with the bank to take advantage of Silvergate’s quick transaction settling times.

Silicon Valley Bank

Silicon Valley Bank (SVB) was a commercial bank founded in 1983 and headquartered in Santa Clara, California. Until its collapse, SVB was the 16th largest bank in the United States and was heavily skewed toward serving companies and individuals from the technology industry. Nearly half of U.S. venture capital-backed healthcare and technology companies were financed by SVB. Companies such as Airbnb, Cisco, Fitbit, Pinterest, and Block, Inc. have been clients of the bank. In addition to financing venture-backed companies, SVB was well known as a source of private banking, personal credit lines, and mortgages to tech entrepreneurs. According to the FDIC, it had $209 billion in assets at the end of 2022.

Signature Bank

Signature Bank was a New York City-based bank founded in 2001 The bank began as a subsidiary of Bank Hapoalim that took on clients with assets of around $250,000, lending to small businesses based in New York City and in the surrounding metropolitan area. The bank provided financing within the multifamily residential rental housing market in the New York metropolitan area beginning in 2007, though it began to reduce its exposure to the market during the 2010s. By 2019, just over four-tenths of the value of the bank’s loans were made to multifamily homeowners in the New York metropolitan area, comprising $15.8 billion of the bank’s then-$38.9 billion in net loans.

Beginning in 2018, Signature Bank began to court customers in the cryptocurrency industry, securing hires that were experienced in the area with the goal of moving away from its dependence on real estate lending. The quantity of deposits held at the bank expanded significantly, with deposits increasing from about $36.3 billion at the end of the 2018 fiscal year to $104 billion by August 2022; that month, over one-quarter of the bank’s deposits held were those of cryptocurrency companies.Its cryptocurrency-sector clients included large cryptocurrency exchange operators, such as Celsius Network and Binance. By early 2023, Signature Bank had become the second largest provider of banking services to the cryptocurrency industry—second only to Silvergate Bank.

In addition to providing traditional banking services to cryptocurrency clients, Signature Bank opened a proprietary payment network for use among its cryptocurrency clients. The payment network, Signet, had opened in 2019 for approved clients, and allowed the real-time gross settlement of fund transfers through the blockchain without third parties or transaction fees. By the conclusion of 2020, Signature Bank had 740 clients using Signet. The network continued to expand during the in the following years; both Coinbase and the TrueUSD dollar-pegged stablecoin had become integrated with Signet in 2022 and 2021, respectively.

Bank collapses

Silvergate Bank

Main article: Silvergate Bank § Liquidation

Despite conducting the majority of its business with cryptocurrency companies, Silvergate’s investment portfolio was fairly conservative; the company took large positions in mortgage-backed securities as well as U.S. bonds. These sorts of assets, while reliable to be paid-in-full through their maturity date, carry risks associated with changes in interest rates; there is an inverse relationship between the mark-to-market value of a bond and the bond’s yield. As interest rates shot up during the 2021–2023 inflation surge, the mark-to-market price of these securities decreased significantly. When these losses are unrealized, this does not typically cause the bank to cease operating, as the bank will receive payment-in-full under the original terms of the bond. However, if forced to sell these securities at a lower mark-to-market price, the losses on these types of assets become realized, posing significant risks to the bank’s ability to continue to operate.

Silvergate was hit with a bank run in the wake of the bankruptcy of FTX; deposits from cryptocurrency-related firms dropped by 68% at the bank, with the bank facing requests from its clients to withdraw upwards of $8 billion in deposits. As Silvergate did not have enough cash-on-hand to satisfy the deposit withdrawals, the bank began to sell its assets at a steep loss; the company realized a loss of $718 million on withdrawal-related asset sales in the fourth fiscal quarter of 2022 alone. The bank, in a public statement, said that it was solvent at the end of Q4 2022, with an asset sheet containing assets of $4.6 billion in cash and $5.6 billion in liquid debt securities, with $3.8 billion in deposit obligations. Silvergate faced tight financial constraints in the coming months, selling assets at a loss and borrowing $3.6 billion from the Federal Home Loan Bank of San Francisco to maintain its liquidity. Silvergate wrote in a regulatory filing on March 1 that the bank risked losing its status as a well-capitalized bank and that the bank faced risks relating to its ability to continue operating.

Facing continued losses from sales of securities at mark-to-market price, Silvergate released a public notice on March 8, 2023, saying that it would undergo voluntary liquidation and would return all deposited funds to their respective owners.

Silicon Valley Bank

Main article: Collapse of Silicon Valley Bank

Silicon Valley Bank recorded an increase of its deposit holdings during the COVID-19 pandemic, when the tech sector experienced a period of growth. In 2021, it purchased long-term Treasury bonds to capitalize on the increased deposits. However, the current market value of these bonds decreased as the Federal Reserve raised interest rates to curb the 2021–2023 inflation surge.[33] Higher interest rates also raised borrowing costs throughout the economy and some Silicon Valley Bank clients started pulling money out to meet their liquidity needs. To raise cash to pay withdrawals by its depositors, SVB announced on March 8 that it had sold over US$21 billion worth of securities, borrowed US$15 billion, and would hold an emergency sale of some of its treasury stock to raise US$2.25 billion. The announcement, coupled with warnings from prominent Silicon Valley investors, caused a bank run as customers withdrew funds totaling US$42 billion by the following day.

On March 10, 2023, as a result of the bank run, the California Department of Financial Protection and Innovation (DFPI) seized SVB and placed it under the receivership of the Federal Deposit Insurance Corporation (FDIC). The FDIC established a deposit insurance national bank, the Deposit Insurance National Bank of Santa Clara, to service insured deposits and announced that it would start paying dividends for uninsured deposits the following week; the dividends were funded by proceeds from the sale of SVB assets. Some 89 percent of the bank’s US$172 billion in deposit liabilities exceeded the maximum insured by the FDIC. Two days after the failure, the FDIC received exceptional authority from the Treasury and announced jointly with other agencies that all depositors would have full access to their funds the next morning. An initial auction of Silicon Valley Bank assets on the same day attracted a single bid after PNC Financial Services and RBC Bank backed away from making offers. The FDIC rejected this offer and plans to hold a second auction to attract bids from major banks, now that the bank’s systemic risk designation allows the FDIC to insure all deposits. The bank was later reopened as a newly organized bridge bank, Silicon Valley Bridge Bank, N. A.

Signature Bank

Main article: Signature Bank § Collapse

Reporters field questions to Signature Bank customers exiting a New York location.

As cryptocurrency prices dropped significantly in 2022, particularly so after the collapse of cryptocurrency exchange FTX, depositors in Signature Bank began to withdraw deposits in the tune of billions of dollars; by the end of 2022, deposits in the bank totaled around $88.6 billion, down from $106.1 billion in deposits held at the beginning of the year—a time when over one-quarter of deposits were held by digital asset-related entities. Towards the end of 2022, Signature Bank cut business ties with cryptocurrency exchange Binance, seeking to reduce the bank’s exposure to risk associated with the cryptocurrency market. According to Signature Bank board member Barney Frank, Signature Bank was hit with a multi-billion dollar bank run on Friday, March 10, with depositors expressing concern about cryptocurrency-related risks affecting the bank. Investor confidence in the bank was also badly shaken, and the bank’s stock declined by 23% on that Friday—the day on which Silicon Valley bank collapsed—marking the then-largest single-day decline of the Signature Bank’s value in its 22-year history.

On 12 March 2023, two days after the collapse of Silicon Valley Bank, Signature Bank was closed by regulators from the New York State Department of Financial Services in what is the third-biggest banking collapse in U.S. history. The bank proved unable to close a sale or otherwise bolster its finances before markets opened on Monday morning in order to protect its assets after customers began withdrawing their deposits in favor of bigger institutions, and shareholders of the bank lost all invested funds. The bank was placed under receivership by the FDIC, which immediately established Signature Bridge Bank, N.A. to operate its marketed assets to bidders.

Signature Bank had been under multiple federal investigations that were ongoing at the time of the bank’s collapse regarding the rigor of its anti-money laundering measures. The U.S. Department of Justice had opened a criminal probe into whether the firm was performing due diligence when opening up new accounts and whether it was doing enough to detect and report potential criminal activity by its clients. The U.S. Securities and Exchange Commission had opened a separate, related civil probe.

Federal response

Bank Term Funding Program

In response to the bank failures of March, the U.S. Federal Government took extraordinary measures to mitigate fallout across the banking sector. On March 12, Federal Reserve created the Bank Term Funding Program (BTFP), an emergency lending program providing loans of up to one year in length to banks, savings associations, credit unions, and other eligible depository institutions that pledge U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral. The program is designed to provide liquidity to financial institutions, following the collapse of Silicon Valley Bank and other bank failures, and to reduce the risks associated with current unrealized losses in the U.S. banking system that totaled over $600 billion at the time of the program’s launch. Funded through the Deposit Insurance Fund,[50] the program offers loans of up to one yearto eligible borrowers who pledge as collateral certain types of securities including U.S. Treasuries, agency debt, and mortgage-backed securities.[51] The collateral will be valued at par instead of open-market value, so a bank can borrow on asset values that have not been impaired by a series of interest rate hikes since 2022. The Federal Reserve also eased conditions at its discount window. The Department of the Treasury will make available up to $25 billion from its Exchange Stabilization Fund as a backstop for the program.

In addition to working with their counterparts at the FDIC and U.S. Treasury to provide liquidity to banks through the BTFP, the Federal Reserve has begun to internally discuss implementing stricter capital reserve and liquidity requirements for banks with between $100 billion and $250 billion in assets on their balance sheets. A review of regulations affecting regional banks has been ongoing since 2022, as Federal Reserve vice chairman Michael Barr and other officials in the Biden Administration had become increasingly concerned about the risk posed to the financial system by the rapidly increasing size of regional banks.

Investigations

The collapse of Silicon Valley Bank itself has also spurred federal investigations from the U.S. Securities and Exchange Commission as well as the United States Department of Justice. Within the scope of both probes is the sales of stock made by senior officers of Silicon Valley Bank shortly before the bank failed, while the SEC’s investigation also includes a review of past financial- and other risk-related disclosures made by Silicon Valley Bank to evaluate their accuracy and completeness.

Broader impact

Silvergate’s public collapse soon spurred a bank run affecting banks that, like Silvergate, took deposits that were largely uninsured. Intense scrutiny and pressure was applied to these banks, like Signature Bank (which failed on Sunday, March 12) and First Republic Bank.[56] Depositors began to move money en masse from smaller banks to larger banks. On Monday, March 13, shares of regional banks fell. Shares of First Republic Bank fell by 67%, and on 16 March, it received a $30 billion lifeline in form of deposits from a number of major US banks on top of a $70 billion financing facility provided by JP Morgan. Western Alliance Bancorporation share price fell 82% and PacWest Bancorp was down 52% before their trading was halted. Moody’s downgraded its outlook on the U.S. banking system to negative, citing what it described as “rapid deterioration” of the sector’s financial footing. It also downgraded the credit ratings of several regional banks, including Western Alliance, First Republic, Intrust Bank, Comerica, UMB Financial Corporation, and Zions Bancorporation.

U.S. President Joe Biden made a statement about the bank failures on March 13, and asserted that government intervention was not a bailout and that the banking system was stable.

The bank failures have led to speculation that the Federal Reserve will pause or halt rate hikes. Beginning on March 13, traders began modifying their strategies in the expectation that fewer hikes than previously expected will occur. Some financial experts suggested that the BTFP, combined with a recent practice of finding buyers who would cover all deposits, may have effectively removed the FDIC’s $250,000 deposit insurance limit. However, Treasury Secretary Janet Yellen clarified that any guarantee beyond that limit would need the approval of the Biden administration and federal regulators.

The bank failures and resulting pressures on other regional banks are expected to reduce available financing in the commercial real estate market and further slow commercial property development.

There were multiple banks that also ran into liquidity issues but did not fail, such as First Republic Bank and Credit Suisse. Unlike the first three banks, these banks faced trouble despite not primarily dealing in the technology or cryptocurrency sectors.

The major obscenity decision in Roth v. United States, 354 U.S. 476 (1957), provided the basis for an important test that the Supreme Court used to determine whether material was obscene or constitutionally protected.

Court had struggled to define obscenity

The Court had long held that there were a few types of expression that merited no First Amendment protection. In this category the Court placed obscenity, libel, and “fighting words.” The problem for the Court and the legislatures that might try to prohibit these forms of expression was the need to define what was obscene or libelous. Roth was the decision that started the Court on the path to defining what constituted obscene material.

Samuel Roth had been indicted for violation of a federal obscenity statute. Roth was charged with sending obscene materials through the mail. A jury found him guilty.

Restrictive Hicklin test made no provision for social, artistic value of obscene material

Prior to this case, the Supreme Court had been using a precedent from a British case, Regina v. Hicklin (1868). Under the Hicklin test, if any part of the material was considered obscene, then the publication as a whole was considered obscene. There was no provision for the potential social or artistic value of the material. That standard was very restrictive and left a wide range of materials unprotected.

Roth case resulted in new obscenity test based on community standards

Justice William J. Brennan Jr. fashioned the test that ultimately would become known as the Roth or Memoirs test, based on a subsequent case that built on Memoirs v. Massachusetts (1966).

The target now was the average person, applying contemporary community standards. Eventually, the community standards became national rather than local. An important component of the new test was that the material, taken as a whole, must be considered obscene.

In subsequent decisions, Jacobellis v. Ohio (1964) and Memoirs, the Court refined the test by adding that to be considered obscene the material must be utterly without redeeming social value.

Roth ruling offered broader protection for free expression in face of obscenity laws

Although the decision would pave the way for a broader protection of free expression, the opinion met with considerable resistance. Certainly those who thought that it was too permissive a standard objected. But there was opposition from others, like Justice William O. Douglas, who argued that Brennan’s attempt to try to delineate a distinction between obscene and protected material would boomerang.

Douglas’s prophecy would turn out to be correct. Douglas, much more of an absolutist on First Amendment issues, felt everything should be protected. Brennan would migrate closer to that stance as it became clear his initial position was untenable. In his dissent in Paris Adult Theatre I v. Slaton (1973), Brennan changed his position, believing that obscenity laws as applied to consenting adults were simply too vague to satisfy First Amendment concerns.

Court became increasingly fractured in cases involving obscenity and the First Amendment

The impact of the Roth/Memoirs test was pronounced on a number of levels.

• First, it became very difficult to get a conviction for obscenity.
• Second, the Supreme Court was forced to micromanage the issue and had cartons of movies, books, and magazines to review.
• Finally, the Court became increasingly fractured over the issue to the point that there was seldom a majority opinion. In most instances, justices would engage in dissenting and concurring opinions that would muddy the already confusing issue.

The Court had to add a variety of exceptions to the test to protect children and to punish those whose exploitation of such material was only for pandering to the basest interests.

Roth test later overturned

Ultimately, the Court would effectively overturn the Roth/Memoirs test in Miller v. California (1973) by removing the “utterly without redeeming social value” prong and changing the community standards to the local level.

This article was originally written in 2009. Richard L. Pacelle, Jr. is professor and department head in Political Science at the University of Tennessee. Pacelle’s primary research focus is the Supreme Court. His research includes concerns with policy evolution particularly regarding the First Amendment and the role of policy entrepreneurs in the judiciary, Supreme Court agenda building and decision-making, and inter-branch relations.

Brennan attempted to determine what categorized obscene expression

Brennan also participated in decisions that attempted to determine what should be categorized as obscene expression, which is not protected by the First Amendment. The line separating obscene from protected speech is difficult to draw, however. Brennan wrote the majority opinion in Roth v. United States (1957), in which the Court defined obscenity as “material which deals with sex in a manner appealing to the prurient interest.” This test would be met if “to the average person, applying contemporary standards, the dominant theme of the material taken as a whole appeals to prurient interests.” Nine years later, Brennan wrote in Memoirs v. Massachusetts (1966) that obscenity was material “with no redeeming social value.”

By 1973 Brennan had decided that it was impossible to construct a workable definition. He expressed that view in his dissent in Paris Adult Theatre I v. Slaton (1973): “No one definition, no matter how precisely or narrowly drawn, can possibly suffice for all situations, or carve out fully suppressible expression from all media without also creating a substantial risk of encroachment upon the guarantees of the Due Process Clause and the First Amendment.” He noted that governments could prevent children and nonconsenting adults from being exposed to certain materials but could not completely ban the materials.

Brennan also dissented in Hazelwood School District v. Kuhlmeier (1988), when the Court approved a principal’s censorship of a student newspaper. Traditionally the Court had held that freedom of the press prohibited repressing expression before it was printed. Brennan wrote that because students “do not shed their constitutional rights to freedom of speech or expression at the schoolhouse gate,” the Court’s decision taught the wrong civics lesson.

Brennan’s opinion on flag burning was one of his most significant

Among Brennan’s last and most significant opinions on free expression was the majority decision in Texas v. Johnson (1989). Gregory Lee Johnson had burned an American flag in protest at the 1984 Republican National Convention. Although no one was injured or threatened by the demonstration, Johnson was charged under a Texas criminal statute for desecrating a venerated object. The Court determined that Johnson’s act was “expressive conduct” intended to convey a political message. Brennan wrote, “If there is a bedrock principle underlying the First Amendment, it is that the Government may not prohibit the expression of an idea simply because society finds the idea itself offensive or disagreeable.” The protection of the freedom to express unpopular ideas, symbolized by burning the flag, was more important than protecting the “cherished emblem.”

The extremely unpopular Johnson decision led to protests, attempts to amend the Constitution, and the enactment of a federal law prohibiting flag desecration. In another opinion written by Brennan, United States v. Eichman (1990), the Court found the federal statute to be just as unconstitutional as the Texas law.

Brennan supported a wall of separation between church and state

Brennan consistently supported a high wall of separation between church and state. He wrote an important concurrence in Abington School District v. Schempp (1963), finding mandatory Bible reading in public schools unconstitutional. He noted that even if such practices were acceptable at the time the Constitution was written, the educational landscape in the mid-twentieth century was significantly different. For example, education had become the responsibility of the government rather than the private schools the founders knew. In addition, the religious beliefs of the U.S. population had become vastly more diverse. Finally, he believed that public schools could best serve their civic functions if they were free of divisive or parochial concerns.

Brennan’s view differed from that of the majority of his colleagues on the Court in Marsh v. Chambers (1983), in which the Court upheld prayers in legislative chambers. He asserted that such prayers failed the Lemon test, devised by the Court in 1971 to determine whether a policy violated the constitutional ban on the establishment of religion. Under Lemon, to be constitutional a governmental action must have a secular purpose, must neither advance nor inhibit religion, and must not foster “an excessive government entanglement with religion.”

Brennan believed the Court majority ignored the Lemon test in Lynch v. Donnelly (1984), when the Court ruled that Pawtucket, Rhode Island’s display of a life-sized nativity scene in a public park paid for with public funds was constitutional. By contrast, Brennan found that the “inescapable effect of the creche will be to remind the average observer of the religious roots of the celebration he is witnessing and to call to mind the scriptural message that the nativity symbolizes.”

Brennan supported the free exercise clause

Brennan also delivered the Court’s opinion in Sherbert v. Verner (1963), an important free exercise case. Adeil Sherbert, a Seventh-Day Adventist, had been fired and denied unemployment benefits after she refused to work on Saturday, the Sabbath in her religion. Brennan wrote that she was being forced to choose either to follow the teachings of her faith and give up benefits or to abandon her religious beliefs to accept work. Ruling that Sherbert did qualify for state unemployment benefits, Brennan stated, “Governmental imposition of such a choice puts the same kind of burden upon the free exercise of religion as would a fine imposed against appellant for her Saturday worship.”

In another free exercise case, Brennan dissented in Goldman v. Weinberger (1986), arguing that an Air Force officer who was an Orthodox Jew should be allowed to wear a yarmulke with his uniform. Congress later enacted a law that reflected Brennan’s position.

He also dissented in O’Lone v. Estate of Shabazz (1987), which concerned Muslim inmates’ complaints that prison rules prevented them from participating in Friday prayers, their most important weekly religious ritual. Although the majority of the Court deferred to the prison administration’s claim that it would be disruptive to interrupt work to permit Friday prayers, Brennan rejected that position. He likened the situation to preventing Catholic prisoners from attending Sunday Mass. In both cases, inmates would be “foreclosed from participating in the core ceremony that reflects their membership in a religious community.”

Brennan wrote a landmark libel decision

Writing for the majority in New York Times Co. v. Sullivan (1964), Brennan declared that public officials may not sue news media for slander or libel unless the injurious statement is made with actual malice or reckless disregard for the truth. The decision struck down an Alabama law under which the Montgomery city commissioner had sued the New York Times for libel after the paper published an advertisement accusing the city of unleashing “an unprecedented wave of terror” against civil rights demonstrators. The commissioner claimed that the advertisement contained minor factual errors and that, although he had suffered no actual loss, he had been libeled. Alabama courts awarded him an historic $500,000 in damages. Had the Supreme Court upheld the Alabama libel judgment, newspapers would be reluctant to print items critical of public officials for fear that minor factual errors would make them vulnerable to lawsuits.

Brennan noted that the nation’s interest in “uninhibited, robust, and wide-open” debate on public issues might include “vehement, caustic, and sometimes unpleasantly sharp attacks on public officials.” The Constitution requires those officials to endure such criticism unless the statements were made with “actual malice — with knowledge that it was false or with reckless disregard of whether it was false or not.” While Sullivan reduced public officials’ protection from libelous statements, the Court believed that free discussion must include the freedom to criticize those in power.

By Richard L. Pacelle Jr. cited https://mtsu.edu/first-amendment/article/414/roth-v-united-states

Legal Principle at Issue

Whether the New York Times and the Washington Post could be enjoined from publishing excerpts from a classified Defense Department study of U.S. involvement in the Indochina War. More broadly, whether the First Amendment protects the publication of “classified information.”

Action

Reversed and remanded. Petitioning party received a favorable disposition.

Facts/Syllabus

The Nixon administration attempted to stop The New York Times and Washington Post from publishing materials pertaining to a classified Defense Department report regarding United States action in Vietnam. The Supreme Court found that prior restraint was unjustified because publication would not cause immediate harm to American forces.

Importance of Case

The Court reinforced the “heavy presumption against” prior restraint principle.

Often referred to as the “Pentagon Papers” case, the landmark Supreme Court decision in New York Times Co. v. United States, 403 U.S. 713 (1971),

defended the First Amendment right of free press against prior restraint by the government.

McNamara commissioned a secret Vietnam War study

In 1967 then Secretary of Defense Robert McNamara commissioned a secret government study on American involvement in Vietnam. When completed in 1968, the project comprised 47 volumes containing more than 7,000 pages. The work was labeled classified, and only 15 copies were made.

In early 1971 Daniel Ellsberg, a RAND Corporation employee who had worked on the project, secretly made copies of the documents and passed them to reporters for the New York Times. On June 13, 1971, after several months of review, the Times began to publish these so-called “Pentagon Papers.”

After the first three installments were published, the Nixon administration, citing national security concerns, obtained a restraining order barring further publication of the Papers. When the Second Circuit Court of Appeals affirmed the order, the Times made an emergency appeal to the Supreme Court, which agreed to hear the case the next day (June 26). The Court issued its opinions on June 30; in all, the entire legal process had taken only 15 days.

Supreme Court allowed Times to continue publication

In a 6-3 decision, the Court dissolved the restraining order and allowed the Times to continue with publication. Citing Bantam Books v. Sullivan (1963), Near v. Minnesota (1931), and Organization for a Better Austin v. Keefe (1971), the three-paragraph per curiam lead opinion noted that “any system of prior restraints comes to this Court bearing a heavy presumption against its constitutional validity” and “the Government thus carries a heavy burden of showing justification for the imposition of such a restraint.” In this case, the government had failed to carry that burden.

Justices differed on reasoning behind opinion

When addressing the question of why the government had failed to carry its burden, however, the Court’s majority splintered into six concurring opinions:

• On one extreme, Justice Hugo L. Black argued that “only a free and unrestrained press can effectively expose deception in government” and rejected any prior restraints on the press.
• Justice Byron R. White, although specifically rejecting the idea that “in no circumstances would the First Amendment permit an injunction against publishing information about government plans or operations,” refused to grant censorship authority to the executive branch without the authorization of Congress.
• Justice William J. Brennan Jr., referring to Justice Oliver Wendell Holmes’s clear and present danger test, concluded that prior censorship would be permissible in certain circumstances, but the vague, nonspecific claims of harm to national security made in this case were insufficient to justify prior restraint.
• Justice William O. Douglas generally agreed with Justice Black and also argued that the legislation the government used to support its case, the Espionage Act of 1917, did not support the government’s case.
• Justices Potter Stewart and Thurgood Marshall argued separately that in the absence of specific guidance by Congress, the Court should not grant the executive broad censorship power.

Dissenters thought case had moved too quickly

The dissenters — Chief Justice Warren E. Burger and Justices Harry A. Blackmun and John Marshall Harlan II — each filed separate opinions. They contended (in greater or lesser detail) that the case had been resolved far too quickly to consider and resolve fully the critically important legal issues at stake, especially the needs and prerogatives of the executive.

Case is regarded as a victory for the free press, although an ambiguous one

New York Times Co. v United States generally is regarded as a seminal victory for the free press in the United States. The per curiam opinion clearly states that in any situation in which the government wishes to resort to censorship, it faces a difficult task in convincing the courts to issue the necessary legal orders.

Despite this, many First Amendment advocates have criticized the decision. Although this case supports the right to publish, its impact is diluted by the failure of the Court to produce a clearly reasoned majority opinion. The Court’s fractured majority fails to say prior restraint may never be imposed; may be imposed only if the threat to national security can be proven to be real, serious, and immediate; or may be imposed if Congress provides sufficiently clear authorization and guidelines. Thus, far from being an unambiguous declaration of support for a free press, the decision leaves open the possibility of government censorship without specifying the conditions under which the First Amendment might permit it.

This article was originally published in 2009. Stephen Robertson is an Adjunct Assistant Professor of Political Science and International Relations at Middle Tennessee State University, where he has taught for about 25 years. He has always had a deep interest in constitutional law and the First Amendment and explores these topics in his courses on American government and women’s rights under American law. 

cited https://mtsu.edu/first-amendment/article/505/new-york-times-co-v-united-states