Fifty years in Wall Street
their opposition has been so far very effective. It has had this
good, at least, that it has revived attention in regard to the
repudiation of old obligations of Southern States. By its act of
repudiation, Georgia mulcted the New York investors to the tune
of millions. I know of one banker who now holds more than
$2,500,000 of these bonds, on which there is an interest
accumulation of twelve years’ duration, and at least three
leading financial institutions were carried to the wall by the
same means. Now, it is considered very poor grace for the modern
Christian statesmen of Georgia to pass around the hat again. Let
the State first repudiate its repudiation, pay up old scores,
and then it will be quite early enough to ask for further loans.
The argument that the credit of the State is really benefited by
the repudiation, as she has so much less obligations to meet, is
a quaint one, and worthy the source from which it emanates. This
is not the sort of “prosperity” that invites further investment
of Northern funds.—_Syracuse, N. Y., Sunday Herald._
* * * * *
GEORGIA BONDS.
When a Georgia bond is put on the market, our Democratic friends
cry out “Great is the Credit of Georgia.” They claim that
Georgia pays all of her obligations whenever they are due,
knowing their claim to be utterly false. Georgia has not only
repudiated legal obligations, in the hands of innocent
purchasers, but she denies the parties who have paid value for
her bonds the right to take the judgment of her own courts on
the validity of those bonds. So in the bond business the State
of Georgia acts not only the role of the thief and robber, but
also of the coward. The man who claims that Georgia meets all
her obligations is simply a liar.
* * * * *
Respecting State securities, investors are showing a very proper
discrimination against the issues of States tainted with
repudiation. The action of the Superintendent of the Banking
Department of this State, in forbidding savings institutions
from investing in the new issues of the bonds of Georgia, has
attracted attention to the danger of investments thus tainted,
and is very generally approved by the investing public as a
check to future acts of this kind. The disposition shown by
certain managers of savings banks to put the funds in their
charge into such doubtful securities should be strongly
condemned; and it is a question whether it is not necessary, as
a protection to such depositors, to make such a use of the
deposits of the poorer classes a penal offence.—_Weekly
Financial Circular of Henry Clews & Co., June 6th, 1885._
* * * * *
HOW THE GEORGIA BONDS WERE NEGOTIATED.
The following circular explains the manner in which the Georgia bonds
were negotiated with my firm:
NEW YORK, July 3, 1885.
HON. WM. A. POST,
_Deputy Attorney-General, State of New York_:
The firm of Henry Clews & Co. did not solicit the account of the
State of Georgia, but it was opened at the request of Mr. I. C.
Plant, the leading private banker of Macon, Ga., and the most
influential and affluent banker of the State of Georgia then and
at the present time. Mr. Plant was brought to my office by Mr.
P. C. Calhoun, President of the Fourth National Bank, which
institution was the financial agent of the State of Georgia at
the time. Mr. Calhoun introduced Mr. Plant to me, by giving that
gentleman a very strong endorsement, and stated that Mr. Plant
was in this city for the purpose of raising money for the State
of Georgia, which money was required to pay off the members of
the Legislature. Mr. Calhoun stated that his bank had loaned to
Mr. Plant $400,000 on currency 7 per cent. Georgia bonds, and as
money was very stringent at the present time and the calls were
very numerous, he felt as though $400,000 was as much as he
ought to loan in any one quarter. “But if you have any money,
Mr. Clews, that you are willing to loan at the present time, if
you will accommodate Mr. Plant, it may result in your doing some
good business with the State of Georgia. I would say,” said he,
“that you cannot advance money in any quarter where it would be
safer than to loan on the Georgia State bonds which Mr. Plant
will offer you. I know the State of Georgia well. I have ridden
on horseback over almost every foot of ground in the State in my
early life in my collecting trips. My father was in the saddlery
and hardware business, and the larger part of his business was
in that State. I know the people of this State; and as an
evidence of my opinion of the future of this State and its
bonds, I will say that if I had my choice to put my money into
these bonds of the State of Georgia, or those of the State of
New York, to leave to my family, I would give the bonds of
Georgia the preference, for the reason that her debt is so small
as compared with the debt of the State of New York at the
present time, and the future of the State of Georgia is destined
to be one of great prosperity.” Mr. Plant then said: “Mr. Clews,
Mr. Calhoun has advanced $400,000 towards the amount I need, and
I want $250,000 in addition. I know the money market is very
tight [as it was at that time, money being worth 7 per cent. per
annum and 1 per cent. per day commission]; still, I think, if
you will loan this money to the State of Georgia, that it will
enable you to make a connection which will prove profitable to
you in the end.” I said: “Very well, Mr. Plant, I will make the
loan to the State of the $250,000 which you require.” Mr. Plant
then said: “Well, place it to the credit of the State of
Georgia, and I will bring in 500,000 of Georgia 7 per cent.
currency bonds, the same character of bonds which have been
lodged as collateral with the Fourth National Bank. I will go at
once to the Fourth National Bank, where they are, and bring them
down here;” which he did. The $250,000 was then placed to the
credit of the State and a telegram to that effect was sent to
the Governor, and it was at once drawn out on the official
drafts of the State. This started a correspondence with Governor
Bullock, in his official capacity, he being entirely unknown to
me before. Other applications were then made direct by the
Governor for additional loans, which were made from time to
time, until the amount so advanced reached to $1,650,000. After
receiving, in addition to the 500,000 bonds referred to, 800,000
more of similar bonds came into our possession from time to time
as collateral, being put up at 50 cents on the dollar; and when
we afterwards received a large installment of the gold quarterly
7 per cent. bonds, having at that time an excess of collateral
in our hands, we voluntarily forwarded to the State 500,000 of
the Currency 7s. This was precisely and exactly the way my
firm’s connection was commenced with the State of Georgia. Mr.
I. C. Plant, who is still a banker of Macon, Ga., I am sure,
will testify to the correctness of my statements.
The State of Georgia gold 7 per cent. quarterly interest bonds
were placed by the Governor of Georgia in my firm’s hands as
additional collateral against the advances made to the State,
with full instructions to sell same and credit avails.
Application was made by request of Governor Bullock to have this
issue of bonds placed on the regular list of the New York Stock
Exchange, and after a full investigation by that body, they were
admitted. A portion of these gold bonds were sold in this
country and the balance in Europe. When the Georgia Bond
Committee came here 77,000 of these bonds were in Europe in the
banker’s hands there for sale, and my New York firm held 25,000,
all others received having been sold. These 102 bonds were
reported to this committee as unsold at that time, but soon
thereafter, and before the Act of repudiation was passed by the
Georgia Legislature, these 102 bonds were sold and reported as
sold, and I think the price was 97½, and the State’s account was
credited with the avails, and the proper authorities of the
State were duly notified thereof. Up to the time of sale of
these 102 bonds our standing order to sell continued and was
never revoked; because, however, these 102,000 had been reported
to the Georgia Bond Committee when in this city as being on hand
at that time, they were repudiated, together with the other
bonds which we were supposed to still hold. The New York Stock
Exchange was called upon by the Treasurer of the State of
Georgia to order struck from the list these 102 bonds, and the
Exchange was compelled to be governed thereby, as official
notice had been received of their repudiation. The following
were the numbers of these bonds * * * * You will perceive that
the numbers are not consecutive, thus showing that they were not
the last of the bonds placed in our hands. The low numbers were
received first and the highest numbers last, in the deliveries
made to us by Governor Bullock. Under this statement of facts,
which I am prepared to prove, I insist that these 102,000 bonds
are as binding upon the State of Georgia as any of those which
are now recognized. My fellow members of the Stock Exchange who
have made investigation fully confirm this opinion. A large
number of the coupons of these bonds were paid by the State on
these 102,000 bonds, thus showing the State’s recognition of
them at one time. My firm repeatedly called upon the officials
of the State of Georgia to pay the balance due, but we could get
no response. After waiting patiently a very long time, we called
in eminent counsel for advice in this matter, and under said
advice the Governor and Treasurer of the State of Georgia were
notified in the regular legal form that if the said indebtedness
was not paid on or before a specified date the collateral in our
hands, each item being specified, belonging to the State, would
be sold at public auction at the Merchants’ Exchange Rooms, 111
Broadway, at 12 o’clock, by A. H. Muller & Sons, auctioneers.
This notice of said sale, together with list of securities, was
inserted in the newspapers; the sale took place, and the 800,000
Currency and other bonds were disposed of to the highest
bidders, and the State’s account credited with the avails. All
these securities should be considered, therefore, as having
passed out of my firm’s possession and in the hands of other
holders for value. The State of Georgia in this matter is
certainly amenable to New York laws, and the entire business was
conducted in accordance with said law. Governor Bullock’s
successors did all they could to depreciate the securities
issued by their predecessors, and are responsible for the low
prices which the State of Georgia bonds afterward sold for, as
during Governor Bullock’s administration the State 7s were at
about par and the first mortgage Brunswick & Albany bonds,
guaranteed by the State, sold at 90 and upwards. As an evidence
of the high credit which my firm had worked up for the State, we