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law-suits would be necessary, it will be seen that the cost of
collection would largely exceed the amount at issue. The statute
was very appropriately called the " coupon-killer ." Its author,
then a member of the Virginia Legislature, has since been pro
moted to the United States Senate. His merits as a legislator
for one State being so conspicuous, to enlarge his sphere of use
fulness, he has been made a law-maker for the people of the
whole country.


In order to secure recognition as a separate State, West Vir
ginia had to promise payment of her share of the old State debt.
Accordingly, in the constitution she presented to Congress, it
was declared that "An equitable proportion of the public debt
of the commonwealth of Virginia shall be assumed by the State,
and the Legislature shall ascertain the same as soon as may be
practicable, and provide for the liquidation thereof by a Sinking
Fund sufficient to pay the accruing interest and redeem the
principal in thirty-four years." It was on that pledge that West
Virginia was permitted to enter the Federal Union. But recog
nition as a State being secured, she proceeded to exercise a State's
prerogative in the formation and adoption of a new constitution
with the foregoing obligation left out 5 and although twenty
years have elapsed and Virginia's creditors have again and again
appealed to the new State to fulfil her promise, she has done
nothing for them, and makes no sign of doing anything.

But peculiar as has been Virginia's treatment of her creditors,
her next-door neighbor, North Carolina, has not been far behind
her. When in accordance with the terms of bonds she had issued
certain taxes were to be levied and collected for payment of the
interest on them, and her officers refusing to execute the contract,
were mandamused to compel them to do their duty, she abolished
the writ of mandamus altogether within her borders. Nor have
other great States been lacking in ingenuity of the same sort.
When Georgia wanted to throw off a large part of her bonded
debt, she appointed a commission, made up entirely of her own
citizens, to investigate and report as to what obligations she should
recognize and what she should reject. The bondholders were
allowed no voice in the selection of the commission, and on the
recommendation of that interested and one-sided tribunal, bonds
representing millions of money were cast aside. Alabama pur
sued precisely the same course.

When Louisiana wanted to cut down her debt, she asked her
creditors to accept new bonds for sixty cents on the dollar of
their claims, and, as an inducement, added to her constitution
an article stipulating that the bonds referred to are " hereby
declared to create a valid contract between the State and each and
every holder of said bonds, which the State shall by no means
and in no wise impair ; also providing for an annual tax, the pro
ceeds of which were to be sacredly applied to paying the interest
on the bonds. The bonds were to bear seven per cent, interest.


But when the reduction in the debt had been secured, the State
again changed her constitution, this time stipulating that only
two per cent, interest should be paid on the bonds, unless their
holders would accept new paper for seventy-five per cent, of the
face amount, in which case they were to get four per cent, in

Arkansas, to aid in the construction of railroads and levees,
issued bonds for some millions of dollars. But after the bonds
had been sold at good prices, and the proceeds invested in per
manent improvements, she made the important discovery that
her constitution required the ayes and noes to be called in the
passage of all statutes, and that the record failed to show that
that formality had been observed in enacting the bond statute.
She accordingly lost no time in having a case involving the ques
tion brought before her own Supreme Court, which duly decided
the bonds to be unconstitutional and void, and thereupon the
leading journal of the State published an article congratu
lating the people of Arkansas on the fact that " a great bur
den had been lifted from their shoulders." There was no
sympathy expressed for the bondholders whose money had
been appropriated.

The latest and, in some respects, worst case is that of Tennes
see. After years of dickering highly discreditable to a great
State, Tennessee and her creditors agreed on sixty cents as the
figure at which the State's obligations should be settled. The
compromise was ratified by the legislature, and the old securities
were largely exchanged for new ones representing forty per cent.
less of face value. But scarcely are the new obligations issued
when Tennessee, having gone through a revolutionary political
campaign and election, utterly discards both them and the agree
ment on which they were based. Without consulting the cred
itors at all, she legislates to substitute for the new bonds still
newer ones at fifty cents on the dollar ; and her present Chief-
Magistrate, Governor Bate, is credited with declaring in a pub
lic address that, if the bondholders don't accept that amount,
" then the bondholders may rot." For the sake of ten cents on
the dollar, Tennessee is willing to break faith with the men who
have furnished the money for her most valuable public improve
ments and the best friends she ever had, and in so doing has ex
hibited to the world the estimate she puts on her own reputation
for fair dealing, It is not too much to say that, in the eyes of


the majority of Tennesseeans, the honor of their State is a very-
cheap commodity.

But in no particular has so much sagacity been shown as in
the so-called compromises of some of the delinquent States with
their creditors. Without direct repudiation, and yet without
payment, they have managed to get rid of a large portion of the
debts they could not dispute. Professing great sympathy with
their unpaid creditors, but at the same time claiming to be very
poor themselves, they have passed laws to settle in new paper at a
heavy reduction on their original liability, taking good care to
leave no hope of better terms to those creditors who might fail to
come into the arrangement. The creditors, glad to get anything,
have taken what was offered them. North Carolina paid off a
large portion of her debt in new obligations, carrying a lowered
rate of interest, at fifteen, twenty-five, thirty-three and one- third,
and forty cents on the dollar. South Carolina, after rejecting
$6,000,000 of her bonds altogether, settled the rest at fifty cents
on the dollar. Alabama in that way reduced a very cumbersome
liability to one of quite moderate proportions. Minnesota, after
keeping her creditors waiting for twenty-three years, gave them
new paper at fifty cents on the dollar, although by the act of
settlement she admitted the justice of the whole demand. Vir
ginia, Louisiana, and Tennessee, as we have seen, have practiced
even sharper tactics. Through their various '" settlements " they
have materially diminished the amount of their outstanding
paper, while their creditors seem very little nearer getting any
money than they were before.

But the three States just named are not the only ones that
have realized the advantage of repeated adjustments of their
liabilities. In 1873 Alabama compromised $4,768,000 of eight
per cent, bonds, which she had indorsed for railroad companies,
down to $1,192,000 in new securities bearing seven per cent,
interest; and in 1876 compromised this last issue down to
$596,000, bearing five per cent. The same State, in 1874, by
means of a compromise of the kind described, scaled $5,800,000
of eight per cent, indorsed bonds down to $1,000,000 at five per
cent. ; and in 1876, by another compromise, reduced the interest to
two per cent, for five years, and so on up to five per cent, again,
rejecting all interest, however, accruing before January 1, 1877.

The cases just mentioned clearly show that settlements with
re\mdiators do not necessarily settle, and that re-adjustments


may adjust nothing. Nor is there anything very remarkable in
the fact. The spirit of repudiation, when aroused, is not likely
to find any point above zero at which it can be satisfied. When
onseience is eliminated, and the old-fashioned law prevailing
between debtor and creditor is set aside, nothing remains but a
question of interest to be solved by supreme selfishness, and it
is perfectly natural that the party having the upper hand should,
from time to time, insist on another turn of the screw. A com
munity that knows it has the power to do as it pleases, and fails
to acknowledge the binding obligation of abstract justice, is not
likely to be at all delicate in its exactions. It is as easy to take
the horse as the bridle when the thief is in possession of the

If individuals, instead of States, had done the thing described,
it is easy to tell what would be the effect upon their standing
with all fair-minded men. But perhaps it is not remarkable
when States do them that they should not be lacking in apolo
gists and defenders. A fair sample of the argument by which
their action has been justified, is furnished in a message to the
legislature of North Carolina by a former Governor of that State,
and now one of its United State Senators. Said Governor
Vance :

" The public debt, as will be seen by the treasurer's report, amounts to
$16,960,095, to which is to be added $10,160,182 unpaid interest. This
is known as the recognized debt, as contradistinguished from the Special
Tax bonds that are rejected. What shall be done with it, is a question that
demands your best consideration. It is out of the question for us to attempt
to pay its face value. Indeed, I do not conceive that there is any moral
obligation on us to do so, nor do our creditors expect it of us. Quite one-half
of our property, upon which one-half of our bonds were based, was wantonly
destroyed by consent of a large majority of those who hold them, and no
court of conscience on the earth would permit a creditor to destroy one-half
of his security and claim full payment out of the remainder."

As North Carolina was one of those States that inaugurated
the war, it would seem hardly fair that the consequence should
be visited upon the heads of her creditors, even if they had all
been actively on the other side during the conflict, instead of
being, as many of them were, residents of foreign countries.
Nor was there more logic or equity in the proposition to charge
up against the bondholders a share of North Carolina's loss of
slave property, for that was the loss mainly referred to,


when bondmen were changed to freemen. Individuals may
have been impoverished through emancipation, but the State
retained the men with all their bone, and sinew, and muscle, and
it was the State that owed the debt.

The grounds on which the repudiating States, except Minne
sota, have sought sympathy, and obtained it, have been their
supposed poverty, and the alleged wrongful issue of bonds by
" carpet-bag " governments. If they had exhibited a stronger
disposition to pay according to the measure of their ability,
which would at all times have fully satisfied their creditors,
they would be entitled to much greater consideration on the
first-mentioned ground. But, in point of fact, the States have
been made richer instead of poorer by the results of the war,
and they can no longer claim exemption from the duties of
honest debtors on account of previous losses. On the 20th of
last October, the " Times-Democrat," of New Orleans, published
a sixty-column article giving a complete statement of the finan
cial condition and progress of twelve Southern States, the
statistics being furnished by their own governors, of which ten
are repudiators j viz., Virginia, North Carolina, South Carolina,
Georgia, Florida, Alabama, Mississippi, Louisiana, Tennessee,
and Arkansas. The figures given show that in the past four
years, that is, since the last national census was compiled, the
twelve States have added to their wealth the enormous sum of
six hundred and forty-one millions of dollars, a sum more
than sufficient twice over to pay every dollar of the defaulted
State debt. By way of contrast with the " Times-Democrat's "
columns of figures, it would be interesting to give the prices for
which the bonds of the States mentioned are selling at the New
York Stock Exchange, some of those there listed being purchas
able at from two and one-half to ten cents on the dollar of their
face value. And as for many of their unlisted securities,
although lawfully issued, and once disposed of for a full con
sideration, they would scarcely find takers if given away.

What absurdity, if not what dishonesty, to talk about those
States not being able to do more than they are doing for the
redemption of their credit ! How ridiculous to claim for them
that they do not pay the full measure of their debts because they
cannot pay them, when we find the city of Poughkeepsie, in the
State of New York, with only twenty thousand inhabitants, to
day, without a murmur of complaint, paying interest on a bonded


indebtedness more than one-third the magnitude of that recog
nized by either of the great States of North and South Carolina,
and under which they stagger and groan. It is a fact that the
same little city of Poughkeepsie and its case is not particularly
exceptional among north-eastern communities to-day pays
more interest in cash to its bond-holding creditors than either of
the States of Virginia, Tennessee, Arkansas, Mississippi, or
Florida, although their aggregate bonded indebtedness amounts
to nearly one hundred and fifty millions of dollars.

The talk about the frauds perpetrated by carpet-bag govern
ments in issuing the discarded bonds has, doubtless, done far
more to extenuate the conduct of the defaulters in the eyes of
the general public than anything else. So much has been said
on that score that it is the common impression that all, or nearly
all, the bonds in question have had that origin. Such, however,
is by no means the fact. All of Virginia's debt antedates the
carpet-baggers. Mississippi's bonds have been in default since
1842. The majority of Tennessee's issues were under a law
passed in 1853. Most of Louisiana's liabilities preceded the
war, as did a large portion of those of Alabama, Georgia, Florida,
and the two Carolinas. When the carpet-baggers were expelled
from Arkansas, the legislature of that State adopted a resolution
repudiating a large portion of her securities on the ground that
they had been imposed on her by " alien adventurers " ; but
bonds representing over a million dollars of her discarded debt
have been held in England for more than forty years, and
:among her creditors, who get neither principal nor interest, is
the treasury of the United States, which, away back in 1838,
invested half a million of dollars of Smithsonian Institute funds
in Arkansas securities, on which there has been no interest paid
since 1842.

Nor is it a fact that the whole of the so-called carpet-bag
bonds were fraudulently or unwisely issued. The proceeds were
mostly invested in railroads and other public improvements
greatly needed, and at the time generally demanded by citizens
of all shades of political opinion. As a rule, the States would
be gainers by the investment, if every one of the bonds had to
be paid in full. Indeed, it has not been so much on account of
alleged impropriety in the creation or disposition of the securi
ties that they have been rejected, as on the sentimental ground
that they were issued by usurpers ; that is, by authorities repre-


senting the military power of the General Government and a
sentiment of loyalty to it, rather than by disloyal majorities of
the population. Excesses in bond-making were, undoubtedly,
perpetrated by some of the carpet-bag administrations ; but as a
whole their financial records compare very favorably with those
of their successors. The highest estimate ever put upon their
aggregate misappropriations, and that, doubtless, was much
exaggerated, has been twenty millions of dollars, while their
successors have deliberately perpetrated a robbery of the cred
itors of the States to the amount of nearly three hundred

The substance of the whole matter is, that twelve States of
the American Union owe a very large sum of money which they
are perfectly able to pay, which they ought to pay, but which
they will not pay, and which they cannot, by any of the usual
processes employed against delinquent debtors, be made to pay.

The question now arises, What is to be done with reference to
these debts ? Certain it is that the Supreme Court of the United
States, in its recent rulings sustaining the "coupon-killer"
statute of Virginia, and the repudiating enactments of Louisiana,
has laid itself open to serious criticism, a criticism fearlessly
administered by some of its own dissenting members. Said
Justice Field, in one of those cases :

" I find myself bewildered by the opinion of the majority of the Court ; I
cannot comprehend it, so foreign does it appear to be from what I have
heretofore supposed to be an established and settled law."

Whoever reads the labored arguments of the majority of the
highest court in the land to prove that it is powerless to pre
vent and redress the plainest violations by the States of the
highest law of the land, and the stinging censure passed upon
its position by the minority of its members, must feel that there
can be no more humiliating chapter in our national history,
although it may be uncertain whether the blush of shame and
indignation which comes to his cheek will be for the laws
passed upon by the Court, or for the Court that passes upon the

So far as the liabilities of defaulting cities, counties, town
ships, etc., are concerned, the Government has created courts
with adequate jurisdiction and powers to determine the rights
of the parties, and redress such wrongs as may be shown to


exist ; and has given the creditors access to them, which is all that
can fairly be asked. But although States are merely larger mu
nicipalities and not entitled, by reason of their greater resources
and proportions, to any exceptional exemption from the obliga
tion to deal honestly with all men, the Government gives their
creditors no such opportunity ; on the contrary, it has taken it
from them, after having been conferred by the men of an earlier

It is clear that the obligated States themselves will not pro
vide for these debts. What, then, remains to be done f Our
answer is : Let the Government, which has full power in the
premises, and which can promptly act through a simple majority
of Congress, at once take steps to assume and arrange for the
settlement of the debts of the delinquent States on some basis
equitable to all concerned. As a matter of fact, a comparatively
small amount of money or obligations would make a satisfactory
disposition of the whole business. For such a policy there are
several most potent reasons.

The General Government, in fact, is the only power which
possesses the moral as well as legal ability to satisfy these claims,
which it can speedily do through the action of Congress and its
control of the national purse. So long as it fails to do so, and
furnishes no means of redress through its courts, the provision
of the Constitution that it was created, among other things, " to
establish justice, 77 is a misstatement and carries a reproach that
should be removed. Many of these repudiated bonds belong to
citizens of other countries, and this country has largely got the
benefit of the bonds in the construction of railroads and other
public enterprises of national importance. The bonds known as
the " carpet-bag n issues are more a creation of the General Gov
ernment than of the States, having been put forth by direction
of authorities representing the General Government rather than
the people of the States.

Our General Government has been a party almost a par-
ticeps criminis to repudiation in several of the States. The
President of the United States has freely given the patronage
and countenance of his high office in behalf of the repudiation
movement in Virginia; many Senators and Congressmen, repre
senting non-defaulting States, have pursued a similar course.
The Supreme Court of the United States has tipped the scales of
justice in the same direction. As a sequence to the success of


the repudiation movement in Virginia, and the outside support
it has received, there has been a violation of a solemn agree
ment entered into between the State of Tennessee and its
creditors, and all efforts on the part of other defaulting States
to arrange with their creditors, largely for the same reasons,
have ceased. These are facts as indisputable as any known to

The Government should care for these debts ; the twelve
commonwealths that are in default contain one-fourth of the
entire population of the country. The public morals demand it ;
the severest reproach to-day attaching to Americans, as a people,
is their indifference to public obligations. The general financial
interest of the country demands it ; America is yet a borrowing
country, and must remain such for many years to come. The na
tional security demands it j our Government owes its life to the
credit of its bonds. Bonds are, indeed, a surer defense than bay
onets ; they create bayonets. Without the means of raising money,
the strongest of peoples in the hour of danger would be powerless.
I have said enough, however, to demonstrate that the question
of redeeming repudiated State obligations is not merely an affair
between the delinquent communities and their creditors; and
for the remedy suggested there are plenty of precedents. Twice
already has the General Government assumed and satisfied heavy
debts contracted by the States ; once in the early history of the
nation, and again at the conclusion of the war of the rebellion.
The same can be said of the gift of millions of acres of the
public lands to the States.

The question is, whether the Government of the United
States, in this matter of repudiated State obligations, will do
anything for the honor of the nation j for it is something that
involves the honor of the whole people. If a number of our
States will pursue toward their creditors, whose fair dealing
is undisputed, a course more shameless than that of Turkey or
Egypt, and the General Government is so powerless that through
its courts and other agencies it can do nothing to bring them to
justice, or so indifferent that, with an overflowing treasury and
ample power, it makes no effort to remedy this wrong ; if the
President, and Senators, and other public functionaries will use
the Government patronage to strengthen the hands of the
repudiators, instead of taking the part of the innocent victims
of their dishonesty ; if our political parties will cater to the


wishes and ambitions of the wrong-doers, in the hope of securing
their support for partisan measures and interests, particularly
that party whose representatives have created the whole of the
defaulted State bonds which are most peremptorily discarded,
and which has professed to be especially zealous in behalf of all
forms of public credit ; if the great body of our people can look
upon such things with unconcern, virtually giving them their
sanction, and making no effort to compel their rulers and legis
lators to respect the public faith and maintain the public honor,
then the inevitable and just verdict of the civilized world will be,
that we are a nation of rascals.



A FEW months ago I published a work entitled " Mental
Evolution in Animals/ 7 in which I attempted to trace, as care
fully and as thoroughly as I was able, the principles which have
probably been concerned in the development of mind among
the lower animals. This work, I believe, has already been re
printed in America ; and seeing that under the existing state of
matters with reference to copyright an author on this side of
the Atlantic is precluded from securing any pecuniary interest
in the sale of his work upon the other side, I am free to allude
to this book as constituting the basis of the present paper. In

Online LibraryNathaniel Hillyer. EglestonThe North American review (Volume 139) → online text (page 14 of 60)