William Graham Sumner

“ A State could not incorporate a company to coin, because it is forbidden to do so itself; nor could it incorporate a company to issue bills of credit. "To constitute a bill of credit within the Constitution, it must be issued by a State, on the faith of the State, and designed to circulate as money. It must be a paper which circulates on the credit of the State, and so received and used in the ordinary business of life. The individual or committee who issue it must have power to bind the State. ”

“ In all the cases of relief attempted by big paper money machines the advantage was won by influential individuals who got the management of the undertaking into their hands and turned it to their own profit.
It may be said, almost without limitation, that all paper money issues and stay laws for the relief of debtors have had, as their sole result, to curse debtors with life-long poverty, misery, and debt; and further, that, in the history of this country, "relief" has been the word of the most direful omen to those-who-have-not that the dictionary contains. ”

“ In November, 1825, Niles quotes a Kentucky paper that more people had left the State than had come to it for many years. It is plain that two classes of persons were driven away by the relief system,—those who were prevented by it from securing such fruits of their industry as they could accumulate, and those who despaired of ever freeing themselves from their embarrassments.
In the mean time the federal Supreme Court had gone on its way making decisions which established the authority of the federal Constitution and the federal judiciary and so integrated the whole national system. ”

“ All laws which harm the people are against the social compact, and "are subject on first principles to the condition of being repealed." A bank charter gives privileges to the few. "To the end, therefore, that the good people of this State be delivered in future from the baneful effect of the power and privileges granted by the law establishing independent banks in this commonwealth, which have been exercised in many cases in the plenitude of tyranny, oppression, and abuse, to the great injury of the good people of this State," that act is repealed from May 1st. ”

“ This bank was a mere paper money machine. If by a "bank" we understand an institution having some permanency, and intended to continue an action and reaction through some prolonged period, for the satisfaction of constant or recurring financial necessities, this institution would not properly be called a bank, nor yet even a loan office. The idea and intention were to inflate the currency and raise prices until the indebted persons could discharge their debts. Then the issues were to be recalled and burned, and the purpose would be accomplished. ”

“ Kentucky has incorporated a bank for necessary purposes. The crisis of the country demanded it, and the people have sanctioned it with a unanimity almost unparalleled. If the constitutionality of this subject were brought before the federal judiciary, I have little doubt that the law would be declared null and void, and the State, by such a decision of persons neither interested in her policy nor responsible to her citizens, deprived of the power of relief in these times of overwhelming difficulty." No State shall pass any law impairing the obligation of contracts. ”

“ Scarcely a word is to be found to show that the legislators had any idea that the management of a great bank would require any special ability, skill, or training. They set up a bank, with $1 million or $2 millions capital, assuming that it was going to run itself and produce great profits, never troubling themselves at all about the question who was competent to manage it, to attain these results. ”

“ In case of default, the agent is to levy on the goods of the Bank or its credit. He is to seize the specie or notes, searching the Bank for them. The officers may be put to oath to disclose where the funds are, and they may be summoned to court and examined, a refusal to answer constituting contempt. Debtors to the banks must pay the State. The agent is to pay the sum collected to the Auditor and he to the Treasurer. The agent is to have, as his remuneration, two per cent. of the specie or notes; five per cent. of goods taken in execution; and if further proceedings are required, ten per cent. ”

“ January 10, 1820, the law of ten per cent. damages on foreign bills of exchange was repealed; a blow at the Bank of the United States. February 10th the independent bank law was repealed. The act has a very long preamble; it states that all men are equal; that there is no monopoly in the social compact; that all power is inherent in the people. These propositions are to lead the way up to the next one which is, that all laws granting privileges to the few are tyrannical and therefore repealable by the supreme authority. ”

“ The people lacked all the utilities of money and suffered instead from a political and commercial curse. He would have said that if bills of credit bore interest, they would not circulate. Hence the prohibition did not touch State bonds, and that, if they were cash specie obligations for value promptly enforceable at law, all their evil features would disappear. He would have said that bank notes were of the latter character. The history of the following fifty years showed that the Constitution-makers placed too much confidence in this latter distinction. ”

“ No positive evidence has been found as to the course of prices in the State from 1820, but nothing indicates that the issues of the Bank of the Commonwealth raised prices in the interest of debtors. In general, the history of currency in this country shows that the doctrine that prices will respond promptly and proportionately to changes in the amount of the currency (or even, more strictly, of the money of account) , cannot be accepted without important limitations. ”

“ Borrowers during 1821 were to take oath as to the purpose for which they wanted the loan. Here then was a novelty in banking, an institution which sought as borrowers, not solvent persons of high credit, but embarrassed and perhaps insolvent debtors. When complete, the bank had twelve branches; its capital was to consist of all money thereafter paid in for land warrants, or land west of the Tennessee river [this was a contingent revenue, which, inasmuch as the land speculation had passed by, proved very small] ”

“ Neither the old nor the new court can unite upon themselves the confidence of both parties or exercise judicial power without doubt as to the validity of their acts. If the Legislature sees fit to provide for the appointment of an entirely new set of appellate judges, he will select them equally from both parties. The salaries should be reduced to $1,500, which by the appreciation of the currency would be equal to $2,000, a year before. The salaries of the officers of the Bank of Kentucky, the Bank of the Commonwealth, and the officers of the Transylvania University should be reduced. ”

“ It is no doubt attendant on a spirit of feverish enterprise, indomitable industry, and a sanguine temperament. It has impressed on our national life a character of endless vicissitude, and alternations of heats of prosperity and chills of disaster. ”

“ The Supreme Court is a part of the general government whose encroachments are complained of. The States can get no more justice, therefore, than an individual could, if judged by his oppressors. The new court of the State has banished "the doctrine of ready submission to the unconstitutional decrees of the Supreme Court." What Kentucky wants is another reformation of the federal judiciary, such as occurred at Jefferson's accession. The relief laws have been repealed "as to all contracts formed after the repeal, and their operation has almost ceased to be felt in our courts of justice ”

“ When payment was demanded of a bank on its notes, and not given, the cashier was to endorse upon it "payment demanded" with the date; then it bore interest at six per cent. until paid in money of the United States. The cashier must keep a book of record of such refusals, and the person who demanded payment might demand an opportunity to see this book, to verify the entry of his own demand, and might sign an attestation of it. If the cashier refused to do these things, the penalty was ten per cent. ”

“ Equality before the banks, however, could only mean that all men ought to have equal credit. When the doctrine of equality comes to be applied to commercial credit it receives its final and most pitiless refutation. ”

“ The banking and currency parts of the relief creed had sunk out of sight and the political elements remained. A relief man was a State rights man and strict constructionist who wanted to set limits to the supposed encroachments of the federal power, especially the judiciary. ”

“ Let us look for its effect on morals to the criminal docket of this court, at this term. Offenses, the offspring of wantonness, of folly, of desperation, of a cultivated contempt for the rights and feelings of others, and disregard for the opinion of the world, and disrespect for what men have been accustomed to hold respectable,—and in short of a total depravation of the moral sense and dissolution of moral obligation, encumber our proceedings and disgrace our records."
In connection with the Loan Office, a new and wider stay law was also enacted December 28, 1821. ”

“ Loans were to be secured by bills and notes with two or more sureties, or by mortgage, and not to be made for more than one year. No loan might be renewed unless interest was paid in advance, and not more than one-tenth of any loan might be called in when it was due, without sixty days' notice. In case of default, judgment and execution were to follow. The bank was not to owe over $1 million before the next session. Within twenty days after it was ready to start, an agent to make the loans was to be appointed in each county. ”

“ In the case, however, in which the plans are excessive, extravagant, and ill-devised, and where the capital is carelessly and recklessly managed, the only consequence must be a wide sweep of financial disaster. Then, if the bankrupts are voters, and the institutions of civil government are those of a democratic republic, a general indebtedness comes to appear like the worst of political and social diseases. ”

“ It has heretofore been admitted by every judicious political economist who has devoted his attention to the subject that the large emissions of paper from the banks by which the country was inundated have been the most prominent causes of those distresses of which we at present complain. They greatly increased the facilities of borrowing money, gave property a fictitious value, and introduced amongst us every species of extravagance and folly. ”

“ The price of produce has been so reduced that that of Kentucky comes here no longer." "We are told of the 'pestilent effects of paper money on the industry and morals of the people.'" On this subject, let us look to the listlessness, the broken-hearted indifference to exertion, which, under the pressure of great pecuniary distress (the strongest incentive to exertion, where every ray of hope is not excluded) pervades the hardy population of this fertile country. ”

“ Each county court might appoint three valuers. The plaintiff might endorse that he would take property at two-thirds of the valuation. When the Sheriff makes a levy, the valuers are to value the property. After twenty days it is to be put up for sale. If no bid amounts to two-thirds of the valuation, the Sheriff is to deliver the property to the creditor at that limit. If the creditor makes no endorsement, the debtor is to have a stay for two years and six months, giving bond, with sureties, approved by the Sheriff. ”

“ What is the sense of such an act of the sovereign power? It can only be that a solvent person, disappointed of his receipts, is momentarily unable to pay, but has bills receivable in excess of his bills payable ”

“ It is quite a different thing when a simple agricultural community consists of householders, nearly every one of whom is under a load of long debt, by which he has pledged his future production and savings; even if the load is not, under favorable circumstances, excessive. Taking into account the vicissitudes of life:—natural calamities, disease, personal and family misfortune, there will be a percentage of such debtors who will fail to carry out successfully the enterprises which they incurred debt. ”

“ It was "required to appropriate one-tenth of its whole funds to loan to citizens of the Commonwealth, residing out of Boston, engaged in agriculture or manufactures, in sums not less than one hundred or over five hundred dollars, with interest annually, these loans to be secured by mortgage." "The State was at liberty to subscribe for an increase of stock equal to one-half of the paid up capital; to appoint a pro rata proportion of directors; and to borrow at any one time any sum not exceeding ten per cent. of the capital of the bank, payable at any time short of five years, at five per cent. ”

“ It is not impossible that here and there a debtor who was extraordinarily shrewd and hard-headed may have availed himself of the relief system successfully, but the number of such must have been very small. ”

“ It was allowed a permanent deposit of $100,000. "Are we to lose the whole for the benefit of the rag barons? but no cost can be too great if modern banking is destroyed by it." [62]
A more stringent and comprehensive law to enforce payment by the banks was passed February 18, 1820. The plaintiff against a bank might declare for money had and received, if over $100, and put the bank notes in evidence if payment had been demanded. He could recover with six per cent. interest, and have an execution as by the previous law. A Sheriff executing a judgment in favor of a bank was to take its notes. ”