John J. (John Joseph) Lalor.

Cyclopædia of political science, political economy, and of the political history of the United States online

. (page 157 of 290)
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state." (N.Y." Nation," 1877, No. 636.) On Dec.
5. 1877, a special session was convened to consider
Me award of the arbitrators. A bill finally passed
jne senate, providing for an adjustment scheme
"y which the old bonds were retired at 40 per



158



cent, of their face value, in exchange for thirty-
year bonds, with interest at 4 per cent, for five
years, 5 per cent, for five years, and 6 per cent,
thereafter. This act was rejected by the house,
on the ground that any plan which contemplated,
scaling the old bonds at less than 60 per cent,
would not be accepted by the creditors. The
legislature adjourned, after a three weeks' ses-
sion, without coming to any definite results. A
year later. Gov. Porter, in his message, stated that
there were over $20,000,000 bonds outstanding, of
which $11,000,000 had been declared invalid. —
The bond question had now become a distinct po-
litical issue. Although the party lines were not
strictly drawn on the question, the republicans
were generally in favor of meeting the debt in
one way or another. The parties or factious were
divided into four distinct groups : 1, wholesale
repudiators; 2, those who favored retiring the old
bonds at 50 per cent, of their face in exchange for
6 per cent, bonds ; 3, those who favored scaling
the bonds, principal and interest, to a third of
their nominal value ; and, 4, a party which ap-
proved the settlement urged by the arbitration
committee. On these issues party lines wavered,
ordinary majorities were shaken, and members of
the assembly were elected because of their known
standing on one or the other of these four schemes
of adjustment. The finance committee reported a
bill retiring different classes of bonds at different
rates ; some at "60 and 4," i. «., scaled to 60 per
cent, of their nominal value, and exchanged for
4 per cent, bonds; some at "50 and 4," and some
at "33i and 4." About $2,250,000 (mineral house
bonds) were absolutely repudiated. Another class
were to be scaled at 38i per cent, , and exchanged
for non-interest-bearing tax wan-ants, receivable
for state taxes and other dues to the state. After
a long debate, during which every scheme was
modified in one way or another, an act was passed
by a close vote, March 28, 1879, providing for the
retirement of most of the bonds at 50 per cent,
in exchange for state fours. The provisions of
this bill were supported by the railroad compa-
nies, which agreed to waive immunity from taxa-
tion and to pay taxes to such an amount as would
leave about 40 per cent, of the burden to be borne
by the people at 4 per cent, interest. The com-
mittee went to New York in April, 1879, where
the compromise was agreed to by the representa-
tives of the creditors, and the state seemed on the
verge of a final settlement. But repudiating sen-
timents had made too strong headway with the
people, who refused to ratify the compromise by
a large majority at the popular election on Aug.
7, 1879. At their convention in the year follow-
ing. May 6, the republicans declared once more in
favor of the validity of the debt, insisting that
any attempt to avoid it would be ' ' downright re-
pudiation, and an act of high-handed dishonor,"
and that any voluntary proposition from the cred-
itors to take less than their claim demanded ought
to be accepted as a favor. On the other hand, the
greenbackers showed plainly enough that the taint



VOL III. — 39



610



REPUDIATION.



of their financial heresies had affected their regard
for a question of common honesty. Their platform'
contained these planks: "Resolution 1. That
neither the state of Tennessee nor its citizens are
bound in law or morals to pay the bonds issued
in aid of the railroads, amounting to $25,000,000,
and that such bonds are no part of the state debt.
Resolution 2. That we are opposed to scaling the
railroad bonds, and to any other act recognizing
them, because the people of Tennessee do not owe
them." The democrats, at their convention, June
8, 1880, recognized the liberal disposition of the
state's creditors, and favored a settlement on the
best terms possible for the state. Two minority
reports, however, were so earnestly pushed as to
show how large a portion of the party had suc-
cumbed to repudiating theories. One (the "John-
son Report ") favored a settlement after canvassing
among the people to learn the terms to which the
majority would agree; the other (the "Garner
Report") urged out-and-out repudiation, as fol-
lows : " § 4. We are unalterably opposed to any
settlement of the state debt by the legislature."
After the adoption of the majority report, so
amended, however, as to provide that the new
coupons should not be made receivable for taxes,
etc., 160 delegates left the hall, organized a sepa-
rate convention, nominated S. F. Wilson for gov-
ernor, and adopted a resolution declaring against
the railrond bonds, the war-interest bonds, and the
receivability of coupons for taxes and other state
dues. The result of this split was, that the repub-
licans carried the election of Mr. Hawkins, their
nominee for governor, by a large vote. In 1881 a
funding act, which had been carried through the
house, passed the senate by a bare majority of one.
But popular opposition to the recognition of the
debt was still strong. Henry J. Lynn and others,
claiming to be citizens and tax payers, applied to
the court of chancery for an injunction, on the
ground that the funding act was procured by
bribery and fraud. The bill was dismissed, and,
on appeal, the supreme court decided that the act
which provided for funding the entire debt at par
by 3 per cent. 99-year bonds, redeemable at any
time after five years, was legal, except as to the
provision which made coupons receivable for
taxes, etc. ; on the ground that the legislature
could not "contract away" the revenue or enter
upon an agreement which a subsequent legislature
might not repeal. On May 19 the "60 and 6 " act
was passed, providing for the issue of new bonds
at 3 per cent, interest for two years, 4 per cent, for
two years, 5 per cent, for two years, and 6 per
cent, thereafter, to be given in exchange for the
old bonds scaled at 60 per cent. This was in ac-
cordance with a proposition from Eugene Kelly,
Esq., of New York, chairman of the bondholders'
committee. On Jan. 1, following, the comptroller
reported that less than half of the old bonds had
been funded. The bond question remained, there-
fore, unsettled, the democrats having split into
"state credit" and "low tax" factions, with the
republicans, for the most part, favoring a settle-



ment on the best possible terms. The democrats
owing to these dissensions in their ranks, were
forced to hold the bond issue in abeyance. At
their convention, June 20, they resolved, "2,
While we accord to all an honest difference of
opinion, we regard the enactment of the ' 60 and
3, 4, 5, 6 ' as unwise, because it is, in our opinion
not in accordance with the views of the people.''
Their third plank recommended funding the
"state debt proper," the validity of which had
not been disputed, at par, less war interest ; and
their fourth urged a tender to the creditors of a
settlement of the remaining debt by ten-year bonds
on the " 50 and 3, 4" plan. Their nominee was
Gen. W. B. Bate. One hundred and fifty delegates
promptly bolted, approved the "60 and 3, 4, 5, 6"
settlement, and nominated Jos. H. Fussell on the
" slate credit " ticket. The greenbackers, after re-
pudiating the railroad bonds, and all but a small
portion of the state debt, declared against the set-
tlement even of that portion until ratified by pop-
ular vote, and nominated Jno. R. Beasley. Gen.
Bate, the nominee of the " low tax " democrats,
was elected. The ' ' 60 and 8, 4, 5, 6 " plan is there-
fore stamped with popular disapproval, and the
politicians will, hardly venture upon the consid-
eration of as favorable terms for the state's cred'
itors in the teeth of the popular feeling. It is
believed that the " readjusters " will consent to
a settlement of the "state debt proper," less war
interest, in full ; with a provision for compro-
mising the remainder by funding it in 3 per
cent, thirty-year bonds, scaled at 50 per cent.;
and the swindled creditors will have to make the
best of a very bad bargain. The federal govern-
ment loses by Tennessee's repudiation. At vari-
ous times, from 1836 to 1851, the United States
invested moneys held in trust for certain Indian
tribes by the secretary of the interior, in Ten-
nessee bonds. Up to Jan. 1, 1883, the amount
due the government, with accrued interest, was
$493,270. As the United States held the money
in trust, the interest has been paid to the benefi-
ciaries from time to time by congressional appro-
priation. As the debt has been repudiated by
Tennessee, the tax payers of the nation have been,
and will be called upon periodically to settle the
debt of that state. It is claimed by ex-congress-
man William I^. MoorCj (vide letter to "N. Y-
Herald," March 13, 1883), that both political par-
ties in the state have again and again, through
their governors and legislators, recognized the va-
lidity of the bonds which United States senator
Harris declared void in the campaign of 1882.
"Propositions," said Secretary Teller, in a letter
to Mr. Moore, March 3, 1883, "have been made
by the state of Tennessee, to issue new bonds for
accrued interest on the bonds held in trust by this
department, but the records do not show that any
offer has been made by said state to pay said
interest."— Virginia. At the close of the war
the public debt of Virginia amounted to about
$41,000,000. In 1866 the auditor of the state re-
ported that the interest accoignt, to the amount of



REPUDIATION.



611



about $2,250,000, could not be promptly met. In
thesession 1870-71 the funding scheme was passed,
by which the coupons of the new issue were made
Teceivable for taxes, etc. The next.legislature re-
pealed the act, as containing provisions too favor-
able for the creditors, but the repealing act was
not sustained by the courts, so the legislature
adopted the expedient of taxing the funded bonds,
evidence of the state's own indebtedness, i per
cent. In 1874-5 " these measures had reduced
the interest account from $3,500,000 to $1,417,000,
but the taste for repudiation, or 'adjustment,' as
it is called in Virginia, had set in and was grow-
ing, so that, after several years of cheating, the
question is still a prominent one in the politics
of the state, and it was only after a vigorous and
excited canvass that the nomination of an open
repudiator for governor was prevented. His suc-
cessful opponent is now obliged to treat the sub-
ject with great caution, and there is every pros-
pect that in the end ' readjustment ' will carry the
day." ("N. Y. Nation," 1877, No. 636.) In 1875
the interest account was nearly $3,000,000 in ar-
rears, and the outstanding bonds in 1876 amount-
ed to $29,489,336.38. On March 11, 1878, the
legislature passed the ref nnding act, providing for
the issue of eighteen-year and thirty-two-year 3
per cent, and 4 per cent, non-taxable bonds. In
his message to the legislature, Dec. 4, 1878, the
governor said: "As long as the state debt contin-
ues unsettled, there is an incubus upon the spirit
and a clog upon the movements of Virginia.
When it is settled honorably and finally, she will
start upon a career that will not be unworthy
«f her history." One of the bondholders, a cit-
izen of the state, published a statement at this
time to the efEect that the only possible remedy
for the financial condition of the commonwealth
was readjustment, i. e., scaling the old issue, and
reducing the interest to 4 per cent. A bill was
passed in February, 1878, but vetoed by the gov-
ernor on the ground that it failed to meet the re-
quirements of the situation, and was vague, un-
just and unconstitutional. In the following De-
cember he urged a further attempt at adjustment
with the creditors. By this time the issue was
fairly before the people, and the state divided
inlo "debt payers" and " readjusters " — a euphe-
mism for repudiators. Early in 1879 the McCul-
lochbill, which provided for refunding $8,491,961
by a new issue, to be dated Jan. 1, 1879, payable
in 1919, with interest at 3 per cent, for ten years,
4 per cent, for twenty years, and 5 per cent, for
ten years, was passed. The state was to have the
privilege of redeeming the new issue at any time
stter the first ten years, and the coupons were
made receivable for taxes and other state dues.
The readjusters, under the leadership of Gen.
William Mahone, assembled in convention at Rich-
mond on Feb. 25, 1879. After adopting a reso-
lution professing adherence to democratic prin-
ciples, they declared themselves formally sepa-
rated from the democratic party, and resolved as
loUows: "3. That in any settlement with the



state's creditors the annual interest of the recog-
nized indebtedness must be brought within her
revenues under the present rate of taxation. * *
6. That a settlement within the limitation desig-
nated is the utmost stretch of the people's ability
to pay, and should be satisfactory to the creditor
as the furthest exaction he can fairly insist on.
* * 16. That full recognition of these principles
and declarations by the people of Virginia and
her creditors, is absolutely essential to any amica-
ble readjustment, and no readjustment in which
they, or any of them, shall have been neglected,
can be final, certain and satisfactory. " Gov. Hol-
liday declared in his message that he did not be-
lieve a higher rate of taxation could not be borne
when the object was to preserve the credit of the
state. "Whatever may be the views of some,"
said he, "I feel that should the present funding
bill be stopped in its execution, it would be a great
misfortune. It has been regarded by the world
as a fair and honest settlement between the com-
monwealth and her creditors. * * We have
every reason to believe that, had no opposition
been manifested and its repeal not been mooted,
the bonds by this time would have been well nigh
all brought in to be funded under its operation. "
The vote at the election of November, 1879, stood
as follows: debt payers, 69,736; readjusters 77,070.
7,689 republicans voted with the debt payers, and
18,436 with the readjusters; a result which showed
a large defection from the ranks of the regular
republican party, and pointed unmistakably to
the coming union. So-called republicans, who
cared more for victory than principle, made haste
to join in a coalition which insured them a place
on the side of the successful faction, and their de-
fection swelled the readjuster ranks to the dimen-
sions of a working majority in the state. At the
ensuing session of 1879-80 the notorious senate
bill No. 176, impudently entitled "An act to re-
store the public credit," and known as the Rid-
dleburger bill, was passed, repudiating over
$13,000,000 of the state debt. It was promptly
vetoed by Gov. HoUiday. "I can not put my
signature in approval to this bill," said he, in his
memorandum. "I respectfully return it to your
honorable body in which it originated, because I
believe it to be in violation of the constitution of
the state, in jriolation of the constitution of the
United States, in violation of the spirit which has
ever moved and inspired the traditions of the
commonwealth and made her name so honored
among men." After referring to the credit of the
state, pledged as far back as 1838, the governor
added: "no sooner was peace proclaimed than a
general assembly, composed of her best citizens,
men of the old regime, unanimously reaffirmed
that obligation. This was repeated, in one form
or another, not less than four times." The read-
juster convention met July 7, 1880, with the issues
and prizes of a national campaign before them.
They indorsed the vetoed bill "as constituting
the extreme limit of legal and moral obligations
upon the part of this commonwealth to the hold-



612



REPUDIATION.



ers of her bonds." Both readjusters and demo-
crats favored the national nominees of the demo-
cratic party, and were careful to declare their be-
lief that in national politics only national issues
should be regarded. An attempt at fusion was
made but failed, because, it is alleged, the read-
justers were too grasping in their claims for the
lion's share of the spoils in event of success. The
futile negotiations only widened the breach, and
finally the national democratic committee, seeing
that a union was out of the question, and perceiv-
ing that this dickering with the repudiators was
likely to lose the party votes elsewhere through-
out the country, issued an address late in Octo-
ber, 1880, urging the democratic voters of Vir-
ginia to support the ticket of the regulars. Where-
upon the chairman of the readjusters brought out
a counter address, declaring that his faction were
striving for a higher prize than " any abstract
title to democracy," viz., the right of the people
to govern their pwn state in their own way. The
election resulted as follows : conservative demo-
crats ("regulars"), 96,912; readjusters, 31,679;
republicans, 84,020. Meanwhile the readjuster
coalition had elected Gen. Mahone to succeed R.
E. Withers as United States senator for the six
years beginning March 4, 1881. In the national
senate the parties were equally divided, thirty-
seven republicatts, thirty-seven democrats, and
two independents, Mahone of Virginia, and Davis
of Illinois. Gen. Mahone did not appear until the
second day of the session, when the debate on the
organization of the committees was at its height.
The fact that he had taken no part in the demo-
cratic caucus, and proclaimed himself an indepen-
dent, aroused the suspicions of the democratic
senators who had counted upon him to give them
a bare majority entitling their party to the rights
of a majority in making up the senate commit-
tees, and upon his appearance he was at once at-
tacked by Mr. Hill of Georgia, who accused
him of treachery and bad faith. Gen. Mahone
took the floor in his own defense and began a
statement of his position. He declared himself a
democrat in principle, but insisted that he did.not
owe his seat to the democratic party, and an-
nounced his intention of voting with the repub-
licans in organizing the senate. Mr. Davis voting
with the democrats, a tie was the Tcsult. Where-
upon Vice-President Arthur cast the deciding vote
in favor of his party and against the protest of the
democratic senators, who endeavored to show that
the vice-president had no vote upon a question of
organization, even in a tie. Gorham was chosen
secretary of the senate, and Riddleburger, the
readjuster, sergeant-at-arms ; a selection which
gave rise to renewed charges of a " deal " between
Mahone and the republicans. Their opponents
made desperate efforts to stave off the election of
officers by all sorts of dilatory measures, motions
to adjourn, etc. ; but Senator Davis then declared,
that, having voted for the existing organization as
he had felt bound to do, now that the majority,
though a majority of but one, had changed, he



would no longer stand in the way to block the busi-
ness of the senate. This decided the matter, and
the new organization was completed. Soon after
the fall election of 1880 the United States supreme
court decided', in January, 1881, in the case of
Hartmann m. Greenhow, Treas., etc., 102 U. S.
Rep., that the Virginia act of 1873-6, which pvovid-
ed that the state treasurer should retain as a state
tax 50 per cent, of the market value of the inter-
est coupons on the bonds, funded and unfunded,
could not be applied to coupons separated from
bonds and in the hands of diflferent owners, with-
out impairing the obligation with such bondhold-
ers, contained in the funding act of 1871, and the
contract with the holders of the coupons At the
readjuster convention, June 2 and 3, 1881, the
Riddleburger bill was again indorsed, and Mr.
Cameron nominated for governor. The second
place on the ticket was given to Jno. F. Lewis,
who at the time was chairman of the republican
state central committee. The republican com-
mittee at once convened, deposed Lewis by a vote
of 15 to 2, and elected Gen. W. C. Wickham in
his stead. Lewis protested, and a struggle at
once began between those who favored the coali-
tion with the readjusters and the "'straight out"
republicans. Both factions adopted platforms,
the former declaring their reasons for allying
themselves to the readjuster, or, as they called it,
the ' ' liberal " party, in opposition to the conserva-
tive democrats whom they dubbed "bourbons."
Their manifesto upon the bond issue was as fol-
lows. "4. * * Abating no part of our deter-
mination to deal justly with all the creditors of
Virginia, and to labor to pay every dollar she hon-
estly owes her creditors, we deem it inexpedient
and unwise to make separate nominations for state
officers, and we declare in favor of hearty co-oper-
ation with all other citizens who support the can-
didates nominated by the anti-bourbon or liberal
convention of June 2 and 3, 1881." The regular
republicans, or "straight outs," also held a conven-
tion and put in nomination a separate ticket, with
Gen. Wickham at the head. This was their bond
plank: "8. That the republican party of Virginia
hereby pledges itself to redeem the state from the
discredit that now hangs over her in regard to her
just obligations." On Aug. 4 the conservative
democrats convened, denounced repudiation, and
nominated for governor Jno. W. Daniel . The read-
justers' fusion elected their candidates, Cameron
and Lewis, and a majority of the state legislature.
At the election for United States senator to suc-
ceed Gen. Johnson in 1883, the readjusters carried
their candidate, H. H. Riddleburger, the author
of the repudiation act, and with a working major-
ity ^f six in each branch of the legislature, pro-
ceeded to carry out their schemes for repudiating
the state debt by enacting the measures commonly
known as "coupon-killers." The first of these
laws, entitled "An act to prevent frauds upon the
commonwealth and the holders of her securities,"
(passed Jan. 14, 1882), provided, under the plea of
protecting the state against forged and spurious



RESIGNATION.



613



toupons, that no coupons should be received by
the tax collectors In payment for dues to the state
until tested by a legal tribunal. In other words,
it required the receiving officer to whom coupons
should be tendered under the act of 1871, for taxes
or dues to the state, to give a receipt for the same
as "held for identification," and then to collect
the taxes in legal tender, coin, or national bank
notes. He was then to mark the coupons so sur-
rendered and deliver them to the court, with which
the tax payer might file a petition to prove the gen-
uineness of his securities, and if successful in his
law suit have his money refunded ! The other act
practically refused mandamus in tax cases. The
constitutionality of these enactments was at once
put to the test. In March, 1882, Andrew Antoni
tendered for taxes a coupon of 1871, and on the
collectors' refusal to accept it as payment, applied
to the state court for a mandamus. The court
divided equally on the law of 1882 ; and, on appeal,
the United States supreme court. Chief Justice
Waite delivering the majority opinion, held
{March, 1883) that the state was bound to accept
these coupons as already laid down in Hartmann
•!)«. Greenhow, {supra), but declared, as the su-
preme court had also held in Hoffman vs. Quincy,
4 Wall, 553, that so long as the state legislature
did not impair any substantial contract it could
change the form of the remedy, and that the right
to appeal to the state court for adjudication upon
the validity of the coupon left to the creditor an
adequate remedy. ' ' No attempt has been made, "
said Chief Justice Waite, "to fix definitely the
line between alterations of the remedy which are
•deemed to be legitimate, and those which, under
the form of modifying the remedy, impair sub-
stantial rights. * * In all such cases the ques-
tion becomes, therefore, one of reasonableness,
and of that the legislature is primarily the judge."
After reheaiBing the provisions of the act of 1882,
and the steps which a tax payer had to take to
«nforce his rights, the chief justice said: "It mat-
ters not whether the coupons have been refused
for the taxes, if full payment of the amount that



Online LibraryJohn J. (John Joseph) LalorCyclopædia of political science, political economy, and of the political history of the United States → online text (page 157 of 290)