USA > Indiana > History of Indiana from its exploration to 1922, Vol. I > Part 33
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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 dam- age on the Eel River section. Contracts were let at Washington, Daviess county, June 27, 1849, for the sec- tion from Newberry to Maysville-twenty-three miles -- for $160,000. The construction from Maysville to Petersburg-twenty miles-was placed under contract at Petersburg, November 14, 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, and the plague affected the canal in every direction. It stopped the sale of land, it cut the tolls to $135,000, $11,000 be- low 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
84 Documentary Journal, 1847, pt. II, No. 6.
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HISTORY OF INDIANA
H. Blake at Cincinnati as he was returning from Wash- ington, D. C., on business for the canal.85
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 latter point is seventy-nine miles from Coal Creek, 268 miles from the State line, and 352 miles from Toledo. The last section, from Peters- burg to Evansville, was placed under contract, Septem- ber 6, 1850, and was to be completed in 1852. This year the cholera broke out among the workmen and killed 150 men. A panic set in and the fleeing work- men carried the plague all over the country. The tolls this year ran up to $157,158, a gain of $22,500.
The whole canal was closed for a full month during the season of 1851, on account of floods. Notwith- standing this, the tolls increased $22,000. The work was received from the contractors down to the White river crossing at Newberry, 281 miles from the State line. One thousand two hundred men were at work during the season. The trustees ordered the part of the canal in Evansville to be made sixty feet wide in order to form a local harbor. The annual 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 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-
85 Governor Wright, Message of 1850, in House Journal. See also Documentary Journal, 1849, pt. II, No. 11.
86Documentary Journal, 1851, pt. I, No. 7.
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TOLEDO TO EVANSVILLE
plaints with the canal board, and if no relief was se- cured 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 Williamsport 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 them- selves 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 meet- ing held in May, 1852, it was agreed to lower all tolls and tariffs on the canal forty per cent. After this re- duction 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 trans- ported 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 remained $126,163 as the net returns of the canal at its best. This would pay five per cent on two and one-half mil- lions. 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 terminal on the Ohio river tolls would increase enough so that the whole canal would become dividend-paying.
87 Laws of Indiana, 1851.
88 Laws of Indiana, 1852.
89 Documentary Journal, 1854, No. 21.
90 Documentary Journal, 1852, pt. II, No. 7.
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HISTORY OF INDIANA
While the outlook in this direction was encouraging to the canal builders, the outlook in other directions was extremely gloomy. Complaints, honest and dis- honest, 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 embank- ments, while their cargoes of farm products, sometimes live animals, depreciated or became 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 Crawfords- ville 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 aqueduct at that place. The citizens, thinking the extreme high water due to the big aqueduct, in- dicted 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 in- habitants 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 blackened 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
91 Documentary Journal, 1852, pt. II, No. 7
92 Laws of Indiana, 1853, March 4.
93 History of Clay County, Index.
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FAILURE
$10,000. Governor Wright sent the militia from Evans- ville under General Dodds and Captain Denby to pro- tect the work. They found everything quiet 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 was never 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 stagnant 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 sec- tion from Terre Haute to Evansville was rendered use- less 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 commerce 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 repair 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 during the summer of 1858 did
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
1
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 sus- pended from June 10 to August 26. The annual ex- penses of the canal, $181,000, exceeded tolls and land sales combined by $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 Janu- ary, 1859, ordered all officers to quit, only a few local engineers, at reduced salaries, remained in service. 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 Vander- burgh 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 re- mained 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 com-
98 Documentary Journal, 1858, pt. I, No. 3.
99 Documentary Journal, 1859, pt. I, No. 3.
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CANAL CLOSED
missioners 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 received $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 re- ceived 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 resolution of the General Assembly of 1857. Fear- ing that a future General Assembly might be induced to pay the debt, or some part of it, the General Assem- bly of 1871 submitted a constitutional amendment to the voters providing that "No law or resolution shall ever be passed by the General Assembly of the State of Indiana that shall recognize any liability of this State to pay or redeem any certificate of stock issued in pur- suance" 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 February 18, 1873. The voters took little interest in the election. Indianapolis cast 2,679 votes for and 14 against the amendment. Evansville'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 magnificent 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
100 Twenty-eighth Annual Report, 1874, Documentary Journal, No. 14.
101 Laws of Indiana, 1873, 83.
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HISTORY OF INDIANA
to the five largest counties or the ten smallest.102. This was twice as much as the whole donation for the com- mon schools.103
102 Donaldson, Public Domain, 755.
103 American Almanac, 1857, 323, gives a brief summary of State and canal debts.
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CHAPTER XVII
THE SECOND STATE BANK OF INDIANA, 1834-1857
§ 72 CHARTERING THE BANK, 1834
THE second period in Indiana banking began with the charter of a new State bank in 1834.1 The agita- tion 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 In- diana of this United States bank whose charter ex- pired 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 improve- ments is one of the unexplained facts of Indiana poli- tics of this period. A State bank was not, however, an issue in the State election of 1832. After it was ascertained 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 move- ment 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
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 Ser- ing, John Woodburn, and Milton Stapp, directors; J. F. D. Lanier, cashier. Indiana Democrat, Oct. 13, 1832.
448
HISTORY OF INDIANA
directors and J. F. D. Lanier was its cashier. A new set of banknote plates was struck, and every arrange- ment made to take the tide of opportunity 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 Assem- bly. The report on this bill by the senate committee, of which John Ewing3 was chairman, is the best exposi- tion of the various views of the legislature on the sub- ject of banking. In this report, which was dated Janu- ary 1, 1833, Mr. Ewing suggested five plans by which a circulating medium for Indiana might be secured :
First, The General Assembly might memorialize the Congress of the United States to recharter a na- tional bank. Second, Congress might be induced to issue a national currency and apportion it among the States according to population. Third, The General Assembly might issue a State currency predicated upon the proceeds of canals, school lands, the Michigan road, and salt springs, and managed by a board of commis- sioners. Fourth, The General Assembly might order an issue of treasury notes bearing five per cent interest. Fifth, The General Assembly might organize a part- nership bank-State and people.
The first State bank of Indiana had almost de- stroyed credit, endangered the validity of contracts, and so lessened the confidence of man in man that ordi- nary business was seriously deranged. Moreover, it had injured the credit of the State, and had given to its citizens a weakened reputation for financial integrity.
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.
449
SECOND STATE BANK
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" cur- rency. Finally, he said, the committee believed a na- tional paper currency preferable to any State emis- sions. 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 cur- rency. Out of the dividends, they estimated, the five per cent on the loan could be paid, and the surplus would go far toward the establishment 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 discussion of these measures. Some members favored . a free banking law; others favored none at all, believ- ing 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
4 This report is given in the Indiana Journal, Jan. 2, 1833. This paper was the organ of the Whigs.
5 Indiana Journal, Jan. 5, 1833.
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HISTORY OF INDIANA
by a vote of 14 to 13. The Jackson men, seemingly, were as much dejected by the defeat as the Clay men.6
The general necessity of a bank was conceded. There was some objection to enacting a State monopoly, and the experience with the old State bank made men hesitate to charter another like it. 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 improvements for the chief place in the campaign of
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 direc- tors for the parent bank were to be elected annually by the Gen- eral 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 the 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 secur- ity on a loan. Each branch was a separate corporation; specie payment was necessary, but the branches were not mutually re- sponsible. 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 capi- tal 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.
451
BANK CHARTER
1833.7 The General Assembly that met in December, 1833, lost little time in getting together on a bank charter.8 A bill was before the House for discussion on the 6th of January. It passed the House by a ma- jority of 48 to 23; and the Senate by 18 to 11.
The provisions of this charter show that it was carefully drawn.9 It has no trace of any interests con- trary to the public welfare. The State was divided into ten districts as nearly equal as possible and the direc- tors were to establish a branch in each district. The directors were given power to locate eleventh and twelfth branches as soon as the commercial situation seemed to demand it. The head office was to be at In- dianapolis, 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 insti- tution, 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 sur- rounding States.
The rate of discount was fixed at six per cent, and it was to issue no notes under five dollars; but this limitation was removed in 1841, after which the bank was allowed 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.
7 Indiana Journal, May 4, 1833.
8 Indiana Journal, Jan. 1, 1834.
9 Laws of Indiana, 1834, ch. vii.
.
452
HISTORY OF INDIANA
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 examina- tions, personally, or require a report 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 stockholder give his stock as security for a loan; nor could a presi- dent, 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 the capital, i. e., $160,000, at first, and after the amendment of 1836, $250,000. The policy in organizing was to distribute the stock as widely as possible, and for this purpose the State ar- ranged to lend money on real estate mortgages to sub- scribers 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.1º As indicated above, the notes were signed by the local cashier and the central presi- dent. There was mutual responsibility among the branches, but not a division of profits, each branch
10 The reference is to a territorial law of 1815 in which private bankers are called "swindling bankers."
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BANKING BUSINESS
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 perma- nently. 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 commission- ers of the sinking fund, by whom it was to be lent on freehold security.
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