USA > Alabama > The formative period in Alabama, 1815-1828 > Part 9
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The difficult problem was to obtain sufficient capital for investment in banking enterprises. As such institutions are conducted today, with solid value behind their paper dollars, they do not add greatly to the capital of the community, being merely organizations for its efficient use. If this had been the case in 1820, they would not have met the requirements of the Southwest. A multiplication of capital was expected of them-the creation of money where none existed before. Yet promising as were the prospects of these money-making ma- chines, men would have invested their funds in lands rather than in banks had they not expected to borrow more than they put in-so great was the lure of cotton in the eyes of the planting community. This situation must be understood be- fore the bank question can be made clear.
The charter of the Merchants' and Planters' Bank of Hunts- ville was granted by the legislature of Mississippi Territory in 1816, while the Mobile and St. Stephens banks were grant- ed theirs by the legislature of Alabama Territory in 1818, yet the provisions of all three documents were very similar. The capital of each institution was limited to half a million dol- lars, a minority of which was reserved to the territorial gov- ernment in each case: no interest over six per cent. might be charged; and the issne of notes was not to exceed three times
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THE FORMATIVE PERIOD IN ALABAMA
the amount of capital actually paid in.1 This last provision indicates that the authorities were more solicitous for a cur- rency than they were for financial safety. They evidently expected the banks to be money-manufacturing institutions, and their hopes were not disappointed.
In September, 1818, the Tombeckbee Bank, of St. Stephens, went into operation with only $7,700 of its stock subscribed for. Israel Pickens, a lawyer of St. Stephens, and register of the land office there, was elected president; and George S. Gaines, for a long time factor for the Choctaw Indians, was chosen secretary." In January, 1820, Pickens wrote to the Secretary of the Treasury that the Mobile Bank had but a nominal existence. He stated that that institution, which had been chartered in 1818, had had $70,000 subscribed to its cap- ital, and that one-eighth of this, or about $8,000 had been paid in specie. An agent was sent North with a part of this sum to secure the materials for putting the bank in opera- tion, but while he was gone, the bank's balance was lost by robbery. Now the agents of the Mobile institution were sup- posed to be drawing upon the Tombeckbee Bank for specie with which to put their corporation on its feet.3
Meantime, the Huntsville bank, being an older institution, - was doing business in a larger way. In August, 1819, it had a capital of $164,000 and had discounted to the extent of $408,000.+ The Secretary of the Treasury wrote to Leroy Pope, president of this bank," as well as to the president of the Tombeckbee Bank," and expostulated on the reckless way in which their affairs were being conducted; but no practical reform was effected. Demand for accommodation was great, capital was limited, and the temptation to profit was too strong to be withstood.
The first evident result of this situation was the suspen- sion of specie payments by the Huntsville bank in 1820. It has already been explained how the suspension of payments by the Tennessee banks in 1819 was followed by a drain of specie from the Huntsville bank, which was too heavy for an institution whose circulation far exceeded its specie reserve .?
1 Toulmin, Alabama Code of 1823.
" American State Papers, Finance, III. 767-768.
" American State Papers, Finance, IV, 740.
4 Ibid., III, 778-782.
5 Ibid., Finannce, III. 764.
6 Ibid., Finance, III. 168.
: Ibid., Finance. III. 765-766.
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THE BANK QUESTION
It was believed, however, that the bank was sound, and its notes continued to circulate on a par with those of the Ten- nessee banks, and the two together made up the currency of northern Alabama.
On account of the lack of commercial relations between the two sections of the State, this financial trouble did not com- municate itself to the south, where the two local banks con- tinued to pay specie and where the bulk of the circulation con- sisted of notes of the solvent banks of Georgia. The equilib- rium of Alabama would hardly have been disturbed had not the situation developed a political as well as a commercial phase. As long as the Huntsville bank paid specie on its notes, they were, of course received by the State in payment of taxes. But when the bank suspended payments, the legis- lature refused to debar its notes from acceptance." The re- sult of this was that all who could procure the depreciated notes turned them in to the Treasury instead of sound funds, and the entire community suffered by the situation. In ad- dition to this, the legislature, during the same session, emit- ted an issue of treasury notes which were made payable in Huntsville currency. The natural result was that they at once fell to a par with the Huntsville notes, and the State lost the difference.
Though the legislature could hardly have misunderstood the inevitable result of the course which it took in this matter. the Governor defended its action by arguing that the people of northern Alabama could not secure other funds than the notes of the Huntsville bank, and that it would be unjust to re- fuse to let them pay their taxes with this money." This gover- nor was not the William Wyatt Bibb who had presided over the Territory of Alabama and had been elected to the chief of- fice under the new State government. He had died in 1820 from the effects of a fall from his horse, and was succeeded by his brother. Thomas Bibb, president of the State Senate. 10 It is interesting to note in this connection that Thomas Bibb was a director of the Huntsville bank in 1823.11
This confusion in financial affairs brought out more strong- ly than ever the desire for a State bank. The three private banks in operation had been chartered under territorial gov-
8 Cahawba Press, Oct. 15, 1821.
9 Alabama, Senate Journal, 1821, 8-9.
10 Pickett, History o' Alabama, 666-665.
11 Huntsville Demoeret, Dec. 16, 1823.
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THE FORMATIVE PERIOD IN ALABAMA
ernment and there was no intention of chartering any new ones under the State. The constitution provided for a bank of the Commonwealth, and efforts were soon on foot to found such an institution.
The first step in this direction was taken by the legislature in 1820. Provision was made for a State bank with a capital of two million dollars. Half of the stock was to be reserved to the State and the government was to choose the president and six of the twelve directors, thus controlling the institu- tion.12 Books were opened for public subscription, but no capital was found for investment in such a bank, and the scheme fell through.1;
But the idea was not abandoned. In 1821 Israel Pickens succeeded Thomas Bibb as Governor. Pickens came to Ala- bama from North Carolina in 1817. having served his native State in Congress since 1811. 'It has been mentioned that he took up his residence at St. Stephens and became president of the Tombeckbee Bank. Before Bibb retired from office, com- missioners had been appointed by the legislature to negotiate with the private banks and to discover on what terms they would be willing to become branches of a State bank.1+ The constitution had provided that such an arrangement might be made, and, since other capital did not seem to be obtainable, the idea of founding a State institution through the instru- mentality of those already existing appealed to many. A bill for carrying this plan into effect was passed by the legislature, but was vetoed by Governor Pickens at the inception of his term of office.15 If allowed to become law, this measure would have committed the credit of the State into the hands of a few bankers without any careful scrutiny of their affairs. Considering the way in which the private banks of Alabama had been conducted, such a move would have been dangerous, to say the least. There were many who praised Pickens for stepping in to prevent it and there were many who blamed him for his action.
The political division in Alabama had previously been due to the rivalry between the north and the south of the State, or to the antagonism which grew up against those Georgia men who, through the friendship of William H. Crawford, en-
12 Toulmin, Alabama Code of 1823.
13 Alabama Republican, June 29. 1821.
1: Alabama, Senate Journal. 1821, 8-9.
15 Alabama. House Journal. 1821. 227.
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THE BANK QUESTION
joyed a practical monopoly of the Federal patronage. Now the bank question was injected into the midst of the situation.
Though Pickens was not a Georgia man, his being made register of the land office at St. Stephens would indicate that he was not at odds with them. It is significant that in 1819 he wrote a letter endorsing Dr. Henry Chambers, who was running against Col. John Crowell for the seat in the Lower House of Congress. 16 Dr. Chambers was from the Tennes- see Valley and represented the Georgia faction, while Crow- ell was from the southern part of the State and not a Georgia man. In 1821 it was Chambers who opposed Pickens for the governorship, but he was a weak candidate and carried only a few of the counties in his own section.17
No political issues seem to have been brought forward in this campaign. The question of the currency and the State bank was before the people and had been discussed at random, but no definite line of action had been proposed. Pickens' attitude on the subject does not appear to have been canvassed, but he no sooner took his stand than a general agitation be- gan.
The Huntsville bank had profited, or was thought to have profited, at the expense of the people of the State, and the capital of this institution was largely in the hands of men from Georgia. The feeling against the bank was added to the feeling against the Crawford faction, and those who shared these sentiments rose up to proclaim Pickens the man who had saved his State from the hands of the spoilers.18
The veto of the charter was followed by an attack on the Huntsville bank. Its notes were debarred from acceptance in payment of debts to the State,19 and this, together with the failure of the prospect that the institution would become a branch of the State bank, led to a rapid decline in their value. In all this, the newspapers of the State, which were edited largely by Adams men, supported the act of the Governor, the Alabama Republican, of Huntsville, being a notable exception.
But when it came to the constructive side of Pickens' pro- gram, there was a greater difference of opinion. Private capital had failed to come to the support of the State man- aged bank in 1820, and the existing banks were not to be trust-
16 Cahawba Press, July 30, 1821.
17 Alabama House Journal, 1822, 25.
18 Cahawba Press, Feb. 4. 1822, April 27, 1822, May 25, 1822; St. Ste- phens Halcyon, Feb. 9. 1822.
19 Huntsville Democrat, July 20, 1824.
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THE FORMATIVE PERIOD IN ALABAMA
ed with the destinies of a public institution. There was but one other possible chance, and the Governor set his face in that di- rection : the State was to furnish its own capital and direct its own bank for the benefit of the people. For procuring the necessary funds, the State had but one recourse: the lands which had been granted to it by the National Government. It was proposed that the proceeds from the sale of these lands be invested in the bank and that six per cent. interest be paid on the funds and devoted to the purpose for which the original grants had been made. The management of the institution was to be in the hands of a president and board of directors chosen by the legislature.20
The bearing of such a proposition in a State where the ma- jority of the people were hard-pressed for money can easily be understood. Those who had some capital and a fairly in- telligent interest in economic affairs would oppose it. Those who had no capital, wanted cheap money, and knew little of business methods, would favor it with all the ardor of frontier democracy. In other words, here was the material for a po- litical cleavage along economical lines, but the Governor who gave the popular party its rallying-ground was not a Jackson man.
Discussion of the question went on with unabated earnest- ness, but without practical results, during the whole of Pick- ens' first term in office. The Alabama Republican, of Hunts- ville, showed an unmistakable leaning toward the private banks, while the Mobile papers contended for a commercial rather than a democratic institution. It was argued with reason that unless the bank was located at the center of trade, its notes would not circulate at par at any distance from the place where they were issued and could be redeemed.21 It was also questioned whether a bank would be efficiently adminis- tered under the auspices of the legislature. But the striking feature in the discussion was the appearance of a new paper in Huntsville called the Democrat, and edited by a man from Kentucky. In the fall of 1823 this publication suddenly came forward and announced itself the champion of "the peo- ple."22 The people had been without a leader, it said, and had suffered many things at the hands of the aristocrats. The
20 Alabama, Senate Journal, 1821, 27-34; House Journal, 1822, 9 et seq. 21 Alabama Republican, Aug. 24, 1821; Mobile Argus, Nov. 6, 1823; Mobile Advertiser, Dec. 15, 1823.
22 Alabama Republican, Oct. 17, 1823.
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THE BANK QUESTION
president of the Huntsville bank was accused of several kinds of rascality, and the administration of the corporation was condemned as a robbery of the poor. It was alleged that cot- ton had been shipped to New York, sold there for sound mon- ey and the proceeds brought back to Huntsville and exchanged by the bank for its own notes, which it took at a discount.23 This process was known as "shaving," and the term "shavers" was applied in opprobrium to those connected with the bank. Color is lent to charges of this kind by the fact that Pope, the president of the bank, who was also pension agent, paid pensioners in the depreciated notes of his institution, and was for this dismissed from his office by the Treasury De- partment.2+
Pickens was again candidate for the governorship in 1823. The bank question was made a leading issue of the campaign,25 and his second election was followed shortly by the incorpor- ation of the Bank of the State of Alabama. The capital was to be derived from the sale of lands donated to the State for the founding of a university, from the 1640 acres donated for a seat of government, from the three per cent. which was giv- en out of the sales of Federal lands for the purpose of con- structing roads within the State, and from several minor sources. The amount of university money which could be in- vested in this manner was limited to $100,000, and $100,000 additional was to be borrowed on the credit of the State. It was provided that six per cent. was to be paid on all funds, and the interest on the university fund, the "three per cent." fund, and other special funds, was to be devoted to the object for which the original donations had been made. The bank was to be founded at the seat of government, the president and directors were to be chosen by the legislature, and all dis- counts were to be apportioned among the several counties in proportion to their representation in the legislature.26 In the Senate, the vote on this measure was thirteen to six, those who were in the negative coming from the more commercial communities.27
23 Huntsville Democrat, Oct. 14, 1823; Alabama Republican, Dec. 12, 1823.
24 Huntsville Democrat, March 30, 1824; Franklin Enquirer, Apr. 7. 1824.
25 Alabama Republicar, June 13, 1823; Mobile Argus, July 22, 1823. 26 Act. of Dec. 20. 1823.
27 Alabama, Senate Journal, 1823, 65.
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THE FORMATIVE PERIOD IN ALABAMA
In July, 1824, the bank was organized with a capital slightly in excess of $200,000. half of which was derived from the re- sources of the State, and the other half of which was borrow- ed.28 Its discounts soon exceeded its capital, and its notes be- gan to constitute an appreciable part of the local circulation.
This addition to the amount of available money came at an opportune time, for several of the older issues of notes were shortly withdrawn from general use. The war against the Huntsville bank was carried on until 1825, when, on account of its failure to redeem a pledge to resume specie payments, its charter was annulled,29 and though all its notes were not withdrawn, they ceased to form any appreciable part of the circulating medium of the Tennessee Valley.
The Tennessee notes, which made up the greater part of the currency of this section, circulated in abundance as long as they were not redeemable, for Eastern merchants who collected debts in Tennessee funds found it profitable to pur- chase cotton with them rather than to take them into a part of the country where they were at a great discount.30 But in 1826, the Tennessee banks resumed specie payments and their notes ceased to circulate extensively in Alabama. 31 Thus the Huntsville region was left almost destitute of a currency, and "change tickets" appeared in great numbers in spite of the fact that their issuance was illegal.32 A planter who sold his cotton in New Orleans and received a draft on New York in payment could realize cash on his paper by exchanging it in Nashville for "post notes" issued by the firm of Yeatman and Woods. These notes were made payable in Philadelphia sev- eral months after date, which arrangement put them at a dis- count and kept them in circulation, so that they came to make up a large part of the currency in northern Alabama.33
In the meantime, the southern part of the State was having its troubles. In 1826 the United States Bank established a branch at Mobile in spite of the protests of those who believed ยท that it would be a menace to the Bank of Alabama.34 The
28 Alabama, Senate Journal, 1824, 7.
20 Alabama, Serate Journal, 1825; 10; Alabama Republican, Feb. 18, 1825.
30 Huntsville Democrat, April 27, 1824.
31 Southern Advocate, Sept. 8, 1826, Sept. 15, 1826.
32 Huntsville Democrat, March 9, 1827.
33 Southern Advocate, Jan. 5, 1827.
3+ Mobile Register, Nov. 18, 1826; Alabama Journal, May 6, 1826; Ala- bama, Senate Journal, 1826, 9.
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THE BANK QUESTION
branch bank refused to receive the notes of the local banks, but made an exception in the case of the Mobile bank provid- ed that it would redeem its obligations at frequent intervals. In turn, the Mobile bank, in order to protect itself, refused to receive the notes of the St. Stephens bank and of the State bank unless they would redeem them at frequent intervals in Mobile. This was necessary because there was a flow of cur- rency from the interior toward Mobile, but no counter-flow to balance the situation. The State bank made terms, but the St. Stephens bank refused to do so and seems to have damaged its credit by the stand which it took. At any rate, it closed its doors in 1827 and its notes ceased to pass as currency.35
By 1828 the capital of the State bank had increased to $409,000, and arrangements were made for borrowing an- other $100,000.36 In addition to this, permission had been obtained from Congress for selling the sixteenth section in each township which had been donated for the establishment of public schools, and provision was made by the legislature for investing the proceeds in the bank.37 The discounts of the institution were now more than $600,000; its notes in cir- culation amounted to $395,000; and its cash funds to $294,- 000.38 Here was an establishment of portentous possibilities.
35 Alabama, Senate Journal, 1827, 184-185; Huntsville Democrat, April 13, 1827; Mobile Register, June 25, 1828.
36 Act. of Jan. 12, 1828.
37 American State Papers, Lands, VI, 891; Southern Advocate, Feb. 1, 1828.
38 Alabama, Senate Journal, 1828, 18.
CHAPTER XI
POLITICS AND THE ELECTION OF 1824
Something has been said of the influence of Georgia on the early politics of Alabama. It remains to trace the conse- quences of the situation. The fraudulent Yazoo land specu- lation had split the former state into two factions; those who attacked and annulled the sales were led by General James Jackson, while the defenders adhered to General Elijah Clarke. In time the leadership of the Jackson party passed into the hands of William H. Crawford, while the opposition was main- tained by John Clarke, son of the General.1
Between these factions there were no standing political dif- ferences, but the rivalry between the leaders on each side was backed by certain economic and sectional differences be- . tween their respective followings. There had been two cen- ters of settlement in Georgia : one along the tide-water region where sea-island cotton formed the basis for a planting aristocracy ; and the other in the piedmont region where the Savannah River cut through the red hills and afforded trans- portation facilities for planters of upland cotton. The older settlements were those of the tide-water region, but after the Revolution, while upland cotton was coming into its own, num- erous emigrants had come from Virginia and North Carolina and established themselves in the piedmont section. Elbert County came to be a center of Virginia influence, while Wilkes County, just to the northward, came to be a center of North Carolina influence. A marked rivalry grew up between the two groups of settlers, both of which tended toward exclusive- ness.
James Jackson, and later, Troup, stood for the tide-water aristocracy, while Clarke represented the plain men of the frontier sections of the State. Crawford was a Virginian of the piedmont section, and his co-operation with Jackson brought about an alliance of the two groups which they repre- sented. The North Carolinians were thus thrown into the arms of the Clarke party.
1 On the subject of the Georgia parties, sce U. B. Phillips, Georgia and State Rights, Chap. IV;
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POLITICS AND THE ELECTION OF 1824
The majority of the leading men of the State were of the Crawford faction and for a long time they succeeded in main -. taining political control. When the new lands in Alabama were opened up, however, the exodus of cotton planters was a severe blow to the party. A substantial number of wealthy Georgians, including Leroy Pope and his son-in-law, John W. Walker, had gone from Elbert County and established Hunts- ville in 1809 and 1810. But it was in 1817 and 1818 that a great body of them bought land at the Government sales at Milledge- ville and moved out into the basin of the Alabama River to be- come the back-bone of the planter class in that section.
It was during this time that Georgia's two Senators, Charles Tait and William W. Bibb, voted for a bill to increase the sal- aries of the members of their body, and thereby brought down a storm upon their heads which resulted in their withdrawal from Congress, and which was instrumental in causing them to remove to Alabama. Bibb at once became Governor of the new Territory; but Tait remained in the Senate until the end of his term, and then, statehood having been obtained for Ala- bama, reaped his reward for senatorial service by being made a district judge of the new commonwealth. These men were accompanied to Alabama by other strong supporters of Craw- ford, among whom was Bolling Hall, who had sat in the House of Representatives for his native state, and who now took up his residence in Autauga County across the river from Mont- gomery.
Governor Bibb was popular in Alabama, and Walker seems to have won his way to the Senate through sheer worth. Tait also had senatorial aspirations, but yielded to William R. King when jealousy of the Georgia group made it clear that it was dangerous to push too far. William H. Crawford was not so cautious, however, in dispensing the Federal patronage for the State. He controlled practically all appointments and his friends were invariably put into office except when it became expedient to shelve an opponent. Bait was held out to King in the hope of diverting him from his race for the Senate, but he refused to be diverted. William Crawford, who succeed- ed Pickens as president of the Tombeckbee Bank, was district attorney and, at the same time, receiver for the St. Stephens land office. If the receiver had been irregular in his ac-
2 Tait Papers, Wm. H. Crawford to C. Tait, Nov. 7, 1819.
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THE FORMATIVE PERIOD IN ALABAMA
counts, the attorney would hardly have been eager to prose- cute the case !3
Such a condition as this necessarily aroused the anger of those who did not have a finger in the pie, and complaints of partisanship and inefficiency went up on all sides. It was not a struggle which would greatly concern the mass of the people, who were absorbed in other things, but it concerned the poli- ticians and they, in turn, had some power to arouse the people.
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