Note 193 — Chapter XIII

Footnote 193:

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The facts with regard to the Mississippi "Union Bank" bonds may be briefly stated as follows:

The Constitution of Mississippi required that no law should ever be passed "to raise a loan of money on the credit of the State, or to pledge the faith of the State for the payment or redemption of any loan or debt," unless such law should be proposed and adopted by the Legislature, then published for three months previous to the next regular election, and finally reënacted by the succeeding Legislature. The object was to enable the people of the State to consider the question intelligently, and to indicate and exercise their will upon it by the election of representatives to the ensuing Legislature, whose views upon the subject would be known, and with such instructions, express or implied, as they might think proper to give.

In 1837 a law was passed by the Legislature for incorporating the "Union Bank of Mississippi," with a capital of fifteen million five hundred thousand dollars, "to be raised by means of a loan to be obtained by the directors of the institution." In order to secure this loan, the stockholders were required to give mortgages on productive and unencumbered property, to be in all cases of value greater, by a fixed ratio, than the amount of their stock. When the stock had been thus secured, as a further guarantee for the redemption of the loan, the Governor was directed to issue bonds, in the name and behalf of the State, equal in amount to the stock secured by mortgage on private property. No bonds as thus directed were ever issued.

This act was duly promulgated to the people, and duly reënacted by the succeeding Legislature on the 5th of February, 1838, in strict accordance with the Constitution.

Ten days afterward, however, viz., on the 15th of February, the Legislature passed an act supplemental to the act chartering the Union Bank, which materially changed or abolished the essential conditions for the pledge of the credit of the State. By this supplemental act the Governor was instructed, as soon as the books of subscription should be opened, to "subscribe for, in behalf of the State, fifty thousand shares of the stock of the original capital of said bank, to be paid for out of the proceeds of the State bonds to be executed to the said bank, as already provided for in the said charter." This act was passed in the ordinary mode of legislation, and was not referred, published, nor reënacted, as prescribed by the Constitution. As soon as the directory was organized and the books of subscription were opened, and before the mortgages required by the charter were executed, the Governor, in behalf of the State, subscribed for fifty thousand shares of the stock, and issued the bonds of the State for five million dollars, payable to the order of the bank.

These bonds were sold to Nicholas Biddle, President of the United States Bank of Pennsylvania, and by him sent to Great Britain as collateral security for a loan previously made. None of the money received for them went into the Treasury of the State of Mississippi, nor was any of it used for a public improvement. All the consideration ever received by the State was its stock in the Union Bank. The bank soon failed, and the stock became utterly worthless.

Before the bonds became due, the Governor of the State had declared them to be null and void, among other causes, in consequence of the failure to sell them at par, as required by the "supplemental act," under which they were issued.

It is not necessary here to discuss the question of the validity or nullity of the bonds. The object is merely to state the principal facts.

While these events were occurring, and until a period several years subsequent to their consummation, I, who had just resigned my commission in the army, was a private citizen, had never held any civil office, and took no part in political affairs. Indeed, I have never at any time before, during, or since those events, held any civil office under the State government, and neither had nor could have had any part in shaping the policy of the State. When brought out as a candidate for office, my nomination was opposed by that section of my party which advocated "repudiation," on account of my opinions in favor of the payment of the bonds.

As a private citizen, it may be stated that I held that the question of the validity of the bonds should be decided by the courts. The Constitution of Mississippi authorized suit to be brought against the State in such cases in her own courts, and this I regarded as the proper course to be pursued by the bondholders, holding that the State would be bound by the judicial decision, if it should sustain the validity of the claim. This course, however, was not adopted until long afterward, when the question had become complicated with political issues, which rendered the effort to obtain a settlement entirely nugatory.

When I was a member of the Senate of the United States, my official influence was exerted to promote the objects of a citizen of Mississippi, who, with quasi-credentials from the United States Secretary of State, Mr. Buchanan, went to London to propose to the bondholders an arrangement by which the claim, or the greater portion of it, might be paid by private subscription, on consideration of the cancellation of the bonds. This effort failed, from a mistaken estimate on the part of some of the principal bondholders, to whom the proposition was made, of the extent to which State pride would induce our citizens to contribute, and to the belief in a power to coerce payment. The gentleman who bore the proposal, indignant at the offensive manner of its rejection, and conscious of the disinterestedness of his motives, abandoned the negotiation in disgust, and the opportunity was lost.