William Graham Sumner

“ The whole country is flooded with its issues amounting to millions, and yet it never had ten thousand dollars of specie in its vault. Its nominal capital was $3 millions, but it is averred that three million cents were never paid in. The very first step in obtaining its charter was a fraud on the Legislature, as the making of a road was never in serious contemplation." Now it is said to have failed. As specie payments were suspended how could it fail? "There is scarcely a man or a woman in that part of the State who has any bills at all but has most of them on this bank." ”

“ If any incorporated company, not having banking powers, becomes insolvent, or refuses to pay the evidences of debt which it has put in circulation, or suspends business for a year, or violates its act of incorporation, or puts out circulating notes, it shall be held to have forfeited its charter, and shall be adjudged to be dissolved; the courts to have visitorial powers; all acts of incorporation hereafter to be subject to amendment and repeal; private corporations are subject to individual liability. ”

“ In the first place a public corporation is created by the solemn act of the legislative department of the government, involving the rights and privileges of individuals as well as the State. In the next place the act of incorporation giving existence to the bank is destroyed by an ex-parte operation of a few individuals, by which a deed of assignment was made to a few men, denominated residuary trustees, whereby the assets of the bank, of every description, were transferred into the hands of said residuary trustees and their officers. ”

“ The state of things at the end of 1844 was thus described in the Governor's message: "A depreciated currency then universally prevalent has been withdrawn, and gold and silver and the paper of solvent banks have been substituted in its place." He attributed this to the laws which had put the banks in liquidation, and which had "demonstrated the grand truths which have been doubted by many; that banks are wholly unnecessary to supply a local currency; that money will, in the main, exist and circulate in every country in proportion to its exchangeable property ”

“ The loans on capital were designated "dead weight;" the loans on deposits were called "movement of banks." No bank was to increase the dead weight while its whole cash liabilities were not covered by one-third specie and two-thirds ninety-day paper. If any one applied for an extension, his account was to be closed and the other banks were to be informed. Any one whose paper lay protested ten days was to be discredited, and the banks informed, and he to have no bank credit until he should pay in full. ”

“ It was not until July, 1841, that the doctrine of Repudiation was announced to the world—and then by the very last man in the world from whom it should have proceeded, Governor McNutt. We have nowhere seen it advanced that even a minority of the Legislature of 1839 made any movement of repudiation which might at least have served as a notice of intention. ”

“ A committee of o said that "in many cases the great bulk of the loss is attributable to the criminal negligence and dishonesty of the officers of the bank." They allowed the loans to be lost under the statute of limitations. They neglected to attend to the security of the debts, and allowed their friends who were men of wealth to escape, by taking men of no responsibility in their stead, and neglected to enforce collections. "The history of the bank exhibits the most astounding instance of long-continued mismanagement and open abuse of trust that ever occurred in a country of laws." ”

“ The Commissioners appointed to examine one of the branches declared that they could not understand how, if private individuals whose interests were identified with the bank they managed could only make five per cent., it could be expected that a bank owned entirely by the State, and managed by men, however skillful and honest, "whose private interests are in direct opposition to that of the institution which they have been appointed to direct and govern," can make as much for the State. ”

“ As the bank could not sell any more and was urged by the Governor, it proposed that he should deliver all the bonds at once on a sale to the mentioned bank and the Bank of the United States, to be paid for in installments, one-fourth by the former and three-fourths by the latter. He agreed. One million was paid before both banks became bankrupt. In the meantime the bonds had been hypothecated in Europe by the Bank of the United States as security for its borrowings there. Michigan refused to pay more than she had received. ”

“ The legal remedy which the bill-holder has amounts to nothing. In modern times the refusal to redeem a note is a common bank operation, and he must be endowed with more than ordinary firmness who will make the demand, as he is sure to encounter the insulting, contumacious spirit of a chartered gentleman."
The Legislature passed a resolution, December 19, 1838, that the Bank of the State should take the best measures it could devise to preserve all the bank notes in the State at par. In 1840, the banks of the State were divided into those which were paying specie and those which were not. ”

“ Property, produce, stock, farming utensils, everything which the people of the country were tempted by advanced prices to dispose of, were purchased and paid for in paper, which was known by the utterers to be absolutely valueless. Large amounts of notes were hypothecated for small advances, or loans of specie, to save appearances. Quantities of paper were drawn out by exchange checks—that is to say, checked out of the banks by individuals who had not a cent in bank—with no security beyond the verbal understanding that notes of other banks should be returned at some future time. ”

“ There was at this time an appraisement law that the sheriff should, at the demand of the debtor, summon three householders to appraise property taken in execution, and that it should not be sold unless two-thirds of the valuation was bid.
The act for the regulation of banks was amended February 21, 1843. No one was allowed to be a director in two banks; not more than one member of a firm might be a director in the same bank; no loan might be made for more than six months; no dividend might be made when the capital was impaired ”

“ Bank Commissioners to inspect the bank and certify that this has been done; no loan to be made to a director for more than half his shares; in a $100,000 bank no one person to owe it more than $8,000, and so on according to a scale; no loan to be made to an officer; debts, exclusive of deposits, not to exceed one and a-half times the capital; the circulation never to exceed the capital, and one-third of it to be held in specie; a State officer to register and countersign the notes, and to guard the limit for each bank as returned to him by the Commissioners; tax to be one-half of one per cent. ”

“ November 24th, banks were given the right to recover damages if they could not collect balances from other banks. The free banking act was amended, December 7th, to authorize the Comptroller, if banks did not redeem, to foreclose mortgages in the banking fund and sell land and slaves by the same process by which personal property might be sold. The president and directors of the bank were to indicate which mortgages should be sold. December 8th, the Central Bank was authorized to issue ones and twos to the amount of $300,000, to be issued only in exchange for larger notes. ”

“ A fine of $500 was to be imposed on any bank official who violated the orders of the Board of Currency. After thirty days each bank was to issue its own notes only, and all were to make weekly settlements. The Governor might issue bonds at five per cent. for fifteen years to pay the debt of the State to the banks. The lowest note was to be for $5; no dividends might be paid during suspension; no bank might have less than fifty separate shareholders after September 30; all were declared liable to examination by the Legislature; no bank might buy its own stock or loan over thirty per cent. ”

“ The requirement of a repeated vote at a second session does not apply to that power; neither did the Constitution ever mean to give an appeal to the people or a right of veto in the people on acts of the Legislature for borrowing money. A double voted law has no extra sanctity. It can be repealed before rights vest under it. "The supplementary charter of the bank did not authorize the issuance of State bonds by which a debt could be imposed upon the State, and no attempt was made by that act to pledge the faith of the State for the payment of a loan or debt ”

“ There is to be no stay of execution on a judgment against a bank. At a meeting of the banks by delegates at Columbus, they resolved to act together to sustain each other. Part of the plan was to establish a Suffolk system of central redemption. March 5th, the notes of a bank were made payable to it in all suits by the bank or its assignees.
March 7th, another act to regulate banking was passed. The association was first to be formed and then to apply for a charter. All were to have the same general powers of organization; all capital to be paid in in specie before beginning ”

“ The Commissioners on the Mobile branch, 1840, reported that its surplus or sinking fund of $1 million consisted only of book-keeping entries, showing apparent profit, and discount charges which had not been collected or realized. "We are afraid that its qualities as a sinking fund are altogether imaginary and that a much larger amount will be swallowed up by the hopelessly bad debt." ”

“ At the session of 1848-9, the Committee on Banks reported that the State Bank had lost a large part of its assets for lack of means to defend its interests, and that this was owing chiefly to the action of the Legislature in 1842 and 1844, in taking out its par funds with which to pay themselves. In a great number of suits, the bank was non-suited because it could not give security for the costs. ”

“ The provision of law by which country notes might be redeemed at a discount of one-half of one per cent. led to a new device. The Comptroller, in his report of, mentioned a case of a bank organized under the free banking law in an out-of-the-way place in Orange county. Its nominal president lived in Connecticut and all its business was done in New York City. The arrangement was devised in order that it might make one-half of one per cent. on such of its notes as were presented for redemption in New York City. ”

“ The liabilities of the Union Bank in May would be $4 millions, and its rescources were nearly all suspended. Hence the desire to recall the second $5 millions of State bonds which had been issued to this bank. The correspondent of a Mississippi newspaper said: "The credit of the State has been banked to death. Insolvency is now our name. Never was State in such an awful condition. The cry of 'relief' is heard on all sides, but what can a State do that is unable to pay its Legislature and the current expenses of government?" Brandon notes were quoted at nine cents on the dollar ”

“ I firmly believe four-fifths of the people of the State prefer going to war in lieu of paying the bonds."
The repudiationists won a great triumph at the November election, 1841. They had two-thirds in each House of the Legislature. The immediate effect was that all State stocks fell. At the opening of the following session of the Legislature, Governor McNutt said that the recent election was a glorious triumph. It had "sustained the sacred truth that the toiling million never should be burdened with taxes to support the idle few." ”

“ Under the resumption act of February 21st, the Governor proclaimed, July 10th, that the Union Bank had forfeited its charter by suspending the payment of its notes. [42] Some time in the autumn, that bank made an assignment. The report in December was that lands and negroes had lost one-half their value; that on the expiration of the year of delay, under the appraisement law, the population was leaving the State for Texas. "Banks are in the worst odor possible." ”

“ They have determined that they never will submit to an invasion of their Constitution by either foreign or domestic foes. The rights secured to them under that sacred instrument they will maintain at all hazards ”

“ The taxpayers now hastened to pay their taxes for 1842 one year in advance, before the Legislature could take any action to prevent taxes from being paid in this depreciated currency. According to the existing system also this revenue must have been paid into the Bank of the State. The Governor, Auditor, and Treasurer, acting under power which had been given by law, published a proclamation, August 15th, forbidding the payment of school, college. and seminary debts, and public revenue, in notes of the Bank of the State. ”

“ Of the bonds issued for banks, there were outstanding, in 1843, half of the $2.4 millions issued in 1824 for the Bank of Louisiana; $2 millions for the Consolidated Association; $7 millions for the Union Bank; $7.1 millions for the Citizens' Bank. [69]
In the message of the Governor, 1843, it was stated that the expenditures of the State exceeded the revenue by more than $200,000; "that there is nothing in our exhausted treasury; that the State can no longer borrow a dollar from her own banks; and that the people are taxed as heavily as they can bear." ”