USA > Arkansas > A pictorial history of Arkansas, from earliest times to the year 1890. A full and complete account, embracing the Indian tribes occupying the country; the early French and Spanish explorers and governors; the colonial period; the Louisiana purchase; the periods of the territory, the state, the civil war, and the subsequent period. Also, an extended history of each county in the order of formation, and of the principal cities and towns; together with biographical notices of distinguished and prominent citizens > Part 20
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Thus closed a dismal chapter in the financial history of the State. The general result had been the means of bringing ruin into thousands of homes. The bank mania had proved to be the "sowing of the storm," out of which the State and the people subsequently "reaped the whirlwind." 18
274
HISTORY OF ARKANSAS.
Under this Funding Act the following amount of bonds is- sued to banks were presented and exchanged for new bonds : Bonds issued to the State Bank, 249, of $1,000.00 each, $249,000.00
Bonds issued to the Real Estate Bank, 212, of
$1,000.00 each, 212,000.00 Bonds issued to the Real Estate Bank (Holford's),
500, at $1,000.00 each, . 500,000.00
Total, 961 bonds amounting to · $961,000.00
.These were converted into new bonds, as follows :
6 per cent. Funded Bonds of 1869, 903 bonds, of $1,000.00 each, .
$ 903,000.00 6 per cent. Funded Bonds of 1870, 2,050 bonds, of $1,000.00 each, 2,050,000.00
Total, 2,953 bonds, amounting to $2,953,000.00
Those bonds held by the Secretary of the Treasury of the United States for the Smithsonian Institute, have not been presented for funding.
In 1888 twenty-two bonds, of $1,000,00 each, sold to the Bank of Washington, through W. W. Corcoran, were pre- sented to the State Treasurer, and paid, principal and interest, total to January, 1888, $73,700,00.
With relation to the 500 bonds which the Real Estate Bank hypothecated, which were known by the name of the "Holford Bonds," we have seen that the charter of that institution required that the bonds should be sold at par only. It contained no permission to hypothecate. On the contrary, the requirement that all bonds parted with by it should be at par, forbade the idea of hypothecation, which, in a business sense, involves the pledging of a thing for an amount some- thing less than its actual value, and doubtless to prevent just this thing the provission was inserted in the charter, meaning, in effect, that no bond should go beyond its con-
275
FROM 1836 TO 1840.
trol for anything less than its face. The act of hypothecation, was, therefore, an act clearly beyond and not contemplated by the provisions of the charter.
Had the matter gone no farther, had the bank in time, in the usual course of business, redeemed the pledge, and the North American Trust and Banking Company held the col- lateral, subject to redemption, there would have been but little . harm done, and this, doubtless, was what was expected by the bank in placing it there. But, by a breach of good faith, and in derogation of all principles of fair dealing, the Trust , and Banking Company sold the bonds to James Holford, a banker, of London, for an advance of $325,000,00, the bank having received considerably less than this.
In all ordinary business transactions, when a loan is made, and collateral is given to secure it, the lender has no right to. sell the collateral until the borrower has made default in the payment of the principal debt. Yet not waiting for this event to transpire, the North American Trust and Banking Company transferred the collateral to James Holford, and thereby pocketed the neat sum of $203,664,00 and over, at the expense of the State of Arkansas. Having done this, the concern shortly afterwards, August 31st, 1841, went into liqui- dation itself, and when Mr. Hugh Wilson, Financial Re- ceiver, addressed a letter to the officers of the broken institu- tion, with relation to making a claim in behalf of the State against its assets, he was informed that whatever assets it had possessed, had been assigned to preferred creditors, and that there were no assets to apply to the claims of general creditors. Hence, being hardly dealt with in the unlawful transfer of her property by her trusted agent, the bank, in the first instance, the State now found herself deprived of the means of recompense by the insolvency of the chief wrong- doer in the second, and so she took nothing by her suit.
When Mr. Holford applied for the payment of the interest on the bonds, none having been paid since 1841, payment not
276
HISTORY OF ARKANSAS.
being made, he opened a correspondence with Governor Yell on the subject. Governor Yell stated the case fairly and strongly in his reply, taking the ground that the transfer was without consideration to the State, and in violation of the duties of the lenders holding the bonds as collateral, which the lenders themselves had acknowledged.
· The following are extracts from his letter to James Hol- ford, then in New York, of November 10th, 1841 :
"The State of Arkansas saw proper to incorporate the Real Estate Bank, and to aid her citizens she loaned to the cor- poration her credit in the shape of bonds, to enable the bank to raise money for the purpose of banking. She issued her bonds in this instance to the amount of $500,000.00, and authorized the bank to make sale of them upon certain express terms and stipulations, forbidding the sale, except they are liter- ally sold (not mortgaged or hypothecated) at par value, thereby securing to the bank the means of payment, operating as an indemnity to the State, by furnishing the bank the full amount of money to redeem the bonds The next question is, have the bonds been disposed of as required by the charter? If so, common honesty and a proper regard for the honor of the State, requires us to meet the interest as it becomes due, and to prepare for the payment of the princi- pal at maturity. What are the facts in relation to the hypothe- cation? It is admitted by the North American Trust and Banking Company, in its agreement with the Real Estate Bank, dated September 7th, 1840, that the bonds were placed in her hands as collateral security only, to secure the payment of the sum of $250,000.00, to be advanced to the Real Estate Bank, and that she advanced on said bonds, at the date of the contract, the sum of about $120,000.00 only. The Company also make the same statement in their deed of trust in favor of Holford & Co., dated the 3Ist of August, 1841. They farther state that they had no authority to assign the bonds, ex- cept upon the failure of the Real Estate Bank to repay, as
277
FROM 1836 TO 1840.
stipulated at the date of the hypothecation, which is farther evidence that they did not consider the bonds as sold, the only mode of negotiating them which would create any liability on the part of the State of Arkansas. Under the contract with the North American Trust and Banking Company, we are clearly by their own showing neither legally nor equitably bound." .
Mr. Holford's reply was a strong argument for his side of the case. He said : :
"I most solemnly assure your Excellency, that from the be- ginning to the end of the negotiation, 'between himself and the North American Trust and Banking Company,' and indeed, until months after the money had been advanced, I was not informed, and did not know, and had no reason to supector be- lieve, nor did I suspect or believe, that the bonds thus hypothe- cated to me were not the absolute and bona fide property of the North American Trust and Banking Company. Nor was there anything in the whole transaction calculated to excite in the most doubting mind any such suspicion or belief. The bonds were payable to order, and were duly, and on the face of them, absolutely endorsed to the Company. They claimed the right to dispose of them, and in the absence of any contrary proof or even ground of suspicion, and according to the universal sense of commercial communities they were, as far as third parties, and the rights of third parties forwarding or advancing money on the faith of them is concerned, to be deemed the lawful owners. In addition to this, it was well known in the community, and had repeatedly come to my knowledge, that this same Company had a year or two pre- viously been large owners of the bonds of the State of Ar- kansas. (I have since learned, to the amount $2,000,000.00.) These bonds they had been in the habit of disposing of by sales, hypothecation or otherwise, the interest on these bonds had always been paid by the North American Trust and Banking Company, and no question has ever been raised, and
278
HISTORY OF ARKANSAS.
I understand that no question exists with regard to their valid- ity. The North American Trust and Banking Company were the agents in this city who paid the interest on these bonds, and in this manner became the reputed agents of the Real Estate Bank of Arkansas, and indirectly of the State of Ar- kansas; and when the five hundred bonds I have spoken of were offerred to me for hypothecation, had any doubts arisen in my mind as to the right of the Company to dispose of them, their previous ownership and disposition of a large amount of bonds of the same description, and the confidence reposed in them by the Real Estate Bank in constituting them their agents, would naturally have tended to allay any such suspicion But I do not appeal to your Excellency as to what are merely my legal or technical rights, but what are my rights in honor and good conscience. The State of Arkansas issues her bonds, on the face of which she 'acknowledges to be indebted to the Real Estate Bank of Ar- kansas in the sum of one thousand dollars, which sum the said State of Arkansas promises to pay, in current money of the United States, to the order of the President, Directors and Stockholders of said bank,' etc. These bonds are presented to me, and I find on the face of each of them, that 'in testi- mony' of this acknowledgment of indebtedness the Governor and Treasurer of the State have signed their name thereto, and the whole has been finally and conclusively verified by the broad seal of the State The bonds were issued to the Real Estate Bank of Arkansas, they are payable to their order, and by the provisions of the law authorizing their issue are made negotiable by endorsement. On looking at the back of the bonds, I find that they are duly endorsed by the Real Estate Bank, 'for value received,' as expressed in the endorsement, and that the bonds themselves are in the hands of parties who had already disposed of two million of these very bonds without question or comment. If the State of Arkansas puts forth her unqualified promises to pay, and
279
FROM 1836 TO 1840.
entrusts them to its own creature, the Real Estate Bank, limit- ing them not to dispose of them under par; and if the bank sends them out into the world under their endorsement 'for value received,' and innocent third person, ignorant and un- suspicious of any irregularity in their issue, advances his money on their security ; I appeal to your Excellency as a matter, I will not say of technical law merely, but of equity and good conscience, on whom should any loss fall, which may result from the transaction? Surely on the parties who have un- guardedly put these promises to pay into circulation, with every indication that they were regularly issued, rather than upon the party who has been misled by these appearances, and on the strength of them has parted with his money."
Finding he could accomplish nothing by correspondence and argument, Mr. Holford, after a while came to Little Rock in person, and finding the Real Estate Bank in liqui- dation, and seeing what was the situation of affairs, in a letter to the Governor gave it as his conviction that the best that could be done for the next ten or twelve years would be to gather up the fragments from the wreck of the Real Estate Bank, and apply as far as they would go to the payment of interest on the bonds, in the hope that by that date increased revenues would enable the State to meet the interest promptly and the principal at maturity. Mr. Holford departed, hav- ing accomplished no more by his personal visit than he did by his correspondence. And although we were called repu- diators on account of it, public sentiment could never be made to agree that the State was either legally or morally bound for the bonds. Committees after committees in Legislature after Legislature considered the subject, and all arrived at the same conclusion that there was no obligation on the State to pay. Finally, when the war came, and resulted in the tem- porary downfall of so much of the' State's progress, the ulti- mate payment of the bonds at any time seemed hopeless. Agitation of the subject, however, arose from time to time.
280
HISTORY OF ARKANSAS.
James Holford was then dead, and had been dead for many years, and his representatives, the owners of the bonds, it is said, were willing to compromise them for a small proportion of their face. However, the Funding Act was passed 1869, and was made sufficiently broad and comprehensive in its terms to include these bonds, and accordingly the Holford rep- resentatives presented 498 of them, out of the original 500 for funding into the new bonds. Two of the original ones have never been presented, but the 498 presented were ex- changed for new bonds, and the old ones were duly cancelled and now lie filed away in the vaults of the State Treasurer's office. The new and substituted bonds are themselves called and known by the name of "Holfords."
Statements made by John Crawford, Auditor, to the Fi- nance Board, of date August 7th, 1880, showed that the whole amount of principal and interest to that date was $399,691.00 ; amount paid to that date, $329,370.00 ; leaving balance due at that date of $70,321.00.
This, however, was a computation on the undisputed por- tion of the debt, being interest calculated on $121,336.00, received by the Real Estate Bank from September 7th, 1840, the date of receiving it.
If the calculation be upon the whole amount of the debt, which was thereby created, and not on the amount received only, the computation would stand thus :
Amount of bonds transferred $500,000.00; interest from September 7th, 1840, to say September 7th, 1880, 40 years, at 6 per cent. $1,200,000.00; due then, $1,700,000.00 ; total of all payments, being less than interest, $329,370.00 ; balance due at that date, $1,370,630.00.
The first payment of interest made on these bonds, was made January Ist, 1871, and amounted to $82,200.00, being 1,370 coupons. $41,100,00 was paid July Ist, 1871 ; $41,- 100.00 January Ist, 1872, and $40,950.00 July Ist, 1872, and smaller amounts afterwards.
28I
FROM 1836 TO 1840.
The funding of the old bonds and the issue of the new did not, however, entirely conclude all proceedings as to them.
In the year 1879, Col. William M. Fishback, of Fort Smith, a Member of the Legislature from Sebastian county, introduced a Joint Resolution providing for an amendment to the Constitution of the State, which should prohibit the Gen- eral Assembly from levying any tax or making any appropri- ation to pay either the principal or the interest of a large num- ber of bonds issued by the State under various Acts of the Legislature, among which were these bonds "numbered from 491 to 1860, being the 'funding bonds' delivered to F. W. Caper, and sometimes called 'Holford bonds.' "'
This Joint Resolution was passed by the General Assembly, and the question of the adoption of the Amendment it pro- posed was submitted to the people in a general election held in September, 1880. From the name of its author, the pro- posed Amendment became known almost universally as the "Fishback Amendment."
The question of the adoption of the Amendment became an exciting topic in the canvass. Public sentiment was con- siderably divided on the subject, and a hot and vigorous can- vass ensued. Among the many prominent and influential persons who took a stand against the adoption of it was Sen- ator A. H. Garland, who labored assiduously with tongue and pen, by speech and letter, for its defeat, fighting it, as he said, "inch by inch, foot by foot, step by step."
In a great speech made by him, at Russellville, July 12th, 1880, in a debate with Col. Fishback, the author of the Amendment, he said, in his unique way :
"If these bonds are ignored, repudiated, destroyed, yet still the debt remains to haunt the Courts and the State. If these bonds are rejected, you will still have to meet the ques- tion at last-where is the debt which these bonds represent ?- and, until the paper is drawn in and receipts passed, there is no settlement before God or man, or before gentlemen-and
282
HISTORY OF ARKANSAS.
the State cannot afford to be anything else but a gentleman before the world.
"I think this Amendment is conceived in a mistaken policy. I think its advocates and friends have gravely erred in pro- pounding it to the people of Arkansas, and urging it upon them for adoption. If they were the sworn enemies of the State, armed with a sword in one hand and a torch in the other, determined to do the State the utmost damage, they could not, in my judgment, more completely accomplish their end, than by having the proposed Amendment incorporated in the Constitution."
In another place he said :
"The adoption of this Amendment would, in my opinion, be the memorial blunder, if not the crowning crime, of the age."
The "Gazette" took strong ground against it, holding in effect, that even though the bonds had been wrongfully hy- pothecated by the Real Estate Bank, in the first instance, and had been more wrongfully sold by the North American Trust and Banking Company, in the second, whereby the debt was created ; and that now new bonds had been put forth as the representatives of the debt, it was better for the State to pay the debt than to take on the appearance of repudiation.
The Amendment was not without able advocates to support it, but at the election it was defeated by a vote of the people. The Constitution of the State under which the vote was held provided, that an Amendment thereto should require for adop- tion the affirmative votes of "a majority of the votes cast." The vote cast at the election was, 132,985
66,493 A majority thereof was,
The vote on the question of amendment was : For Amendment,
64,497
Against Amendment,
. 41,049
Number not voting on the question, ·
. 27,439
Total vote, 132,985
FROM 1836 TO 1840.
283
Majority for Amendment on vote cast on the sub-
ject .
23,448
Majority of all the votes cast
66,493
Number voting for Amendment 64,497
Number short of a majority of all the votes cast
at the election 1,996
The Board of Commissioners to declare the result, consist- ing of the Governor, the Secretary of State, and the Attorney- . General, issued their proclamation, declaring the Amendment rejected. There was considerable dissatisfaction with the re- sult, until it was ascertained that the fault lay with the law, and not with the Board of Commissioners; that under the law, every failure to vote on the subject of Amendment was equivalent to a negative vote, so that really the vote was : Negative votes actually cast
Negative votes from not voting on the subject
27,439
Total negative votes, .
68,488
Total affirmative votes,
64,497
Excess of negative votes, 3,991
The friends of the Amendment, however, renewed their ef- forts in its behalf, and in the Legislature of 1883 it was re-adopted on a Joint Resolution, was re-submitted to a vote of the people in the general election of 1884, and was this time adopted by the vote of the people, and is now a part of the State Constitution. Under its provisions the following bonds are practically repudiated :
DATE AT WHICH ISSUED.
RATE OF INTEREST.
DESCRIPTION OF BONDS.
AMOUNT OF PRINCIPAL.
Jan. 1, 1870.
6 per cent.
Funding Bonds, Numbered 491 to 1860, inclusive of both numbers,
$1,370,000.00
Apr. 1, «
7
66
Memphis & Little Rock Railroad Aid, Mississippi, Ouachita & Red River Rail- road Aid,
600.000.00
66
1,
7
66
Little Rock, Pine Bluff & New Orleans Railroad Aid,
1,200.000.00
1,
7
1,000,000.00
1,
7
66
Little Rock & Fort Smith Railroad Aid, Arkansas Central Railroad Aid, - Levee Bonds,
1,350,000.00
Mar. 23, 1871.
7
3.005,846.05
Total, -
$9,725,846.05
1,
7
1,200.000.00
41,049
284
HISTORY OF ARKANSAS.
The doors of the bank closed, all of its affairs were placed in the hands of Receivers. The old story began to repeat itself. Every conceivable expedient to escape obligations re- inforced the real embarrassments of the time. The hopeless and practically fruitless struggle to collect, which was experi- enced by the State Banks, fell to the lot of the Real Estate Banks.
The difficulty of making payments, suggested to many minds arguments for not wishing to pay. The banks had came to be regarded the cause of widespread financial de- pression. The popular mind came to think of them as per- sonal enemies. But little was accomplished. The wearying story runs through years of trial and disappointment. The State staggered under the weight it carried, while multitudes of individuals fought the battle of life, fettered by humiliating embarrassments, and worn by actual wants. In 1858, Octo- ber Ist, by report of the Receiver, the situation was expressed in these figures : liabilities $2, 170, 132.00; assets $889,506.00.
Thus closed a dismal chapter in the history of Arkansas. The bank mania had wrought like a mad-man. Sowing the wind, the people had reaped a whirl-wind.
The war came on, and the State passed into experiences yet darker and sadder.
The intervention of the war, and the subsequent prostration, deferred attention to the bank matters until 1869. The Legislature of that year, under date of April 6th, passed a general funding act, under which all outstanding bonds issued to the State Bank, Real Estate Bank, or any other, were permitted to be exchanged, on presentation, for new bonds, running twenty-five years, bearing interest at 6 per cent.
285
FROM 1836 TO 1840.
The second regular session of the General Assembly con- vened, according to law, on the 5th day of November, 1838, and remained in session until December 17th. The Senate organized by the election of Mark W. Izard as President, and J. M. Stewart, Secretary. The House elected Gilbert Mar- shall, of Scott county, Speaker, and Samuel H. Hempstead, of Little Rock, Clerk. This Assembly passed 100 Acts, Reso- lutions and Memorials, making 321 in all, acted upon in three sessions. The principal ones were the prohibiting of the issue by cities, towns and corporations, of small notes or bills, com- monly called "shinplasters;" authorizing the sale of the seminary lands; promulgating a Revised Code of Laws, pre- pared by William McK. Ball and Samuel C. Roane, under the superintendency of Albert Pike; establishing the counties of Desha and Searcy; incorporating a number of stock com- panies, and companies for railroads and turnpikes-which never were built-defining boundary lines between counties, and many Acts for individual relief.
On the 20th of November, 1838, John Hutt was elected State Treasurer, and held the office till 1843.
An important act of the session was of date December 13th, 1838, establishing a State Penitentiary at Little Rock, for the building of which the sum of $20,000.00 was appropri- ated, and Commissioners were directed to be appointed to conduct it. The work of the building of it was begun early in 1840. At the session of the Legislature of 1840 the Com- ittee on the Penitentiary reported that it would take $40,- 000.00 to complete it, and accordingly that amount, with $500.00 added, $40,500.00 was appropriated for the purpose. The building was constructed at an entire cost of $70,000.00,
-
-
286
HISTORY OF ARKANSAS.
and was completed by 1842. It was then put into use, and was made use of until August 5th, 1846, when, in a revolt among the prisoners, and an attempt to escape, the buildings were set on fire by them and were burned to the ground. An appropriation of $10,000.00 was made by the Legislature of that year to rebuild it, and George Brodie entered into a con- tract to rebuild it at that price. The new buildings were put up and completed in 1849.
In August, 1839, occurred the election for Congressman, the term of Archibald Yell expiring. Judge Edward Cross was elected to the position. He was subsequently twice re- elected, in 1841 and 1843, filling the position for six years, or until 1845.
On the 21st of November, 1838, four Lodges of Free- Masons held a convention at Little Rock, and established a Grand Lodge. They were: Washington Lodge, of Fayette- ville, represented by Onesimus Evans, Washington L. Wil- son, Robert Bedford, Abraham Whinnery, Richard C. S. Brown, Samuel Adams and Williamson S. Oldham ; Wes- tern Star Lodge, of Little Rock, represented by William Gilchirst, Charles L. Jeffries, Nicholas Peay, Edward Cross, Thomas Parsell, Alden Sprague and John Morris; Morning Star Lodge, of the Post of Arkansas, represented by John W. Pullen ; and Mount Horeb Lodge, of Washington, rep- resented by James H. Walker, Allen M. Oakley, Joseph W. Mckean and James Trigg. Upon the Grand Lodge being organized, William Gilchirst was elected the first Grand Master, and George C. Watkins the first Grand Secretary. The organization thus established has grown to have 408 Lodges, scattered all over the State, with a membership of up- wards of 12,000.
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