USA > Indiana > A history of Indiana from its exploration to 1850 > Part 32
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Date of
Inter- Sale
Still
Loan.
Amount.
To Whom Sold.
est. Price.
Cash.
Due.
1832
$100,000
J. D. Beers Company
.06
113
$113,260
1834
500,000
Prime, Ward & King
.05
101
505,250
1835
300,000
Prime, Ward & King
.05
102
306.150
1835
65,257
Secretary of War
.05
107
69.825
1835
200,000
J. J. Cohen & Bro. .05
105
210,000
1835
400,000
J. J. Cohen & Bro
.05
104
418,000
1835
90,000
Prime, Ward & King
.05
104
94,250
1836
100,000
J. J. Cohen & Bro.
.05
100
100,000
1836
2,742
Secretary of War .05
101
2,934
1836
440,000
Biddle and Morris C. Co. . 05
101
444,400
1836
400,000
J. J. Cohen & Bro .05
100
400.000
1836
589.000
Biddle and Morris Can ._
.05
101
594,890
1836
100,000
Law. & Indpls. R. R. Co. . 05 100 Christmas. Livingstone __ . 05 100 Morris Canal & Bnk. Co. . 05 102
100
121,000
1838
40,000
Staten Isl. Whaling Co ._ . 05
100
40.000
1838
300,000
Western Bank of N. Y ._ . 05
100
60,000
240.000
1838
100,000
Erie County Bank .05
100
100.000
1838
100,000
Detroit & Pontiac R. R ._ . 05
100
10,000
90,000
100.000
1837
30,000 2,000,000
30,000 2,034,000
1837
1837
121,000
Law. & Indpls. R. R. Co. . 05
378
HISTORY OF INDIANA
§ 70 THE SETTLEMENT WITH THE CREDITORS
THE Wabash and Erie Canal was a more difficult prob- lem to dispose of than any of the other works of the State. In the first place, the State had accepted a large donation of land from the United States on condition that it build a canal uniting at navigable points the waters of the Wabash and Lake Erie. Although the State did not fear any puni- tive measures on the part of the federal government, still the violation of the obligation would remain a disgrace to the State. In the second place, the State had covenanted with Ohio to complete a part thereof as a joint undertaking. Ohio had completed her part of the canal, carrying it to Maumee Bay, Lake Erie, in 1843. At the instance and in- sistence of Indiana, Ohio had built seventy-one miles of canal whose value depended very largely on Indiana's ful- filling her obligations.
The Wabash and Erie was opened, as stated above, from
Date of
Loan.
Amount.
To Whom Sold.
Inter- Sale est Price.
Cash.
Still Due. 60,000
1838
60,000
Staten Island Whaling
.05
100
1838-9 4,702,000
Morris Canal Co.
.05
90
2,136,376 2,385,383
1839
20,000
Binghampton Bank
.05
88
17,600
1839
294,000
Indiana State Bank
.06
100
294,000
1839
200,000
Merchants Exch. Bank
.05
96
192,000
1839
35,000
Bank of Commerce
.05
96
33,600
1839
47,000
Bank of North America.
.05
88
1.360
40,000
1839
221,000
Madison Company
.05
88
194,480
1839
95,000
Madison Company
.05
88
83,600
1841
30,000
Various persons
.07
100
30,000
1841
404,000
Various persons.
.05
100
131,175
*
1841
665,000
Various persons
144,697
*
$12,751,000
$8,732,205 $3,040,972
There was nearly $2,000,000 in bonds out and unaccounted for. The fund commissioners had taken collateral securities for money still due on bonds "hypothecated." This list of the State's property furnished much amusement for facetious members. It included among others :
Winchester & Potomac railroad bonds for $44,000; Baltimore & Ohio, and Baltimore & Susquehanna railroad bonds for $78,880; second mort- gage on 184 New York City lots, $25,000; second mortgage on forty- eight Brooklyn lots, $150,000; second mortgage on land in Poughkeepsie, $30,000; debts on wildcat banks of western New York, $240,000; Detroit & Potomac railroad bonds, $90,000; Erie Company Bank, $587,000; Bing- hampton Bank, $58,200; Hiram Pratt, $35,600.
(See table opp. p. 75, Documentary Journal, 1841-'02.)
SYSTEMATIC INTERNAL IMPROVEMENTS 379
Lafayette to Lake Erie, in 1843, and everything indicated that it would be a useful and money-making property. The people, as well as their creditors, had looked forward hope- fully to the opening of the canal to the lake. They ex- pected an income from it that would go far toward reliev- ing the State of its financial troubles. The bondholders, who had received no interest on their bonds for three years, expected to receive their interest again regularly. Both parties were disappointed. Although the tolls did increase five hundred per cent, they still fell short of paying the running expenses of the canal. The year 1844 brought no brighter prospects. A flood closed the canal for two months. The receipts for the year fell far short of repair expenditures, and the bondholders saw this hope depart, as all others, without bringing any money.
The General Assembly of Indiana and many of the citizens were loud in their protestations of honesty, and there is no doubt public sentiment favored the ultimate payment of every dollar of the State debt. Governor Whit- comb said in his messages of 1844 and 1845, that the great mass of our fellow citizens were willing and anxious to meet all their just obligations. That with them it was not a matter of inclination, but one of ability.68 That some arrangement would be made with their creditors and the tarnished reputation of their State restored, he would not permit himself to doubt.
By a joint resolution January 13, 1845, the General Assembly solemnly expressed its opinion on repudiation : "We regard the slightest breach of plighted faith, public or private, as an evidence of a want of that moral principle upon which all obligations depend: that when any State in this Union shall refuse to recognize her great seal as the sufficient evidence of her obligation she will have for- feited her station in the sisterhood of States and will no longer be worthy of their respect and confidence." The governor was directed to transmit copies of this resolu- tion to all the States.69
68 House Journal, 1845, 19.
69 Laws of Indiana, 1844, 92. On the other hand, in this same mes-
380
HISTORY OF INDIANA
In speaking of all these fulsome protestations, State Auditor Horatio J. Harris said: "It would be fortunate for the reputation of the State as well as gratifying to her creditors should this evidence consist hereafter of some definite action, rather than general expressions of legis- lative opinions." Not one of these demagogues who ha- rangued about State honor ever showed enough courage to vote a measure to retrieve the State's honor. They feared the sullen resentment of the outraged citizen voters who felt that somehow the State had been swindled and that it did not justly owe the debt.
Relying on this sentiment, widely and loudly expressed, and still hopeful of getting their money, the bondholders banded together and hired Charles Butler, an attorney of New York, to look after their claims. After visiting Michi- gan on a like mission, he reached Indiana in the summer of 1845.70 His plan was to rally the anti-repudiation sentiment by means of a series of public addresses. He recognized it as useless to demand an immediate and un- conditional payment of the bonds. The resources of the State and the condition of the currency, demoralized by floods of treasury notes, bank scrip, "white dog," "blue dog," and "blue pup," all depreciated from forty to sixty per cent, were such that it is doubtful if this could have been done. He began then by flattering the people on the Wabash with the hopes of finishing that canal to the Ohio river. Whether he believed the canal, so improved, would be a paying property, or whether he wished merely to re- vive the courage of the people, is not known. In the face of the facts as he knew them, the latter seems to have been his intention, hoping in the future to get the State
sage, page 18, the Governor says: "The opinion has hitherto been near- ly, if not quite, universally held among our citizens, as well as others acquainted with our conditions and resources, that it is beyond the power of our State. at present, to fully meet our obligations. Even the plan submitted at our last session of the Senate, virtually made that con- cession by proposing to convert our bonds, bearing five per cent. interest, into a stock bearing only three. No plan that has been mooted for a resumption of payment, even the most stringent, has contemplated a full and immediate payment."
70 Indiana Democrat, Dec., 1845.
SYSTEMATIC INTERNAL IMPROVEMENTS 381
to pay the bonds in full and take charge of the finished canal.
He began his campaign at Terre Haute, where in an address in May, 1845, he proposed to divide the interest on the State debt into two parts, one of which should be paid by the State, the other from the revenues of the canal. These views were transmitted to the General Assembly in a memorial. The question of the settlement of the debt had some influence on the fall elections, but not so much as was hoped. There was a general restlessness among the people, under the charges of repudiation then being made against the State, but no sweeping sentiment for full payment could be aroused.
It was arranged to have Mr. Butler meet a joint com- mittee of the General Assembly, as it was understood he had a specific proposition to make. On December 19, Mr. Butler met the committee and he submitted his plan as follows :
1. For arrears of interest, the State should give certifi- cates payable by 1851; or if not paid then, to be funded into five per cent stocks.
2. The State should pay, by taxation, three per cent interest on the debt up to 1851.
3. All arrears of interest up to 1851 to be funded at five per cent. After 1851, three per cent interest to be paid promptly by tax and two per cent from tolls of the canal. It was understood that the State was to finish the canal to the Ohio river.71
In a message, December 27, 1845, the governor urged the General Assembly to accept Butler's proposition. It would place the credit of the State on a certain basis; it would aid returning prosperity ; it would turn the tide of settlement to our State again, thought the governor.72
It did not take the joint committee long to come to an agreement. On Christmas day it notified Mr. Butler that it could not accede to his demands and inquired if he had
71 Indiana Democrat, Dec. 23, 1845. Also Decumentary Journal, 1845, pt. II, No. 21.
72 Documentary Journal, 1845, No. 8, 1S.
382
HISTORY OF INDIANA
anything better to propose. The attitude of the committee was not at all creditable. They seemed to be negotiating for a bargain with their own creditors rather than trying to uphold the honor of the State.
The next day Mr. Butler was again before the com- mittee and made what is known as his second proposition. It differed very little from the first. Elaborate tables were submitted showing how the State could meet all its obliga- tions. One could not fail to agree with Butler, that the State was able to meet all its obligations honorably, except for two reasons. These were, first, the demoralized con- dition of the currency, and second, the leadership of a clique of oily politicians. Neither of these reasons is credit- able to the State. A State levy of 70 cents would have paid principal and interest. Ohio was meeting her debt in that way. Indiana would have done no less had her General Assembly risen to the occasion.
A bill was finally drawn along the lines of Butler's propositions and introduced in the Senate by Joseph Lane73-the same man who had declared he would cut cordwood to pay his part of the debt. The measure en- grossed the attention of the Assembly completely. The House was Democratic, the Senate Whig. There was little straightforward policy manifested in either branch. Both parties finally agreed to postpone action on the bill till after the party conventions on January 9. Even after both parties in convention had endorsed the Butler bill, the Democrats in caucus decided to refer the whole matter to the people in the August elections. The governor and leaders of the party succeeded in breaking the Democratic caucus. January 19, 1846, Governor James Whitcomb at- tached his signature to the bill.
General satisfaction was felt no doubt, throughout the State at what was felt to be a final adjustment of the State debt. Butler left for New York, February 20, and the New York papers generally expressed approval of the settle- ment.74 The long law of thirty-five sections was very care-
73 Indiana Democrat, Jan. 6, 1846.
74 Indiana Democrat, April 14, 1846.
SYSTEMATIC INTERNAL IMPROVEMENTS 383
lessly drawn, and was soon found to be impossible of execution.75 The bondholders had lost enough money with- out investing the $2,225,000 called for under the law. No bonds were surrendered under it.
When the General Assembly convened again in Decem- ber, 1846, Mr. Butler was on the ground demanding some amendments. A bill purporting to be an amendment was drawn, and after a long struggle received the governor's approval January 27, 1847.76 The new bill was founded on the option contained in the thirty-second section of the previous law. Its general effect was to divide the outstand- ing bonds of the State, except those known as the Bank bonds, into two equal parts. One of these parts, with its accumulated interest, was assumed by the State, and the other was made a debt on the canal for which the State assumed no further responsibility. The canal was deeded to the bondholders and they were forced to accept the compromise.77
75 It provided that the bonded debt should be refunded entirely. The old five per cent bonds were to be surrendered and in their stead new State registered stocks created. First, there should be issued State two and one-half per cent twenty-year registered bonds equal in amount to the face of the old bonds. Second, the arrears of interest should be funded, at the rate of two and one-half per cent from 1841 to 1847, in- clusive, in like bonds as the principal. The State agreed to pay interest on the above bonds at the rate of two per cent if a State tax levy of 25 cents on the $100 and a poll tax of 75 cents should furnish sufficient funds after the ordinary State expenses were paid. The remaining one- half per cent and any arrears by reason of the failure of the above tax levy to bring in sufficient revenue were to be funded or paid as the State should choose January 1. 1853. For the payment of the remaining two and one-half per cent of annual interest the bondholders were to look entirely to the Wabash and Erie canal. In order that the canal might be more productive, the bondholders were given permission to raise a sum of not less than $2,225,000 to complete the canal to the Ohio river. The canal was to be placed in trust by the State, and its earnings and land grants set aside and pledged to the payment of the bondholders. These last loans were not to become a debt chargeable against the State, though in this law the State remained pledged to pay the principal of the entire State debt.
76 Laws of Indiana, 1846, ch. 1. Benton (Wabash Trade Route, 73) calls this bill a "few minor modifications," and leaves the impression that there was no opposition worth considering. In fact, the fight on this was longer and more acrid than on the other.
77 The conditions of the compromise close with the following notice
384
HISTORY OF INDIANA
The outstanding bonded debt of the State July 1, 1847, was $11,048,000.78 These bonds were held in New York and London and the debt was always referred to as the foreign debt, in distinction from the State scrip and treasury notes, which were called the domestic or floating debt. The inter- est on the bonds had not been paid for six years, and the arrears added to the principal brought the total foreign debt up to $13,120,692.
If Indiana can be charged with repudiation, it must be done on account of this law of 1847. No one will for a moment contend that the bondholders would have pre- ferred the arrangement of 1847 to the payment of the bonds according to their tenor. The bonds at this time were never quoted higher than thirty cents on the dollar. Yet they were not depreciated more than the debt which the United States paid in 1789. Even at thirty cents, men like John Jacob Astor and the elder Belmont bought In- diana bonds and exchanged them for the new five per cent stocks, and made a good profit. Two facts stand out promi- nently. The State made a bargain with its creditors, and its creditors lost half their invested money. Two parties were deeply wronged: the persons who had invested their earnings in State bonds expecting to enjoy in their old age the comforts of a certain income ;70 and the citizens of Indiana who had entrusted their credit and honor to their government, and had been robbed of both. For it cannot
to the bondholders: "The State will make no provision herefter to pay either principal or interest on any internal improvement bonds until the holder shall first have surrendered such bonds to the agent of the State and shall have received in lieu thereof certificates of stock as pro- vided in the first section of this act. Anything in this act to the con- trary notwithstanding." This proviso makes the law of 1847 very dif- ferent from the harmless one of 1846. It must also be kept in mind that the provisions of this law are not the same as those laid down in Butler's first or second proposals.
78 Documentary Journal, 1847, 102. Report of Agent of State.
79 Documentary Journal, 1845, pt. II, 273. A memorial from the New York Savings Bank. This pictures some of the suffering caused by the State's failure to pay its interest promptly. See also letters from foreign creditors to Governor Whitcomb, Indianapolis Sentinel, June 17, 1842. See also Documentary Journal, 1844, pt. I, No. 5, Indianapolis Sentinel, June 17, 1842.
SYSTEMATIC INTERNAL IMPROVEMENTS 385
be denied that the reputation of Indiana suffered greatly in this transaction. Nearly all the Indiana bonds then out- standing had been taken out of the State's hands wrong- fully by being sold on credit in the face of a law to the contrary. More than one-third of the bonds had been se- cured from the State in the first instance by criminal col- lusion, the agent of the State being at the same time a member of the firm of brokers who took the bonds, sold them, and failed to pay the State the proceeds. The State of Michigan was similarly swindled, and promptly repudi- ated the bonds so obtained. This step was seriously con- sidered in the Indiana legislature during the session of 1845-'46, and might have been done but for the opinion of the State agent, Michael G. Bright, who advised the Gen- eral Assembly against it. The correspondence of the gov- ernor for years afterward contains evidences of the bit- terness of the bondholders on this subject.
§ 71 FINISHING THE WABASH AND ERIE CANAL
THE act of January 28, 1842, as indicated above, left the Wabash and Erie east of Lafayette in the hands of a com- missioner selected by the General Assembly. An act of January 1, 1842, had already provided for building the canal on down to Terre Haute. The commissioner was di- rected to let contracts for as much of it every session as could be paid for with available funds. To expedite mat- ters as much as possible, canal scrip was to be issued. This scrip was made receivable at the canal land offices in pay- ment for the lands donated under act of Congress March 2, 1827, and confirmed by act of February, 1841. By a later act this scrip was made receivable for all tolls, water rents, and other dues to the canal. As the canal crept slowly southward more lands were made available, under the grant of 1827. Work proceeded slowly. Tolls failed to do more than pay for repairs.80 Superintendent E. F. Lucas reported receipts for land during the year 1844, as $85,855; tolls and rents, $58,212; expenses, $94,466. It
80 Commissioner's Report, Documentary Journal, 1843.
386
HISTORY OF INDIANA
is reported that a single flood caused most of this extra- ordinary expense. In spite of all obstacles the canal was pushed steadily downward to Terre Haute. For 1845, the tolls were $95,473 ; income from land sales, $108,943; while the expense for repairs was $106,344.81 During this season the canal was short of water a great part of the time. This was to be supplied partly by the feeder at Northport.82 Business was reviving rapidly and there was every indication of prosperity in the transportation business. But the rotten condition of the wooden aque- ducts and inadequate supply of water from the feeders did not promise so well for the canal. In 1844, the canal had been placed under a single superintendent for its whole length.
A considerable export trade was growing up. Docks, warehouses, and elevators were springing up over night at Logansport, Attica, Peru, Lafayette, Huntington, Lagro, Pittsburg, Lockport, Wabash, Fort Wayne, and Montezuma, not to mention a score of lesser towns long since disap- peared and forgotten. All kinds of craft swarmed on the canal.
July 2, 1845, the surveyor, R. H. Fontleroy, was ordered by Governor Whitcomb to finish surveying the canal down to Evansville. He accordingly began the survey at the summit of the Eel River canal. To get water at this place was the most troublesome problem on the whole line from Lake Erie to the Ohio. A feeder was planned at Rawley's Mill. Next, it was decided to dam Splunge creek. This would require an embankment one mile long and fifteen feet high. This dam was made twenty feet wide on top so that it could be used as a wagon road. The reservoir thus formed would cover 3,900 acres and hold one billion cubic feet of water. A second reservoir was planned and surveyed high up Eel river, near Monrovia, in Morgan county. The
81 Documentary Journal, 1845, No. 17.
82 An excellent description of the work at Northport was furnished the writer by Miss Anna Caseley, of the Kendallville High School. Her paper (History of Sylvan Lake and Vicinity) ought to be published. The Northport reservoir was at Rome City, Noble county.
SYSTEMATIC INTERNAL IMPROVEMENTS 387
Monrovia reservoir was to cover 3,500 acres. From Raw- ley's Mill the canal survey was continued down the bank of Eel river. This was the third canal site that had been laid down along this river. At Point Commerce it con- nected with the Central survey down White river.83 The canal crossed White river at Newberry. Skirting the east- ern edge of the White River Valley, it crossed Daviess county, touching Maysville. It crossed Driftwood on an aqueduct one mile from its mouth. It left White river and passed by way of Petersburg, Pigeon Summit and Pigeon creek to Evansville.
This was the work undertaken by the bondholders under the Butler bill. The surveyor placed the total cost at $2,502,813, of which $966,544 had already been expended. The canal was in operation by 1847, as far down as Coal creek near Cayuga, thirty-six miles above Terre Haute. The water was insufficient below Lafayette and feeders had to be constructed, one at St. Mary's and another eight miles west of Logansport at Crooked creek. The whole canal from Lake Erie to the Ohio was 458 miles long. The board hoped to have the whole line to Evansville under construction by 1850.84 During the year 1848 there were 189 miles of canal in use, extending from Coal creek to the Ohio State line. Ninety-six miles of construction were under contract. One thousand seven hundred eighty men were at work, scattered from Coal creek to Patoka Sum- mit. Three hundred and forty-two thousand dollars were expended for construction, and $35,000 for repairs. Tolls had arisen to $146,148.
The work was not successful during 1849, although the board began in the spring with more than ordinary vigor. A flood during the winter caused $31,600 damage on the Eel River section. Contracts were let at Washington, Daviess county, June 27, 1849, for the section from New- berry to Maysville-twenty-three miles-for $160,000. The construction from Maysville to Petersburg-twenty miles- was placed under contract at Petersburg, November 14,
83 Documentary Journal, 1845, No. 17, 2.
84 Documentary Journal, 1847, pt. II, No. 6.
388
HISTORY OF INDIANA
for $278,000. The canal was opened to commerce from the Ohio line to Lodi. But the prosperity of the early part of the season was not to last. Cholera broke out in several places along the canal, especially at Toledo and Lafayette. The plague affected the canal in every direction. It stopped the sales of land, it cut the tolls to $135,000, $11,000 below the previous year, although a long stretch of canal was opened for the first time. It demoralized the con- struction gangs, and, finally, it killed trustee Thomas H. Blake at Cincinnati as he was returning from Washing- ton, D. C., on business for the canal.S5
For the season of 1850 the canal opened March 18, and closed December 8-261 days. During this time there was no interruption. The long delayed hopes of the promoters seemed at last about to be realized. Boats arrived at Lodi, October 25, 1849; they passed the Eel River division to Point Commerce and Washington, June 7, 1850. This lat- ter point is seventy-nine miles from Coal Creek, 268 miles from the State line, and 352 miles from Toledo. The last section, from Petersburg to Evansville, was placed under contract September 6, 1850, and was to be completed in 1852. This year the cholera broke out among the work- men and killed 150 men. A panic set in and the fleeing workmen carried the plague all over the country. The tolls this year ran up to $157,158, a gain of $22,500.
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