USA > Kentucky > History of Kentucky, Volume II > Part 8
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26 December 5, 1821. These remarks were occasioned by the passage of the law in the Senate, which was done by a vote of 26 to 10.
27 Niles' Register, Vol. 21, p. 381 ; Vol. 22, p. 273.
28 Niles' Register, Vol. 22, p. 291, 292.
29 Niles' Register, Vol. 20, p. 225.
30 See Ibid., Vol. 21, p. 278; Vol. 22, p. 97; Vol. 23, p. 96; Vol. 24, p. 16. 31 Ibid., Vol. 20, p. 225.
82 Ibid., Vol. 23, p. 148.
83 Ibid., Vol. 22, 116; Breckinridge MSS. (1821). Letter from B. B. Stith to Joseph C. Breckinridge, Aug. 25, 1821.
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was willing to pay what he owed "provided you agree to take the currency of the country, such money as the state has made for the payment of debts : but so long as your present order exists I most solemnly declare, that I will not pay you one dollar, not even the interest, and thus publicly give notice to all sheriffs, constables, bailiffs, marshals, and their deputies, that if they do serve any precept on me, preparatory to coercion, that I will as soon thereafter as I can, put a period to their earthly career- for I hold it as a right undeniable, that all improper, oppressive, or im- practicable orders ought to be repelled with force." 34
The City of Louisville in order to relieve itself from the uncertainties and hazards of this circulating medium, which some believed might soon cease to circulate at all, issued a city currency to the amount of $40,000 in denominations of 614 cents to ȘI. The city taxes and property were pledged in payment of them, and they were made receivable for all city taxes and other debts due the corporation. But being made receivable for city taxes and redeemable in the same medium, it was soon evident that the notes were in fact then redeemable in themselves-a vicious circle which soon sent them down to zero as a limit of their value.33
In more than one way the impossibility of using the Commonwealth Bank notes with any great degree of satisfaction in the ordinary money transactions stood out. According to the postal regulations, uniform for the whole country, postage was required to be paid in specie or other national currency. The Kentucky currency was, therefore, not receivable at the postoffice. As this so-called "rag money" made up the great bulk of the currency in the state, and as many of the citizens were "denied the privilege of the post office, by requiring of them round specie in pay- ment for postage," the legislature called upon the National Government to amend the rules of the postoffice so as "'to enable the citizens of this commonwealth to avail themselves of the privelege of conveying their letters by mail."36
As a necessary part of the relief system and a direct outcome of the depreciated Commonwealth Bank notes, the so-called "scaling system" grew up. This consisted in juries giving their verdicts for damages, exe- cutions, and claims in specie rating rather than in the Commonwealth paper-"scaling verdicts" as they came to be called. According to the Le.rington Reporter, "Those who have not experienced the operations of the scaling law, will find, on inquiry, that it is a wonderful expedient for the benefit of a debtor. It is just the thing that deserves a patent." Under this system some very fantastic results ensued. The following case was reported :- A poor man was sued on a note of $12 on the back of which was credited a payment of $6. As there was no proof that the $6 had not been paid in specie, the magistrate assumed that it had, and as the ratio of Commonwealth paper to specie was two to one, he decided that the whole amount of the note had been paid, and therefore gave a judg- ment for costs against the plaintiff. This led the Lexington Reporter to comment : "Into what absurdities are we plunged by the relief system." What a mockery to talk of justice and freedom and happiness, when the Constitution is brought to the level of such legislative acts as have been adopted by the relief party! We have here in Kentucky, a code of such relief laws ; a code intended to suit the case of every man who is disposed to wrong his neighbor ; a code which invites all men to break their con- tracts. If a trespass be committed, and property destroyed or taken away. damages for one half the amount of injury only. can be obtained ; and that half payable in paper worth 50 cents on the dollar! If a man
34 Quoted in Niles' Register, Vol. 24, p. 2.
35 R. T. Durrett, The Centenary of Louisville (Louisville, 1893), Filson Club Publication, No. 8, pp. 90-92.
36 Acts * * of the Thirteenth General Assembly for the Commonwealth of Kentucky, 1821, P. 451 ; Niles' Register, Vol. 21, p. 212.
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refuses to pay his bond, judgment can be obtained against him for one half only, and thus he clears fifty per cent. by being sued. If he prefers not paying even one half of his just debt, in commonwealth paper, he can replevy two years; and, at the expiration of two years, he may send his creditors to seek WILD LAND PROVIDED THE RELIEF LEGISLATORS HOLD THE SCALES OF JUSTICE TWO YEARS HENCE." 37
By the advocates of the relief system, the depreciated currency was declared to be a blessing in disguise. True it was that the Commonwealth notes would not be accepted outside of the state; and by that very fact Kentuckians were forced to buy home productions. This was bound to lead, they argued, to the rejuvenation of home manufactories. These notes would also not be accepted by the Federal Government in payment for public lands. This was also a blessing; for there was no need for good Kentuckians migrating to other states or to the territories. The Kentucky Gazette said, "At present our money is certainly protecting every class except the purchases of foreign articles. * * * Take from this state the present currency, and there is not an article made of leather, wool, cotton, flax, hemp, or iron but will be imported till the last cent is drained from us and carried away." 38 As there was cer- tainly little specie in the state with which to make outside purchases; there was in fact some cogency in these contentions. It was a question, however, as to whether this was the best way to encourage manufactories. Would not the economic detriment to the state outweigh and outlast any aid that might result for home production? On October 26, 1822, the Bank of the Commonwealth had only $2,633.25 in specie.39
But the very originators of the relief system soon saw there was a limit to the amount of notes that should be issued and also a limit to the time during which they should circulate; for in fact the bank had not been set up as a permanent financial institution any more than it was expected that hard times would be permanent. Governor Adair in his message to the Legislature in October, 1822, favored the gradual retirement of the Commonwealth Bank notes. This course, he said, would "silence the clamors of those who have depreciated the credit of the paper by impeach- ing the credit of the public faith, and inspire the community with increased confidence in the final redemption of the notes." 40 A legislative committee appointed to investigate the question raised in this part of the message seriously regretted that the notes of the Bank of the Commonwealth and of the Bank of Kentucky "have depreciated during the present year, and it can only be accounted for, on the ground of a redundancy of the paper of these banks, because it must be acknowledged by all, that the resources of the state are ample for the redemption of all the paper of both insti- tions. * * *" It recommended that a sum not exceeding $1,000,000 each of the two banks be called in and burnt, one-half as soon as possible and the remainder in six and twelve months. It also recommended that only twelve months, instead of two years, be allowed in cases where the plaintiff failed to take advantage of the endorsement law.41 This policy of retiring the currency of the banks and burning it was adopted and soon the bonfires were illuminating Frankfort. On January 8, 1823, $71,000 of the notes of the Bank of the Commonwealth were consigned to the flames. Of this Hezekiah Niles said, "What an excellent fire it must have made! It is a good beginning." 42 Exactly one week later $700,000 of Commonwealth Bank paper was burned "in the presence of suitable persons duly appointed to see that the conflagration was properly made."
37 Quoted in Niles' Register, Vol. 24, P. 391.
38 May 9, 1822. Also see May 21.
39 Niles' Register, Vol. 23, p. 181.
40 Ibid., 171.
41 Niles' Register, Vol. 23, pp. 235, 236.
42 Ibid .. 321.
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"A few more good fires like this," Niles added, "and we shall begin to expect remittances from our friends in Kentucky-whose arrears amount to a distressing aggregate at this time." 43 The work of gathering up the money and burning it went steadily on. In June the (Frankfort) Argus announced that "$109,000 of Commonwealth's paper was committed to the flames, in obedience to the act of the last general assembly. Original cost about $22." 44 The notes of the Bank of Kentucky were also being steadily called in and burned. Niles' Register reported in June, 1823. that "KENTUCKY is going on nobly in the work of burning paper money. There was lately another great purification of the currency by fire-$1,400,000 in notes of the Bank of Kentucky, besides the conflagra- tions of the paper of the Bank of the Commonwealth, have been com- mitted to the flames." 45 It was later provided that all the outstanding notes of the Bank of Kentucky should be called in at the rate of one per cent per month and boxed up, instead of being burned.46 This bank was well on its way now to a final winding up of its affairs preparatory to going out of business. The Bank of the Commonwealth was also getting on a sounder basis. On October 10, 1825, there was outstanding about a million and a half of notes out of a grand total of nearly three millions. For the redemption of these notes it had almost $2,500,000 in various forms. The notes, under these circumstances, were gradually approach- ing par, much to the joy of most of the people of the state who longed for a sound circulating medium.47 There was a movement on the part of some before the appreciation began, to retire the notes on the basis of 50 cents on the dollar. This was, however, not adopted as it would have further impugned the credit of the state.48
When the notes began to rise in value the inflationist relief men im- mediately took fright. They began to cry out that money was be- coming scarce again and that it was an injustice for them to pay back to the bank their loans from it dollar for dollar, since every day made the dollars they were paying back dearer and harder to get. When they borrowed the money from the bank, $2 of the paper was worth $1 in specie, now it had so advanced in value that $1.50 equalled $1 in specie. More money was the only remedy, in their estimation. Said a corre- spondent to the Washington (Kentucky) Union: "Justice forbids it [the payment in dear money of debts contracted in cheap money]-the spirit of the relief system (from which the country has derived so much benefit) forbids it-and I call upon the friends of the system to rally around it, and boldly to demand a moderate additional emission of the not created as an instrument of oppression, and the true friends of it will not be driven from their stand in its favor. The pretence of wind- ing up, has only been resorted to as a means of conciliating the anti- relief's, and is at best, but a kind of half-way measure. I say there- fore speak out boldly, and stick close together, all you who are really in favor of relief." 19 Others would take advantage of the appreciation of the currency for other purposes. As the money became more valuable, Governor Desha in 1825 urged the advisability of paring down the salaries of state officials and other public expenditures. "It should be the object of a republican government," he said, "to give only that compensation to public officers which will purchase the faithful performance of their
43 Ibid., 355.
44 Quoted in Niles' Register, Vol. 24, p. 260.
45 Vol. 23, P. 387.
46 Niles' Register, Vol. 25, P. 368.
paper of the bank, sufficient to prevent the shavers and money grippers from speculating upon the necessities of the debtors of the bank-It was 47 For a statement of the bank see Niles' Register, Vol. 29, p. 229.
48 Ibid., 4.
49 Quoted in Niles' Register, Vol. 28, p. 342.
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respective duties. Above all things our government should avoid sinecure offices." He called special attention to the salaries of the officers of the Commonwealth Bank and suggested that the various branches of the bank might be completely discontinued and the remaining duties be performed by resident agents.50
As heretofore indicated, this whole relief system of banks and replevin laws was bitterly assailed from the very beginning, and it increased as time went on. In a bewailing letter a Kentuckian summed up the in- famies the state had been guilty of during the past few years: "I dis- cover that I have lived too long. I have lived to see this country rise from a howling wilderness to a rich, populous and respectable state. I have lived to see the savages driven far away, and the sons of Kentucky step forward to vindicate their country's rights-but also, after a residence of forty-two years, I have lived to see my country in disgrace at home and abroad. I have lived to see it cursed with forty independent banks. I have lived to see the lands of non-residents and residents confiscated under what is here called the 'occuping claimant's law.' I have lived to see the charters of the independent banks repealed; but I have lived to see fifteen more established in violation of the constitution of the United States : and, worse than all, I have lived to see two successive legislatures of Kentucky guilty of the ridiculous folly of attempting to legislate the people of the state out of debt. I have lived to see the measures of gov- ernment much influenced by bankrupts. I wish to live to see my state regain her former standing." 51
The replevin laws and the bank were severally and collectively at- tached ; but the latter seemed to be singled out for some of the bitterest thrusts. In describing its blighting effect on the state a correspondent to Niles' Register, said: "It has nearly destroyed all commerce or trade, extinguished personal credit, broken down confidence between man and man, as well as dampened and depressed the industry of the state- but thank God, the people are beginning to get tired of its blessings, and its paper mill will soon cease working; leaving a debt, however, due to it from the poorest of the people, to the amount of 21/2 or three million of dollars." 52 An effort was made by the enemies of the institution in 1822 to repeal the charter but it failed by a vote in the House of sixty to thirty.53 It was early argued that this bank was unconstitutional for "It is impossible to believe that the paper of this bank can be forced upon any one in the payment of debts-for no state can pass a law impairing the obligation of contracts. This is forbidden, and wisely, by the consti- tution of the United States." 54 The question was soon raised in the state courts in a regular law suit. The Bank of Commonwealth brought suit in the Adair County Circuit Court against one Benjamin Lampton and others on a note for money loaned by the branch at Greenupsburg. The defendants maintained in their answer that the paper they had received from the bank was illegal and void, for the bank in issuing it had violated the Constitution of the United States, which declared specifically that no state shall "emit bills of credit." 55 The court sustained the right of the bank to issue the notes, and the case was appealed to the Court of Ap- peals, which sustained the judgment of the lower court.56
This question was finally settled in 1837 in the celebrated decision of the Supreme Court in the case of John Briscoe and others v. The Presi- dent and Directors of the Bank of the Commonwealth of Kentucky. John
50 Message of November 25, 1825, in Niles' Register, Vol. 29, p. 223.
51 Niles' Register, Vol. 20, p. 52.
52 Vol. 23, P. 337.
53 Niles' Register, Vol. 22, p. 240.
54 Ibid., Vol. 20, p. 225.
55 Art. I, sec. 10.
56 Niles' Register, Vol. 23, P. 371.
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Briscoe borrowed $2,048.37 from the Bank of the Commonwealth and received payment in its notes. Later he refused to settle this debt, as he maintained the consideration illegal and void. In so holding, the plain- tiff in error argued that the bank had no right to issue money, as it was an instrument of the state and in practical effect amounted to the state emitting bills of credit, which was specifically forbidden by the Federal Constitution. In the minds of many people this very question had been settled in the case of Craig v. The State of Missouri, the opinion in which had been delivered by John Marshall; and if that were true, there seemed little question that the case would go against the Kentucky bank. Henry Clay and Benjamin Hardin were retained as counsel for the state. The outstanding point in their argument was that the bank was not the state, but merely a corporation created by the state for a specific purpose, viz. : to do banking. Their contentions carried with the court, and the emission of notes by the states through a state-owned bank continued until the days of the Civil war, when a tax of ten per cent was imposed on all such emissions, which effectively put a stop to them. In its decision the court held that a bill of credit must be issued by a state, must involve the faith of a state, and must be designed to circulate as money on the credit of the state. In the case of the notes in question, there was no promise on the part of the state involved. Moreover, when a state became a stock- holder in a bank it imparted none of its attributes of sovereignty to the institution, and it exercised no powers different from those exercised by private holders of stock to the same amount.57
The Commonwealth Bank was defended and praised as the salvation of the people generally. Governor Adair declared in 1821 that he had sensed during the year the gradual return of prosperity and that the bank was largely responsible for it. "The wisdom of the policy which gave birth to that institution, has received the decided conformation of a short experience ; and the important benefits it has conferred on the distressed portion of our population, have strongly endeared it to the people. Its favors have been general-equal-and, for the most part, adequate to the pressure of the times." 58 In his message to the Legislature the follow- ing year he reiterated his conviction that the bank was justified by the conditions and that it had been successful in accomplishing what it had been set up for. "If the legislature of Kentucky has been compelled to yield for a season to the imperious nature of causes which it could not subdue, in devising measures requisite to insure the general welfare; has sanctioned means heretofore not usually employed, let it never be for- gotten, that the measures adopted have completely realized their proposed ends; that an agitated and endangered population of a half a million souls has been tranquillized and secured without the infliction of legal injustice or the example of violated morality. I rejoice that the hour is near at hand, when we may change, without fear or injury, our precautionary attitude, and, mingling freely in the emulative pursuits of nations, with increased vigor urge onward our career of wealth, of power and of fame." 59
The bank in particular as well as the whole system of relief legisla- tion in general, was opposed by many people on the principle that it was no concern of the state that private individuals were in debt, and that it was no concern of the state to get private individuals out of debt. It was argued that thrift, industry, and economy were the only remedies, and that any intervention on the part of the state would only aggravate con- ditions in the long run. Governments, they said, were not made for such
57 11 Peters 257; Reports of the Supreme Court, B. R. Curtis, editor, XII, 419- 456; North American Review, Vol. 46 (1838), 142-156; Calvin Colton The Life and Times of Henry Clay (New York, 1846), I, 82, 83.
58 Message to the legislature, October 16, 1821 in Niles' Register, Vol. 21, p. 185. 59 Message of October 22, 1822 in Niles' Register, Vol. 23, p. 171.
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purposes, and laws could do no permanent good. Amos Kendall, who had come to Kentucky as a boy and was now editor of the Argus, said the people might cry relief! relief! "Alas! we know the futility of such efforts and the wickedness of exciting hopes which must be disappointed. We might as well cry silence to the thunder, and bid the tempest cease. Things will take their course in the moral as well as the natural world. When men raise their feeble arms and build their weak barriers, the flood is stayed but to accumulate a greater force and whelm the deeper in the furious waves. To parry, to palliate, is all that man can do. They may delay, may give facilities, but they cannot RELIEVE. The people must pay their own debts at last. This truth should be impressed upon them, their eyes should be turned from banks and the Legislature to themselves, -their own power and resources. Few need despair. Industry never died with hunger. Economy never went without its reward. The Legis- lature can do little,-the people can do much. Let both do what they can, and our country will soon be easy and tranquil, if not prosperous and contented." 60
The relief men answered with much impatience the argument that the people themselves must work their salvation and do so without the aid of the Government. What, they asked, was a Government for, if it was not to relieve the people in their distress? A legislative committee said : "Our people had a right to expect relief, and to effect which, they com- menced a system of economy and retrenchment; but this alone was too slow for those who were already struggling with the storm, and we are happy in the belief that this bank saved many worthy citizens in an im- portant crisis .- The commonwealth, like a wise and beneficent parent, gave to her children bread in time of need. To conduct prudently, and not abuse this institution, ought to be the object of all." Continuing, it declared : "Your committee have always believed that republican govern- ments were instituted for the happiness and safety of their people, and, although the bank of the commonwealth has been deprecated by many as unconstitutional, which cannot be admitted according to a just con- struction of that instrument, but which we consider as founded upon sound wisdom; yet the better feelings of the human heart cannot avoid responding with a noble pride, that it has been able to carry joy and glad- ness to the homes of the distressed, the unfortunate and enterprising mechanic, farmer and merchant whose all would have been sacrificed perhaps at one tenth of its value. Your committee believe that moral principle would as much oppose one citizen taking the property of an- other for one tenth or twentieth part of its value, under sanction of law, as if it was taken without law. The bold and intrepid robber, who takes our property by violence, cannot have a worse conscience than the man who coolly and deliberately deprives his neighbor of his home, without any consideration, under pretext of justice. Moral principle and honest feeling equally forbid both." 61
As heretofore intimated the replevin laws were strongly assailed as being nothing less than the virtual repudiation of contracts. Niles de- clared that he has always "entertaining an opinion that proceedings of this nature must needs operate for the benefit of a designing few at the cost of the honest many-and, that for one deserving person whom they really assist or preserve, they break down and destroy at least twenty others, as well entitled to the public concern as that favored one." 62 At a Fourth of July dinner in 1822, Isaac Shelby, now beyond the alloted years of man, gave this toast: "The relief measures are demoralizing. impolitic and unconstitutional-may they be crushed." 63 But the relief
60 Autobiography of Amos Kendall, 246.
61 Niles' Register, Vol. 23, p. 235.
62 Niles' Register, Vol. 22, p. 386.
63 Ibid.
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men seemed to think that they should be praised for their forbearance in not having all private debts repudiated outright. By one it was stated: "In times not worse than these, the legislator of Athens, Solon, abolished the debts; but the Kentuckians were too magnanimous to think of such a measure ; all that the debtors were looking for was time to pay." 64
The replevin laws were more difficult to defend than the bank, and they were designed from their very nature for a shorter duration. In January of 1824 these laws were abolished and there was substituted in their place as a gradual departure from the whole principle a law requir- ing that all property taken in executions should be valued in gold or silver and that it must bring at least three-fourths of this value. In November, 1825, Governor Desha stated that their operation had almost ceased to be felt in the courts of the land.65
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