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This fell under the eye of Senator Douglas, at Washington, who took occasion to reply on January 5th, 1851, at length, giving a detailed history of all the efforts made in congress to procure either pre-emption or grant of land in aid of building this road, saying: "You were the champion of the policy of granting pre-emption rights for the benefit of a private company (the Holbrook,) and I was the advocate of alternate sections to the State." The letier is quite long, but very interesting, and may be found in the Illinois State Register, and papers of the State of that period generally.
Judge Breese rejoined under date of January 25, 1851, through the columns of the same paper, at great length, claiming that beside seeking to obtain pre-emption aid he also was the first to introduce "a bill for an absolute grant of the alternate sections for the Central and Northern Cross Railroads," but finding no favorable time to call it up, it failed. “It was known from my first entrance into congress that I would accomplish the measure, in some shape, if possible;" but the Ilinois members of the house, be ascerts, took no interest in the passage of any law for the benefit of the Central road, either by grant or pre-emption. He claims no sbare in the passage of the law of 1850 : "Your (Douglas',) claim shall not, with my consent, be dispuraged, nor those of your associates. I will myself weave your chaplet, and place it, with no envious band, upon your brow. At the same time history shall do me justice. I claim to have first projected this great road, in my letter of 1835, and in the judgment of impartial and disinterested men my claim will be allowed. I have said and written more in favor of it than any other. It has been the bighest object of my ambition to accomplish it, and when my last resting place shall be marked by the cold marble whicb gratitude or aftfection may erect,
I desire for it no other inscription than this, that he who sleeps beneath it projected the Central Railroad."
He also cited at length his letter of October 16, 1835, to John Y. Sawyer, in which the plan of the Central Railroad was first foreshadowed, which opens as follows . "Having some leisure from the labor of my circuit, I am induced to devote a portion of it in giving to the public a plan, the outline of which was suggested to me by an intelligent friend in Bond county, a few days since.".
To this Douglas, under date of Washington, Feb. 22. 1851, surrejoins at considerable length, and in reference to this opening sentence in the Sawyer letter, exclaims, "How is this! The father of the Central railroad, with a Christian meekness worthy of all praise, kindly consents to be the reputed parent of a hopeful son begotten for bim by an intelligent friend in a neighboring county! I forbear pushing this inquiry further. It involves a question of morals too nice, of domestic relations too delicate, for me to expose to the public gaze. Inasmuch, however, as you have furnished me with becoming gravity, the epitaph which you
desire engrossed upon your tomb, when called upon to pay the last debt of nature, you will allow me to suggest that as such an inscription is a solemn and a sacred thing, and truth its essential ingredient, would it not be well to make a slight modification, so as to correspond with the facts as stated in your letter to Mr. Sawyer, which would
make it read thus, in your letter to me: “It has been the highest object of my ambition to accomplish the Central Railroad, and when my last resting place shall be marked by the cold marble which gratitude or affection may erect, I desire for it no other inscription than this: HE WHOSLEEPS BENEATH THIS STONE VOLUNTARILY CONSENTED TO BECOME THE PUTATIVE FATHER OF A LOVELY CHILD, CALLED THE CENTRAL RAILROAD, AND BEGOTTEN FOR HIM BY AN INTELLIGENT FRIEND IN THE COUNTY OF BOND." We find no further correspondence. See Illinois State Journal, March, 1851.
OUR FREE OR STOCK BANKS-1851-1865.
Horo a Bank might be started - Ultimate Security of the Bill holder
The Small Note Act-Panic of 1854-Revulsion of 1857-Wind
Notwithstanding the State, in 1851, was in the hands of the democratic party by an increased majority, and that this domi. nant party had for years in its State platforms fulminated resolutions against the enormity of banking as the source of all our financial woes, the legislature, also largely democratic, neverthe. less passed another general banking law, authorizing free or stock banks. The democratic governor vetoed the bill, but it was promptly passed over his objections, and the people of the State, notwithstanding their experiences of the disastrous results from the banks authorized in 1821 and in 1836-7, and in spite of their teachings and democratic majority, approved it by their votes at the election of November of that year. As a rule, the masses favor any scheme which promises an abundant currency—they are naturally for expansion-while capitalists favor contraction.
Directly after the adoption of the coustitution of 1848, the establishment of another banking system was agitated. The project advanced was to divide up the State into 3 banking districts, with boards of bank trustees for each. As security, banking associations were to deposit United States stock and a certain portion of gold, when circulating notes as money were to be issued to them. The democratic press made a great outcry against the whig scheme, as it was called, to fasten again upon the then once more thriving and prosperous State the withering curse of banks. This plan, which proposed but one class of securities–United States 6's-was certainly preferable to that adopted two years later, which allowed as security the stocks of any or all the States. The former presented the advantage of having a uniform security for all the banks of the country, giving a like uniformity of value to their issues all over our broad domain ; while to the latter, with bonds of any State, many far from home perhaps, the fluctuations of a varying market would severally attach. But in principle the State stock banks were the forerunners of the present national banking system.
The banking law of 1851 required as a basis or security for all banks operating under it, the depost with the auditor of, 1st, United States stocks; 2d, stocks of any other State; 3d, stocks of Illinois valued at 20 per cent. below the market price. Stocks on which the interest was not annually paid could not be deposited except in double announts. If they depreciated in the market, further deposits were to be made. The depositors were entitled to the interest accruing on the bonds. When the deposit of stocks was perfected, the auditor was authorized to have engraved and issue bank notes to the owners in nearly equal amounts, not less than $50,000, to circulate as money, The notes on presentation at the bank were required to be redeemed in specie, the amount to be kept on hand not being specified, and for refusal and after protest it became liable to 124 per cent damages in lieu of interest. On failure of the bank, it was to be wound up by sale of its stocks at auction in New York, and the proceeds were first to be paid out on the circulating notes. If the stocks and other effects of the banks proved insufficient, then the stockhold. ers became liable respectively to the amount of their stocks in their private property, to pay the bill holders. Interest was fixed at 7 per cent., and loans might be made on real or personal property. Dealing in real estate was not allowed, other than to sell that which fell into their hands as security. The usual bank. ing privileges of buying and selling exchange, coin, &c., were extended to them. A board of 3 bank commissioners, with power of examination into their affairs, was also provided ; and the offi. cers of the banks were required to render quarterly statements to the auditor, under oath, as to their condition.
With these provisions, it was thought that the notes would certainly be safe. Indeed the law was first regarded as so stringent that few would attempt banking under it–certainly mere speculators would not. The bill holders appeared to be ultimately secure. New York, we have seen, as early as 1838, authorized banking on State stocks, and by the time Illinois, which subsequently copied the New York law, embarked in the project, half the States of the Union ran wild after the discovery of the new and safe scheme, by means of which the capitalist, contrary to Franklin's aphorism, might - eat his cake and have his cake"invest his money in 'bonds, deposit them, and from the hands of the auditor have his money again and own bis bonds too.
While the banking bill was pending before the people, the friends of the measure, to secure its adoption, pointed to the fact that the State was inundated with millions of the notes of banks of foreign States, of the value, solvency, or genuineness of which little or vothing was known here; that by allowing aliens to furnish us a circulating medium we not only paid tribute to them but yielded our State pride; that it was but just to ourselves and to our interests to replace this exotic trash by a sound and safe currency of our own; that the basis for banks required by this law made them not only perfectly secure to the bill holders, but that a home currency, within easy reach of the places of redemption and its ready convertibility into specie, would directly drive out the foreign bills; that with the greater abundance of money, times would become easy, produce would rise in price, lands enhance in value, the influx of emigrants be augmented, and general prosperity would shower its glad smiles upon all our people with a profuse hand. Experience shows that the masses are but too ready to grasp at a project which promises plenty of money to-day, although assured that it will be worthless to-morrow.
Its opponents argued that under the new law, the currency proposed to be introduced was susceptible of multiplication to an indefinite amount, and if the bill carried, an avalanche of paper money might be thrown into circulation, dazzling and bewildering the senses of the people, leading them into a wild, headlong mania of speculation, the sequel to wbich, as had ever been the case, must be disaster and ruin. With an inflated currency property would attain to unhealthy prices, purchases would be made at perhaps half cash, balance on time, secured by mortgages on the premises. While the obligations were maturing a contraction would take place, stagnation ensue and prices be depressed below the normal standard ; claims would be pressed upon debtors, mortgages foreclosed, and many an unwary purchaser would be stripped of his all under the hammer of the sheriff, his vendor buying back the property at less than the mortgage claim, leaving an unsatisfied judgment still hanging over him. The barik measure was held to be a project to swell the coffers of the rich from the labor and necessities of the poor.
They further showed that the bank securities might be of unstable value, which would rise and fall in the market with the operations and machinations of financiers; that money based upon them would be subject to similar fluctuations ; that these pledges of stock were as nothing to the man with this money in his band which he desired to convert. Let but an actual case of suspension be contemplated. To sell the stocks and redeem the notes required time and was attended by circumlocution. The poor or needy cannot wait.' Want and exigence press from myriad directions. Now the broker steps in, himself perhaps a shareholder in the suspended bank, and offers 50 or 75 cents on the broken promises. The holder of this money received in exchange for his labor or other equivalent, cannot wait the ultimate redemption by the auditor, but is compelled to suffer a shave to this depth. The broker, however, is in no such stress; he quietly awaits the sale of the stocks, the redemption of the notes with the proceeds, and realizes the 25 or 50 per cent. which his thousands of victims bave lost, and with the gains starts another bank.
The 6th section of the bank bill provided for the association of persons "to establish offices of discount, deposit and circulation," with an aggregate capital stock of not less than $50,000. This section served the opponents of the bill a good turn before the people. It was deduced thence and asserted that the bill was a trick, concealing deceptive phraseology; that it provided for two classes of banks, one secured by the pledge of public stocks, the other totally irresponsible, allowing its issues to “circulate” on no other basis than pen, ink and paper to write out its articles of association, money enough to pay for recording and posting copies thereof to Springfield to be filed with the secretary of state; that the former were to catch the votes of the people, but the latter concerns were to furnish the currency. The phraseology of this section in connection with the word “ circulate,” it must be confessed, was somewhat ambiguous.*
*The Chicago Press, December, 1852, says it has warned the people that paper would be issued not secured by stocks, and there were then various issues of certificates of deposit in the similitude of bank notes, signed and subscribed by the officers, designated by the utterers to circulate the same as bank notes.
Notwithstanding these arguments against it, the people in November, 1851, elected the bank bill, and it became the law. of the State. The vote stood 37,626 for to 31,405 against it. This poll was less by 7,000 than half the votes cast at the gubernatorial election one year later, being 153,882.
The constitution provided that no banking law should be enacted except by the sanction of a majority of the people voting for it at a general election. A special election, it was doubtless thought by the framers, would not call forth a full expression of the sentiment of the people upon such a measure. In their haste to have the people pass upon the bank bill, the legislature created a general election for this purpose, by repealing all the county treasurers out of office, and ordering a new election for those officials at the same time the bank bill was to be voted upon. With this action of the legislature, after the election, the defeated opponents of the measure found much fault, and it was severely denounced. It was claimed that a presidential, biennial election for members of congress, or the state legislature alone, were general elections, where the bill would have been fully discussed before the people. The spirit of the constitution was doubtless violated by the legislature.
The apprehensions that the law was so stringent that few, if any, banks would be organized under it, was speedily dispelled. Within the first year the democratic press cried aloud that the country was flooded with paper money to an alarming extent. Property rose in price, and a speculative spirit became rife. All who could command the means were enlarging the area of their territorial possessions and debts were freely incurred. The mania of 1836–7, it was urged, would be repeated, and irretrievable ruin overtake thousands. Indeed the new plan of stock banking became very general throughout the Union, and there was no little expansion. But in Illinois much of all this was owing to the inauguration of the railroad era just at that time, and enhance. ments had a solid basis, very unlike the period of 1836–8.
When the organization of banks under the new loan was commenced, nothing further was heard of the great part the associations under section 6 were to play; no issues were uttered without the deposit of stocks by any associations. But as the law stood and the courts afterwards held, the deposit of $50,000 in bonds was a sufficient compliance with its provisions as to capital. The amount of specie capital to be kept on hands was a question of risk for the banks, the law not fixing any amout. This caused much of the business of free banking to go into the hands of ir. responsible and non-resident persons, who, having no object or interest further than to get their potes into circulaton and leaving the bill-holders to take care of them, located their concerns in remote and inaccessible places, where no legitimate banking business could or was expected to be done, and flooded the country with 6 wild cats." And as such banks did not often keep any place of business in the apparent location thereof, the power of demand and protest was destroyed.*
How a Stock Bank Might be Started—While doubtless many of these free banks were started with an actual paid up capital, * See Report House Committee, 1861.