Fifty years in Wall Street
hardly be apprised of it until everything should be fixed according to
the pre-arranged programme, and in favor of the repudiating State
obtaining fresh and unlimited credit without settling up the old score.
Mr. Calhoun was assisted in his able argument on the sovereign right of
repudiation by the Hon. N. J. Hammond, Member of Congress and
ex-Attorney-General of Georgia.
In reply to these great lights of the Southern Bar, whose genius would
have shone more brilliantly in an honest cause, I made the following
address:
Henry Clews’ speech before the Attorney-General of the State of New
York, June 20, 1885:
The original act of repudiation by the State of Georgia has been
repeated each six months since that period to the present date,
by the refusal of the State to recognize and pay the coupons on
said bonds as they matured. This alone repeats the repudiation
of that State twice each year for the past ten years at least,
and therefore is a continuance of the repudiation from the time
of the original vile act up to the present date; besides which,
the bonds repudiated had twenty years to run. The maturity of
said bonds does not expire until 1890. The repudiation should be
considered, therefore, as continuous during the entire period,
from the date of the issue of said bonds until 1890, five years
hence. If it is to be accepted that the test of a State’s credit
is to be able to show a record free from fresh repudiation for a
period of ten years, and that repudiation is not a continuous
repudiation until such obligations are fully settled and
provided for, what is to prevent a State from negotiating a
fabulously large amount of bonds, and thereby place an amount
sufficiently large in her treasury to admit of bridging over for
the required ten years, and, after making such ample provision,
then pass an act, as heretofore, repudiating the bonds issued,
and keep repeating it each decade? Supposing the same rule held
good with a bank robber—and there is, as far as integrity goes,
really no great difference between the two, only one seeks
protection in Canada and the other behind her sovereign rights,
which is her Canada refuge. The robber breaks into a savings
bank, guts it of several millions of dollars, flees to Canada,
and there lives in affluence for ten years. How silly it would
appear if, after ten years, provided he could show a record free
from thieving during that time, he had the legal right then to
come back, and thereby be entitled to a clean record as an
honest man, and in consequence be accorded a high credit. The
position of the State of Georgia in assuming such a role, in
coming here at this time to ask our savings banks to aid her in
such a nefarious business, simply lacks a parallel for audacity.
The management of savings banks must be conducted so as to
inspire confidence with the depositors and with the entire
community also. It is necessary, especially at panic periods,
for full confidence to be felt in the investments of such
institutions. If the prohibition is removed, as is now sought to
be, and savings banks be permitted to invest in Georgia
securities, and one of them should buy $500,000 of the bonds, I
venture the prediction that such an investment will sooner or
later form the basis of a rumor which will cause a panic among
its depositors and break that institution. This would result in
a most serious disaster to probably thousands of poor people
whose money had been lodged there for safe-keeping. The mere
whisper during a panic that a certain institution had $500,000
of Georgia bonds, and they were about to be repudiated, would
bring about just such a disaster as I have stated.
I ask your Honor if it would be wise for any savings bank to be
permitted by the Superintendent of the Banking Department to
become thus exposed to ruin? A State that is abundantly able to
meet her obligations and dishonors them is too despicable for
either credit or tolerance in a civilized community, and it is a
disgrace to the nation that States comprising it have the power
to make such obligations and repudiate them at will and screen
themselves behind their sovereign rights, whereby they cannot be
sued, and in consequence leave the outrageously wronged innocent
bondholders without means of redress whatsoever. If the United
States Government ever expects to obtain that permanent high
credit in the money markets of the world to which the immense
resources of this magnificent country justly entitle her, the
great and growing evil of State repudiation must be remedied.
For States to repudiate with impunity, as the State of Georgia
has done, leaving no means whatever for redress on the part of
the victimized creditors, is a blot upon the escutcheon of the
whole country. This is not a fight, your Honor, on the battle
field against the South; it is a fight on the financial field,
and, as it is second only in importance to the other, it must be
settled, and now is the time to strike the blow, as it will do
the most good in that direction. We, the creditors of Georgia,
have not only borne the loss and hardship of having our
securities made valueless by a legislative body, and many of us
ruined thereby, but we have also been vilely defamed—being
branded as conspirators to rob the State—simply because we were
found to be holders of these dishonored bonds. This has been
done by the State to cover up her own infamy, and make it appear
that we were the guilty parties and not the State. The attitude
of the State of Georgia, your Honor, is not unlike that of a
pickpocket, who, after rifling his neighbor’s pockets, is the
first to cry “stop thief” to elude detection. All that the
bondholders ask and claim is to have the entire case submitted
to a proper judicial tribunal. This right we have been denied by
the State, and the Constitution leaves us powerless to enforce
it. The State simply says, the bonds are fraudulent and we will
not pay them. It is a very remarkable circumstance, however,
that there has not been a single one of the numerous officials,
from ex-Governor Bullock down, who were connected with the issue
of these so-called fraudulent bonds, prosecuted to conviction in
the thirteen years that have intervened since their issue. Still
these bonds are all repudiated on the ground of being
fraudulently issued, and the innocent bondholders alone are made
to suffer the harsh penalty imposed for having staked their
money on their belief in the honor and integrity of the people
of Georgia, which it is quite apparent are now _non est_.
I addressed a letter to your Honor on May 27th last, which
contains important information in connection with these
repudiated bonds. I ask permission to read this letter at the
present time, so that it may become a part of the evidence in
this case.
The following circular letter contains a variety of opinions analyzing
the true relations of the State of Georgia to her creditors, and clearly
setting forth the nature of her liability in the matter of the
repudiated bonds in connection with the house of which I was the head:
REPUDIATION ROBBERY BY THE “SOVEREIGN” STATE OF GEORGIA.
“_The divine doctrine of State Sovereignty, which makes a State
too dignified to be sued for its debts, ought to make
it also too respectable to cheat its creditors_”
NOTICE.—Managers of Insurance Companies or Savings Banks should be and
are likely to be held responsible, by stockholders and depositors, for
any losses incurred in the event of their buying or loaning upon any
bonds issued hereafter by States which are under the cloud of
repudiation.
* * * * *
NEW YORK, May 27, 1885.
HON. WM. A. POST, _Deputy Attorney-General, Albany, N. Y._:
DEAR SIR:—I deferred answering your telegram of Saturday until
this morning for the purpose of ascertaining whether the
bondholders’ counsel would be in readiness to meet you at the
time proposed, and only ascertained the fact this morning that
he would, so I wired you accordingly. I presume that this
Georgia repudiation question comes before you for the purpose of
removing the prohibition from the savings banks of this State to
their buying or loaning upon Georgia State bonds, owing to that
State being under the cloud of repudiation. The prohibition of
the savings banks, issued by Mr. A. B. Hepburn, the former
Superintendent of the Banking Department, was based upon a
thorough and exhaustive examination in reference to all matters
appertaining thereto. This I have reason to know, as that
gentleman visited New York and took my testimony and others in
the case. The State of Georgia has always charged, as the
justification for repudiation, that R. B. Bullock, Governor at
the time of the issue of said bonds, had issued the bonds
without proper legislative authority, and besides had stolen or
misappropriated most of the avails. About three years since
Governor Bullock visited Atlanta, Ga., and demanded his trial
under the several indictments against him. The trial came up
soon thereafter, and he was acquitted on all the charges. This
gentleman is now a resident of Atlanta, Ga., and is to-day one
of its most prominent citizens. It has been also charged that as
he was a Northern born man, that he was a “carpet-bag” Governor,
and for that reason the bonds were not a legal issue. That
attitude is also unwarrantable, as the ex-Governor remained
South during the period of the entire war, and took a prominent
part on the Confederate side, in giving aid and comfort, and
thereby can justly be considered as being a Southerner and not a
Northerner in his interests and feelings. Most of the bonds
repudiated were passed upon as legally issued and properly
signed, by our best lawyers, such as Messrs. Evarts, Southmayd &
Choate, ex-Judge Emott, Abbott Bros., E. Randolph Robinson, the
brother of Judge Sedgwick, of this city, and others.
Some of these repudiated bonds were also passed upon by the New
York Stock Exchange, and because repudiated were afterwards
stricken from the list of securities to be dealt in. The face of
these securities were worth par a few days prior to their
repudiation, and immediately after that Act was passed were
reduced to no more than the value of the paper upon which they
were engraved. The same may at any time be the fate of any new
securities to be issued by that State. Those who had these bonds
were and are innocent parties, and among the sufferers are Trust
Companies and savings banks. The Metropolitan Savings Bank holds
$100,000 of the 7 per cent. Georgia gold bonds, bought about
par; the Brooklyn Trust Trust Co. holds $100,000; the Union
Trust Co. holds $100,000; the Commercial Warehouse Co. held
between $300,000 and $400,000 of the bonds, and their
repudiation caused the failure of that institution. The New York
State Loan and Trust Co., Henry A. Smyth, President, also had
$100,000 of the bonds, which loss was largely instrumental in
causing the collapse of that concern. The Broadway National Bank
holds $200,000 of these bonds as collateral, upon which they