Mississippi : comprising sketches of towns, events, institutions, and persons, arranged in cyclopedic form Vol. I, Part 20

Author: Rowland, Dunbar, 1864-1937, ed
Publication date: 1907
Publisher: Atlanta, Southern Historical Publishing Association
Number of Pages: 1030

USA > Mississippi > Mississippi : comprising sketches of towns, events, institutions, and persons, arranged in cyclopedic form Vol. I > Part 20

Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).

When the Chickasaw land was sold in 1836, the Agricultural bank established a branch at Pontotoc, and through its manipula- tion the returns of the land sales showed about $2,200,000 received in coin, when in fact there was only $700,000 used. The bank dis- counted bills freely for the mammoth land companies and greedy speculators present and gave them fraudulent certificates of de- posit. Nearly $400,000 principally in gold of the government de- posits at Pontotoc, were transported to the parent bank at Natchez, and much of it sold at a premium of three per cent. A large por- tion of the gold was sold to land companies in which the officers of the Agricultural and Planters bank were deeply interested. So said Governor McNutt in a message.

But on the other hand it was said that the papers of the late Maj. William Edmondson, receiver of the land office, showed that he deposited in the Pontotoc branch as coin $1,044,000, in notes $112,000. B. W. Bradford, president of the branch, denied general- ly the governor's statements.

It was in the midst of such conditions that the Union bank charter was finally passed, in full constitutional procedure, and with popular approval at the polls.

This bank was regarded as promising greater security than the previous schemes, but was in fact the most fantastic. The real assets were to be the plantations or town property, including buildings and negro slaves, of subscribers for stock. Nominally, the bank was to have a capital stock of $15,500,000, but it might be

195

MISSISSIPPI

paid in almost by notes secured by mortgage on the property just specified. It was planned to get the necessary money by selling the bonds of the State of Mississippi, within the limit of $15,500,- 000, for the payment of which the stock mortgages were first to be looked to, but ultimately resting on the faith of the State, which was solemnly pledged. There were various regulations embraced in the charter, and the empty State treasury was promised a bonus of $200,000.

Such, in brief, was the scheme as constitutionally adopted. By the same legislature, February 5, 1838, a supplemental act was passed, by which the State renounced the bonus, and instead be- came a prospective sharer in profits, by subscribing for 50,000 shares of stock, to be paid for by the sale of $5,000,000 of the bonds authorized in the original charter. It is not difficult to ob- serve that the outcome of the bank and the bonds would be the same in either case; but it was subsequently maintained that,

"Instead of an institution carefully organized, founded upon in- dividual stock, and ready to go into full operation at the end of twelve months, with a capital of $15,500,000 of stock, secured by mortgages, with ten per cent in cash paid in on the same, and prepared to discount only upon mortgages of a like nature, an in- stitution was reared up in about half that time, at a single point in the State, with a capital stock of $5,000,000 subscribed for by the governor, on behalf of the State-to secure which, not a dol- lar of property was mortgaged-bearing the impress of a State bank, issuing post notes and discounting individual paper." (Joint Committe report, 1842.)

Upon this report resolutions were adopted that the supple- mental act under which the bonds were sold "was a fundamental change of the original charter, passed contrary to the letter and spirit of the constitution of the State, and adopted without the assent of her citizens." The meaning was that this supplemental act was void, unless it also was submitted to two legislatures, as was required for bills to pledge the faith of the State. On this point hinged the arguments for and against repudiation of the bonds. The supreme court of Mississippi never agreed with the legislature. When the original Union bank bill was passed there were found two senators, Hanson Alsbury and Tilghman M. Tucker, to protest that it was a violation of the constitution and the republican form of government; that it tended to establish a landed aristocracy, and would, if successful, make the great body

196

MISSISSIPPI

of the people mere vassals, "tenants at will of a soulless moneyed monopoly and deformed monster of corruption."

The legislature elected as managers of the bank, Hiram G. Runnels, J. A. Brimball, J. L. Irwin, R. M. Williamson, John S. Gooch, John J. McRae, Jacob B. Morgan, G. M. Barnes, Thomas Land, James McLaren. Runnels was made president. The salary list of the bank was $50,000 a year. Two thousand five hundred State bonds, for $2,000 each, were executed in June, 1838, and delivered to the managers, $1,250,000 were made payable in 12 years, and $3,750,000 in 20 years from February 5, 1838. The bonds were made payable in dollars, current money of the United States, bearing interest at the rate of five per cent. Governor Mc- Nutt said in his message of 1839 he "never was in favor of pledg- ing the faith of the State for banking purposes, but inasmuch as the question had been long before the people and had twice re- ceived their sanction, I signed the charter of the Mississippi Un- ion bank, having no constitutional scruples." Soon after the managers were elected he was called on to pay 212 per cent on the State's subscription of $5,000,000, but declined. When the books were opened for subscription, he subscribed for 50,000 shares and subsequently executed the $5,000,000 bonds and delivered them to the managers. They were sold to Nicholas Biddle, of the old United States bank, August 18, 1838, for $5,000,000 lawful money of the United States, payable in five equal installments by July 1, 1839.

The sale of bonds was arranged by James C. Wilkins, William M. Pinckard and Edward C. Wilkinson, who represented that "since 1830 there has been sold to individuals within the state 11,573,712 acres of public lands, which, estimated at the reduced rate of $10 per acre, amounts to $115,737,120; and during the same period the increase in slave population is 98,834, estimated at $500 per slave, amounts to $49,417,100." This was figured as an ac- cumulation of "individual wealth," and people were found in Europe to believe it such, and surrender cash for the bonds, through Mr. Biddle, and other eminent votaries of "high finance" at Philadelphia and New York. Before the sale of the bonds was made the bank started up at Jackson and began the issue of post notes, payable about a year later. This made it impossible for the bank to ever maintain a specie reserve. From September 27, 1838, to January 17, 1839, the bank put out by loan nearly $3,000,- 000 in these notes; advanced to planters on basis of $60 to the

197

MISSISSIPPI

bale, and discounted on cotton notes $1,269,000. The largest lia- bility of any one mercantile house was about $80,000.

When news of the sale of the bonds reached Jackson, "the smoke of great guns filled the capital city with a pillar of cloud by day and bonfires and illuminations lighted it with a pillar of fire by night. In due course of time the $5,000,000 in specie and British gold arrived by ocean steamer at New Orleans; thence by river steamer at Vicksburg, thence by a guarded caravan of wagons to Jackson, where the central office was located on a plot of ground now occupied by E. S. Virden's store." Crowds of peo- ple gathered to witness this golden caravan. (C. H. Brough.)

Governor McNutt said in Jan., 1840, that he believed "a large portion of the property accepted as security is incumbered by judgments, mortgages and deeds of trust-the valuations of the appraisers were generally very extravagant-that in many in- stances 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 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 in- stitution. Many of the cotton agents and assignees are defaulters and great loss on the cotton account is inevitable. The post notes, issued in violation of law, have greatly depreciated, and if the decision of several of our circuit judges is affirmed, actions can not be sustained on a large portion of the bills receivable of the bank."

In the summer of 1839 McNutt signed another $5,000,000 bonds, and the president of the bank took them east to sell, but could find no purchaser. In November the governor was requested to sign up the remaining $5,500,000 which he declined to do until after the session of the legislature.

The present liabilities of the bank were $4,290,880, and its total specie was $387,618. It would require more than $250,000 of the available funds to pay in London the interest due in 1840.

Hanson Alsbury, chairman of legislative committee, reported in 1840: "The committee . are fully persuaded that the State will ultimately be compelled to pay a greater portion, if not the entire amount of the bonds already negotiated. It is al- together impossible that the profits of the bank will meet its ex- penses. The committee see no legal objection to canceling the bonds already issued and unsold. Justice and the hon- esty of human dealing call loudly for a pause in this journey to

198

MISSISSIPPI

State insolvency and national ruin. . It cannot be honest for the State to borrow money of capitalists for the use of the bankers who will never refund, and when, too, it is absolutely cer- tain the state will have no means of discharging the debt."

In January, 1840, a legislative committee found that the Union bank had issued $300,000 demand notes, and enough post notes to make a total of $6,629,500, to offset which it claimed cash on hand of $3,000,000. The total amount, however, of "silver, notes of other banks and auditor's warrants," was $465,000. Its cotton business was about $4,000,000. The liabilities of the bank over its available resources at that time were in excess of $4,000,000. There was no longer any hope of selling bonds to obtain money. The foreign market was glutted with State stocks that could not be disposed of on any terms.

The association of the Union bank with the Water Works bank of Vicksburg had excited interest, but the committee could not say that there had been fraudulent intent. H. G. Runnels and J. B. Morgan, directors of the Union, became stockholders in the Water Works concern in 1839. The committee expressed the "decided opinion that the arrangements have not been beneficial to the country or the Union bank." The bank managers, elected by the legislature, had "borrowed a sum equal to nearly one- twelfth of the whole capital of the bank, and are liable as drawers, acceptors and endorsers, for more than one-fifth of the capital stock now paid in."

McNutt recommended the repeal of all the bank charters in case of suspension of specie payment. He said "the directors in many instances, have borrowed nearly the entire capital of their respective institutions."

Bank commissioners Francis Leech, Basil C. Harley, and Charles T. Flusser, reported in January, 1840, that they had ex- amined 20 banks and branches. They had $109,000 in specie, $550,000 in currency of other banks; due from banks and indi- viduals, $2,750,000; expended on railroads, $3,028,000. Circula- tion, over $4,000,000. The charters would expire in the years 1857-64.

James Hagan was appointed special commissioner to examine the Agricultural bank in 1839. W. J. Minor was president. The governor said every possible obstacle was thrown in his way, and the correspondence of the bank in regard to its "nefarious post note transactions" were removed by Dr. Stephen Duncan, an in- termediate agent between the bank and the New Orleans commis-

199

MISSISSIPPI

sion house. Duncan denied this. In July, 1839, the Agricultural bank had issued $500,000 in post notes, payable in 1843, at 8 per cent, of which Duncan sold $50,000 in Philadelphia for $45,000.

This bank in January, 1840, had about $25,000 in specie, and would need $23,000 within the year to meet its engagements. Its stock, and cotton and post notes were worth not more than 50 cents on the dollar. November 29, 1839, the United States govern- ment obtained judgment against the bank for $587,256, amount of trust funds for the Chickasaws deposited in the bank. This debt, which was prior to every other, had been reduced to $380,- 000. $600,000 bills receivable had been transferred to Richard M. Gaines, U. S. attorney for the southern district, as collateral, and the debt was also secured by a judgment against Stephen Dun- can, D. C. Michie, W. J. Minor, H. Tooley, A. C. Henderson, and A. P. Merrill, securities.

The chartered banking capital of the State was $56,750,000. The amount of capital stock nominally paid in was $30,379,000, de- posits, $8,691,000, due to banks, $7,065,000, sterling bills drawn, $1,500,000 ; circulation $15,171,639. The resources were cotton ac- counts of over $3,000,000, notes and bills discounted for about $32,000,000, suspended debts $17,000,000, invested in railroad con- struction, $4,000,000, etc., the total specie being estimated at $868,- 000.

Prof. C. H. Brough quotes with approval the remarks of Henry V. Poor (Money and Its Laws, p. 540): "The $48,000,000 of loans were never paid; the $23,000,000 of notes and deposits were never redeemed. The whole system fell a huge and shapeless wreck, leaving the people of the State very much as they came into the world. Their condition at the time beggars description. Every- body was in debt, without any possible means of payment. Lands became worthless, for the reason that none had any money to pay for them. The only personal property left was slaves, to save which such number of people fled with them from the State that the common return upon legal processes against debtors was in the very abbreviated form of 'G. T. T.'-gone to Texas-a State which in this way received a mighty accession to her population."

Some golden truths were brought to light in this crucible. Gov- ernor McNutt, in vetoing a charter for a real estate bank at Co- lumbus, said: "A company organized on such principles could, under no circumstances, keep in circulation paper money con- vertible on demand into specie. Banks can only loan capital- they can never create it. The circulation and value of paper money

200

MISSISSIPPI

depends mainly on its convertibility into specie-not entirely on the ultimate solvency of the corporation issuing it, as is generally supposed."

James Hagan wrote, in 1840: "Mystery and concealment in banking have been the principal causes of the ruin of the banks and the people." Individuals a few years before not worth a dollar had been favored with secret loans; buying property, they were enabled to secure more loans, and so they proceeded, "ex- tending their credit and increasing their property at enormous prices, until they and their credit system have broken down, over- whelming themselves, their friends, the banks and the country in one common ruin. "Publicity would have equalized and limited credit and prevented such a catastrophe." And this query: "Why should a few rich men be allowed the privilege of drawing inter- est on three dollars for every one they possess?"

Under the act of February, 1840, for winding up the business of the banks, Governor McNutt declared forfeited the charters of the following railroad and banking companies: the Tombigbee, Hernando, Mississippi, Benton & Manchester, Grand Gulf, the Aberdeen & Pontotoc, also the bank of Vicksburg, the Mississippi Union bank, and the Citizens bank of Madison county. None of these banks complied with the law requiring specie payment notes. The Agricultural, Planters and Vicksburg Commercial and others put their assets in trust before the law was passed. The Union had at this time $4,000 in specie, with immediate lia- bilities of $3,000,000.

Governor McNutt in 1841 proposed repudiation of both the Un- ion and Planters bank bonds. Both houses of the legislature re- solved in 1841 "that the State of Mississippi is bound to the holders of the bonds of the State of Mississippi, issued and sold on account of the Planters and Mississippi Union banks, for the full amount of the principal and interest due thereon; that the State of Mississippi will pay her bonds and preserve her faith in- violate; that the insinuation that the State of Mississippi would repudiate her bonds, and violate her plighted faith, is a calumny upon the justice, honor and dignity of the State." The senate concurred in these resolutions. Governor McNutt vetoed the res- olutions, with a sarcastic message, declaring that it was for the people to say whether the Rothschilds who had a mortgage on "the sepulchre of our Savior," shall have a mortgage on our cot- ton fields and make serfs of our children."

A committee reported that it was likely the banks of Mississippi

201

MISSISSIPPI

were as sound as those of Louisiana and Alabama, that furnished at that time the greater part of the currency of Mississippi, while the notes of the home banks were banished from circulation. The solution can be found in the fact that in the one case the power and influence of the governors and legislatures were exerted to preserve and sustain the credit of their own institutions, whilst in the other this power was exercised to the discredit and destruc- tion of our banks."

But the election of Governor Tucker in 1841 was a popular ap- proval of McNutt's policy of repudiation, and thereafter the legis- latures insisted that the State was not bound to pay the Union bank bonds. Consequently the State of Mississippi obtained an unenviable notoriety throughout the United States and in Eu- rope, though she was not alone in declining to stand for the finan- cial operations into which her legislatures had been deluded. In 1852 H. A. Johnson sued the State in the superior court of chan- cery on the interest coupons of some of these bonds. The chancery court decided in his favor, and against the arguments of uncon- stitutionality, as previously indicated in this article. The State appealed to the High court of errors and appeals, which sustained the opinion of the chancery court (25th Mississippi reports, also the decision to same effect in 1842, Campbell vs. Union bank, 6 Howard.) But there was no way to enforce collection.

Of the Planters' bank, Governor McNutt said in 1842, "With good management, the bank may possibly, under favorable cir- cumstances, be enabled, at a day far distant, to take up all her circulation. The proceeds of five millions of dollars in State bonds, disposed of in 1838, were all wasted in less than eighteen months after the bank commenced discounting in September, 1838. Near a million dollars had been lost by advancing on cotton alone. A careful examination of the charter of the Planters' Bank will demonstrate that that institution is not bound (and never has been) for either the principal or interest of the bonds. The Mississippi railroad company has obligated itself to pay the interest of the bonds, and all the instalments except the two first. It is confidently believed that the company never will be able to comply with its contract with the State."

During McNutt's administration (1839) the Planters' bank stock had been invested by the State in the Mississippi railroad bank (Natchez), which in 1844 possessed a few miles of railroad track, "a monument of blasted hopes and squandered means." The State had "a worthless railroad and its worthless assets, and

202

MISSISSIPPI

9,960 shares of Planters' bank stock to meet $2,000,000 with some four or five years' interest." (House Journal, 1844, 760.)

Joseph S. Leake, chairman of a house committee, reported in 1842, upon the Kentucky resolutions deploring repudiation of debts by a "sovereign state", that his committee had been able to discover but one act of bad faith by the State government of Mississippi, "that is the act of transferring the State stock in the Planters' bank of Mississippi, to the Natchez railroad company. By the charter of the Planters' bank, the State stock, with the divi- dends, was pledged for the redemption of the Planters' bank bonds and the accruing interest, and by the act of transfer, above alluded to, the faith of the State was shamefully violated." A few noble Mississippians there were in the house to protest (S. M. Puckett, S. J. Gholson, S. M. Hargrove, D. W. Hyneman, J. C. Rupert, E. J. Sessions, H. R. Carter, John Gilmer) "because it was a fraud upon the holders of the bonds of the State." A joint committee of the legislature, Joseph S. Leake, chairman, argued in 1844 that the debt of the Planters bank bonds should also be repudiated, except that the remaining assets should be tendered the bond- holders. The argument was made that the Planters bank law was "unconstitutional" because it was not for the benefit of the peo- ple, according to the bill of rights. "Therefore we are called upon by the highest considerations to repudiate." "The government being established upon the authority of the people, and only for their benefit; therefore, if any action of the government shall en- danger these great objects, such action is false action, and should be repudiated."

In his inaugural address of 1846, Governor A. G. Brown said: "If Mississippi was called upon by her constitution to reject the Union bank bonds, that same constitution bids her pay those of the Planters' bank to the last mill. I will not ask you if it shall be done, because I will not ask you if Mississippi shall be dishon- ored." But the legislature directly refused to follow his advice and pay out the $84,000 then in the treasury, belonging to the sinking fund accumulated for the redemption of these bonds. Not only did the legislature do this, but reduced the revenues of the state about $75,000 in order to prevent any payment on the obli- gation. The sinking fund had reached $800,000, and it was loaned out, but in 1846 Governor Brown estimated that only about $100,- 000 was collectible besides the $84,000 then on hand. Governor Brown wrote to John A. Kasson, of Massachusetts, in the spring of 1846: "The legislature authorized Planters' bank bonds and

203

MISSISSIPPI

coupons (past due) to be taken from the debtors in payment [for 500,000 acres of land donated by the United States as an internal improvement fund] and directed the commissioner to dispose of about 30,000 acres of land for bonds and coupons, and further to compromise with insolvent debtors and receive bonds and cou- pons. These acts of the legislature have stimulated the present demand for the bonds, and I am satisfied if Mr. Wadsworth had his bonds here now he could get 75 cents on the dollar on them. But after the present pressing demand is over, I do not know that they would command anything." . I fear I have not made

myself understood. . . . It is proper for me to say that there is in this State a large party opposed to paying the bonds, of which Ex-Gov. McNutt is the avowed and acknowledged leader."

Governor Matthews reported in 1850 that about 5,500 acres of the 500,000 had been sold, and Planters' bank bonds and coupons had been received in payment to the amount of $19,391. The act of legislature provided that the lands should be sold to pre- emptors at $2.50 an acre, and to others at $6 an acre, payable in bonds. He said, "I am aware that it is still insisted by some that the reception of the bonds is a diversion of the fund from the purposes of the grant. After the most respectful attention to all I have heard urged in support of this position, I have not been able to perceive how, taking into our possession these bonds, and placing them to the debit of the State, as cash due the Internal im- provement fund, is a diversion of the fund in its application."

If the amount received, whether in bonds or cash, be ap- plied to anything alse than internal improvement, it will be a di- version of the fund; but if that amount be expended in cash, as required by the honor, then there will be no diversion.

The legislature of 1848 also appropriated the amount of the sinking fund charged against the State on the treasury books, to the payment of the Planters' bank bonds and coupons, but the law was inoperative, because it prohibited the payment of coupons unless attached to the bonds when presented for payment.

In the House, 1852, a committee to which the subject was re- ferred, reported that "the payment of the Planters' bank bonds, and interest, constitute a legal and moral obligation upon the people of the State of Mississippi." By a vote of 49 to 33, the question of paying the bonds was referred to the people at the next general election. The committee of ways and means was strongly opposed to such a reference, and urged provision for payment of the debt. It was estimated that the debt and interest

204

MISSISSIPPI

could be wiped out by the payment of $250,000 annually, for twenty-two years, leaving $105,000 to be paid finally in 1876. But the work begun by the charter of the Planters' bank in 1830 was continued by a popular vote in favor of the repudiation of its bonds, in 1853.

Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.

Mississippi : comprising sketches of towns, events, institutions, and persons, arranged in cyclopedic form Vol. I, Part 20

Author: Rowland, Dunbar, 1864-1937, ed Publication date: 1907 Publisher: Atlanta, Southern Historical Publishing Association Number of Pages: 1030

Author: Rowland, Dunbar, 1864-1937, ed
Publication date: 1907
Publisher: Atlanta, Southern Historical Publishing Association
Number of Pages: 1030