USA > Mississippi > Mississippi : comprising sketches of towns, events, institutions, and persons, arranged in cyclopedic form Vol. I > Part 19
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The loan to the State treasury continued unpaid and the State had run in debt some forty thousand dollars in all when the gov- ernor, by act of February 5, 1827, was authorized to borrow $250,- 000, and issue a bond or bonds for that amount, out of the proceeds to pay the debt to the bank, and take up the full amount of stock contemplated by the act of 1818. Governor Brandon reported to the next legislature that the bank had agreed to join with the State in guaranteeing payment, but even with that assistance the Eastern concerns to which they applied declined to make the loan. The capitalists refused to make a loan of such an amount for such a time on a non-negotiable bond.
"Efforts having been made by many of our fellow citizens to
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procure the establishment of a branch of the United States bank at Natchez, it was deemed advisable to postpone further efforts until the meeting of the general assembly. In the event of the in- troduction of a branch of the United States bank in our state, the dividend of the bank of the State of Mississippi would be so far re- duced as not to make it an object desirable that this loan should be carried into effect." He noted that in a few years the charter of the old bank would expire, and the State could charter as many banks as might be desired and take stock in the same or a bonus, and he recommended the legislature to resist the opening of the proposed Branch bank.
In 1828 the governor was authorized by the legislature to sub- scribe for stock in the State bank to the amount of $30,000 and borrow the money from the bank to pay the ordinary expenses of government. At the same time the legislature resolved that "the location of a branch of the United States bank, within the limits of this State, would be inexpedient, impolitic and injurious to the financial resources of the state."
The effort was renewed in 1829, to borrow $200,000 under the guise of an internal improvement fund, (q. v.), and again failed, though Stephen Duncan negotiated in behalf of the State. Dun- can was then the president of the bank.
In 1830 the legislature, in view of the fact that "the pecuniary demands of the country demand an extension of capital," author- ized the bank to make private sale of about $200,000 worth of stock that had been returned to it in payment of debts.
In 1830 the bank stock was $950,600. The bank notes in cir- culation were $574,710. The deposits were $307,000, surplus $73,- 858. Specie on hand, $77,666. Bills receivable, over $1,500,000.
It will be noted on what slender basis of specie the bank notes were founded. The fact that the bank refused to make further dangerous expansion impelled the legislature in February, 1830, to ignore the pledge of the State to the old bank, and incorporate a new institution, called "the Planters' Bank of the State of Mis- sissippi." The nature of the charter may be inferred from the pro- test spread upon the house journal by Joseph Dunbar, J. F. H. Claiborne, Thomas Land, Alexander Morrison, J. R. Marsh, Robert T. Dunbar, J. W. McDonald, John H. Horne and Adam Gordon. They said the bank was not calculated to go in operation on the scale contemplated and would give no relief ; the principle of mort- gage security for loans would induce extravagance, speculation and general insolvency ; there would be a tendency of real estate
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to mortmain and dilapidation; fraud would be encouraged; the organization of the directory was unconstitutional; a dangerous power was vested in the governor.
The act purported to be for "a judicious increase of the circu- lating medium," in order to "give impulse and vigor to agricul- tural labor, activity to commercial enterprise and increased value to our lands," also, "by the creation of revenue, relieve the citi- zens of this State from an oppressive burden of taxes, and enable them to realize the blessings of a correct system of internal im- provements."
The bank was to be established at Natchez, with a capital of $3,000,000, shares of $100 each, 20,000 of which would be reserved for the State, and ten thousand, or $1,000,000 to be subscribed by individuals. Subscriptions were to be taken for the million, in March, 1830, at Natchez, Vicksburg, Port Gibson, Woodville, Rod- ney, Columbus, Liberty and Monticello, by gentlemen named in the act, among them George Poindexter and James C. Wilkins. The life of the corporation was to 1855.
The governor of the state was required to subscribe for 10,000 shares, or $1,000,000 of stock, and to raise the money by selling bonds of the State, bearing five per cent. interest, and falling due in ten, fifteen, twenty and twenty-five years in equal installments. The "faith of the State of Mississippi," also the stock of the State in the bank, was pledged for the payment of these bonds, principal and interest. These bonds when printed and signed, were for the use of the bank to sell and obtain specie, as a basis for an issue of paper money, and the bank was required to establish a sinking fund for the redemption of the bonds. Any time, if the sinking fund were insufficient the bank was to meet the demand and charge the same to the State; "for the payment thereof the faith of the State is hereby pledged." The State had seven directors, the stockholders six. The State would sell its stock in the Bank of Mississippi, except fifty shares, and invest it in the new bank, also all the Three per cent. fund on hand and to be received, and all the escheats, fines and forfeitures recently reserved for public education. The bank was authorized to issue paper money of de- nominations not under $5, without limit. An amount not exceed- ing one-half of the capital paid in (one-half of which was to be borrowed), was to be apportioned among the senatorial districts to be loaned on real estate at one-third the appraised value. Wheth- er on first or second mortgage is not mentioned. But any individu-
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al's loan was limited to $4,000. The bank was exempted from tax- ation and its notes made receivable for taxes.
It is obvious that the test of the scheme was the ability of a bank, thus constituted and regulated, to accumulate enough gold and silver or United States bank notes in ten years, to pay the interest on the State bonds and take up $250,000 of the principal.
Said the Natchez "Southern Galaxy:" "Can the legislature for a moment imagine that the enormous sum of three millions of dollars would be subscribed and actually paid in for the stock of a bank, founded in bad faith, uncertain of the duration of its existence, and still more uncertain of successful operation? Does the legis- lature, even in its most fantastic dreams, under the grossest infat- uation of political superstition, entertain the thought, that the State would be able to pay into the coffers of this bank the sum of two millions of dollars, when she has utterly failed in the attempt to beg or borrow the paltry sum of two hundred thousand. It is the climax of absurdity-it is downright folly. But even if this castle could, for a moment, be suspended in the air, is the public faith of Mississippi, solemnly pledged by her legislature, to be thus recklessly trodden under foot? Because the letter of the law may possibly be evaded, shall the sancity of honor be put at de- fiance? Upon what times have we fallen? Why do we longer wonder that the faith of our State commands no respect abroad, when it ceases to be respected at home."
President Duncan informed the legislature in December, 1830, the Planters' bank having failed to get started, up to that time, that the Bank of Mississippi would consent to a renewal of its charter, if extended to the end of 1850, on these conditions: the faith of the State to be pledged to charter no other bank until the close of 1849; capital stock and dividends to be exempt from all taxation ; privilege to discount paper having sixty days or more to run, at eight per cent .; in which case the bank would convey to the State $250,000 shares of stock, and take therefor State bonds. The bank would also cancel the debt of the State to the bank, about $20,000. Two additional branch banks had been established at Vicksburg and Monticello. The total bank notes in circulation were $450,000, surplus, $84,000, deposits, $209,000.
The legislature was of another mind. While waiting for the Planters' bank to get in operation the Agricultural bank was chartered. "This grant was urged and carried as a compromise upon the plea of injustice done the old bank, in chartering the Planters' bank," and to cover the withdrawal of the United States
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bank. "This was succeeded by the application for the West Fe- liciana & Woodville railroad with banking privileges, which was opposed as being dangerous in its tendency. . But the in- terest enlisted and the plausible argument of aiding public im- provement, carried it through, and I need not add that the predic- tions of the time have been fully verified." (Governor Lynch, 1838).
The building of the Agricultural bank at Natchez was described by J. H. Ingraham (The Southwest, 1835) as the finest structure in the city, with a noble colonnaded front. "It is entered from the street by a broad and spacious flight of steps, leading to its lofty portico, from which three large doors give admission to its vast hall, decidedly the finest room south or west of Washington." The other bank buildings were very plain.
The legislature authorized another effort, to start the Planters' bank, and Samuel Gustin, Angus McNeil and R. L. Throcmorton were appointed commissioners, who succeeded in selling in New York five hundred $1,000 bonds, bearing interest at six per cent. The sale was at a premium of one-eighth of one per cent. This was considered very flattering to the credit of the State, in view of the prevalent opinion that its faith had been violated in charter- ing the bank. In November, 1831, the bank was in operation, "and prospering beyond our most sanguine expectations," said Governor Brandon. J. P. Walworth was the first president, succeeded by James T. Wilkins. In addition to the bonds, the State invested in Planters' bank stock about $20,000 on account of the Literary and Three per cent. funds.
The act of December 19, 1831, authorized the Bank of Mississippi to wind up its business, the reduction of loans to be $300,000 in the ensuing year, and in consequence about one-fourth of the capital stock was paid off at the end of that year.
For a time its existence kept the Planters' bank in restraint, as a deposit of notes of the new bank in the old one caused an imme- diate demand for specie from the new institution. There were branches of the Planters at Vicksburg and Rodney in 1832.
The constitution of 1832 required that any act to "raise a loan of money upon the credit of the State, or to pledge the faith of the State for payment or redemption of any loan or debt," should pass two successive legislatures, with publication of the act intervening, provided that a further loan of $1,500,000 for investment in the Planters' bank might be made without this restriction.
Governor Scott said in January, 1833: "By the charter of this
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institution, the State is permitted to become a stockholder to the amount of $2,000,000. State bonds, pursuant to a supplemental act, were sold, and the proceeds vested in stock; the three per cent fund, as it has become available, and a portion of the literary fund, have respectively been vested in stock in said bank, making to- gether with the proceeds of State bonds $525,900. Of the two mil- lions worth of stock reserved for the State in this bank, there therefore still remain $1,474,100 yet vacant."
A branch of the United States bank had been established at Natchez, March 4, 1831. But the charter of the United States bank would not be renewed and the large amount of circulation it supplied would be withdrawn, the gradual collection of loans by the Bank of Mississippi would also contract the currency, hence, said the governor, "it would appear that the policy is un- questioned which dictates a further sale of State bonds, first with a view to prevent a sudden diminuation of our circulation, and sec- ondly to extend it." So it was done, under an act of 1833.
Niles Register of August 9, 1833, says: "The Mississippi State bonds to the amount of $1,500,000, bearing six per cent. interest from the 1st of March last, redeemable in thirty-three years, have been purchased at 1131/4%, by Messrs. Prime, Ward, King & Co., T. Biddle & Co., S. & M. Allen, J. D. Beers & Co. and others." The sale was made by James C. Wilkins and Felix Huston, bear- ing a commission from the governor, under the great seal of the State.
In January, 1835, the Planters Bank, J. C. Wilkins, president, had $3,890,000 capital stock. It had notes in circulation for $1,- 760,000 ; the gold and silver coin on hand was $265,000. The ordi- nary deposits amounted to $557,000; $843,000 was deposited by the United States treasury. A ten per cent dividend was declared for 1834, leaving a residuary dividend of $180,000, besides which $80,000 was put to the credit of the sinking fund, which then amounted to $285,000. In 1834 the Bank of Mississippi paid the State for the 300 shares of stock held by the State and 290 shares belonging to the literary fund. The literary fund money was then invested in the Planters' stock, making a total of 617 shares on that account. The proceeds of sales of seminary land were also in- vested in Planters stock.
The Agricultural bank, chartered April 1, 1833, was also running at Natchez. Alvarez Fisk was the first president, succeeded by W. J. Minor. In March, 1837, the circulation of the Agricultural and Planters banks amounted to $2,559,000; specie on hand, $553,-
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000. The United States had on deposit in the two banks over $1,000,000 each.
The State was now in the throes of boundless speculation, and prices were inflated beyond reason to correspond to a fictitious valuation of land. The prevalent opinion was that there was not money enough. In his message of January, 1835, Governor Run- nels said: "On the withdrawal of the branch of the United States bank from this State, which must take place during the ensuing year, we shall be left with a banking capital of little more than six millions of dollars and that chiefly located at Natchez. The branches of the Planters bank, he said, were a mere mockery, because of their limited capital. The net proceeds of the crop of the State in 1833 was $11,316,000, and might be fairly estimated at $15,000,000 in 1834, and it was ridiculous to suppose that the State could get along with a banking capital of $6,000,000. He rec- ommended "the establishment of a bank on the principle of the Union or Citizens bank of Louisiana, the stock to be taken by planters on the mortgage of their lands. A bank erected on this principle, and placed at the control of the planters of the country, will insure a sound currency, and at the same time will enable the planters to increase their force and render more pro- ductive their lands." He was aware the 9th section of the general provisions of the constitution forbade any "immediate pledge," of the State for the payment of a loan for that purpose, but the legislature could throw safeguards around such an institution.
A charter for a Union bank was ready to submit to the legis- lature of January, 1835, and passed the house, 49 to 7, but was rejected by the senate. It was strongly recommended again by the governor in 1837, and the charter was adopted by the legisla- ture. In the fall of 1837, State elections were held with an eye single to the establishment of the bank and the pledging of the faith of the State, and the vote was favorable. The legislature of 1838 passed the act again, which made the pledge of the faith of the State constitutional.
In January, 1836, there were five banks in the state, with a nominal capital of $12,000,000. In January, 1838, 24 banks, with nominal capitals of $62,000,000, but less than $19,000,000 paid in. The circulation of bank notes was nearly seven millions. None of the bills of these banks were made "legal tender." The under- standing was as stated by Governor Lynch, "Under the constitu- tion of the United States, bank notes are not a legal tender."
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(Journal, Senate, 1838, p. 33). In the crisis of 1837 non-resident creditors demanded payment in money, that is to say, coin.
The most or all that could properly be objected to in the man- agement of the Planters bank, said Governor Lynch, could be traced to a too close participation in the interests of various com- mission houses, and the temptation to over issue of notes caused by the deposit of public funds. There was almost unlimited credit given to the paper of the commission houses, and the bank invested freely in these bills, for the profit in exchange. The secretary of the treasury, Roger B. Taney, had instructed the bank to issue. notes on the basis of these deposits, and in their accommodations give preference to merchants in the foreign trade. After that, the treasury issued its specie circular, causing a sudden run for gold and depreciating the notes in value, and the collapse followed. The Planters bank did all it could, announced that it would pay interest on its notes, would make no dividend, and no new loans, yet President Jackson declared when his banking scheme had tumbled to ruin, "The history of the world never has recorded such base treachery and perfidy as has been committed by the deposit banks against the government." (Lynch's message, 1838.)
"At length the intensity of the pressure caused a suspension of specie payments, which, by cutting off all facilities for borrow- ing, placed us in the most trying situation, upon the issue of which depended credit of the State; and requiring of this community the utmost firmness and respect for the supremacy of the laws and good order."
Before the legislature of 1835, the West Feliciana railroad and banking company, with a proposed capital of $1,000,000, Joe John- son, president, applied for a charter, and, says Governor Lynch, "the interest and the plausible argument of aiding improvement and promoting the general prosperity carried it through." The same legislature chartered the Commercial railroad and banking company at Vicksburg, with branches at Trenton and Vernon, capital $4,000,000, William Prescod, president, to build the Vicks- burg to Jackson road; and the Grand Gulf company, at Gallatin, capital $2,000,000, B. Hughes, president, to build the Grand Gulf & Port Gibson road. In 1836 was chartered the Mississippi rail- road and banking company, at Natchez, John A. Quitman, presi- dent, capital $4,000,000, to build the Natchez-Jackson road; the Mississippi and Alabama railroad and banking company, W. H. Shelton, president, at Brandon, capital $4,000,000, to build the road east from Jackson to the State line, and similar companies with a
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million proposed capital each, at Lake Washington and Columbus. This year also were chartered the Commercial bank at Natchez, with branches at Holmesville, Madisonville and Shieldsboro, cap- ital $3,000,000; and banks of the same name (Commercial) at Columbus, Rodney and Manchester (Yazoo City). Gen. Cowles Mead figured as the president of a bank capitalized at $1,000,000 at Clinton, and a bank of the same sort was founded at the famous watering place, Mississippi Springs. All these banks issued paper money in profusion. The particular function of the railroad banks was to put out these notes to pay for the building of railroads which would be the property of the bank, while the people would give up their property and labor for the worthless money as well as "pay the freight."
This "money" was loaned without much question and at low rates of interest, and was used partly to buy land, which rapidly increased in nominal value. The entries of United States land amounted to $39,000,000 in 1835-36, whereas in the previous year the total was $4,500,000. The opening of the Chickasaw lands brought many adventurers to the State and aided in the general wild speculation. In December, 1836, the famous specie circular was issued, from Washington, requiring payments on public land to be in specie. It created a great demand for specie, and revealed the fact of its scarcity. March 31, 1837 Governor Lynch issued a proclamation calling a special session of the legislature to do what it could to avert "the impending ruin." The legislature came to the relief of the banks with the "Post Note" law, authorizing the banks to issue notes payable in thirteen months, at six per cent. interest, which should be receivable for taxes and public dues. A bunch of new banks were at the same time chartered, including the Vicksburg Waterworks and banking company. But before the legislature adjourned the great financial crash of May, 1837, came, and all banks in the United States suspended specie pay- ment.
In 1839 the legislature transferred all the $2,000,000 stock the State owned in the Planters bank to the Mississippi railroad and banking company, to aid it in building the proposed road from Natchez to Canton through Jackson. The stock up to that time had paid a regular annual dividend of ten per cent. and the inter- est on its bonds, and carried a surplus to the sinking fund. Gen- eral Quitman, the president, went East and finally to Europe to obtain a loan on this stock, but failed. The stock eventually be- came worthless, and the Natchez railroad-banking company col-
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lapsed. The Vicksburg company built the road to Jackson and then made an assignment. (Millsaps, History of Banking). The Mississippi company in 1839 issued about $1,500,000 in post notes and paid them out in construction of 24 miles of railroad and depots.
The United States deposit with the State, amounting to $380,000, was transferred by the Agricultural bank in July, 1837, to the Planter's bank, $2,400 of the money being in Brandon notes. Dur- ing the following year and later, the Planters bank managers spec- ulated in Brandon money, which they obtained in large quantities and paid out on State warrants drawn against the United States deposit. This operation gave the bank an enormous profit and created a frightful increase of prices.
The legislature in May, 1837 elected three bank commissioners- E. F. Calhoun, A. L. Besancon and James McClaren. Their report in January was that a few persons had obtained control of the banks and made most of the loans to commission merchants, spec- ulators and officers of the banks. The commission merchants schemed to get control, and the bank managers were bribed by usurious rates of interest to discount all the bills of these mer- chants they could get hold of. By so doing they were able to make a great show of profit for stockholders, at the expense of the people of the State. The seventeen banks and branch banks ex- amined by commissioners had $303,304 specie in their vaults; had made advances on cotton to the amount of $314,307; had currency notes out to the amount of $3,840,000, There was little prospect of the banks collecting much on their heavy loans for several years to come. The Planters' and Agricultural banks had "from their commencement, disregarded their charters, totally neglected the great objects of their creation and defied the demand of the legis- lature for inspection."
The State owned stock in the Planters' bank amounting to $2,- 212,000, "all of which has been paid in actual capital ; individuals took two millions in stock, a great portion of which was "paid" for by promissory notes.
The Planters' and Agricultural were the first in the United States to suspend specie payments, and the only ones that per- sisted in refusing inspection. The Governor advised that they be compelled to resume specie payments or forfeit their charters. Wilkins, president of the Planters bank, Stephen Duncan, of the Agricultural, and L. R. Marshall, of the Commercial of Natchez,
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announced that they would resume specie payments in January, 1839.
The Besancon-Hagan report on the Brandon bank in 1838 showed that it had issued post notes to the amount of $4,000,000, i. e., its promises to pay that amount at a future time with interest, which the public was expected to accept as money, because it was a "bank." The paper of this bank was then the principal circula- tion medium of the State. Needless to say, the profits of the bank were enormous-at least $700,000 a year, or fifty per cent. on the capital, a large part of which was merely promised. There were over forty such concerns in the State, and the commissioners re- ported that their future endurance would speedily ruin everybody but the stockholders. When popular indignation was at its height, in 1839, the Brandon bank moved all its specie, about $30,000, to the Union bank at Jackson, where it was levied upon by United States Marshal Gwin. The president of the Brandon bank, Colonel Shelton, committed suicide.
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