USA > Illinois > The era of the Civil War, 1848-1870 > Part 10
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Then began a war of words between the bank and anti- bank forces, the one finding in the presence of banks the expla- nation of every economic ill with which banking states were afflicted, the other attributing the economic backwardness of Illinois and the dullness of business to the absence of banking facilities. Meantime, it was discovered that there was no constitutional or legal provision against insurance companies that might furnish money for loans and add to the facilities for carrying on trade by issuing some form of evidence of indebtedness as a circulating medium. The paper of the Wis- consin Marine and Fire Insurance Company, an institution located at Chicago and controlled by George Smith, had a wide circulation in northern Illinois. Chicago business interests considered the expediency of utilizing the Chicago Fire and Marine Insurance Company to this end. Springfield inter- ests advocated the establishment of a local company to supply money to local borrowers. 32
This eagerness for paper currency stimulated the organi- zation of unincorporated private banking companies whose issues began to circulate at a variable discount. It also brought into the state a flood of foreign paper: Ohio "red backs."
30 Western Journal, 4: 211 ff .; Illinois State Register, May 5, December 29, 1848; Joliet Signal, January 2, 1849.
31 Illinois State Register, May 5, 1848; Joliet Signal, January 16, Feb- ruary 27, 1849.
32 Chicago Democrat, February 19, April 19, May 8, December 6, 1849; Illinois Journal, April 27, May 11, 1850; Illinois State Register, June 21, 1849.
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Indiana "shinplasters," and all sorts of "rag" money of out- side banks of unknown soundness. It was estimated that in 1850 St. Louis had a bank circulation of nearly half a million dollars in Illinois, while the people of the state paid annually in the form of interest not less than $600,000 of tribute money to foreign financial institutions.33
The laws of trade had proved stronger than the laws of Illinois; as a result Illinois suffered from all the evils of a paper circulating medium without receiving any of the benefits which banks conferred. "The present system has driven capi- talists from the State to invest their wealths elsewhere, and domestic enterprise hobbles about on crutches, being forced to pay the unlicensed usurer twenty and twenty-five per cent. interest, for the poor privilege of moving at a snail's pace," complained the spokesman of the bank forces.3+ "Since we cannot prevent the bank paper of other States from flooding ours," he reasoned, "and since we must pay so enormously for its circulation, does not necessity and self-preservation call upon us to doff our scruples about banking for the present- make our own Banks, use our own money, and pay the profit to our own States. " 35
The bank forces concentrated their energies on a plea for a system of free banking that would provide a safe and reliable currency by which every dollar issued would be secured by real estate or other good, safe, and reliable property; a general banking law similar to the one prevailing in New York was urged. The issue was fought to a decision in the legislative session of 1851, after a large number of bank men had been elected to the general assembly. Governor French and down- state democratic leaders threw their entire strength against the movement; several professed anti-bank assembly men from the northern counties, however, including E. B. Ames and Peter Sweat, voted for the law because of the strong
33 Illinois Journal, January 3, October 12, December 19, 1850.
3+ Rock Island Advertiser clipped in Illinois Journal, January 3, 1850.
35 Tazewell Mirror clipped in ibid., October 12, 1850. Said the Journal, November 23, 1850: " If banks are to furnish the medium of exchange of property, we can see no reason why we should not have them under our control; and we can see many reasons why such institutions would consolidate scattered funds, collect capital, and thus furnish facilities for doing the heavy produce business of our State."
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demand of their constituents for banking facilities. Senator Joel A. Matteson cast the deciding vote in the upper house on the principle that it had become a question for the people to decide. When the bank bill passed both houses it promptly met the gubernatorial veto. Upon reconsideration, however, the assembly overrode the suspensive veto of the governor and enacted the measure over his head in the closing hours of the session.36
This law provided for the incorporation of banking asso- ciations on a minimum of fifty thousand dollars of capital stock. They were authorized to do a general banking business and were to receive from the auditor circulating notes to the market value of state or federal bonds deposited with him. The prevailing uncertainty as to the stability of Illinois securi- ties occasioned a discrimination against them in the require- ment that they be listed at twenty per cent less than their average market value. Banks were limited to seven per cent interest on loans, three per cent less than the current rate. The banks were to operate under the supervision of the auditor and of three banking commissioners.37
It remained for the measure, in accordance with the con- stitution, to go before the people for their approval. A stir- ring contest followed. Invoking the shade of Andrew Jackson, democratic leaders fought the "hydra headed monster," throwing themselves in the way of "the great oligarchy of money " that was said to rule Chicago. The New England and New York elements in northern Illinois, however, had brought with them preferences for banks which even local democratic leaders could not defy. This fact came out clearly in the canvass and proved the undoing of democratic leader- ship. The election in November, 1851, returned a fifty-four per cent vote in favor of the law: only four counties north of Springfield went anti-bank, while the counties about Chicago returned bank majorities of from eighty-five to ninety-five per cent; southern Illinois, except the old whig strongholds, voted overwhelmingly against the law. The democrats soon found
36 E. B. Ames to French, December 22, 1851, Peter Sweat to French, Decem- ber 22, 1851, French manuscripts; Illinois Journal, February 12, 17, 27, 1851 ; Laws of 1851, p. 163-175.
37 Ibid., p. 163 ff.
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themselves embarrassed by the question as to whether they could still make hostility to banks a test of party orthodoxy.38
A number of banks were promptly organized throughout the northern part of the state under the law of 1851. The law was so construed, however, as to result in two types of insti- tutions : those engaged in a general banking business under the supervision of the auditor and issuing non-secured notes, and those depositing securities with the auditor and obtaining notes for circulation. Only two banks issuing secured paper were organized by the summer of 1852, so that secured bank notes furnished but a small part of the circulating currency. For this reason there was much complaint and considerable talk of repeal in the session of 1853, the senate formally acting in favor of a repeal measure. This caused a rush for bank applications; within a few days twenty-seven were filed with the auditor. At the end of 1852 the first bank in southern Illinois was established at Belleville, St. Clair county; so eagerly did this district, which gave the largest numerical vote against the bank law, seek to embrace the opportunities created by it that a few months later four other companies were organ- ized in that county with an aggregate capital of eight and a half millions, although none of these passed the stage of paper projects. By 1854, however, the banking commissioners, headed by ex-Governor French, reported only twenty-nine banks operating under the law, ten of which were located in Chicago, and two each in Springfield and Naperville, with other cities supplied with a single institution; these had an author- ized capital of seventeen millions and resources totalling over six millions. Notes to the amount of over a million dollars were issued during the first year of the general banking act. They constituted, however, but a small fraction of the entire circulating medium of the state. Illegal issues by both private banks and certain of the newly authorized banking associations together with the notes of foreign banks comprised the vast
38 Joliet Signal, September 9, 1851; W. Reddick to French, November 27, 1848, F. C. Sherman to French, December 6, 1848, E. B. Ames to French, Decem- ber 16, 1851, William M. Jackson to French, January 2, 1852, French manuscripts. William Reddick, Joel A. Matteson, Norman B. Judd, Plato, Charles V. Dyer, John Hise, and Benjamin F. Hall were among the democratic bank men. Chicago Democrat, December 3, 1851.
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bulk. At the recommendation of Governor French and his successor, Governor Matteson, the legislature undertook in the supplementary act of 1853 to drive out all unauthorized issues, whether domestic or foreign. This was successful in eliminating the Illinois lawbreakers; but in spite of the drive, paper of non-specie paying foreign banks continued in the field, largely pandering to the demand for small notes which grew out of the high premium on silver coins. In 1854, over two and a quarter million secured notes were in circulation, but these were estimated as furnishing only thirty per cent of the entire volume of circulation in Illinois.39
The domestic issues, however, furnished a very reliable currency40 amply protected through the cautious policy of the auditor in regard to the securities deposited with him. In the fall of 1854 Illinois banks were put to their first test when panic conditions began to appear in the west as a result of overdevelopment in railroads. When Virginia and Missouri bonds, which constituted two-thirds of the bank securities, dropped several points below par, a general alarm seized the holders of Illinois currency, especially of that based on Vir- ginia and Missouri securities. The panic struck Chicago in November; runs on various institutions commenced; thou- sands of dollars of notes were presented for redemption; and several banks were compelled to close their doors. In a few weeks, however, after assurances by two of the bank commis- sioners, the excitement subsided, although money continued to be very tight. The auditor's report for December 1, 1854, showed three banks permanently closed by the panic; five others still in a state of suspension were later forced into liquidation under the supplementary act of 1855.41
By 1856 banking operations had expanded until $6,480,873 of notes were in circulation. Even then this paper constituted
39 Illinois Journal, February 12, 1853; Belleville Advocate, December 8, 1852, February 16, 1853; Illinois State Register, June 15, 1854; Bankers' Maga- zine, 9: 102-113. Many bankers preferred to circulate their notes outside of the state in order to postpone the necessity of redeeming them; domestic needs, therefore, had to be cared for largely by recognized foreign paper.
40 Thompson's Bank Reporter clipped in Ottawa Free Trader, May 20, 1854.
41 Alton Weekly Courier, November 23, 1854; Chicago Daily Democratic Press, November 17, 1854; Free West, November 23, 1854; Illinois Journal, November 24, 1854; Aurora Guardian, December 7, 1854; Bankers' Magazine, 9: 822.
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but a minor part of the currency of Illinois. Much foreign paper, especially the notes of Georgia banks, circulated in the state. Several of the Georgia banks were institutions owned by Chicagoans. George Smith had opened two banks in Georgia to take advantage of the opportunity of circulating paper unhampered by bond deposit restrictions and by limited interest rates. Although bitterly attacked by regulation bank- ers and by the journals of the state almost without exception, Smith's Georgia operations had sufficient stability not only to weather the storm of abuse but for a long time to thrive upon it as an excellent advertising medium. The war on the "Georgia red dogs and wild cats" took the form of pro- longed runs on the bank of issue and of a boycotting agree- ment in which the leading merchants and business men of Chicago urged the banks to refuse to receive Georgia paper on deposit.42 Smith, however, held his own until declining profits hastened his retirement in 1858.
The banking system was given a thorough overhauling in an act of February 14, 1857, which provided for more ade- quate regulation and at the same time sought to encourage legitimate banking by increasing the legal rate of interest from seven to ten per cent. This revision in part reflected the signs of an approaching storm in the financial world. The warning of 1854 had not stemmed the tide of overspeculation in the west, nor had it pointed out the danger of overexpansion of loans, discounts, and note issues, in the banking world. Two- thirds of the securities of the stock banks consisted of the bonds of Missouri, whose credit was now almost ruined by its wild fling at internal improvements. All these factors undermined the banking and currency situation in Illinois, and signs pointed to a financial collapse. The state was saved, however, by the solid foundations laid during the first six years under the bank- ing act of 1851 and by the cooperation of the various forces in the financial world in making the necessary adjustments. The banks retired a part of their note issues and reduced the
42 Belleville Advocate, October 4, 1854. " George Smith ought to pay the editors for abusing his bank of Atlanta. They have abused it into credit all over the United States. It is current all over the Union." Chicago Weekly Democrat, July 2, 1853 ; Rockford Republican, January 2, 1856; Andreas, History of Chicago, 1 : 546, 547, 2: 617.
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outstanding circulation by nearly a million; Chicago bankers agreed to receive the notes of Illinois banks at par despite steady depreciation. Auditor Jesse K. Dubois called for addi- tional securities to cover the decline in the value of state bonds. The action of St. Louis merchants in voting to reject all Illinois currency offered at their counters caused general alarm, but they were shortly induced to recall their decision and to accept Illinois paper at a slight discount.43
In this way Illinois was saved from the full effects of the panic of 1857. Six banks out of fifty-four failed; but with a single exception, all redeemed their notes without loss to the holders. Business for a time came to a complete standstill in Chicago, 117 establishments failing out of 1,350; in the rest of the state, however, conditions were far from serious, with 199 failures out of 11,459.44 The early months of 1858 showed rapid recovery; but with a short grain crop in that year, it remained for another twelvemonth to initiate the com- plete restoration of normal conditions. The bank commission- ers, reporting in January, 1859, proclaimed the fact that the banking system had withstood the test of two trying years of financial depression and was therefore entitled to public approval. Governor Bissell subscribed to this fact in his mes- sage, and the legislature on this ground acquiesced in the decision to allow the system to stand without change. The decade, therefore, gave the state the experience of passing from a puerile hostility to banking institutions through a suc- cessful experiment with the institutions of a complex economic order. 45
43 Illinois State Journal, April 1, 1857; Ottawa Republican, April 4, 1857; J. K. Dubois to Trumbull, October 5, 1857, Trumbull manuscripts; Quincy Whig, October 5, 1857; Chicago Daily Democratic Press, October 6, 9, 14, 1857; Cairo Weekly Times and Delta, October 14, 1857.
44 Bankers' Magazine, 12: 681.
45 Illinois State Journal, January 5, 1859; Dowrie, The Development of Banking in Illinois, 131-158.
V. THE KANSAS-NEBRASKA ACT
TN THE closing decade of the ante-bellum period no polit- ical issues remained vital enough to hold voters rigidly to old party affiliations. In Illinois local issues had changed with three decades of statehood; new problems in banking, railroad development, and education scarcely permitted an alignment that would coincide with old party divisions. In the main these questions came to be settled on their merits exclusive of the possibility of making political capital out of them. National politics in spite of the senility of orthodox leaders and issues was forced to furnish the chief basis of party alignment. An- drew Jackson, the popular champion of western democracy, had passed away without leaving any successor to continue the old traditions in their former vigor. Surely President Polk had not done so, nor was Franklin Pierce to meet with any more success. The leadership of Stephen A. Douglas was an acknowledged factor in Illinois but not in the nation at large. Even this was more than any whig could claim. Henry Clay had closed his career in a blaze of glory, not as a party chief- tain, but as a national leader. No one fell a clear heir to his mantle, not even Abraham Lincoln, the aggressive Illinois orator who following Clay's death delivered the commemo- rative eulogy in the statehouse at Springfield.1 Lincoln, indeed, was just reappearing from the obscurity forced upon him by his unpopular opposition to the Mexican War.
Whiggery was now upon its deathbed; anaemic democracy, desperately seeking a blood transfusion from political move- ments of youthful vigor, hoped to save itself from a like fate. The national bank issue was dead and buried; it was no longer politic to resurrect it either as a Cerberus to protect the nation's treasure or as a dragon to call forth a new American St. George. The tariff was discussed by all in terms of the revenue needs
1 Illinois State Register, July 8, 1852.
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of the government and the prosperity of American industry. Land policy was debated only in reference to the great agrarian reform demanded by the whole west to give land to the land- less. Eyes were fixed on Washington, the federal capital, to be sure, but largely to judge of the nearness of the political storm that was gathering, a menace to all existing party lines. Illinoisians watched, ready to take refuge under the new standard of "liberty and union.".
Before the crisis of 1850 the general desire of the north- west that the new territories should not be disgraced by the incubus of the enslaved African had expressed itself in an out- burst of political independence which had threatened to arouse the south, regardless of party allegiance, to battle in defense of its institutions. The danger of disunion brought a reaction in which zeal for liberty was replaced by an even keener devo- tion to the union; even the professional politician decried that agitation out of which he had hoped to secure so much profit and sent forth the rally cry of loyalty to party.
This reaction was carried to completion in the course of 1851, undisturbed by the unexciting contests for city and county offices. The new bank law which was submitted to the voters for ratification aroused some democratic anti-bank prejudices. Party activities that sought to defy the general lethargy were directed toward the coming presidential and state election. Democrats early began to discuss the relative merits of their available candidates. Almost all were agreed upon Senator Douglas for the presidency, so that livelier discussion took place concerning the gubernatorial nomination. An array of names was suggested including those of David L. Gregg of Cook county, then secretary of state, Colonel John Dement of Lee county, and Joel A. Matteson, a well-known politician and contractor upon public works.2 It was generally agreed,3 that the nominee of the party must be a democrat ready to eschew with a holy abhorrence all Wilmot provisoism or free-soilism. Others, in line with traditional democratic anti-bank doctrine, held that the recent revival of the bank question also required
2 Matteson to French, November 18, December 15, 1851, French manuscripts.
3 Chicago Democrat, February 10, 1852, spoke for the few dissenters to this policy.
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the old test of orthodoxy and that only anti-bank men ought to be considered.4 To the Egyptian democracy anti-Wilmot provisoism and anti-bankism were cardinal principles. When Dement, their early favorite, came out against the bank ques- tion as a party issue, they abandoned him for Gregg, who seemed to have a clean bill of health on both points.5 North- ern democrats, satisfied with the abortive death of an attempt to apportion the state convention on the basis of the democratic vote of 1848 as against total population, bided their time.6 When the state convention opened at Springfield in April, Gregg was easily the favorite candidate. For six ballots he led the field; then his opponents began to concentrate on Matte- son, whose strength grew until finally he was nominated on the eleventh ballot. The ticket was completed by the selec- tion of Gustave P. Koerner for lieutenant governor, Alexander Starne for secretary of state, and Thomas H. Campbell for auditor.
Steam roller tactics seemed to dominate the convention, making possible the harmony that prevailed. All new business had to pass through the hands of a special committee, so that the introduction of various disorganizing resolutions was pre- vented. This accounted for the silence of the convention on the bank and slavery questions and explained the passage of resolutions approving the democratic principles of '40, '44, and '48, declaring for full obedience to the laws of the country, especially the recent compromise legislation, and seriously deploring all sectional agitation.7 It was further agreed that
4 The new bank law submitted to voters for ratification in 1851 aroused some democratic anti-bank prejudices but at the same time met with support from large numbers of northern Illinois democrats, who saw no harm in cooperation with whig bank men. [Lewiston] Illinois Public Ledger, clipped in Chicago Daily Journal, March 18, 1851; Jonesboro Gazette, May 21, 1851; Cairo Sun, December 4, 18, 1851.
5 Canton Weekly Register, January 24, 1852; Illinois Journal, January 7, February 6, 1852; Breese to French, January 5, 17, 1852, French manuscripts. 6 Illinois State Register, February 5, March 4, 1852.
7 Ibid., April 22, 1852. There was only one attempt to disturb the prevailing harmony; one of the southern delegates was prevailed upon to offer a set of resolutions indorsing the compromise laws, declaring ineligible to seats any person known to have been and still to be hostile to those measures and closing by proclaiming John Wentworth a political renegade and expelling him from the convention. Chicago Democrat, April 24, 28, 1852; Quincy Whig, April 26, 1852. The resolutions had such a smack of Cook county factionalism, however, that they were tabled by a large majority.
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all future state conventions ought to be based solely upon the democratic vote of the state.8
The nomination of Matteson caused much astonishment. He was a capable business man, "a man of integrity, & a man of property," but it was an unexpected victory for the bank men and for the moderate antislavery democrats of northern Illinois.9 Matteson's private convictions on both points were well known, although he was publicly noncommittal to a degree very acceptable to the entire party. The shelving of Gregg, however, caused such dissatisfaction as to require some expla- nation, especially when a rumor began to circulate that he was discarded because of his Roman Catholicism. The whig press immediately attacked their opponents for such bigotry.10 Gregg was, therefore, induced to write a letter in which he denied the assumption that the convention had been actuated by such motives; "it is doubtless true," he said, "that a few men in the convention and out of the convention, sought to stir up religious prejudices with a view of accomplishing my defeat. But does that afford a reason for branding the con- vention with improper motives ? Are the democracy of Illinois- to be held responsible for the unworthy course of an inconsider- able number of knaves or bigots ?" 11
The whigs were meantime reorganizing in an attempt to "hold their own " in the coming contest : a tacit recognition by party enthusiasts of the inroads time had made into the party's strength; a grim and determined effort must be made to drive away the growing apathy and despondency even among the old stand-bys. A preliminary state convention was held at Springfield, December 22, 1851, which nominated delegates to the national whig convention and appointed a provisional state central committee to cooperate with committees to be appointed in every county.12
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