USA > Indiana > A history of Indiana from its exploration to 1850 > Part 33
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The whole canal was closed for a full month during the season of 1851, on account of floods. Notwithstanding this, the tolls increased $22,000. The work was received from the contractors down to the White river crossing at New- berry, 281 miles from the State line. One thousand two hundred men were at work during the season. The trus- tees ordered the part of the canal in Evansville to be made sixty feet wide in order to form a local harbor. The an- nual report shows $58,549 for repairs, and that $65,000 had been expended for bridges, of which there were 150 over the canal.86 Many of these that had been built earlier
85 Governor Wright. Message of 1850, in House Journal. See also Documentary Journal, 1849, pt. II, No. 11.
86 Documentary Journal, 1851, pt. I, No. 7.
SYSTEMATIC INTERNAL IMPROVEMENTS 389
were rotten and many complaints on this account found their way into court. Seven of these suits were carried into the State supreme court. The canal trustees were slow in adjusting damages, and an act of February 13, 1851, directed that injured parties should file their com- plaints with the canal board, and if no relief was secured in ninety days they should file suit in the circuit court.87 A law similar to the one mentioned above gave authority to road supervisors to institute suit to compel the canal board to rebuild rotten bridges.88 The citizens of Williams- port tried by mandamus suit to force the board to build a lateral canal over to that town, and, failing in their suit, they dug one themselves and forcibly connected it with the main canal. This left the main canal almost dry for some time.89
The water was let into the Maysville division in June, 1852. Laden boats then made the trip all the way from Toledo to Maysville, 392 miles. At a meeting held in May, 1852, it was agreed to lower all tolls and tariffs on the canal forty per cent. After this reduction the total receipts still rose to $193,400, a gain of $14,000. This was the high- water mark for toll on the Wabash and Erie. This is the more significant because it came before the whole canal was opened. The work was about done to Petersburg, and $262,281 had been expended on the Evansville division, showing that it, too, was well-nigh completed. There was transported on the canal this year 2,300,000 bushels of corn, 1,606,000 bushels of wheat, and 88,000 barrels of salt. The expenses of operation this year were $67,237.90 Deducting this from the gross tolls, there remains $126,163 as the net returns of the canal at its best. This would pay five per cent on two and one-half millions. While this does not look very favorable to us, yet in the steadily increasing tolls one can see some grounds for the hope that with a
87 Laws of Indiana, 1851.
88 Laws of Indiana, 1852.
89 Documentary Journal, 1854. No. 21.
90 Documentary Journal, 1852, pt. II. No. 7.
(26)
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HISTORY OF INDIANA
terminal on the Ohio river tolls would increase enough so that the whole canal would become dividend-paying.
While the outlook in this direction was encouraging to the canal builders, the outlook in other directions was ex- tremely gloomy. Complaints, honest and dishonest, ending in lawsuits, multiplied all along the canal. Floods tied up navigation for days, weeks, or even months. Fleets of boats were grounded for weeks at a time in shallow water, or by breaks in the embankments, while their cargoes of farm products, sometimes live animals, depreciated or be- came utterly worthless. At best there was traffic during only eight months of the year. The Evansville and Terre Haute railroad was already under construction, and the Fort Wayne and Covington (Wabash Valley), and the Crawfordsville and Vincennes had been organized. These, it will be noticed, paralleled the canal throughout its length.91 The tolls for 1853 dropped to $181,207, due to poor crops. A great deal of trouble was had with the banks along the deep cut south of Petersburg. A flood in White river destroyed all the aqueducts from Point Commerce to Newberry and piled the drift high against the big aque- duct at that place. The citizens, thinking the extreme high water due to the big aqueduct, indicted the trustees for maintaining a nuisance; but the legislature stopped the prosecution.92 All the locks, gates, dams, towpaths, and bridges were reported rotten and giving away.
The Birch Creek Reservoir was built during this year. It covered about six square miles, and the inhabitants of the district regarded it as a fruitful source of malaria. The General Assembly had it investigated in 1854 and it was reported quite healthful.93 A mob of armed men black- ened their faces and cut the dam at midday, May 10, 1855. This left the whole of the Eel River section dry. The loss on the dam was over $10,000. Governor Wright sent the militia from Evansville under General Dodds and Captain Denby to protect the work. They found everything quiet
91 Documentary Journal, 1852, pt. II, No. 7.
92 Laws of Indiana, 1853, March 4.
93 History of Clay County, Index.
SYSTEMATIC INTERNAL IMPROVEMENTS 391
and spent the season hunting, fishing, and playing cards with the settlers. The next day after the soldiers left, the dam was again leveled. Many men were arrested, but were promptly released by the local magistrates.94 This trouble never was settled, and this division of the canal was rendered useless by the lawlessness of the people of that neighborhood. The reservoirs were swamps full of the natural growth of the forest, and in summer became stag- nant frog ponds.
By the year 1856 it was manifest to all that the canal was doomed. The tolls dropped to $113,000 and expenses for repairs rose to $106,000. The whole section from Terre Haute to Evansville was rendered useless on account of the destruction of the Birch Creek Reservoir. Again the board of trustees reduced the toll rates on the canal. This failed to hold the trade. All the lighter articles of com- merce were shipped by rail.95 Fortunately for the State, the scrip issued to finance the canal was about all redeemed. Over $1,200,000 had been issued and all was now in except $15,000. The State was thus free of all obligations to it.96
The report of 1857 left no question of the future of the canal. The tolls were $60,000 for the whole line. There was no regular navigation, no through traffic, as had been hoped. South of Terre Haute the tolls were $8,000 and re- pair expenses $40,000. The repairs for the whole line amounted to $115,000. The St. Joseph river broke around the feeder dam and it required $7,500 to repair the breach.97 A series of local floods in the Wabash Valley dur- ing the summer of 1858 did heavy damage. Wild Cat, Wea, Coal creek, Spring creek, and Otter creek overflowed and carried away their aqueducts. The Wabash broke over its banks in Terre Haute and destroyed forty-six rods of canal. The entire damage was $55,000. Navigation was suspended from June 10 to August 26. The annual expenses of the canal, $181,000, exceeded tolls and land sales combined by
94 Documentary Journal, 1855, pt. II, No. 3.
95 Documentary Journal, 1856, pt. II, No. 6, Trustees' Report.
96 Ibid., pt. I, No. 3, State Auditor's Report.
97 Documentary Journal, 1857, pt. II, No. 4.
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HISTORY OF INDIANA
$60,000. The stockholders ordered the trustees to close any part of the canal not paying expenses. The part from Terre Haute to Evansville was at once closed.98 After the canal board, in January, 1859, ordered all officers to quit, only a few local engineers, at reduced salaries, remained in ser- vice. In this year, a bondholder, named John Ferguson, secured an injunction from Justice McLean preventing the use of any money, except tolls, for making repairs. The canal was then divided into three sections which were let to persons who would keep the canal in repair for its use.99 The south section from Terre Haute to Evansville was not kept repaired at all. The Birch Creek Reservoir was cut for the last time. The first breach in the long fill across Daviess county was left unfixed. Navigation was finally abandoned south of Terre Haute in 1860, although a few miles in Vanderburgh county remained open a year longer. Two men, Miller and Hedges, undertook to keep the line open from the Eel river dam to Terre Haute and with the aid of a gift of $1,000 from the city succeeded for a short time. The part from Terre Haute to Toledo remained open during the year. The Wabash railroad began a rate war at this time and soon attracted all trade from the canal. The railroad did this by a free use of rebates. By 1870 little more than a succession of stagnant pools marked the site of the former canal. A law of February 14, 1873, permitted the county commissioners to keep local sections of the canal in repair, but only a few temporary repairs were made. The trustees formally surrendered their trust in 1874. They had paid $436,545 for repairs and had re- ceived $274,019 in tolls.100
A decree was obtained in 1874 under which the canal was sold February 12, 1876. There was realized from this sale $96,260. All told, the bondholders received about forty per cent of the $800,000 which they had advanced for the completion of the canal.
The bondholders were not entirely silenced by the joint
98 Documentary Journal, 1858, pt. I, No. 3.
99 Documentary Journal, 1859, pt. I, No. 3.
100 Twenty-eighth Annual Report, 1874, Documentary Journal, No. 14.
SYSTEMATIC INTERNAL IMPROVEMENTS 393
resolution of the General Assembly of 1857. Fearing that a future General Assembly might be induced to pay the debt, or some part of it, the General Assembly of 1871. submitted a constitutional amendment to the voters provid- ing that "No law or resolution shall ever be passed by the General Assembly of the State of Indiana that shall recog- nize any liability of this State to pay or redeem any cer- tificate of stock issued in pursuance" of the settlement of 1847. This was agreed to by the next General Assembly and submitted to the voters.101 By proclamation of the governor this was voted on on February 18, 1873. The voters took little interest in the election. Indianapolis cast 2,679 votes for and 14 against the amendment. Evans- ville's vote favored it by 1,365 to 12; Terre Haute, 1,502 for, and 1,520 against; Fort Wayne 950 for, 12 against. The amendment was carried and the question settled. Thus closed the story of the old Wabash and Erie. The State and bondholders had expended all told, $8,259,244. They had received from land and tolls, $5,477,238. A magnifi- cent land grant by the federal government had been squandered. The total amount of land donated was 1,457,- 366 acres, or 2,277 sections ; an area equal to the five largest counties or the ten smallest.102 This was twice as much as the whole donation for the common schools.103
101 Laws of Indiana, 1873, 83.
102 Donaldson, Public Domain, 755.
103 American Almanac, 1857, 323, gives a brief summary of State and canal debts.
CHAPTER XVII
THE SECOND STATE BANK OF INDIANA, 1834-1857
§ 72 CHARTERING THE BANK, 1834
THE second period in Indiana banking begins with the charter of a new State Bank in 1834.1 The agitation for a State bank began as soon as the election of 1832 settled the fate of the Second Bank of the United States. The State Bank of 1834 was the heir in Indiana of this United States Bank whose charter expired in 1836. It was favored and upheld by the Clay party in the State. Why the voters of the State always supported Jackson, and at the same time favored the United States Bank, a high tariff, and internal improvements is one of the unexplained facts of Indiana politics of this period. A State bank was not, however, an issue in the State election of 1832. After it was ascer- tained that Clay was defeated and that the Second Bank of the United States would not be rechartered, speculation began as to what would take its place.
Soon after the October election in 1832, a movement was started to reorganize the old Farmers and Mechanics' Bank of Madison, Indiana. This bank had always borne a good reputation, and the character of its officers assured it a good standing among business men.2 John Sering was a member of its board of directors and J. F. D. Lanier was its cashier. A new set of banknote plates was struck,
1 Dewey (State Banking Before the Civil War, 43), says this was an extension of the earlier charter. This is an error. The charter of the earlier bank was annulled in 1822 by the Knox county, Indiana, circuit court. The first State bank is treated in chapter X, above.
2 These were Victor King, president; John Vawter, John Sering, John Woodburn, and Milton Stapp, directors; J. F. D. Lanier, cashier. Dem- ocrat, Oct. 13, 1832.
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and every arrangement made to take the tide of oppor- tunity at its flood. There was in Indiana no branch of the Second Bank of the United States; nevertheless its currency and power reached and controlled the State . through the branches at Cincinnati and Louisville.
Early in the session of 1832, a bill for a State bank charter was introduced in the Indiana General Assembly. The report on this bill by the senate committee, of which John Ewing3 was chairman, is the best exposition of the various views of the legislature on the subject of banking. In this report, which was dated January 1, 1833, Mr. Ewing suggested five plans by which a circulating medium for Indiana might be secured :
1. The General Assembly might memorialize the Con- gress of the United States to recharter a national bank.
2. Congress might be induced to issue a national cur- rency and apportion it among the States according to population.
3. The General Assembly might issue a State cur- rency predicated upon the proceeds of canals, school lands, the Michigan Road, and salt springs, and managed by a board of commissioners.
4. The General Assembly might order an issue of treasury notes bearing five per cent interest.
5. The General Assembly might organize a partnership bank-State and people.
The First State Bank of Indiana had almost destroyed credit, endangered the validity of contracts, and so lessened the confidence of man in man that ordinary business was seriously deranged. Moreover, it had injured the credit of the State, and had given to its citizens a weakened repu- tation for financial integrity. Mr. Ewing thought it the duty of the State to guard against the repetition of such a calamity, and oppose every possible bar to such an issue of "Owl Creek" currency. Finally, he said, the committee
3 John Ewing was born in Ireland; came to Vincennes and engaged in mercantile pursuits; represented his county in the House in 1819 and in the Senate from 1825 to 1835, and from 1842 to 1844. He also served in the twenty-third and twenty-fifth Congresses.
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HISTORY OF INDIANA
believed a national paper currency preferable to any State emissions. A national bank was thought better than a State bank on account of its wider power, its national affiliation, and its greater uniformity.4
In general, the members of the committee agreed with Mr. Ewing. They favored a national bank with State branches, State controlled; and recommended that Indiana organize a branch, and by issuing State five per cent bonds buy $800,000 of this national currency. Out of the divi- dends, they estimated, the five per cent on the loan could be paid, and the surplus would go far toward the establish- ment of free primary schools throughout the State.
At the same time there was a bill before the Senate to charter a co-partnership bank with nine branches.5 If any branch failed to pay six per cent it was to be closed. The State was to take one-half of the stock, which was to be non-taxable, and the charter was to run twenty-seven years. Another bill for chartering State banks had been introduced and passed in the House. There were at this time three bank bills before the General Assembly. The Committee Bill was not discussed.
There was a long, earnest, and sometimes angry dis- cussion of these measures. Some members favored a free banking law; others favored none at all, believing nothing but "hard money" should circulate. A large majority, however, favored a State bank but could not agree on a charter. A motion to postpone action till the following session prevailed in the Senate by a vote of 14 to 13. The Jackson men, seemingly, were as much dejected by the de- feat as the Clay men.6
4 This report is given in the Indiana Journal, Jan. 2, 1833. The In- diana Journal was published at Indianapolis, and was the organ of the Whigs.
5 Indiana Journal, Jan. 5, 1833.
6 The three bills are worthy of attention as a reflection of the popular views on banking. The Committee Bill provided for the Bank of the State of Indiana, to be located at Indianapolis, with power vested in the first directors to establish five branches in whatever counties they thought best. The $1,600,000 capital was to be divided into shares of $50 each, and one-half was to be furnished by the State, the other half by individuals. Seven directors for the parent bank were to be elected
397
SECOND STATE BANK OF INDIANA
The general necessity of a bank was conceded. There was some objection to enacting a State monopoly, and the experience with the old Vincennes Bank made men hesi- tate to charter another State bank. But on the whole the people were strongly in favor of a State bank and were deeply disappointed at the failure of the Senate to enact a charter.
The bank question contested with that of internal im- provements for the chief place in the campaign of 1833.7 The General Assembly that met in December, 1833, lost lit- tle time in getting together on a bank charter.8 A bill was before the House for discussion on the 6th of Jan- uary. It passed the House by a majority of 48 to 23; and the Senate by 18 to 11.
The provisions of this charter show that it was care- fully drawn.9 It has no trace of any interests contrary to the public welfare. The State was divided into ten districts as nearly equal as possible and the directors were to establish a branch in each district. The directors were given power to locate an eleventh and twelfth branch as
annually by the General Assembly, who were to choose six directors for each branch. The individual stockholders were to elect six directors for the parent bank and seven each for the branches. Non-residents were not to vote in stockholders' meetings. Each director must own at least ten shares, and no one could sit as director in two branches. The stock was non-taxable; six per cent was made the legal rate of interest; the charter was to run twenty-seven years, and the State auditor and treasurer were to visit and inspect both bank and branches.
The House Bill resembled the senate bill very much. The capital stock was the same, and the location and number of branches were to be the same; unpaid stock, however, was to be secured by a mortgage, and stock could not be given as security on a loan. Each branch was a separate corporation ; specie payment was necessary, but the branches were not mutually responsible. No municipal corporation could borrow over $5,000 and no State, or county, officer could be a director in the bank. The profits were to go to education. As passed by the House, this bill provided for thirteen directors, five chosen by the General Assembly, and eight by the stockholders; and the minimum capital for each branch was to be $50,000, instead of $80,000. The Farrington or Senate Bill is printed in the Indiana Journal, Feb. 16, 1838; the House Bill in the issue of Feb. 23; and the Ewing or Committee Bill in the issue of March 9.
7 Indiana Journal, May 4, 1833.
8 Indiana Journal, Jan. 1, 1834.
9 Laws of Indiana, 1834, ch. vii.
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HISTORY OF INDIANA
soon as the commercial situation seemed to demand it. The head office was to be at Indianapolis, but there was no parent bank. The branches were on an equality, and the Indianapolis branch was not to enjoy any prestige nor exert any undue influence over the other branches. This charter forbade the bank's dealing at all in real estate. The provision worked to the advantage of the bank, for the people had more faith in a bank that did not deal in real estate. It was to be a strictly specie-paying institution, and if at any time it refused to redeem its notes in specie it was to forfeit its charter, a provision which was later disregarded in a critical period of its life. This provision in its charter put it in a class with the best banks in our history, and clearly set it off from the "wildcat" brood then springing up in all the surrounding States.
The rate of discount was fixed at six per cent, and it was to issue no notes under five dollars; but this limita- tion was removed in 1841, after which the bank was al- lowed to issue notes as low as one dollar. The president was elected by the General Assembly for a term of five years at a salary of from $1,000 to $1,500. For the State Bank the General Assembly chose four directors, and each branch one. These constituted what was known as the bank board. This board had full power over the branches, and could make examination, personally, or require a re- port of any branch without a day's notice. The bank board in its turn made an annual report to the General Assembly. It appointed three directors yearly for each branch, and the stockholders chose from seven to ten more. The branch boards elected presidents and cashiers for the branches. None of the officers could hold State offices while on the bank boards; nor could any stock- holder give his stock as security for a loan; nor could a president, cashier, or director, endorse for anyone or for each other.
The capital of the bank was placed at $1,600,000, later raised to $2,500,000 by an amendment adopted March 1, 1836. One-half of the entire capital stock was subscribed by the State. Each branch was to have an equal part of
399
SECOND STATE BANK OF INDIANA
the capital, i. e., $160,000, at first, and after the amend- ment of 1836, $250,000. The policy in organizing was to distribute the stock as widely as possible, and for this purpose the State arranged to lend money on real estate mortgages to subscribers of bank stock. To carry out this provision of the charter and pay for its own subscriptions the State borrowed in the East $1,300,000. The charter was to run twenty-five years, expiring January 1, 1859.
One cannot fail to note the great care displayed in the charter to make the bank safe, and its circulation sound. All the arts known to "swindling bankers" were guarded against.10 As indicated above, the notes were signed by the local cashier and the central president. There was mutual responsibility among the branches, but not a di- vision of profits, each branch retaining all it earned. The bank board might limit the loans of any branch to one and one-fourth times the paid in capital; and might call for reports monthly or oftener, or take control, and close a branch permanently. It might take funds from one branch, when they were not being used, and transfer them to another in need of money. No branch might have more debts due it than twice its capital; later this limit was raised to two and one-half times. A subscriber had to pay $18.75 in cash on each $50 share. The State furnished the balance, $31.25, and took freehold security, double the value of the loan. "The loans to subscribers were to run from twenty to thirty years. All money earned by the State stock, above the five per cent interest on the bonds, was to go into the hands of the commissioners of the sinking fund, by whom it was to be lent on freehold se- curity.
§ 73 ORGANIZATION AND POLICY OF THE BANK
IT was impossible at this time to concentrate the trade of Indiana in one center as was done in Ohio at Cincinnati, in Kentucky at Louisville, and in New York at New York
10 The reference is to a territorial law of 1815 in which private bank- ers are called "swindling bankers."
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HISTORY OF INDIANA
City.11 The Whitewater Valley traded to Cincinnati. The trade of the southern part of the State flowed to the Ohio, but one could not say whether Madison, New Albany, or Evansville would secure the larger portion. New Orleans was the final market, and boatmen shipped indifferently from a dozen river-board ports-Vevay, Jeffersonville, Leavenworth, and Troy sharing the trade with their larger rivals. 12 Back from the river small centers of popula- tion and business, and especially of politics, were growing up at Brookville, Lexington, Charlestown, Salem, Bedford, Bono, Paoli, and Princeton. Vincennes, Terre Haute, La- fayette, and Logansport were the Wabash towns. Craw- fordsville, the "town in the big flat woods," was the greatest land market in the United States. There was little com- merce at this time at Indianapolis, while Muncietown, An- dersontown, Delphi, Peru, and Wabash were blooming out from struggling villages into pretentious county seats. Seven out of ten towns chosen as locations of the branches of the bank were on the borders of the State; only six of the ten contained over two thousand people each. The population of the State was about 500,000. There were about 900 merchants resident in the State, and perhaps an equal number of nonresident traders operating on the Ohio and Wabash.
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