USA > Kentucky > History of Kentucky, Volume II > Part 7
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Governor Adair in his message to the Legislature in October (1820) forecast some sort of action that would have to be undertaken by the state to relieve the besetting hard times. "It will be admitted by all," he said, "that the people of this state feel, at this time, a severe and universal pressure, in their monied transactions. To relieve them in some measure, is, I trust, the wish of all. Different views will be enter- tained as to the best means of effecting so desirable an object, by members from different parts of the state." 9 The rumor soon started that the additional relief demanded would be in the establishment of an immense banking institution to have a capitalization of 4,000,000 to turn out paper money without limit which should not be redeemed in specie. Hezekiah Niles said, "It is regarded by some as the sovereign remedy for the diseases of the times, and by others considered as a mammouth to consume what the 'independent banks' left undestroyed." 10 After much opposition from the conservative sound money men, the Legislature on November 29. 1820, chartered the Bank of the Commonwealth wholly as a state institution for the direct purpose of relieving hard times. There was to be a president and twelve directors, all chosen by the two houses
8 Niles' Register, Vol. 23, pp. 234, 235.
9 Niles' Register, Vol. 19, p. 170.
10 Ibid., 208.
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of the Legislature on joint ballot. The capital stock was the amount to $2,000,000 and all to be owned by the state. It was to issue notes to the amount of $3,000,000, which in theory should be redeemable in gold and silver, but in fact not. The notes were to be in denominations rang- ing from $1 to $100. 11 As one of the main functions of the bank was to issue the notes to relieve hard times, among the first concerns of the authorities in charge was to arrange the artistic designs for the different denominations and order the printing presses to begin work. Francis P. Blair, a rising young politician in Frankfort at this time, addressed a communication to John J. Crittenden in which he stated that he had worked out an elaborate system of designs for the different denominations taken from Greek mythology. He wanted to know Crittenden's opinion of the scheme-he also expected to consult the "knowing-ones" in Phil- adelphia. "If you don't like my heathenish designs," he continued, "I'll give you the Christian parable of the prodigal son on the different stages of his progress on the different denominations of notes. He shall set off in high snuff on $100's & pass through the eventful scenes of his life on the rest, till he returns to his father's house in wretchedness & drops on the $1 denominations, without a dollar in his pocket. The moral of it will be to make every man hold to the dollar that he has, lest he should be in the same fix-and the whole of the denomination together would be no bad history of the causes which produced them." 12
The experience of the state recently with the independent banks, the so-called "Forty Thieves," had caused it to lose faith in the integrity and ability of private individuals to do banking business. It was there- fore by studied and conscious design that no individual could hold stock in the Bank of the Commonwealth. Governor Adair declared that past happenings had by no means strengthened the country's confidence "in the stability and safety of monied corporations, in the control of which, the integrity of their directors is left at the mercy of their avarice." He believed that no private bank could be honest and make a profit at the same time. Its resources could not be made sufficiently ample for this. It was only in a state, then, that stability and strength lay. After all he thought that paper money was only a temporary makeshift, but absolutely necessary in certain crises. Now was a time, he thought, when the frozen assets of the state, which were ample for all purposes, should be made liquid through the issuance of paper money with which the people might lift themselves out of the financial and economic depression. The capital of the bank, which stood as security for the notes issued, was made up of all money paid into the treasury for vacant lands, from the purchase of land warrants, and from the sale of the lands west of the Tennessee River, and of the state's stocks in the Bank of Kentucky amounting to over $500,000. According to Governor Adair, "to withhold from the solemn and binding pledges of an entire community rich in resources, and stained by no single act of dishonor, that willing credence which is yielded to each and every one of its individual members, is irrational in the extreme. Why shall not a state as well as individuals, anticipate their resources? To the Bank of the Commonwealth it cannot with fair- ness be objected that the foundations of its credit are insufficient." 13
The relief features of the bank stood out in almost every part of its charter. In order to best serve the people the parent bank, situated at Frankfort, had twelve branches scattered over the state according to
11 Acts of Kentucky, 1820; Collins, History of Kentucky, I, 29; Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 180; Reports of the Decisions of the Supreme Court of the United States (Boston, 1870), B. R. Curtis, editor, XII, 423, 424. 11 Peters 257. A supplementary act was passed December 22.
12 Crittenden MSS, Vol. 2, Nos. 366, 367. Letter dated Jan. 6, 1821.
18 Niles' Register, Vol. 21, pp. 186, 187.
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judicial districts.14 The notes were to be loaned on mortgages or other good security and the amounts were to be apportioned over the state according to population. In the beginning the loans had to be used for the specific purposes of paying debts, or buying stock or produce; and the further restriction was made that no single individual should be allowed to borrow over $2,000. By these methods it was hoped that extravagance and speculation could be prevented. The bank, itself, was not permitted to run into debt more than twice the amount of its capital. The people eagerly entered into these loans, with some sections of the state feeling that they had been slighted in the munificence at the hands of the state. A citizen of Henderson said, "In a sectional point of view I think the Henderson people are now entitled to a small share of the loaves and fishes from the Mother Bank, as she has not extended to us one of her Branches, and very limited accommodation heretofore." 15
In the summer of 1821 the money began to make its appearance in great quantities and to gladden the hearts of the people once more. Within a short time (by November of 1821) the bank had lent its credit to the people to the extent of almost $2,400,000 and had issued more than $2,300,000 in paper notes.16 The joyful intelligence had soon spread "that a waggon load, or less, of curiously marked and stamped paper had arrived *
* * and was just about to issue as money, from the shops established in virtue of a late act of the Legislature for chartering the bank of the commonwealth ;- on which, it seems as if many honest farmers had their nags already saddled, to proceed post haste to some neighboring village, to execute liens on their lands and obtain some part of this magical stuff-which, like a mighty genii, is to relieve the dis- tresses of the people and spread happiness over the land." "These things are really laughable" said Hezekiah Niles, "if one could be allowed to laugh at a proceeding which must terminate in unbounded misery. Gallant Kentucky could easier resist the force and eradicate the effects of an invasion by the most numerous and best appointed army that ever appeared in America, then combat with the wide destruction which her paper system will bring upon her." What he predicted about the results of the independent banks was too sadly true, as all Kentuckians now knew. "The money-shops have disappeared, but their slough re- mains to poison the prospects and paralize the efforts of a noble com- munity : and relief is sought for in another application of the same kind of stuff that caused the distress !- It is just as if a person intoxicated with strong beer, should expect to sober himself by pouring down French brandy! A state of insensibility might thus be easily produced; or, if a sense of feeling remained, the patient might be independent of the consideration whether he was drunk or not,-but such a procedure would not be regarded by a sane man as the best method of managing the disease !
"This similitude applies directly, in my opinion, to the state of things in Kentucky-and I venture boldly to say, that the day on which this bank is put into operation will be the blackest in the calendar of that state. The act for it ought to have been entitled an act to encourage the people to ruin themselves. Then its title would have conveyed a just idea of the effects which the unhappy law must produce, unless, indeed, like causes shall fail to be followed by like effects. But if in this case I shall turn out to be a false prophet, and the people are relieved-I will gladly surrender up any assumption of prescience to a knowledge of the fact,
14 The branches were located at the following places, Bowling Green, Falmouth, Flemingsburg, Greensburg, Harrodsburg, Hartford, Lexington, Louisville, Mount Sterling, Princeton, Somerset, and Winchester.
15 Breckinridge MSS. (1821). N. C. Hardly to Joseph C. Breckinridge, Feb. 1, 1821.
16 Niles' Register, Vol. 21, p. 178.
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and heartily rejoice that Kentucky has been benefited by the procedure in question, being deeply interested in the prosperity of the good people of that state."
Niles said he had recently been led to believe that Kentucky was on the road to recovery, when she had abolished her independent banks. and when by the force of economy and the sheer want of means to pur- chase and the lack of credit to run into debt she had been forced to do without those things that could be dispensed with. He had hoped "that a few years more of suffering and privation would afford relief and establish a system of abstinance and retrenchment which would neces- sarily result in future ease and independence. This is not a pleasant operation, but no other, of a domestic nature, can relieve a people so situated; and though the progress of the remedy is slow, its effect is certain as well as permanent. But now the fiend Speculation has been let loose again-something that will pass for money will be bor- rowed, and wild extravagance will rage for a season. Every thing will be apparently prosperous for a short time-the farmers will purchase coats for which they will pay as much or more than twenty barrels of flour will fetch them, and their wives have gowns more costly than the whole surplusses of their dairies will bring them in a year. Some will be building palaces, and many more be engaged in building castles in the air, like adventurers in lotteries. Who will want money when he can get it for only signing his name to a piece of paper, by virtue of which his wife and children may be driven into the woods by soul-less persons vested with the management of some neighboring bank? The price of land will rise, and there will be much buying and selling-a great bustle and appearance of business. But the paper money thus put afloat will not, in the first instance, relieve those kinds of debts that bear most heavily on the people of Kentucky-I mean those due to merchants on the sea-board through their own shop-keepers and traders: the first dollar bill issued will, perhaps, be not less than thirty per cent worse than gold or silver, or the bill of any specie bank, before it is one day old- yet the depreciated currency thus borrowed, must finally be redeemed with something that will command gold and silver, and pay-day will come. When that day arrives, and it will be upon them before the people are aware of it-a scene of distress will be presented such as Kentucky has never yet witnessed. A few knowing ones will build up great fortunes for themselves by getting off the trash for things of value and imperish- able in their nature; but the mass will be engulfed in bankruptcy-and thousands that now live comfortably will be reduced to beggary. This is but a faint picture of what I believe will surely come to pass-and if these remarks shall cause one honest man in the state to preserve his independence, by refusing to have any thing to do with the bank, in signing or endorsing notes, there will be one person to bear honorable testimony of me-to join me in saying that all attempts to legislate a people out of debt are null and void-unwise or wicked; that they in- evitably add to the miseries which it is pretended they are to relieve." 17
Regardless of opposition and friendly advice within the state and without, the program that had been entered upon was followed up with no relenting. Shortly after the Bank of the Commonwealth had been chartered, the final cap-stone was laid on the relief edifice that had been building. A replevin law was passed on Christmas Day (1820), doubt- less by conscious design so timed as to convey to the people the idea of an inestimable prize for the day and the period to come, which was designed to help the bank directly, and hence the people indirectly and finally.
17 Niles' Register, Vol. 2, pp. 180, 181. This postscript is added: "Later papers inform us that in several places all the 'money' that was apportioned to be loaned had been borrowed, and the demand not half supplied."
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By this law a stay of two years was allowed on executions unless the plaintiff should endorse the note with the acceptance of notes of the Bank of Kentucky or of the Bank of the Commonwealth. If he accepted the notes of the Bank of Kentucky only, then he was forced to wait twelve months for his payment ; but if he should accept the notes of the Bank of the Commonwealth, he should have to wait only three months.18 Here was a clear and invidious distinction between the two banks. This was a bold effort to force the notes of the latter in preference to the former. The Bank of Kentucky had long been under the ban of the radical relief party. To. them it was a monster which sought to kill the effects of the relief measures at every step. It was in fact managed by conservative men who sought to confine its activities to sound banking principles. It had been bitterly attacked in the campaign before the establishment of the Bank of the Commonwealth. The relief men claimed that it would execute loans only to certain privileged persons and that it was a dangerous influence in politics.19 When the Commonwealth Bank was chartered it was expected that the Bank of Kentucky would fall in line with the policy and principles of this relief bank. But disillusion- ment soon came. It began to restrict its loans and call in some of its notes, all of which tended to hurt the Bank of the Commonwealth.20 A
report from Frankfort in February, 1821, stated that "The twelve months replevin bonds are expiring daily, and the executions going out on them : and, on these things, the money must come, if it can be had-but 'there's the rub:' for I do not think there is money enough in the county to pay one-fourth of the debts! The bank of Kentucky has, in a few days past, determined to sue all her debtors, who have failed to pay the discounts and calls on them; and, in this single county, she has commenced, within the last two days, two hundred and seventy-five suits, and the sum for amounts to 887, 154 dollars." 21
The outcry against this bank became more widespread and persistent. Governor Adair in his message of October, 1822, advocated the complete severance of the state from further interest or participation in the Bank of Kentucky. He believed that there were outstanding evils in this divided government of the bank by the state and private stockholders. He was not, however, hostile to the bank ; nor did he believe the resump- tion of specie payment by it would be injurious to the Bank of the Commonwealth. On the contrary, with the resumption of specie payment by it, its notes would rise and tend to carry along upward the notes of the Bank of the Commonwealth. A committee of the Legislature appointed to invesitgate the question of the currency, advised that the state should not immediately withdraw its stock from the bank and thereby lose its voice in its affairs. But the Legislature was controlled by the relief party who saw this bank foreclosing mortgages and selling people out of their homes. That was enough to condemn it! On December 5 (1822) it pleased the people by repealing the charter of the only sound banking in- stitution in the state, which it could control, giving it seven years to wind up its affairs. 22
The state was now left with its replevin laws and relief bank free to continue its mad plunge toward economic and financial ruin. The
18 Doolan, "Old Court-New Court Controversy" in Green Bag, XI, 180; Niles' Register, Vol. 24, P. 391.
19 See Kentucky Gazette, Mar. 17, 1820, et passim.
20 Ibid., Oct. 11, 1821.
21 Dispatch in Richmond Enquirer, March 30, 1821, quoted in Niles' Register, Vol. 20, p. 85. Niles adds that this is a per capita debt for the county of about $400. He asks, "What then is the amount of all the debts owing? Such are the results of glorious banking-such the fruits that the tree of speculation bears ! And legislation to pay debts is worse than either. It is the abomination of abomina- tions ! For one honest man that is relieved by such legislation, fifty men are victims."
22 Kentucky Gazette, Dec. 12, 1822; also see Niles' Register, Vol. 23, pp. 171, 235.
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rights of debtors and the obligations of contracts were further infringed by exempting altogether from sale for debt a number of implements and personal belongings, among which were one horse, one plough, one axe, one hoe, and all the necessary tools of mechanics.23 Between replevin laws and relief banks it was consciously designed and confidently ex- pected that all the ills of the debtor class would be speedily cured. The Bank of the Commonwealth was designed to relieve a very numerous class of small debtors whose debts amounted to more than $2,000,000, "all of which were under judgment and execution, and the property ready to be sacrificed, in most cases, for little more than the officer's fees." Of the success in this respect, Governor Adair said, "It cannot be doubted by any, that such an amount of property, exposed by the officers at the same time, or in a short period, would not have brought a tenth, perhaps, not a twentieth of its value. This numerous, and I will venture to say, this class of honest debtors, have been relieved by loans by the bank; their creditors have been satisfied; and thus, allowed sufficient time to raise the money by adopting the very sage advice which we have all read in our almanacs since the days of poor Job, and may yet read from most public documents and newspapers, of industry and economy, an advice always good in itself, but when given to a man whose whole property, the labor of many years, is in the hands of an officer, and about to be torn from him, for one-tenth of its value, in a few days, a week or month, it is then little better than insult." The other class of debtors, which were to be relieved by the replevin laws, was made up of those whose debts were so large that the bank could give them little aid with its limited means. The only help the Legislature could extend to them was to grant delay on their payments. In defense of the whole system of relief laws, Governor Adair said that "notwithstanding the abuse that has been heaped upon them by the designing and ignorant, I have not a doubt but that, from the then situation of the country, they were essentially necessary, and better calculated to do moral justice between creditor and debtor, than any other course in the power of the Legislature." 24
In line with the various relief measures and actuated largely by the same causes and conditions came the abolition of imprisonment for debt. This practice of throwing people into prison who were unable to pay their debts, a strange survival for so late a time, was common throughout the country. Its evils were so patent and its effects so inhuman, that the conscience of the country was beginning to be awakened, one evidence of which was seen in the establishing of the Society for the Relief of the Distressed. Hard times in Kentucky served to draw the public at- tention more forcibly to this besetting evil, and finally caused its complete abolition. In 1820 a beginning was made by exempting women from imprisonment for debt, and men were practically relieved by a curious law which extended the limits of the jail for such purposes to the boun- daries of the county. In the following year a law was enacted which, without further circumlocutions, specifically abolished all imprisonment for those who did not or were unable to pay their debts.23 The Kentucky Gazette commented on the triumph for humanity that had been secured : "This may be considered a real triumph over the deep rooted aristocratic principles that have continued to obstruct the progress of republican
28 Niles' Register, Vol. 19, p. 416.
24 Niles' Register, Vol. 25, p. 204. Message to legislature of November, 1823. Also see Kentucky Gazette, Nov. 16, 1820.
25 For text of law see Niles' Register, Vol. 23, Supplement, 160, 161. This act was approved December 17, 1821. If an affidavit should be filed with the clerk of the court stating that the plaintiff believed the person against whom the process was about to issue would leave the state or move his property away before judgment could be rendered, then the clerk might require bail.
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doctrine in this, as well as most of the states of the union. The poor may consider it particularly favorable to their situation, and a severe wound inflicted on tyranny." 26
This action primarily affected the law and procedure in state courts. Some fear was felt that Federal courts, which had lately won for them- selves an unsavory reputation in the state, might refuse to be governed in their procedure and processes by state law, and would, therefore, con- tinue to throw into prison such persons as came within their power. To guard against such a contingency, a law was enacted increasing the prison bounds in cases of imprisonment for debt, to extend to the limits of the state. As the Federal courts used state prisons, it was thought that they would have to regard and use as such any arrangement the state should set up.27 The fears that the Federal courts might not recognize the state law as bearing on themselves were soon justified. In the summer of 1822, the United States Bank, that unwelcomed "money monster," sought in the Federal Court in Lexington the writ to imprison a de- fendant who was indebted to the bank. Henry Clay, who was retained by the bank, argued that the Federal courts were regulated in their processes by Congress, and that that body had so exercised its authority. The defense maintained that the state has as much power and right to regulate personal liberty and locomotion and stated that Congress had never regulated the processes of the Federal courts differently from the rules set up by state law for the State courts. The court refused to grant the writ on the ground that the Federal courts had always followed the rules set down for State courts on the subject of processes and execu- tions.28 Thus Kentucky's law successfully abolished imprisonment for debt in State as well as Federal courts, throughout the commonwealth.
The notes of the Bank of the Commonwealth, "most splendidly en- graved and beautifully printed on superfine paper, being as good-looking notes as were ever manufactured any where," immediately on their issuing depreciated to about 70 cents on the dollar in United States Bank notes or good notes from the Atlantic States.29 Getting a bad start in the very beginning, they never circulated at par with the notes of the specie-paying banks. A year later they had dropped in some places to the level where $205 worth of them was required to purchase $100 in specie or United States Bank notes.30 They became so plentiful and worthless as to draw the remark that "One good thing may come out of this-such notes will not be counterfeited, 'that's flat'-because they will not pay the cost and hazard of their fabrication." 31 One person on paying a debt of $5 with a $10 Virginia note was surprised to receive back in change three $5 bills of the Bank of the Commonwealth.32 Other people refused to accept the Kentucky notes at any price. It was reported that the stock raisers, hemp and tobacco growers, and commission mer- chants flatly refused to have any transactions in which this money was used ; and a stage driver refused to accept it as fare.33 An order issued by the Bank of Kentucky, casting some doubts upon its acceptance of the new Commonwealth notes, provoked one of its debtors to threats of violence. This irate customer inserted a notice in the Russellville Weekly Messenger in which he announced that he was a debtor of the bank and
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