USA > Mississippi > A history of Mississippi : from the discovery of the great river > Part 25
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Section 8th enacted, "that to secure the payment of the capital and interest of said bonds, the subscribers shall be bound to give mortgage, to the satisfaction of the direct- ors, on property to be in all cases equal to the amount of their respective stock, which mortgage may bear on culti- vated lands, plantations and slaves; on town lots with houses thereon; on other buildings yielding a rent, or lands not under cultivation, but susceptible of being culti- vated; and on vacant lots capable of being improved, with this provision, that not more than one-fifth of the stock of each stockholder may be secured by mortgage on unim- proved lands, not included in any plantation, and on vacant lots in town; no mortgage on slaves alone shall be re- ceived; and that when a mortgage shall be offered on lands and slaves, the value of the lands shall be equal to three- fourths of the stock for which the mortgage shall be given ; that houses or other buildings, situated in any city or town, shall always be insured against the risk of fire, and the policy of the insurance transferred to said Union Bank, but it shall not be required to have the buildings on any plantations insured ; no mortgage shall be received on a brick building for more than one-half of its value, and on a wooden building for more than one-fourth; and that no one shall be permitted to subscribe until he shall
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deliver to the commissioners a valid act of sale, or patents, or certificates of confirmation from the Land Commission- ers of the United States, or partition sales and adjudications by a decree of a court, verified according to law, or such other evidences of title to the property proposed as a guar- antee to the bank, as may be deemed satisfactory to said commissioners or directors ; that property already mort- gaged may be received as a guarantee: provided, that the directors shall first deduct from the whole value of the property at least twice the amount of said mortgages, and then grant such only on the excess remaining after such deduction ; provided further, that the mortgage existing on said property shall not prevent the board of directors from receiving them as security for stock, when the sum to be loaned is to be employed in the extinguishment of said mortgage."
Section 10th provided, " that for the management of the affairs of said bank, there shall be thirteen directors, chosen from among the stockholders, five of whom shall be elected and chosen by the Legislature, by joint vote of both houses biennially ; and, upon the part of the stock- holders, eight shall be annually chosen, at the banking- house of the said bank, by the qualified stockholders of the capital of said bank."
Section 13th enacted "that the Legislature shall, upon joint vote, appoint three commissioners in each of the dis- tricts of the State hereinafter designated, whose duty it shall be to ascertain and appraise the property of those who wish to become stockholders in the institution, as well as those who are desirous to obtain loans on mort- gage ; and the said commissioners shall deliver to all per- sons whose property they appraise, detailed and authen- tic certificates of its value, of the number of acres of which each is composed, how many acres are under cultivation, and how many are capable of being cultivated, and how many are not, the nature of the culture, the number of slaves, and their condition, age and sex, and the number of animals employed; the number and quality of the buildings, and an estimate of each and all, which certifi- cate must be signed and sworn to before a judge or magis-
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trate, or some one anthorized to administer oaths, by said commissioners, or a majority of them."
Section 31 provided that " every stockholder should be entitled to a credit (meaning thereby a loan) equal to one- half of the total amount of their respective shares, "of which said loans, four per cent and interest shall be paid annually," and "the notes of stockholders renewed annually, until the whole loan shall be paid and extin - guished."
Section 32 provided for the establishment of certain branches, and directed that two-thirds of the capital assigned to each branch should be loaned on notes, the payment of which should be secured by a mortgage on property.
Section 36 directed " that persons borrowing on mort- gage shall be allowed, at the end of twelve months, to renew their bonds or notes for twelve months longer, dur- ing the space of eight years from the date of their respect- ive loans ; " provided such borrowers shall pay at the time of each renewal all interest due on their said loans.
Section 47 provided that the fifth section of the act pledg- ing the faith of the State for the payment of the annually ac- cruing interest, and the payment of the bonds themselves when they became due, should be submitted to the people in accordance with the provisions of the constitution ; the pay- ment or redemption of any loan or debt, unless such law be proposed in the Senate or House of Representatives, and be agreed to by a majority of the members of each House, and entered on their journals with the yeas and nays taken thereon, and be referred to the next succeeding Legislature, and published for three months previous to the next regular election, in three newspapers of this State; and unless a majority of each branch of the Legislature so elected, after such publication, shall agree to and pass such law; and in such case the yeas and nays shall be taken, and entered on the journals of each House; pro- vided that nothing in this section shall be so construed as to prevent the Legislature from negotiating a further loan of one and a half millions of dollars, and vesting the same in stock reserved to the State by the charter of the Plant- ers' Bank of the State of Mississippi."
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In pursuance of the foregoing section, the act incor- porating the Union Bank of Mississippi had been " pub- lished for three months previous to the next regular election," and when the Legislature assembled at the cap- ital in January, 1838, that body promptly proceeded to re-pass it in conformity with the provisions of the Constitu- tion. The original act, re-enacted, was approved by Gov- ernor McNutt, on the 5th day of February, 1838, but the legislators of that day were not content with this. The charter of the Union Bank, as originally enacted, author- ized the issuance of the bonds of the State for fifteen mil- lion five hundred thousand dollars, and their delivery to the bank as a loan.
The bank was required to "secure" the payment of these bonds, and the prompt payment of the accruing interest, by mortgage upon the property of the stock- holders of the bank. But this did not satisfy the legis- lators of fifty-three years ago. They introduced and passed " an act supplementary to an act to incorporate the sub- scribers to the Mississipi Union Bank," the first section of which was in the following words:
"Section 1st. Be it enacted by the Legislature of the State of Mississippi, That as soon as the books of subscription for stock in the said Mississippi Union Bank are opened, the Governor of this State is hereby anthorized and required to subscribe for, in behalf of the State, fifty thousand shares of the original stock of the capital of the said bank ; the same to be paid for out of the proceeds of the State bonds, to be executed to the said bank as already provided for in the said charter ; and that the dividends and profits which may accrue and be declared by the bank on the said stock subscribed for in behalf of the State, shall be held by the said bank subject to the control of the State Legislature for the purposes of internal improvement and the promotion of education."
Section 9th enacted, "That the president and directors of the said Mississippi Union Bank, or the managers thereof, shall have ample power to appoint three commis- sioners to negotiate and sell the State bonds provided for in the fifth section of the act incorporating the subscri-
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bers to the Mississippi Union Bank, in any market within the United States, or in any foreign market, under such rules and regulations as may be adopted by said presi- dent and directors or managers, not inconsistent with the provisions of the charter of said bank ; provided, said bonds shall not be sold under their par value."
This supplemental act was approved by Governor Mc- Nutt on the 15th day of February, 1839. only ten days later than the date of his approval of the original charter of the Union Bank, after its passage by two successive Leg- islatures, in obedience to the requirements of the consti- tution.
During the spring and summer of that year, bonds of the State to the amount of five millions of dollars were. prepared, signed by the Governor, countersigned by the Treasurer of the State, and delivered to the president and directors of the Union Bank. The bank appointed Col. James C. Wilkins, of Natchez, William M. Pinckard, of Vicksburg, and Edward C. Wilkinson, of Yazoo City, as commissioners to negotiate the bonds. These gentlemen were all men of the highest character for honor and integ- rity. The two first were prominent and leading merchants in their respective cities, and the third, Edward C. Wil- kinson, was regarded as a very able lawyer and a gentle- man of the highest integrity and purity of character.
Such were the characters of the gentlemen to whom were confided the honorable, responsible and delicate duty of negotiating the bonds of Mississippi for five millions of dollars. These gentlemen accepted the important trust and proceeded to the northern cities in the performance of their mission.
On the 18th day of August, in the year 1838, the com- missioners succeeded in disposing of the entire five million dollars worth of bonds to the Hon. Nicholas Biddle, then the president of the United States Bank of Pennsylvania. As soon as the intelligence of the sale of the bonds reached Mississippi, the unthinking multitudes were wild with a delirium of joy. Bonfires and illuminations were the order of the day, or rather of the night, while great guns, the rattle of drums, the blare of trumpets and
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the shouts of the frantic multitude made night absolutely hideous.
To the thinking, cool, clear-headed people, and there were many such at that day, the Union Bank was fore- doomed to a disastrous and ignominious failure. The entire banking system of that period was radically de- fective, but the theory upon which the Union Bank was founded, that of "relieving" people who were hopelessly insolvent, was a grotesque absurdity. The system of loans on mortgages of real and personal property, prescribed in the act of incorporation, for twelve months, renewable for eight years upon the payment of the interest and one- eighth of the principal, at the end of each twelve months, would have wrecked the Bank of England. The payment of the bonds as they fell due, and the interest thereon, which the bank was required to pay from the funds in its vaults, was a sheer impossibility. By the terms of the charter, the fifteen and a half millions of bonds, to be de. livered to the bank, were made payable in four install- ments. The first installment was made payable in twelve, the second in fifteen, the third in eighteen, and the fourth in twenty years. In other words, the legislators of that period were insane enough to pledge the faith of the State for the payment of the enormous amount of fifteen and a half million of dollars in the brief space of twenty years, together with the annually accruing interest, which amounted yearly to more than three-quarters of a million of dollars. And all this was to be the result of the profits of the Union Bank in the course of two decades. Nothing can better expose the blind fatuity of the legislators of that day, or the mad, reckless temerity of the so-called finan- ciers of the times.
Meantime, Governor McNutt had inaugurated a relent- less war against the Union Bank, as well as against all the other banks in the State. Two years previously he had approved a law providing for the election by the Leg. islature of three bank commissioners, whose duty it should be to examine, once in each year, and oftener if found necessary, the several banks in the State, and ascer- tain their capacity to meet their obligations to their note-
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holders and depositors. These bank commissioners had been elected by the Legislature and had entered upon the discharge of their duties. This law, however, was not pro- ductive of any essential benefit to the public, as the man- agers of a large number of banks absolutely refused to permit the commissioners to investigate the condition of their business affairs. This refusal was based on a variety of grounds, the chief of which was that the com- missioners were so prejudiced against all banks that nothing like an impartial report could be expected from them.
In his annual message, dated January 7th, 1840, re- ferring to the management of the Union Bank, Governor McNutt said :
"I am induced to believe that a large portion of the property accepted as security for that stock is incumbered by judgments, mortgages and deeds of trust; that the valuations of the appraisers were generally very extrava- agant ; that, in many instances, the titles to the property offered are yet imperfect, and that the whole management of the affairs of the bank has been disastrous to its credit, destructive to the interests of the State, and ruinous to the institution. The cotton advanced upon by the bank, in some instances, has been attached, and the suits decided against the institution. Many of the cotton agents and consignees are defaulters, and great loss on the cotton ac- count is inevitable. The post notes, issued in violation of law, have greatly depreciated, and if the decisions of sev- eral of our circuit judges are affirmed by the High Court of Errors and Appeals, actions can not be maintained on a large portion of the bills receivable of the bank." Continuing, the Governor adds : "I signed and delivered to the managers last summer (summer of 1839) bonds to the amount of five millions of dollars. The president of the bank was dispatched eastward to make a sale, but was unable to effect it. On the 18th of November, 1839, I received a letter from the cashier of the bank, together with two resolutions of the directors, one of which informed me that the remaining five million and a half of bonds were ready for my signature. Believing
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that there was no immediate prospect of a sale of the bonds, and that further legislation might be required, I determined not to execute the remaining bonds," etc.
The Governor continues in the same strain: "The faith of the State is pledged for the whole capital stock, and the property of all her citizens may hereafter be taxed to make up its losses and defalcations. The right of the people, therefore, to know the conduct of all its agents and the liability of everyone of its debtors, cannot be questioned."
In the same message the Governor estimates the liabili- ties of the Union Bank, then due, at $249,696. The amount due and payable during the months of April and May, 1840, at $3,999,922, and the amount due in January, 1841, at $43,261, making a total aggregate of $4,290,880.
"To pay the residue," continues the Governor in his mes- sage, "the bank has five millions of dollars of State bonds. and exchange, bills receivable, etc., to make the amount of nine millions of dollars. The State bonds cannot be sold, and a sufficient sum cannot be realized in time, out of the other assets of the bank to pay the post notes due next April and May. It will take more than $250,000 of the available funds of the bank to pay in London the inter- est on the State bonds previous to the first of September next."
The Governor then proceeds by saying, "it is our duty to place the institution either in liquidation, or to repeal all that portion of the charter giving to private individuals stock in the bank and privileged loans. The State debt already amounts to about seven and a half millions of dollars. The interest on seven millions is payable abroad and amounts to three hundred and seventy thousand dol- lars annually. The rights of the stockholders are yet in- choate, and until the residue of the bonds are sold, they can have no peculiar claims. Influenced by no motive save that of the public good, anxious to protect the rights of all, and to advance the interest of the State, I am bound to recommend that the five millions of the State bonds last issued shall be called in and cancelled, and that no more shall be hereafter issued for the Mississippi Union Bank."
In this message the Governor recommended an immediate
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repeal of the charters of all the banks that were unable to meet promptly their obligations to their note holders and depositors. In support of this proposition he urged : "the existing banks cannot be bolstered. Destitute as they are of credit and available means, it would be folly in us to attempt to infuse vigor and stability into their lifeless forms. They are powerless to do good, but capable of inflicting injuries irreparable."
In this message the Governor gives the liabilities of the various banks of the State at the enormous figure of $62,840,365, while the amount of assets reached the sum of $67,810,805. While this was a nominal excess of assets over liabilities of nearly five millions of dollars, a glance at these assumed assets was sufficient to show how utterly unreliable, how absolutely worthless was the value of their securities for the protection of the note holder and the depositor. The amount of the "suspended debt," and of the "suspended debt in suit," aggregated the enormous sum of nearly seventeen millions of dollars, while the banks held in their possession more than thirty-one mil- lions of dollars in the shape of "notes and bills discounted," and not more than twenty-five per cent. of this immense sum could by any process known to man ever be col- lected. In point of fact, not one-tenth of this vast sum ever was collected.
. In concluding his message of January, 1840, the Gov- ernor said: "The liabilities of the directors of the banks, examined by the bank commissioners, are $4,052,852. The liabilities of the banks not examined by them, are at least double that sum."
In his next annual message, bearing date January 5th, 1841, Governor McNutt renewed his assaults upon the Mis- sissippi Union Bank with great vigor. In this message he assailed the validity of the sale of the bonds of the State issued to meet and pay for the subscription of stock owned by the State, in a most trenchant manner. He thus refers to the three great institutions in which the State was a stockholder :
"The situation and affairs of the Mississippi Railroad Company, the Planter's Bank of the State and of the
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Mississippi Union Bank, will demand your calm considera- tion. All those institutions are insolvent, and neither of them can resume specie payment for several years or make further loans. I submit, herewith, copies of my letters to those banks, calling for specific information in relation to their condition, and the answers and statements furnished. The Union Bank has $4,349 of specie on hand. Her sus- pended debt in suit is $2,698,869 ; suspended debt, not sued on, $1,777,337 ; resources, chiefly unavailable, $8,033,154 ; immediate liabilities, $3,034,154 ; capital stock, $5,000,000.
The Governor declares "that the whole capital stock of the Union Bank has been lost," and proceeds to refer to the system of advancing on cotton by the Union Bank, which, in common with the other banks, had been engaged in that business. The Governor says : " The Bank has seven thousand bales of cotton in Liverpool, on which it has drawn $267,116. An advance of sixty dollars per bale was made to the planters upon that cotton in 1838. The bank will sustain a clear loss, including interest, of thirty dollars per bale, equal in the aggregate to $210,000. The bank has been irretrievably ruined by making ad- vances on cotton, issuing post notes, and loaning the prin- cipal portion of her capital to insolvent individuals and companies. The situation of the Mississippi Railroad Company and the Planters Bank is equally bad."
The Governor made a strong argument in favor of the re- pudiation of the Union Bank bonds, for the reason : First, that they were sold on a credit, instead of for cash at their par value ; and second, that they had been purchased in the name of an institution, the United States Bank of Pennsylvania, the charter of which absolutely prohibited that bank from buying or selling bonds or stocks other than issued by authority of the United States or of the State of Pennsylvania.
The Legislature of that year, however, did not concur with the Executive, and both houses adopted, by decisive majorities, resolutions declaring that the honor of the State demanded that both the Union and Planters bank bonds should be paid, both principal and interest. The adoption of the resolution declaring in favor of paying the Planters
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Bank bonds was adopted in the Senate unanimously, every Senator being present, and in the House of Representa- tives it passed by a majority approaching unanimity.
The vote in favor of paying the Union Bank bonds was passed by a two-thirds majority in the Senate, with every Senator voting, and the majority in the House on the same resolution was large. .
The agitation had commenced, however, and it is not the fashion of revolutions to make retrograde movements. The Democratic Convention assembled on the 8th day of Janury, 1841, to nominate candidates for Governor and other State officers. The convention made its nomina- tions, but was silent as the grave on the bond question.
Some six weeks later the Whigs met in convention and took strong ground in favor of paying the State bonds, and nominated a full ticket in entire accord with the con- vention on the bond question. Judge David O. Shattuck was the nominee of the Whig, and Thomas H. Williams of the Democratic party, for Governor. It was soon ascer- tained, however, that Mr. Williams was not entirely sound as a repudiator, and a few gentlemen got together at the old capitol building, and nominated Mr. Hanson Allsberry. He accepted the nomination and commenced the canvass, but being embarrassed financially, he abandoned the con- test, and removed to Texas. Tighlman M. Tucker, of Lowndes county, was next nominated, and after a long, bitter and exciting campaign, the repudiators were suc- cessful in electing their whole State ticket and a majority in both branches of the Legislature. It was a notable fact that the largest taxpayers were uniformly in favor of paying the bonds, and that the heaviest tax-paying coun- ties gave large majorities for meeting the obligations of the State, and for paying the Union Bank Bonds. Thous- ands of the best and most intelligent men in the State scorned to discuss the legality of the issue or the sale of the bonds, and based their advocacy of payment on the broad ground of comity, fair dealing, and expediency.
There can be no question that the repudiation of the Union Bank bonds, followed eleven years later by the for- mal repudiation of the Planters Bank bonds by the votes,
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of the people, has proved to have been a most expensive luxury to every citizen of Mississippi engaged in any kind of business. There is no doubt that as a mere ques- tion of policy and expediency, the repudiation of her bonds by the State was a most costly experiment. The in- creased cost of all monetary facilities to the people for twenty odd years was vastly in excess of the entire bonded indebtedness of the State. It is undeniably true that longer time, and a lower rate of interest, could readily have been obtained from the creditors of the State, and when it is remembered that not less than ten millions of dollars were extorted from the people of Mississippi in the brief period of three years, in violation of the Consti- tion, as a government tax on cotton alone, it will readily be perceived with what ease the State could have paid the entire amount of her bonded indebtedness, more especial- ly when extended through the long term of fifty years, as could have been done with great facility. The repudia- tion of the bonds was an undeniable blunder, and a blun- der, according to Talleyrand, "is worse than a crime."
The second term of Governor McNutt, which commenced in January, 1840, was made memorable by the visit of General Andrew Jackson to the capital of Mississippi. The ex-President had been induced to visit New Orleans, where it was said the corner-stone of a monument to commemorate the victory won by the army under his command on the 8th day of January, 1815, was to be laid. The Legislature of the State being in session at the time, the old hero was unani- mously invited to visit the capital of Mississippi and accept the hospitalities of the State. A joint committee of the two Houses was appointed to visit New Orleans, and to endeavor to secure the proposed visit from the venerated chief, who had so often led the sons of Mississippi to bat- tle and to victory. General Jackson promptly accepted the invitation, and the news flew fast that the hero of New Orleans was to be the guest of the State. Ample prepara- tions were made by a joint committee of the Legislature, aided by a large committee of the most prominent citizens . of Jackson and Hinds county. The ex-President left New Orleans on board of a steamboat, accompanied by General
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