USA > Kentucky > History of Kentucky, Volume II > Part 6
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47 American State Papers, Finance, IV, 178-183, 294-297. These reports were made in 1823.
48 Niles' Register, Vol. 20, p. 49.
"What incentive, now, has the farmer to industry and exertion?
Vol. II-3
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How fruitless would be the effort of the merchant, to rouse from their torpidity, the fallen energies of the state? A meeting of the Legislature has been loudly and vehemently spoken of, as the only means which can recover it from its death-like stupor. That ruddy complexion and vivid glow, which is the best evidence of the health and vigor of a constitu- tion, and the best indication of the advancement of a state to happiness and refinement (and which once so peculiarly distinguished Kentucky) had faded away, and has been succeeded by a paleness, prognostic of all the terrors of a decline. I may be told that all these consequences may be traced to the wanton profusion and extravagance of our citizens, and the introduction of the habits of luxury. These things, I admit, may have had their due tendency-but the profound and impartial politician, who is aloof from the influence of individual gain, and who has been in the habit of reasoning accurately from the tendency of every political measure to its necessary consequence, will give you a different account. He will refer you to a bank here, and a bank there, and a bank every- where, and he will read you an instructing lesson upon their policy and expediency, in the devastation which surrounds them." 49
The people were indeed reaping the full harvest of their bank and money mania. Warrants, writs, and executions were reported to be almost as common as the bank notes themselves. Should the remedy be still more money, with the hope that conditions might be improved or should the paper age be definitely and forever abandoned. An observer from afar offered this advice: "There will be no peace for the people until the quantity of the banks are reduced, and those that remain are compelled to recollect that they cannot do what they please. The paper age must pass away, and speculation must fail. At present, the command of what passes for money is not in those who hold property, but in such as are directors of banks, or who hold shares in them. Real wealth has little to do with the circulation of money, at this time, because the priests of Mammon want it for-themselves. We allude chiefly, to the modern money-shops. Many of the old banks are yet highly honorable and emi- nently useful institutions." 50 The banks, themselves, were beginning to feel the pinch of hard times. The day of reckoning was coming for them even as for the ordinary debtor throughout the land. The notes which they had been so eagerly printing and calling money were drifting back to their sources again for redemption; and the two branch banks of the United States Bank were steadily assisting this process by pre- senting for redemption these notes as fast as they came into their pos- session. Thereby they incurred great enmity which helped the state right feeling soon to develop so vigorously against the Federal Government.
The people soon came to discuss the perils of the times and the reme- dies that ought to be adopted in dozens of meetings held throughout the state. Almost every county held one or more meetings to take the will of the people and their advice, with the result that the state was agitated as profoundly as by any political campaign for many years. The gen- eral opinion of the day was that "those who think that the banks should pay their debts, or shut up shop, like individuals, have a large majority." It was advised that "Now is the time-'now or never,' for the honest people of Kentucky to relieve themselves, for the future, of the evils intended to have been entailed upon them, by the late legislative litter of banks." 51 Pressure brought to bear upon the independent banks was steadily producing results. They were gradually dropping off and clos- ing their door. It was reported in the summer of 1819 that it was con- sidered unsafe even in Kentucky to receive the notes of more than two
49 Niles' Register, Vol. 17, p. 19.
50 Niles' Register, Vol. 16, p. 180.
51 Ibid., p. 311.
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or three of the independent banks. "Many of them," an account said, "have forfeited their charters, and others are wisely preparing to wind up their affairs. It will require many years of industry and economy to repair the depredation which these institutions have caused in Ken- tucky-but the severe lesson received, may give future safety to the people. Experience is a dear school." 52 The stockholders of the inde- pendent bank designated for Richmond held a meeting in the summer of this same year and decided that it was inexpedient to carry the insti- tution into operation. They voted to withdraw their stocks and dissolve the charter.53 In August, 1819, sixteen independent banks were reported in the doubtful column with the statement that "Public confidence seems to have been almost entirely withdrawn from the independent banks." The only banks at this time whose notes were receivable by the Lexing- ton banks were the Lancaster Exporting Company, Louisville Commercial Bank, and the independent establishments at Frankfort, Versailles, Bardstown and Flemingsburg. Shortly afterwards two more of the in- dependent banks dropped by the way-side and another announced it would redeem its notes in Bank of Kentucky paper to be payable one year after date. This led Hezekiah Niles, who worked hard to lead Kentucky out of the wilderness of money heresy, to remark that "they may be as legally issued payable at one hundred years hence, as at any other time. Only three of the whole litter of independent banks are said to pay their debts at all." 54 About the same time the stockholders of the bank at Winchester by a vote of 300 to 220 decided to close their affairs and give up their charter.55
In the word of a parody of the day:
"But their glory is gone! ev'ry dog has his day --- Yet their fame (such as 'tis) shall abide in my songs ; Not e'en in the hour when my heart is most gay, Will I cease to remember their notes and their wrongs. The stranger in passing each village will say, (As he eyes the sad spot, with hand on his breast)
THERE ONCE STOOD A BANK ! but unable to pay, It suspended itself, and thank G-d is at rest."
But regardless of the dishonesty of banks and the precarious posi- tion into which they had run, the people of the state were heavily obli- gated to them. It was conservatively estimated that debts in the state due the various banks were at least $10,000,000, of which $5,000,000 was due the Bank of Kentucky and its branches, $3,000,000 to the two branches of the United States Bank, and $2,000,000 to the independent banks. Over and above this indebtedness was a balance of about $4,000,- 000 due from the merchants to Eastern establishments.56 The county meetings suggested various remedies. There was expressed almost every- where the fear that the property of the state would fall into the hands
52 Niles' Register, Vol. 17, p. 84.
BB Ibid., Vol. 16, P. 311. It was reported about this time that nearly all of the independent banks had stopped. It was also reported how the dishonest officials of a bank sent out an agent with $30,000 of their notes to exchange them for Tennessee notes or other current paper and a few days later closed their doors. The news account continued, "The agent had passed off most of the paper, and the last account of him was, that those he had swindled were in pursuit of him, determined to intercept him and take the law in their own hands, breathing vengeance for the trick played upon them. Yet the directors who sent out this agent are called honorable men. Verily, verily, Mr. Niles, you have oftentimes told us that cor- porations have no souls." Ibid., Vol. 17, p. 335.
54 Niles' Register, Vol. 17, p. 139; also see pp. 19, 20.
55 Ibid., Vol. 16, p. 359.
BB Kentucky Gazette, May 21, 1819; Niles' Register, Vol. 16, p. 261.
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of a few moneyed men and the great mass of the people become their virtual slaves.57 Before the end of 1818, while the banks were yet much less than a year old, representatives from ten of them met in Glasgow and unanimously resolved to "recommend to their respective institutions, to suspend the payment of specie, notes on the bank of the United States and its branches, notes on the Bank of Kentucky and its branches, until otherwise ordered by said institutions, or the decision of the legislature." However, a majority of the banks represented refused to ratify these recommendations at that time.58 In the summer of 1819 the movement for suspension of specie payment gained considerable headway.59 A meeting of the citizens of Franklin County was held in a church in Frankfort to devise means to avert the "impending distress." The banks were blamed for the hard times and it was recommended that they sus- pend specie payment at once. This was an immediate palliative, which, however, did not strike the fundamental cause. As a final resort and definite remedy they believed "That a prudent and rigid economy ought to be observed; the consumption of foreign articles of luxury and man- ufactures diminished; home manufactures encouraged, the annual ex- penditures of individuals lessened, so as to enable them by industry and frugality to pay off old arrearages without accumulating new debts." 60 A meeting of Bullitt County citizens declared with only two dissenting voices that, "It is confidently believed that the suspension of specie pay- ment by the Bank of Kentucky and its branches, will tend to ameliorate (in a considerable degree) the embarrassments by which the people are at present circumvented ; a suspension is therefore recommended." 61
Counsels were divided on this method of procedure as a remedy. A meeting was held in Washington of Mason County people which passed a long series of resolutions against such a program by the banks.62 In Jefferson County the voice of the people was taken at three separate times in a systematic way at the election precincts and resulted the last time in a majority of about three to one against suspension.63 A num- ber of the most important banks met in Frankfort in May, 1819, "for the purpose of taking into consideration the distressed state of the coun- try, and of devising some plan for the relief of the people." It was the opinion of the meeting that "the circulating medium may be increased and considerable relief afforded to the people by a good understanding and co-operation among the said banks, without suspending specie pay- ment." They resolved to "render all the aid in their power to individ- uals, by loans or otherwise, to avert the public pressure now experienced" and furthermore agreed to "continue to pay their notes in gold and sil- ver." 64 This meeting was of doubtful benefit, as all the banks repre- sented refused to carry into effect the recommendations.65
Out of all this agitation of the masses of the people and banks in meetings and assemblies, there stood out three definite programs, viz. : the suspension of specie payment, the issuance of more paper money, and the calling of an extra session of the Legislature. It was widely held that the Legislature should devise ways of relief and that it should meet in an extra session as soon as possible to consider them.66 It was also
57 See Kentucky Gazette, May 29, 1819.
Niles' Register, Vol. 15, pp. 290, 361.
59 This, of course, concerned the Bank of Kentucky and its branches as the independent banks were not required by their charters to pay their notes in specie. 60 Niles' Register, Vol. 16, pp. 260, 261 ; Supplement, 16, 17.
61 Ibid., p. 434; also see p. 421.
62 Ibid., p. 274; Supplement, 17, 18.
63 Ibid., p. 434.
64 American State Papers, Finance, IV, 883, 884; Niles' Register, Vol. 16, p. 261.
65 Niles' Register, Vol. 16, p. 292.
66 For instance see Kentucky Gazette, June 11, 1819.
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generally held that the banks were largely responsible for the crash that had come. A majority would keep banking institutions as a necessary adjunct to the industrial and commercial development of the state, but would make them conform to fixed rules and principles. There were some, however, who unreasoningly took a violent hatred and antipathy to all banks as parasites, reaping where they had not sown, and devel- oping into instruments of tyranny and autocracy. The position of this group was well set forth in a series of resolutions which were introduced in the Legislature in January, 1819. As an example of a remarkable re- action of the mind toward a given set of conditions, they are given here :
"I. Resolved by the general assembly of the commonwealth of Ken- tucky, That the establishment of a monied monopoly, is hostile to repub- lican liberty.
"2. Resolved, That banks are such a monopoly, and do not depend for their profits upon the correct employment of the products of industry.
"3. Resolved, That as the products of the labor of a nation are the only genuine sources of national wealth, any corporation or institution which tends to substitute speculation, instead of the proper and valuable fruits of this labor, must be pernicious and ought to be abolished.
"4. Resolved, That any corporation not promotive of, or essential to, public good ought not to exist.
"5. Resolved, That all banks wherein individuals are interested, are monied monopolies, tending to make profit to those who do not labor, out of the means of those who do; not tending to increase the means of industry, but to profit of those means unjustly ; tending to tax the many for the benefit of a few; tending to create a privileged order, unuseful and pernicious to society ; tending to destroy liberty and create a power unfriendly to human happiness ; tending inevitably to an unfeeling monied aristocracy more to be deprecated than monarchy itself; tending to the destruction of the best hopes of man here and hereafter.
"6. Resolved, That it becomes the duty of the general government, and of every individual state composing it (gradually if necessary, but ultimately and certainly) to abolish all banks and monied monopolies, and if a paper medium is necessary, to substitute the impartial and dis- interested medium of the credit of the nation or of the states.
"7. Resolved, That copies of the foregoing resolutions be transmitted by the acting governor of this state to the President of the United States, and to each of the senators and representatives in congress from this state, as an evidence of the sense of the people of this state, to be sub- mitted to congress." 67 These resolutions represented the opinion of a considerable body of citizens, men of conservative thought. In fact it was an extreme reaction of this class. Governor Slaughter went so far as to advocate an amendment to the United States Constitution making it unlawful for any incorporated bank to exist within the nation's limits; for, he argued, money was power and when collected within a few hands, and those of private persons, it would be used tyrannically.68
Efforts had already been made to amend the law incorporating the independent banks in order to make the president and directors of the banks liable out of their individual estates for all bills issued after a certain designated time and all stockholders also liable to the amount of their individual holdings. A bill introduced in the Legislature and em- bracing these principles was introduced in the early part of 1819, but failed to pass. At the next meeting of the Legislature, in the latter part of this year, Governor Slaughter recommended the same amendments. But the feelings against the independent banks had become so strong throughout the state as well as among the members of the Legislature,
67 Niles' Register, Vol. 15, p. 417.
68 Public Advertiser, Dec. 15, 1818.
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that instead of amending the law, it was repealed. This happened on February 10, 1820. Thus, was the question of the independent banks now and forever settled.69 There still remained the Bank of Kentucky with its thirteen branches and the two branches of the United States Bank. The former institution had been managed with care and con- servatism ; and had, thus, not abused banking privileges. Therefore, the Legislature, instead of repealing its charter, extended it to 1841. The relatively sound state of this bank at this time appears in the following facts : Its capital stock amounted to $2,726,100 of which the state owned $586,400. Its notes in circulation were $666,422.56 face value, and its specie on hand was $270,325.53. The widespread obligations it held on the people amounted to nearly three and a half million dollars.70 But conditions in the state were far from solved or settled; the repeal of the charters of the independent banks did not give the people money with which to pay their debts, nor a circulating medium in which the people could have faith. The Bank of Kentucky suspended specie payment about this time, thereby risking the loss of its charter. They hoped, however, to receive the sanction of the Legislature. To this body the banks as well as the people were not looking for salvation.
69 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 180; Collins, History of Kentucky, I, 29.
70 Niles' Register, Vol. 17, P. 448.
CHAPTER XLIX REPLEVIN LAWS AND RELIEF: THE BANK OF THE COMMONWEALTH
By the action of the last Legislature the supply of money, worthless as it was, was sharply curtailed by the destruction of the independent banks. This procedure was, therefore, a step apparently away from the relief of debtors, for without money how could they be expected to pay their debts? But it was through a general popular clamor that the Legis- lature had so acted; the people had seen that institutions like the in- dependent banks were worse than useless. The steady march of hard times was unimpeded, debts were falling due, property was being sold in fulfillment of mortgage obligations, and it looked as if the great mass of the people would, indeed, become the slaves and bondsmen of the moneyed class. "An Old Resident" pessimistically pictured the situation of many an individual: "He must be taken by order of the relentless creditor and shut up in prison, until he pays the uttermost farthing, or give up his little hard earned property to be sacrificed, at perhaps one fiftieth part of its real intrinsic value, leave his helpless family to suffer with hunger, cold and nakedness, and finally take the oath of insolvency. Nine tenthis of his creditors yet unpaid, he loses all hope of ever being able to discharge his just debts, and his family ruined. He languislies, takes to drink, and dies at a miserable death." 1 The day of reckoning seemed to be fast approaching, when the logical results of promiscuous borrowing and consequent speculation would come home to many Ken- tuckians, who a few years before had held out visions of great wealth. The woes of the people were set forth by a pamphlet of the times: "The course of business was disorganized, creditors became clamorous and more pressing, and the dockets of our courts were choked full with suits and executions.
"Lawyers, clerks, sheriffs, constables made great crops; but the most of their stocks did not grow big, the most of those of the people were diminished.
"Agriculture, commerce, and all sorts of acts were discouraged ; shaving did raise its hideous head, and you could not hear of anything but misery." 2
It was, therefore, only natural that the people should turn to a remedy which had been used by themselves and other people often times before, a remedy which, if it did not finally avert the evil days, would postpone them and give time a chance to work out a solution. Replevin and stay laws were now embraced again. The legislation of the state in the past along these lines had left a feeling among the people that as a last resort, laws should be made to interfere in the relations of debtor and creditor when the public good as they understood it should warrant it. This development had made a dangerous weapon respectable with far too large a number of people and had left them to believe that the
1 Kentucky Gazette, May 21, 1819.
2 Considerations on Some of the Matters to be voted on * *
* at the Next Session of the General Assembly of Kentucky. * * * (Louisville, 1824), Pam- phlet, p. 8.
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principle could be almost indefinitely extended under extraordinary cir- cumstances. While Kentucky was yet a district of Virginia she had seen the mother state use the very same principle which she, herself, was now about to adopt in a rather aggravated form. And one of the first laws passed by the daughter, the willing pupil of the mother in this respect, provided that in the case where land was under execution in the payment of a debt, if the price offered did not amount to three-fourths of the estimated value, the defendant might replevy the debt for three months by giving good security to pay it at the end of that time.3 In 1808, the debtors were relieved from immediate executions on their property by a law which allowed a stay of one year, upon the defendant giving bond or good security to pay the debt within the year, and upon his failure to give bond or security the sale was to take place immediately on a year's credit.4 Near the end of the War of 1812, when much money of doubtful value was floating over the state and creditors were loath to accept it, the Legislature in order to stabilize and give confidence to the notes of the Bank of Kentucky as well as to offer aid to the debtors, passed a law allowing twelve months replevin on all executions unless notes of the Bank of Kentucky would be accepted.5 Thus it was that the legislative history of the state was punctuated throughout with debtor laws-and, indeed, the operation or influence of these laws had never been completely eradicated at any time. Her statesmen, eminent lawyers, judges of the highest courts, and the masses of the people had upheld the principle.
The campaign for the election of a legislature in 1819 had raged for the most part around the question of enacting replevin laws. The opposition was spirited but restricted; the relief supporters won an over- whelming victory. This Legislature, the same that repealed the inde- pendent bank charters, busied itself with relief measures among its first labors. Before even destroying the discredited banks it passed an emergency replevin law to tide over the debtors until a well-designed law could be formulated. On December 16, 1819, it passed a law granting a stay of sixty days on all executions. Governor Slaughter refused to sign the measure on the ground that the permanent welfare of the state should not be endangered by the delay or denial of complete justice. But the Legislature promptly passed the bill over his veto, and it became the law of the land. Leave was also given to bring in a bill to make void any execution made in favor of the United States Bank, an institution which had already aroused the bitterest hostility from Kentuckians.6 On February 11, 1820, the day after the independent banks had been destroyed, the finished replevin law was enacted. This carried the principle far beyond any law heretofore passed and laid the beginnings of a train of consequences that was destined to shake the political and economic foundations of the state to their very center. Hereafter when any execution should issue from any court in the state, from the justice of the peace to the Court of Appeals, the plaintiff might endorse the bill, by writing on it the words, "Notes of the Bank of Kentucky or its branches will be accepted in discharge of this execution," whereupon twelve months' stay would be allowed on the debt ; but should the plaintiff refuse to endorse the note, the defendant might replevy for two years.7 The effect of this Legislature was to delay the payment of all debts at
3 This law was passed in 1792. Marshall, History of Kentucky, II, 71, 72.
Ibid., 464.
5 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 178, 179.
6 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 180; Niles' Register, Vol. 17, p. 365; McMaster, History of the People of the United States, IV, 508.
7 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 180; Mc- Master, History of the People of the United States, IV, 508.
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least one year and to bolster up the notes of the Bank of Kentucky and make them in fact a legal tender.
Just as the road to cheap money was easy to travel, so was the way to the postponement of debts. And having traveled the former recently the state had forgotten the rough places and jolts and only remembered the joys; and so again it decided to journey by that route. Delay was only a part of the program; when the days of grace should be used up, then, with what should the people pay? The situation was likely to be as aggravated as ever. Therefore, the relief laws unaided by other agencies must be a failure. A committee of the Legislature stated the case thus: "The balance of trade being against us to a great amount, when the year 1819 commenced, many began to see and feel that they had been deluded by appearances; and such was the universal pressure over the whole United States, that even the Bank of the United States, with all its power and influence, was almost driven to the brink of ruin, and was only saved by the fortunate arrival of $250,000 in specie from the states of Kentucky and Ohio, at a moment when every other resource had failed, as acknowledged by the president of that bank, in his last report. In this state the pressure was unprecedented in every quarter of the country ; alarm and distrust prevaded every class of our citizens, it was evident to every reflecting and humane mind that widespread ruin and desolation would soon overwhelm thousands of our best citizens, unless some expedient could be resorted to, for the purpose of saving the country. A twelve months' replevin law was resorted to, in the first instance, which only dammed up the current for a time to again break loose with redoubled fury. As the hopes and expectations for that year were cut off for the want of a market, because it cannot be forgotten, that in the spring and summer of the year 1820, the products of the country had fallen to prices far below what was ever known before, and although abundance and plenty smiled around the husbandman, his debts were increasing, and a fearful looking-out for the day of execution and ruin, met the unfortunate in every direction. These are stubborn facts which cannot be denied, and are now fresh in the recollection of all. Under these circumstances the Legislature of 1820 assembled .- What can be done to save the country? was the universal inquiry. The resources and funds of the state were known to be ample and it was determined to draw upon her as the safest expedient.8
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