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 loaned $160,000; Morton, Bliss & Co., Morris K. Jesup, Drexel, Morgan & Co., Ezra A. Boody, George Morgan, son-in-law of J. S. Morgan, of London; J. Bowman Johnson & Co., Richard Irvin & Co., L. Von Hoffman & Co., Russell Sage and many other first-class parties that I can name are prominent sufferers resulting from Georgia’s repudiation; besides which, my firm in 1873 held over $2,500,000 State of Georgia securities, all of which had been paid for or advanced upon, and my firm’s suspension at that time was attributable thereto.
The only way to do, in my judgment, is to make the Southern States which are now under the serious cloud of repudiation, understand that their credit is impaired and facilities for obtaining money materially lessened because of it. Then, realizing _that_ as their position, and finding that they are shut out of the financial markets of the world owing thereto, they will soon make a compromise with their lenient creditors, and remove the blot from their escutcheons. The Federal Government is comprised of the various States of the Union, and to-day enjoys as high a credit as any nation in the world. If the various States comprising the United States are permitted, however, to repudiate with impunity and screen themselves behind their sovereign rights so that creditors have no recourse, the odium will soon fall upon the General Government, and its credit will finally become tarnished if not crippled in consequence. The State of Georgia, as can be proven, received full value. The internal improvements in Georgia bear testimony of this. The taxable property of the State has been immensely enhanced by these improvements, and the debt repudiated is a mere bagatelle as compared with the ability of the State of Georgia to provide for it. She has become rich in late years, and if the stain of repudiation should be wiped out, would stand an excellent chance of becoming a favorite resort for emigration and for the flow of capital. Emigrants from other countries to this, in locating, first look to the credit enjoyed by the State their attention is called to, and if found high, their conclusion is that there is safety for property, and if so, corresponding safety for life; but they will not go to a repudiating State, and in this way the South is held in check in the development of her resources, owing to the want of new blood. The bondholders of the State of Georgia have frequently offered to leave all points at issue in reference to Georgia’s repudiation to the Courts of that State, to the United States District Judge, or to arbitration, the parties to be selected by both sides, all of which has been denied, the reply being the “bonds are repudiated, and we simply will not take any steps to provide for their recognition or payment, and what are you going to do about it?” Under the circumstances, creditors are powerless, of course, to do anything, as the State cannot be sued. If you desire it, I will send you a sample bond of some of the issues repudiated, so that you may see how beautifully the signatures are written, and how firmly fixed the seal of the Commonwealth is placed upon them, besides the magnificent steel engraved workmanship of the Continental Bank Note Company of this city. If there was not a prospect of the State of Georgia being forced by public opinion to provide for these bonds at some future time, they would be worthy to be framed and hung up in our parlors as a complete and fine work of art.
Judge Lochrane, former Chief-Justice of the State of Georgia, has wired me that he will appear before you on Wednesday; Colonel R. A. Crawford, of Georgia, will also do so; Messrs. Abbott Brothers, of this city, and others will appear before you.
You will please append this communication as a part of the testimony, and should you desire more on the subject, call upon me therefor.
I have the honor to remain,
Your obedient servant,
HENRY CLEWS.
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EDWARD BRANDON, ESQ., _Chairman of the Committee on the Admission of Securities to the N. Y. Stock Exchange_:
DEAR SIR:—It is currently reported that the State of Georgia is about to apply to your Committee to list a new issue of bonds. In behalf of myself and others who have suffered most seriously by that State’s unwarrantable repudiation of bonds, which have as full a right to an equal standing as representing the credit of the State of Georgia as possessed by the new bonds to be issued, and fully realizing that the cruel fate of the former merely represents what may be that of the latter, I claim the right, as a member of the New York Stock Exchange, as a sufferer to the extent of several millions of dollars by the State of Georgia’s bad faith, to protest against the admission of any new securities hereafter to be issued by that State until her repudiated bonds are recognized and provided for.
Yours very truly,
HENRY CLEWS.
Ex-Governor Bullock’s Democratic successor, soon after he was elected to that position, appointed as Attorney and Agent for the State of Georgia, one of the State’s ablest lawyers, a gentleman distinguished as having been a member of the Confederate Congress, to investigate all the business transactions between Henry Clews & Co. and the State of Georgia. Under his signature as Attorney and Agent for the State, he makes the following statement: “I would say, with a great deal of pleasure, that after a very thorough and complete examination of the books of account, papers and correspondence of Messrs. Clews & Co., so far as they relate to transactions of that house with the State of Georgia during Governor Bullock’s administration, I am satisfied that in all the dealings of that firm with the State of Georgia, they have acted with both fairness and liberality, and I am convinced that in all these matters Mr. Clews did nothing that would not bear the closest scrutiny, and he did nothing, in my opinion, to affect his character for integrity and fair dealing. I make this statement with the more pleasure because I began this examination of accounts of Clews & Co. under impressions very unfavorable to Mr. Clews.”
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The opinion of ex-Governor Brown, now our able senior United States Senator, was asked by thirty-five members of the Legislature of 1873. In the course of a comprehensive and exhaustive argument, the distinguished Senator says: “The State will be driven to abandon this position (legislative repudiation) and to permit a case to be made by her creditors to test the validity of these bonds in the courts of the country, or she must stand dishonored in the estimation of all good men, and her credit must sink to a ruinous depth.”
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The late ex-Governor Alexander H. Stephens, ex-Vice-President of the Southern Confederacy, is on record as saying, in reference to this repudiation, that it is “nothing short of public swindling. Not less infamous than obtaining money under false pretences.” But the partisan feeling was then so intense that even the lamented ex-Governor Jenkins was hardly accorded a respectful hearing in the Constitutional Convention, of which he was president, when he plead against sweeping repudiation without granting the holders a judicial hearing. Ex-Governor Jenkins said on that memorable occasion: “Now, sir, I take this ground: that for the proper examination and investigation oi these claims, neither the Legislature nor this Convention, nor the people themselves, are a proper tribunal to decide these matters. They ought to be examined and determined judicially. It will now, I presume, be admitted that the five years’ time between legislative and constitutional convention repudiation was not allowed to pass unnoticed by the parties having these bond claims against the State. Having waived our sovereignty in the past to allow the State to be sued in every county in the State on claims for small-pox expenses, I submit that our sovereignty ought not to be plead to bar so important an issue as that now under consideration. The State can, in no event, be put to loss. The whole State has been largely benefited by the legislation and by the executive action which was subsequently repudiated. We have been for fifteen years past collecting annual taxes on fifty millions of enhanced value of our taxable property; an increase which is directly traceable to the good effects of the new railroads built under that legislative and executive authority. Shall we—can we honestly receive these benefits and repudiate our liabilities?”
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An interview with ex-Governor Rufus B. Bullock, of Georgia, May 29th, 1885:
A reporter called upon ex-Governor Bullock at his rooms, Fifth Avenue Hotel, and obtained the following interview:
Governor Bullock: “Any information in my possession is at your service. I have published from time to time, over my own signature, my views on this subject, and I have no objections to repeating them. I desire to say, however, that I am in no wise a party to the recent proceedings which have been had before the Attorney-General of New York. I was in the city on private business and without any previous knowledge of the proposed hearing. I attended the hearing out of curiosity, expecting to hear an argument by ex-Chief Justice Lochrane, and while there was invited by the Acting Attorney-General to respond to his inquiries. This I did with the result as reported in your valuable paper. During my administration in 1868-’69-’70 and ’71, bonds of the State were issued for State purposes, and the endorsement of the State was placed upon certain railroad bonds under the authority of law.
During the wild excitement that resulted in and followed the overthrow of the Republican government in Georgia, nearly all the acts of Republican administration were repudiated, among them its financial transactions, and up to this day and hour the questions of fact have never been permitted to reach any judicial tribunal.
The people of New York State are fair-minded, law-abiding and honest, and whenever they can be informed of the truth will fearlessly follow it; but with regard to the real merits of this repudiation, no light has reached them because our courts have been closed.
It is asserted by the holders of these repudiated obligations—and in this assertion I concur—that every bond was issued in accordance with law, and that the State is now in the enjoyment of the benefits resulting therefrom. In the exciting times to which I have referred, a majority of the then Legislature decided that the State was not bound by the acts of its predecessors, and therefore these obligations were null and void.
This is, of course, a question of law, and not of legislation. I am sure that now, when partisan passion has subsided, both parties to this controversy would cheerfully acquiesce in any decision reached by our Supreme Court, and that the holders of these defaulted securities would accept whatever is awarded them in a long term bond at a low rate of interest, and on such an adjustment all parties, at home and abroad, could unite in maintaining the high financial credit to which the Empire State of the South would then be entitled.
In December of last year the Atlanta _Constitution_, discussing this subject, used the following language: “The burden of his complaint is, that the bonds have never had a hearing in court. This comes with poor grace from the ex-Governor, who, when the validity of the bonds issued under his administration was being discussed by the legislative committee, was absent from this country, his whereabouts unknown, and his testimony not procurable. The bonds were ‘in court’ then, and as Governor Bullock was not present with his evidence when it was needed, he should not complain that a new hearing is not had for his benefit.” To this I made reply, which the _Constitution_ kindly published, and I will thank you to copy as follows: “I desire to say that I was not absent from the country. My whereabouts were known, and my testimony was before the committee in the full and complete report of the financial condition of the State which I made to my successor, sustained by the official records of the Executive and State Departments. I never received a request from that committee to come before them in person, and my presence would not have added to the information in their possession. Every request received by me from my successors, to aid in their investigations, has been promptly complied with. In accordance with such request I met Dr. Bozeman, financial agent, Attorney-General Hammond and Governor Smith, in New York, and also subsequently, Colonel Snead, Attorney for the State, and Colonel Kibbe, chairman of committee. No fact within my knowledge has ever been withheld, nor have I ever neglected any proper opportunity to contradict the statement that any of the bonds issued during my administration and reported to my successor were ‘bogus.’ But, Mr. Editor, the question is, shall a debtor pass on the validity and enforce judgment against his own indebtedness? I submit that a legislative investigating committee is not ‘a court’ in the sense that its findings are conclusive on questions of law. To hold a question so decided to be _res adjudicata_, is to sustain a legislative usurpation of the judicial functions of the government. If your position be well taken, that because the Legislature has decided against the bonds, the case is _res adjudicata_, and the judiciary is precluded—of what avail is our constitutional guarantee that the executive, legislative, and judicial branches of the government shall be separate and distinct, and that neither shall encroach upon the functions of the other? What protection has a citizen for his property if a legislative decision upon a legal question must be regarded as final _res adjudicata_?
Does not the taking of other people’s money to build up our railroads, and refusing those people a hearing in courts of our own creation, before judges of our own election, indicate a want of confidence in the justice of our cause? The Territory and State of Minnesota used other people’s money to open up her lands by the construction of railroads, just as Georgia did, pledged the faith of the State for repayment, and then repudiated, just as Georgia did. After twenty years’ delay, justice has been done, and her obligations, as ascertained through her court, have been paid. I have faith to believe that the Empire State of the South will eventually keep pace with her sister States in the Union in meting out exact justice through her courts to every man, come from whence he may.
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Hon. Wm. A. Post, Deputy Attorney-General of this State, by appointment, visited this city last Friday to take evidence on the Georgia repudiated bond question, the object being to determine the legal status of a new issue of bonds by the State of Georgia in connection with the savings banks of this State. Owing to the repudiation of that State, at present these institutions are debarred from investing in bonds of any repudiating State, and the effort now is being made by the representatives of the State of Georgia to remove that barrier, so that the savings banks can be gutted of their surplus means and filled up with the bonds issued by that State, which are more than likely to share the wicked fate of repudiation, as previous issues to the extent of $8,000,000 have done. The savings banks managers, even in the event of obtaining a decision authorizing them to take Georgia bonds for investment, should be held personally liable for any losses that may fall upon such institutions if they hereafter invest the funds of widows and orphans in a security which, judging from past experience, is almost sure to be wiped out and made worthless. Mr. Clews charged that Mr. Calhoun’s appearance in representing the State before the Attorney-General at Albany was a surreptitious proceeding, and was only heard of by mere chance by the holders of the repudiated bonds through a squib in a Georgia paper. He also stated that the bondholders had patiently waited twelve years for their money, and no body of creditors had ever been so lenient as those of the State of Georgia, and justice demanded that these long-suffering and much-defamed creditors should be settled with prior to the financial world according to the State of Georgia a sufficiently high credit to admit of her floating any new issues of bonds. A motion was made to adjourn the meeting until the 20th, which Mr. Post said he would accede to after asking ex-Governor Bullock a few questions in relation to the connection of the firm of Henry Clews & Co. and the State of Georgia during the time he was its Governor. He desired to make these inquiries now, as the ex-Governor was present and might not be at the adjourned meeting. Mr. Clews requested permission to state that his firm—Henry Clews & Co.—had never been agents for the State of Georgia, but merely acted for her as bankers and brokers. The agent of the State during the entire period of Governor Bullock’s term of office was the Fourth National Bank of this city. He stated that his firm received no bonds, excepting by purchase or as collateral, and advanced money to the State as it was needed. At one time the State owed for said advances as much as $1,650,000; the money so advanced was stated by Georgia’s officials as required to meet the expenses of the government of the State. Ex-Governor Bullock fully ratified Mr. Clews’ statement. He admitted that the Fourth National Bank was the State financial agent, and that he had placed a large quantity of bonds with Henry Clews & Co. to market and as collateral for advances. “I will say,” said the Governor, “that every dollar secured on the sale or pledge of these bonds was received by the State, and it was expressly agreed that the firm of Henry Clews & Co. should hold all the bonds in their hands as security for the indebtedness due them by the State of Georgia.”
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GEORGIA’S OUTLAWED BONDS.
Newspapers in Atlanta, Savannah and other parts of Georgia have violently assailed _The Graphic_ for its comments on the new issue of Georgia State Bonds as affected by the repudiation of a former issue. These journals are short-sighted, as are the people of Georgia who imagine that they save money by outlawing the obligations of their State issued in the usual manner. We will not impute deliberate dishonesty to them, but they certainly do not place their own motives in a favorable light when they exclude the holders of the repudiated bonds from even the right to present their claims before the civil courts of Georgia. Ex-Governor Bullock has been berated in the same connection, and he cogently replies:
“I have no pecuniary interest in the repudiated bonds or obligations. I have no lot or part in any scheme or combination by or through which public attention is or has been called to this matter. My attitude is that of a private citizen who has as high a regard for the honor and good name of Georgia as any man within her borders. I never obtrude “the bond question” upon the public attention. But when my official action is attacked in that connection I shall never fail to assert and re-assert that the financial statement made by me to my successor in office was the exact truth and that its correctness never has and never will be successfully controverted. In that financial statement were many of the State obligations, which in a time of great public excitement and partisan zeal were ‘outlawed’ by the action of a political body, and up to this day and hour the holders of such obligations have been denied that cool, dispassionate hearing of their claims which our courts alone can give. My ‘attitude’ is that Georgia is too great, that she stands too prominent in this country and in the world at large to accept the position of being a semi-annual defaulter and refusing to the creditor a hearing in her own courts. It is idle for me to assert or for you to deny the validity of the defaulted securities. That is a question of law, and no Georgian can defend his State while she slams the door of our courts in the face of our creditors. I assert that it does make a vast difference to Georgia whether her new securities are listed at the Exchange in New York. Our own people or other people can, of course, buy and own them, and I know the interest and principal will surely be paid, but unless the bonds are ‘listed’ they are not, in mercantile parlance, a ‘good delivery,’ and will not stand abroad as they should, equal with the best State in the Union.”
A State which once repudiates its obligations cannot be trusted not to do the same thing again. What guarantee can any investor have that the bonds which Georgia is now trying to put upon the market may not be outlawed by the next Legislature? The _Graphic_ has no interest in the matter beyond that of upholding public morals, the good name of the State and the rights of swindled creditors. The State which repudiates is as foolish as the imbecile who cut off his nose to spite his face.—_N. Y. Graphic_, June 6th, 1885.
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The extreme care with which so-called securities or new issues of bonds are scrutinized in this market nowadays is shown in the opposition which has sprung up to the proposed listing on the New York Stock Exchange of $3,500,000 new Georgia State bonds. While money is a glut in the markets and our banks are now carrying a larger idle reserve than ever before known in the history of business, there is no disposition to permit Southern repudiators to come in and secure any part of the funds. The application to the Attorney-General to permit our savings banks to “invest” in the bonds, and the request that they be listed in the Stock Exchange, aroused New York bankers to action, and 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._
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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.
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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._
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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.