Indiana State University - Sycamore Yearbook (Terre Haute, IN)

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the proportion in wliich the debtors found it difficult to get money with which to pay their debts, there would be counnensurate oppor- tunities for speculation for those who can com- mand funds which are receivable, unless con- gress shall interfere in their behalf. If land could be paid for only at a heavy discount on the moncA ' which the farmers were compelled to accejjt at par for their produce, this discount was, the governor said, an indirect but exor- bitant tax on the farmer. He said that there were two reasons for this condition : ( 1 ) There was a mere regulation adopted to the interest of the stockholders of the national bank. He thus referred to the fact that this bank would accept only its own notes and specie. (2) The National Bank was aided in this purpose by the treasury department, which refused to ac- cept fnnii tlic tanners anything but specie and currency of the United States bank. Undoubt- edly he was expre.ssing the general view of the west at that time. The Westerners did not realize that their own bad banking and exces- .sive speculation were responsible for this de- pi-essing economic condition. RELIEF FOR THE FARMERS. The state legislature came to the aid of the debtors, and passed a law to go into effect in January, 1819. The amount of personal prop- erty exempted from sale under execution for debt was considerably enlarged by one act. A creditor was compelled to accept the paper of the state bank and its branches, and of all other chartered banks whose money was current with the merchants at the time, or, should the creditor refuse to accept it at par, the debtor should have a stay of execution for one year. In other words, those to whom money was due were compelled to take in payment money at par that might really vary a great deal from par value. Obviously, this law was partial to the debtor, entirely unfair to the creditor, and, under conditions less distressing, would have api eared to be a disgrace upon the legislature. Niles Register. Supplement. XV, P. 77 ' State Laws, 1818- ' 19, P. 142. Western Sun, June 7, 1819. This legislature also passed an act ordering that all county and state collectors of revenue should collect the bills of the state bank and of about all the state and private banks of the surrounding states, as long as such paper passed current in the state. The notes of the United States Bank were not included in the list. Such legislation soon raised opposition on the part of certain classes, for it was evident that the law passed for the relief of debtors was aimed as much for the relief of the state bank and its branches as of the debtoi-s. A meeting of citizens was called at Salem in Washington County, and resolutions were adopted condemning the banking system of the state as injurious and dangerous. These people maintained that its influence was already too prevalent in our legislative councils. By the fall of 1819 the people and editors in the west had begun quite generally to awaken from their dreams and delusions.. One west- ern editor wrote: There is one cause in the western country which has operated very pow- erfully in producing the present state of things, and which must continue to operate in the same way: I mean, speculations in the public lands. Capitalists, both real and fictitious, have en- gaged very extensively in this business. The banks have conspired with the government to promote it; the former by lending money to the speculators, and the latter by its wretched system of selling the lands on credit. Nearly all the money which is paid goes over the mountains; the government has but little use for it in the western country. This last fact occasioned a real grievance. The state bank petitioned the secretary of the United States treasury to allow the surplus moneys collected at the Vincennes land office to be deposited at Vincennes. so that they could be used. The petition continued: Your memorialists are strongly of opinion that the citizens of this state have a righf° to the use of the public moneys raised within this state, when they are not wanted by the government, an opinion in

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(liicr fniiii which their country derives its Mealtli. they have built up tiieir capital in cities and towns, from which they may, perhaps, de- rive the interest of their money, but cannot ao-ain witlidraw their funds, at least for a long time. ■ An English farmer liviiio- near Triuceton stated the economic an l Mn ' ial roudilioii as seen throua-h the eves of an KnqHshm,,, lie said: ••.M,,uev raniiut l,e o-niuci by cuh i val i,.u. There is nn ,-.Miaiii -(kmI niarUcI: farm produce may. pvi vour niouey ,.f ih. ' cheats and scum of so- ciety who Hve here. l ' ,oth d ' liiese men saw the real cause of the depression of 1819. and all the Westerners felt it keenly. Economic distress Yas felt quite generally in 1818. Lands had been bought on four years ' credit, so nearly all the purchasers were in debt to their neigliliors or to the banks. Indiana passed a law in IMS for the executicm of the estates of insoJNcut lcbtors. ' I ' ld, seemed to be a fair law. but it naturally worked liard- shi]is on the debt(U-s. who could get no sound money with wlii. ' h to pay their debts. During the seven years following the expiration (d ' the first United States Bank in 1811. there was a i:)eriod of reckless banking. A great many state and private banks had sprung up. and these had quite generally issued several times as much paper money as they could redeem. James Flint, a judicious Scotch traveller who spent a part of the year 1819 at Jeffersonville, described the situation of the banks as follows: The total number of the-e eslablishmeuls in the Tuited States, could not. perhaps be ac- curately stated on any gi en day. The enu- meration, like the census of ])opulation. might l e eflVctcl by the births and deatlis. The cre- ation of this vast host of fabricators, and ven- ders of base money, must form a meuu.rable epoch in the history of the country. It is b ut just to the Farmers and Mechanics Bank of Madison, however, to observe that it fared ■ ' • .A.mer. State Papers. Finance, III, P. 735. ™W. Faux-s Journal, Nov. 3, 1S19, P. 222. Thwaites. R. G,. Early Western Travels. IX. P. 133. ' iState Papers, Cong. 17. Sess. 1. Vol. 6, Doc. 66. P. better than the state bank and most private banks, for it continued to pay specie until all state bank paper was refused at the land offices, and even then it continued to favor the farmers of the Jetfersonville land district by redeeming its bills when presented by persons indebted to the Jelfer.sonville office. AVhen it. was found that more paper money had been issued than could lie redeemed, such money depreciated in value. The branches of the Second United States I ank which began operations in 1817, sustained .serious losses be- cause of the wretched condition of the currency. If it accepted paper money at par, for gold, silver or United States bank notes, it could not dispose of such ])aper at par. The .secretary of the treasury in 1818 ordered the land office, in- cluding that at Jeffersonville and Vincennes, to accept for lands purchased only money that was payal)le on demand in legal currency of the United States Bank. ' ' The United States Bank then ordered its cashiers to accept only its own notes and .specie. Since the land offices could accept only United States liank notes and specie, a great hardshi]) was thrust upon the debtors of the west. How couhl they pay for their farms ' ? Suppose they did raise good crops and a large surplus of hogs and cattle, when they sold them (if they could find a mar- ket ) they wouhl be paid in notes issued by state or private baid -. This money woidd not be acceptable at the land offices in payment for their lands. Specie and United States bank notes were so scarce that not enough could be kejit in the west to serve the general needs for money. The debtors were really in an aggra- vating and embarrassing , ' ,Mi.liti..ii. They laid the blame f u- this condition .ii the United .States bank. an l in this they weiv led by the t crested in the branches of the state bank. The goNcrn.ir in his message of 1818-1819, in re- ferring to the economic condition, said that in ■i- ' The State Constitution of Indiana prolilbited tliat Bank from having oflices in Indiana. Dewey. Fitiancial Hist, of the U. S., P. 2 28. E.sarey. Indiana Banking, P. 223. =Esarey, Indiana Banking, P. 229.

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which they believe they are seconded by tlie unanimous voice of their fellow-citizens of this state. This bank was given the right to de- posit the public moneys, but it soon failed ut- terly in its business. By the end of 1819 popular sentiment had softened toward the United States Bank. The legislature which met in December of that year authorized state and county collccinr hi ac- cept notes of the banks of the I ' micd Stales or its branches, or in the notes of the chartered banks of this state or their branches, or any of the state banks and branches of other states, that pass at par within this state. ' ' This legislature also passed one of those in- genious laws for the relief of debtors. By this act, if a debtor could not meet his obliga- tions, the sheriff should provide for an inquest of five respectable freeholders, who should estimate the value of the property of the debtor whose ijrojDerty was to be sold under execution. Xo property was to be sold ' for less than two- thirds of the returned value of the inquest. ' If the property would not sell for at least two- thirds of its assessed value, then there should be a stay of execution for one year. It is ob- vious that in a community where nearly all the people were debtors, it would almost be im- possible to get five respectable freeholders who would assess the property low enough that it would find a ijurchaser even at two-thivds its (hssem-d value. This law is typical of many laws that were passed for the relief of debtoi-s during this financial crisis. Congress also came to the relief of the debtors. In fact, relief acts in some form or other had been passed by congress nearly every year since lands were put on sale in Indiana, in 1818, 1819 and 1820. relief acts were passed for the benefit of debtors. By these acts. debtors whose lands were subject to forfeiture, were given an extension of credit for one year, if the holding did not exceed 640 acres. By the last of these acts the final jjeriod of foi-- feiture was extended to March 31, 1821. Doc. 66. p. 47. I.. ND SYSTEM REVISED. Other national legislation which did more to relieve the debtor class than any other laws yet passed, was to follow — legislation which would jirevent men from getting into debt to the government. All the factors mentioned by observers, farmers and statesmen as being in- strumental in bringing the economic distress upon the west in 1818- ' 19 possibly operated. Extravagant living and excessive buying from the east; the drain of money from the west through the land offices; reckless speculation in lands and town property; bad and careless banking; the restrictions placed by the secre- tary of the treasury upon the kind of money that would be received from the land pur- chasers — all these undoubtedly operated in bringing disaster to industry in the west. But one factor stands out distinct and fundamental, and above all the other causes that were influen- tial in bringing on the depression. The credit Hy stern had been abused. Banks and individ- uals had loaned money without sufficient secur- ity, on investments that w ' ere not likely to pay dividends. The United States goernment had unduly encouraged speculation since 1800 by giving four years ' credit to purchasers of lands. As a result, the greater part of the peoj le in the west were in debt, and could not meet their obligations. Tiiey had bought be- yond their capacity to pay. By December 31, 1820. the total indebtedness at the land offices in Indiana alone was $2,214,168.63, which amounted to a per rapifa indebtedness to the government alone of $1.5 in a population of 147.178. In a country where accciilablc money was not to be had, this was virtual liaiikrii[)tcy. The past twenty years of the en dif si sfr n in the operations of the pnblii ' hind sales had shown its incomjietency. It had worked disas- trously for the jjeople for whom it was devised — for the settlers. In 1820 congress passed an act establishing a new system of land sales — a fdsh si stem. Treat, the historian of the early operations of our national land system, says of