USA > Arkansas > The aftermath of the civil war, in Arkansas > Part 17
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The Memphis and Little Rock; the Little Rock and Fort Smith; the Mississippi, Ouachita, and Red River
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Railroads, and a line running from Little Rock to the Mississippi River, called the Little Rock and Napoleon Railroad, were ante-bellum corporations. After the war they were all re-organized under new ownership, the first three retained their original names and the Little Rock and Napoleon Railroad was called the Little Rock, Pine Bluff, and New Orleans Railroad. Later, under the consolidation hereafter referred to, it became a part of the Little Rock, Mississippi River, and Texas Rail- road.
At the time the State Aid Bill was passed there were only forty-five miles of dilapidated railroad in the State. The railroad companies were bankrupt and unable to procure credit. Notwithstanding the opposition of the Democratic party that had developed, and its false, malevolent, and constantly repeated misrepresentations as to the manner in which the law was being executed, the wonderful stimulus given to the construction of rail- roads under this Act will be apparent when I state that from the date of the first issue of bonds on April 20, 1869, to the date of the consolidation of the Little Rock, Pine Bluff, and New Orleans and the Mississippi, Oua- chita, and Red River Railroad Companies in the fall of 1873, three hundred and fifteen miles of road were built by the aid of the State alone, and were then in operation.
Throughout the entire period of the operations of this law, until it ceased to be effective by the repeal by the Democrats, on May 29, 1874, of the law provid- ing for the payment of interest on the State Railroad Aid Bonds, the total mileage built with the bonded aid of the State was four hundred and forty-five miles, which was 63 per cent. of the total mileage of all the roads built in the State within that period.
During the operations of this law some confusion arose in the public mind, perfectly honest in many cases,
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because of the improper use of the word "award" in- stead of "grant," which was used in the law. When it was announced in the newspapers that a certain road had been "awarded" State Aid it was understood by some per- sons that the language meant that the road had actually received State Aid, and that no other conditions were required. The word "award" is nowhere used in the law, and the granting of State Aid and the issuance of bonds were two separate and distinct official transac- tions.3
Poor's "Manual of Railroads," which is accepted as authority on railroad matters, states that under five years of Republican rule there were seven hundred miles of railroad built in Arkansas. After the Democrats came into power, with all their boasted prosperity, it took them nine years to build as many miles. With the exception of the Cairo and Fulton Railroad none of this construc- tion could have been accomplished at that time without State Aid.
In support of this statement I quote as follows from a letter from C. G. Scott, President of the Little Rock and Fort Smith Railroad Company, to the Gazette, Sep- tember 4, 1871 :
"I am satisfied that without this State Aid the road could not thus far have been completed, and indeed doubt that without State Aid anything at all could have been accomplished by our company."
R. C. Brinkley and B. D. Williams-respectively president and superintendent of the Memphis and Little Rock Railroad Company-frequently assured me that on account of the great expenses caused by the deeply overflowed regions of the Cache River and the lands be- tween the St. Francis and Mississippi Rivers their road could not have been built without the State Aid. I know
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from actual experience that not one mile of railroad on the two roads that formed the consolidated line of which I afterward became president could have been built with- out this aid from the State.
Other important roads doubtless could have been built with this State Aid, had it not been for the demor- alizing effects of the panic of 1873 and the constant efforts of the Democracy through its organ, the Gazette, and other agencies to ruin the State's credit.
In this connection I quote the following article from the Little Rock Republican, of May 24, 1871 :
"A SLANDER REFUTED
"The Gazette, yesterday morning, editorially re- ferred to a speech recently delivered by one Fulton [a negro] and declared that he had said:
"'He looked upon Clayton as the worst man in the State, and that at the time the articles of impeachment were presented against him, General Brayman, the presi- dent of the Cairo and Fulton Railroad, had a letter from Clayton in which he proposed to Brayman that he would issue bonds to that road if Brayman would pay ten per cent of the amount issued, and yet the articles of im- peachment were withdrawn.'
"In order that the public may know the grounds upon which the Gazette bases its indorsement of the miserable slander to which it gives prominence, we invite atten- tion to the following letter from Gen. M. Brayman, which effectually settles the matter :
"LITTLE ROCK, May 23, 1871.
"EDITOR REPUBLICAN: I find in the Gazette of this morning a statement of E. A. Fulton, in Drew County, that at the time the articles of impeachment were pre- sented against Governor Clayton, 'General Brayman had a letter from Clayton in which he proposed to Brayman
1
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that he would issue bonds to the road, if Brayman would pay ten per cent of the amount issued.'
"Allow me to say in connection with this statement that I never had such a letter, nor any knowledge of its existence.
"Respectfully, "(Signed) M. BRAYMAN."
On account of the high standing and well-known character of General Brayman, his statement, when con- sidered along with the charge of the irresponsible negro Fulton, should be sufficient,-to say nothing of my own positive denial. When repeated at home charges of this character had but little effect, but when constantly reiter- ated in the money markets of New York and elsewhere, -mostly through the Associated Press Agency, controlled by the Gazette,-they were very damaging to the public credit.
On August 27, 1871, the following article appeared in the columns of the Gazette :
"OUR RAILROADS-STATE AID
"It is a well-known fact that owing to over- anxiety to complete the roads, or for some other cause, our late Governor was not as careful in his issue of bonds to our railroad enterprises as he should have been. He gave the bonds to the roads in many instances, expect- ing the roads to follow; these bonds were thrown on the New York market, as much realized from them as could be obtained, some little work done, and the enterprises brought to a standstill. This is true particularly of the Little Rock, Pine Bluff, and New Orleans, and the Mis- sissippi, Ouachita, and Red River Railroads. Just ex- actly how the affairs of these two corporations now stand we are not advised."
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I admit that I was very anxious for the success of those two enterprises, but I emphatically deny that a single bond was issued by me to either company which it had not the lawful right to demand. Considering the obstacles that were constantly placed in the way, every mile of railroad to which bonds were issued dur- ing my administration was built and operated within a reasonable time. I have in my possession, for each issue made by me, an exact duplicate of the original re- ceipt and affidavit of the president and other officers, as required by the following provision of the State Aid Law :4
"Be it further enacted, That thereupon the Govern- or, or the person filling for the time being the executive office, shall issue to the President of said Company the bonds of the State of Arkansas, bearing the seal of the State, attested by the Secretary of State, as provided in section I hereof, upon the completion and preparation for the iron rails of each succeeding ten miles or more, until the entire line or lines of road of said railroad cor- poration shall be completed. The President of such railroad company shall file his official receipt for each issue of bonds, accompanied by the affidavit of himself and at least four directors, that the bonds, or the avails of them, shall be disposed of solely for the purpose of providing for the ironing, equipping, building, and com- pleting said road."
For the information of the reader I here insert copies of the original receipt and affidavits received by me, in compliance with the above provision of law, covering the last issue of bonds made during my administration to the Little Rock, Pine Bluff, and New Orleans Railroad Com- pany :
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"I, James M. Lewis, President of the Little Rock, Pine Bluff, and New Orleans Railroad Company, do hereby solemnly swear that the fifth section of ten con- secutive miles of said railroad has been graded, bridged, furnished with ties, and made ready for the iron rails, in accordance with Act of the General Assembly of the State of Arkansas, approved July 21, 1868, entitled, 'An Act to Aid in the Construction of Railroads.'
"(Signed) JAMES M. LEWIS, President.
"Subscribed and sworn to before me this seventeenth day of January, 1871.
" (Signed) JNO. MCCLURE, Associate Justice, "Supreme Court of Arkansas.
"STATE OF NEW YORK,
"CITY AND COUNTY OF NEW YORK.
"I, Jackson E. Sickels, director of the Little Rock, Pine Bluff, and New Orleans R. R. Co., do solemnly swear that the bonds of the State of Arkansas, about to be issued to said railroad company, or the avails of them, shall be used solely for the purpose of providing for the ironing, equipping, building, and completing said company's road.
"(Signed) JACKSON E. SICKELS, Director.
"Sworn to before me this Ioth day of January, IS71. "(Signed) C. WESLEY TURRELL, "Notary Public, N. Y.
"I, Thomas M. Bowen, director of the Little Rock, Pine Bluff, and New Orleans railroad company, do here- by solemnly swear that the bonds issued to said com- pany by the State of Arkansas on the completion of the fifth section of ten consecutive miles of the roadbed of said railroad shall be disposed of solely for the purpose of providing for the ironing, equipping, building, and completing said road in accordance with an Act of the
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General Assembly of the State of Arkansas, entitled 'An Act to Aid in the Construction of Railroads,' approved July 21, 1868.
"(Signed) THOMAS M. BOWEN, Director.
"Subscribed and sworn to before me this 17th day of January, 1871.
"(Signed)
JNO. MCCLURE, Associate Justice, "Supreme Court of Arkansas.
"I, O. P. Snyder, director of the Little Rock, Pine Bluff, and New Orleans railroad company, do hereby solemnly swear that the bonds issued by the State of Arkansas to said company on the completion of the fifth section of ten consecutive miles of the roadbed of said railroad, shall be disposed of solely for the purpose of providing for the ironing, equipping, building, and com- pleting said road in accordance with an Act of the Gen- eral Assembly of the State of Arkansas, approved July 21, 1868, entitled 'An Act to Aid in the Construction of Railroads.'
" (Signed) O. P. SNYDER, Director.
"Subscribed and sworn to before me this seventeenth day of January, 1871.
"(Signed) JNO. MCCLURE, Associate Justice, "Supreme Court of Arkansas.
"I, S. W. Mallory, director of the Little Rock, Pine Bluff, and New Orleans Railroad Company, do hereby solemnly swear that the bonds issued to said company by the State of Arkansas on the completion of the fifth section of ten consecutive miles of the roadbed of said railroad shall be disposed of solely for the purpose of providing for the ironing, equipping, building, and com- pleting said road in accordance with an Act of the Gen- eral Assembly of the State of Arkansas, approved July
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21, 1868, entitled 'An Act to Aid in the Construction of Railroads.'
"(Signed) S. W. MALLORY, Director.
"Subscribed and sworn to before me this 17th day of January, A. D. 1871.
"(Signed) JNO. MCCLURE, Associate Justice, "Supreme Court of Arkansas.
"I, James M. Lewis, President of the Little Rock, Pine Bluff, and New Orleans Railroad Company, do hereby solemnly swear that the bonds issued to said com- pany by the State of Arkansas on the completion of the fifth section of ten consecutive miles of the roadbed of said railroad shall be disposed of solely for the purpose of providing for the ironing, equipping, building, and completing said road in accordance with an Act of the General Assembly of the State of Arkansas, approved July 21, 1868, entitled an 'Act to Aid in the Construc- tion of Railroads.'
"(Signed) JAS. M. LEWIS, President.
"Subscribed and sworn to before me this 17th day of January, A. D. 1871.
"(Signed) JNO. MCCLURE, Associate Justice, "Supreme Court of Arkansas.
"Received, Little Rock, Arkansas, January 17, 1871, of Powell Clayton, Governor of the State of Arkansas, One Hundred and Fifty State Bonds of the denomina- tion of One Thousand Dollars each, it being amount of State Aid due the Little Rock, Pine Bluff, and New Orleans Railroad Company on completion of fifth sec- tion of ten consecutive miles of roadbed of said Rail- road, said bonds numbered from 601 to 750 inclusive. "(Signed) JAS. M. LEWIS, President."
The whole purpose of the State Aid Bill, as set forth in the law above quoted and in the affidavits reproduced,
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was to aid the railroad companies in the purchase of rails and other equipment.
Some time later the Little Rock, Pine Bluff, and New Orleans Railroad-not having complied with the pro- visions of Section 7 of the State Aid Law 5 requiring the payment of taxes, or interest, under the provisions of Section 8,6-was sequestered by the State Treasurer, and Col. A. H. Ryan was appointed receiver. No better ap- pointment could have been made. He was faithful, in- dustrious, and frugal, and he worked energetically for the completion of the road to Pine Bluff, where a large amount of business was awaiting the establishment of train service to that point.
A wagon service was put on by the merchants of that city to cover the few miles of unfinished road then in the course of construction, which added very materially to its revenues; and under the operations of the State Aid Law and this increased income the road was com- pleted between the eastern terminus on the west bank of the Mississippi River and the city of Pine Bluff, and put into successful operation.
Under the act providing for the consolidation of railroads,7 the Little Rock, Pine Bluff, and New Orleans and the Mississippi, Ouachita, and Red River Railroad Companies were, in the fall of 1873, consolidated under the title of the Little Rock, Mississippi River, and Texas Railroad Company. My official services to the State having terminated, I became president, with Jackson E. Sickels as vice-president and treasurer of said consoli- dated lines.
James M. Lewis and Thomas M. Bowen had been the respective presidents of the two companies prior to that time, and as neither of them had had any previous railroad experience they had made a rather sad mess of affairs. I accepted the position very reluctantly, know-
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ing that I was taking up burdens that they were only too eager to lay down, but I finally did so, principally for the reason that I was personally interested in the success of the Little Rock, Pine Bluff, and New Orleans railroad, which was the main portion of the consolidated lines. It ran through my plantation on ground that I had donated to it, and where was then established "Lin- wood," one of its most important stations, thus giving me constant and reliable shipping facilities to New Orleans; whereas previously the uncertain navigation of the Arkansas River sometimes delayed shipments for months and even years. In addition to plantation facili- ties it enabled me to establish a store and shipping agen- cies at "Linwood," and also a sawmill adjacent to the depot, on the edge of a large body of fine cypress tim- ber, affording the means of shipping the product to a profitable market.
With the faithful Ryan in charge, I now joined, in New York City, Jackson E. Sickels, who was working on a project for the continuation of the road to Little Rock, a distance of forty-three miles, and for the extension of the Mississippi, Ouachita, and Red River line to Camden. He was negotiating with one Dr. Ryder, who in turn was negotiating with a foreign syndicate amply able to finance this project. As we were nearing the consum- mation of our purposes dark financial clouds gathered in the east, which soon developed into the great panic of 1873, and, along with more meritorious enterprises all over the country, our work came to naught.
This left the Railroad Company not only subject to the State's claim for the non-payment of the taxes [inter- est] heretofore referred to, but what was still worse, in default of the interest on its first mortgage bonds, a number of which had been purchased by others than the original owners of the property. This resulted, during
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the widespread financial crash, in the foreclosure and sale of both properties. Under these very discouraging con- ditions, the stockholders, being men of moderate means and having exhausted to a great extent their private re- sources, allowed the Little Rock, Pine Bluff, and New Orleans and the Mississippi, Ouachita, and Red River Railroads to be separately foreclosed and sold at almost confiscatory prices.
Could they have borrowed money under those condi- tions, it would have been vastly to their interests to have competed with the purchasers who bought the property, but the question at that particular time was, where to get the money! Soon after the panic ceased the new owners of the properties constructed the line from Pine Bluff to Little Rock and extended the Mississippi, Oua- chita, and Red River line to Warren, the county seat of Bradley County.
In closing this chapter I desire to say that I was frequently criticized for my actions in connection with the issuance of bonds to aid in the construction of the various railroads and, while I was never openly charged with appropriating any of them for my own use, it was strongly hinted that I had been well paid for the aid I had given to the railroads.
I will state positively that until the year 1892, when ten of them came into my possession, I had never owned nor held a single bond that had been issued to aid in the construction of railroads. Those bonds were received by me in the following manner :
After my brother, John M. Clayton, had been assas- sinated, my brother Thomas and I entered into an agree- ment to bear equally the expenses of maintaining and edu- cating his minor children. I placed two of them in school and took the other four with me to the hotel in Eureka Springs where I resided.
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My brother was slow in meeting his half of the ex- penses and I advanced his share until he owed me $1, 500. During the year 1892 I visited him at Chester, Pa .. and while I was there I suggested to him that he was behind in his payments. He had at some previous time invested $10,000 in the State Aid bonds issued to the Memphis and Little Rock Railroad Company, and he suggested that I take his investment and relieve him from all future responsibility on behalf of John M. Clayton's children.
Although in 1874 the State Legislature had passed an act relieving the railroad companies of the interest obligations on the bonds issued to them, which was fol- lowed in 1883 by a constitutional amendment repudiating the bonds themselves, and I realized that my brother's investment was absolutely worthless, I agreed to his proposition and he immediately turned over to me the ten bonds.
These bonds remained in my possession until just be- fore I returned from Mexico to the United States, when they were stolen. I have always supposed that some of the Mexican employees took them and, knowing that they were of no value, I made no particular effort to recover them.
These were the only bonds issued to aid in the con- struction of railroads that were ever in my possession.
FOOTNOTES FOR CHAPTER XI.
1 Arkansas House Journal, 1868, p. 295.
2 Arkansas Laws, 1868, pp. 148-153.
$ Arkansas Laws, 1868, pp. 149-150, Secs. 4 and 5.
4 Arkansas Laws, 1868, pp. 150-151, Sec. 6.
5 Arkansas Laws, 1868, p. 151.
6 Arkansas Laws, 1868, pp. 151-152.
7 Arkansas Digest of Statutes, Gantt, pp. 866-867, Sec. 4969.
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1
CHAPTER XII
FUNDING THE STATE DEBT
As the loan of the bonds of the State in aid of the construction of railroads depended to a great extent for its efficacy upon the power of the State to establish first its financial credit, I shall now undertake to give a brief history of the Real Estate and State Banks and the fund- ing of their indebtedness.
In 1836 the State of Arkansas was admitted into the Union, and on the 12th of September ensuing the first General Assembly convened. Its first acts were to charter the Real Estate and State Banks. I shall first take up the history of the former.
The charter provided for the loan to this Bank by the State of $2,000,000 of its six per cent. bonds. Per- haps never before in the history of banking operations was such a system adopted,-a system whereby a few favored individuals were created stockholders by the act, and enjoyed the special privilege of bank ownership with- out contributing anything themselves. And these indi- viduals, by the loose character of their charter obliga- tions, refused successfully for about sixteen years to give any information whatever to the Executive and Legis- lative Departments of the State concerning its operations.
The Bank, with an inadequate supply of coin in its vaults, opened its doors December 12, 1838, upon a specie payment basis, which was suspended less than a year thereafter. This was followed about fourteen
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months later by the default of its interest payments on the bonds loaned to it by the State, on which bonds the State also soon after defaulted in its interest payments. These defaults continued for twenty-six years, when the Republican administration funded the entire indebtedness.
The reader will bear in mind that the first president of the Real Estate Bank was John Wilson, who was also Speaker of the House of Representatives. He was the originator of the substitution of the bowie-knife for the gavel as the emblem of his authority. How long he occupied this dual capacity I am not able to ascertain, but it is evident that his influence with the Bank and the Legislature continued for a long time.
In view of the Bank's arbitrary actions, before re- ferred to, a full history of this stupendous swindle, im- properly designated a "Bank," never has been and never can be fully made known by authentic history. For the further information of the reader, I invite his attention to the following extracts from official sources :
From Governor Yell's message of 1840:1
"The bonds were hypothecated in September, 1840, but the fact did not leak out till July, 1841; and it was not the only important fact concealed from the Legis- lature. The statement of the condition of the bank was drawn up in such a way that it was impossible to tell from it whether there was one dollar or one hun- dred thousand dollars in specie in its vaults."
From the message of Governor Adams, dated No- vember 5, 1844:2
"The condition of the Real Estate Bank is unknown to the community whose interest is so deeply concerned in its management .... Whether the property and assets of the bank are applied to the legitimate objects of its
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creation, I am unable to say ... . . I have but little doubt, however, that the want of confidence in the operations of the bank, as manifested in various portions of the State, proceeds more from the fact that all information in relation to it has been kept in the hands of a few individuals than from any corruption in its administra- tion. The history of the bank already presents the most extraordinary picture ever exhibited to a free people. In the first place, a public corporation is created by the solemn act of the legislative department of the Govern- ment, involving the rights and privileges of individuals as well as the State. In the next place, the act of incor- poration giving existence to the bank is destroyed by an ex parte operation of a few individuals, by which a deed of assignment was made to a few men denominated resid- uary trustees, whereby the assets of the bank of every description were transferred into the hands of the said residuary trustees and their officers. From that period the operations and management of the bank have been involved in profound mystery."
From Governor Drew's message of 1846:3
"The limited knowledge which, in common with the public, I possess of the affairs of the Real Estate Bank does not enable me to add much to the suggestions of my predecessor. I concur with him as to the propriety of an investigation into the affairs of that institution. It is a monstrous proposition which I have heard ad- vanced, that the legislature had no rightful authority to examine into the affairs of this institution."
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