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 bought out the first million issued of Brunswick & Albany First bonds guaranteed by the State of Georgia, in the Berlin and Frankfort markets at 104, and there were seven millions of bids therefor, and the one million had to be distributed _pro rata_ amongst the said bidders. In testimony of the correctness of this statement, I refer you to Mr. Budge, the head active partner of Hallgarten & Co., and Mr. Schiff the head active partner of Kuhn, Loeb & Co., of this city, who were interested with me, and through these two gentlemen the bonds were sold. After this great success, I ask you, or any fair-minded man, was not my firm entitled to continue to advance upon Brunswick & Albany first mortgage bonds endorsed by Georgia? and as the 275 Cartersville & Van Wert bonds, endorsed by the State of Georgia, were offered to my firm shortly after this signal success as collateral, were they not also equally justified in advancing 167,000 upon them? and _in that_ way, and in that alone, these securities came into our hands. I most positively assert that my firm never had any other pecuniary interests but as herewith set forth in these two enterprises. At the time of the repudiation of the State, my firm held
750,000 Brunswick & Albany first mortgage bonds, endorsed by State of Georgia.
275,000 Cartersville & Van Wert first mortgage bonds, endorsed by State of Georgia.
587,000 State of Georgia Gold 7s.
350,000 Brunswick & Albany first mortgage bonds.
400,000 Coupons cashed by us on the State of Georgia securities, but a legal claim against the State.
800,000 State of Georgia Currency 7s.
——
3,162,000
Also, a judgment of 525,000 obtained in favor of Henry Clews & Co. in the State courts of Georgia against the Brunswick & Albany Railroad Company, being an amount due my firm over and above all securities in our hands. My firm also obtained in the United States District Court of Georgia a judgment to secure our advances of 167,000 to the Cartersville & Van Wert Company. Neither of these judgments have ever been satisfied.
This leaves out entirely the 102,000 Georgia 7s (quarterlies), as well as many other scattering lots of different issues of the State of Georgia securities. The past due bonds referred to by Mr. Hammond were being hawked about, both here and in London, for the purpose of forcing their payment, and the holders threatened to use them to interfere with the sale of the gold 7s which we were about to bring out in this and foreign markets. I mentioned this matter to Governor Bullock when on a visit here. He then directed me to buy up such of these bonds which were in troublesome hands, and as they were a demand claim against funds then in the State Treasury, all you have to do, he said, is to charge up the amount which you paid for said bonds to the State’s account and retain in your hands the bonds as collateral, and when the State is flush enough I’ll see that you are paid direct from the Treasury. These past due bonds belonged to us, and were taken up by our money and not the State’s; the 98,000 which were cancelled, which Mr. Hammond refers to, were so cancelled by error, which I am fully prepared at any time to prove. The depreciation in Georgia State bonds which Mr. Hammond refers to did not exist during Governor Bullock’s administration, but was brought about by his successors in office, as they did all they possibly could to depreciate the bonds of the State authorized and issued by the previous Legislature.
I have the honor to remain,
Your obedient servant,
HENRY CLEWS.
* * * * *
GEORGIA SECURITIES AND NEW YORK SAVINGS BANKS.
The efforts that are being made to place Georgia securities in the savings banks of New York ought to be resisted for two very good reasons: First, such investment would be contrary to the law of the State; second, even if it were legal it would be imprudent and unsafe.
As to the authority of our savings banks to invest in these securities, it is understood that the opinion of the Attorney-General has been asked. On this point there is not much room for question. Savings banks are prohibited by law from investing in the stocks or bonds of any State that has within ten years defaulted in the payment of any part of the principal or interest of its debt. By a constitutional amendment adopted in 1877, Georgia ratified previous acts of the Legislature repudiating more than eight millions of its obligations. The excuse given for this proceeding was that the State’s obligations had not been lawfully contracted, and therefore were not binding. On this ground it is claimed that Georgia securities do not fall within the prohibition put by the law upon the savings banks of New York. There would be some force in this view if Georgia were sustained by any judicial decision holding the bonds invalid. But it took advantage of that principal which protects a State against suit by a citizen. It decided the question by its own arbitrary edict It gave its victimized creditors no voice in the matter. In the absence of judicial support or warrant, its action can be regarded only as a repudiation.
But if there were no legal obstacle in the way, prudence alone should deter any savings institution from investing in the bonds of a State that has so recently broken its faith and repudiated its obligations. The managers of a savings bank hold an exceptional trust. These institutions are the depositories of the earnings of the poor. The first consideration in their management is safety. With that end in view the law imposes the most stringent regulations on their supervision and the disposition of their funds. Their investments are properly restricted to the safest and most unquestionable securities. There is neither authority nor excuse for taking any risk. Let individuals, if they wish, invest in Georgia bonds. That is their own business. But the managers of a savings bank cannot run any such risk without failing in their duty to thousands of poor depositors.—_N. Y. Herald, July 17, 1885._
* * * * *
THE ATTORNEY-GENERAL’S DECISION.
The decision of the Attorney-General, as was expected, wisely prohibited the savings banks of this State from risking any of the hard earnings of their large number of depositors in such an uncertain security as Georgia bonds.
The Bank Superintendent, Willis S. Paine, referring in his report of March, 1886, to this decision, says:
“For some time there has been a determined effort to have the bonds issued by the State of Georgia accepted as a lawful investment for savings banks of this State. My predecessor in office declined to recognize their legal right to invest in bonds of the State mentioned. Late in 1885 the State issued a considerable amount of bonds, which were offered to the savings banks on terms advantageous to them, and there was a desire on the part of some of the banks to purchase the bonds. The matter was by me referred to the Attorney-General to determine whether the State had defaulted. Several hearings were had, at which the various interests involved were represented by eminent counsel. The conclusions reached by the Attorney-General were based upon a consideration of the facts and circumstances relating to the issue by the State of Georgia of its guarantee of $1,500,000 of bonds of the Brunswick and Albany railroad, which he holds are in default of interest, the principal not yet being due. He reaches the conclusion that at least in the case of the bonds issued or indorsed in aid of the Brunswick and Albany railroad it has defaulted, and this brings the case within the prohibition of the statute of New York regulating investments by trustees of savings banks. He therefore concludes that the savings banks of New York may not lawfully invest their deposits in the bonds of the State of Georgia.”
* * * * *
GEORGIA’S NEW ISSUE.
An attempt was made last summer to have several millions of the new issue of Georgia bonds listed on the Stock Exchange in a second hand style, through the instrumentality of Mr. Fred. Wolf, who was presumably an innocent holder of these bonds. On this occasion I addressed to the Governing Committee the following protest:
June 22, 1886.
_To the Governing Committee of the N. Y. Stock Exchange_:
DEAR SIRS:—I have just been informed, whether correctly or not, that, not the State of Georgia, but a person by the name of Mr. Fred. Wolf, of this city, has applied to your Committee to list $3,300,000 State of Georgia 4½ per cent. bonds, and sets forth that said bonds are to take up those of the State maturing in February, April and July. I am advised that the bonds which matured, during the two months first named, long since past, have already been taken up by the State, so there remains but those which mature on the 1st of July next outstanding of the class of bonds referred to. At the time I was instrumental in defeating the State of Georgia from removing a very necessary restriction imposed by a New York State law from lodging these same bonds upon the savings banks, the officials of the State of Georgia exulted over the fact that the said defeat in no way injured the State of Georgia, as the bonds had already been disposed of at a satisfactory price to the State, and therefore no longer belonged to them; thus showing that the State of Georgia does not make the application for the admission of these bonds to the Exchange, but clearly shows that they are in possession of the avails of these said bonds to provide for; not only those that had matured but those that are due on the 1st of July next, consequently it takes away the necessity of the State having the application now made favorably acted upon by your Committee. Mr. Wolf, therefore, makes the application in his own behalf, doubtless to enable him to extricate himself from his own speculative venture in these so-called securities, which he was in hopes when he took them of turning over to certain saving banks who, by the Attorney-General’s opinion, were precluded from buying these identical bonds, which misfortune, from the statements made by the officials of the State of Georgia, falls not upon them but the party who has bought the bonds. As the original plan of lodging these bonds in the savings banks was a failure and the poor people’s money on deposit there was saved from wreck thereby, it is now sought to land them upon others, providing the New York Stock Exchange can be secured to give character to them by listing them as is now attempted. My firm represents two seats on the New York Stock Exchange and has large interest there and I protest against the proposition to list these Georgia bonds for regular dealings at the Exchange, as the State of Georgia is not only in default in payment of her bonds, both principal and interest, and long since past due, but besides has repudiated eight millions of her bonded debt which were issued for value received under the great seal of the commonwealth, properly signed, legally issued and in the hands of innocent parties who have acquired vested rights therein, and, therefore, are the victims of a gigantic robbery by the repudiation of said bonds. It is but fair to assume that a State which undertakes to blot out by a legislative act, without being willing to submit any questions at issue to the judiciary—who alone have the right to decide upon such questions—find _that_ to be so simple a method of paying debts will not unlikely be tempted to repeat repudiation often in the future. These bonds now attempted to be foisted on the public cannot, by any possibility, be expected to have any greater permanency of value than those that have already received the shameful fate of being reduced by repudiation to the value of brown paper. I foresee, therefore, that if the N. Y. Stock Exchange lists this new issue of bonds, that by fictitious methods quotations may be obtained, and in all probability the members of the N. Y. Stock Exchange be induced to deal in them and suffer the cruel loss that has already been my fate. The State of Georgia, with interest to date, owes me and my old firm at least five million dollars; therefore, I have a right, owing to my large interests in the Stock Exchange, to urge that the application to list these new Georgia bonds be denied, for I fear that should it be otherwise, many of the members whose seats are in part security for transactions, may be tempted to deal in these so-called “securities” and suffer great loss if not ruin thereby, for when the time of repudiation takes place the security in their seats at the Exchange may be made valueless through said loss to honest creditors. When the State of Georgia wipes out the disgraceful blot of repudiation which now stains the escutcheon of the commonwealth, she will then be entitled to have the facility which the New York Stock Exchange has the power of granting, to aid her in restoring her credit to rank alongside others. She will then be entitled to credit on a 3 per cent. basis similar to the States of New York, Massachusetts, Maryland and many others, _but not before_.
Respectfully yours,
HENRY CLEWS.
* * * * *
SHALL REPUDIATION BE RECOGNIZED
NEW YORK, June 25, 1886.
_To the Governing Committee of the N. Y. Stock Exchange_:
DEAR SIR:—I send you an exact copy, published in the _Graphic_ newspaper under date of June 15th, 1886, of a bond issued by the State of Georgia, which you will perceive is an out-and-out State bond and represents an issue of 1,800 bonds of $1,000 each. The act of authorization of the State was passed upon by the eminent legal firm of Evarts, Southmayd & Choate, also by the late Judge Emott as being in conformity with law and in every respect a regular and legally issued bond of that State. The innocent holders of these bonds are the following:
The Broadway National $200,000 Bank
The Metropolitan Savings 100,000 Bank
The Brooklyn Trust Co 100,000
Russell Sage 200,000
Henry Clews & Co 486,000
The Union Trust Co 100,000
Ezra A. Boody 200,000
Richard Irvin & Co 133,000
The Commercial Warehouse 200,000 Co. about
The balance is in small lots scattered in numerous hands. None of these bonds was disposed of for less than 90 cents in money. The Broadway Bank loaned $160,000 upon theirs, taking them as collateral. Some other institutions held them as collateral against advances similar to that of the Broadway Bank. The whole of this issue was repudiated by the State.
The State of Georgia also notified the Exchange that a large number of bonds known as Quarterly Gold Georgia Bonds were also repudiated. The numbers of these bonds were scattered in amongst an issue of two and one-half millions of that class of bonds, all of which were long previously admitted to dealings at the N. Y. Stock Exchange. The N. Y. Stock Exchange having received notice from the State that they had been repudiated, ordered them stricken from the list. These bonds are all in the hands of innocent, _bona fide_ holders, who paid in the neighborhood of par for them in all instances and the avails therefor were received by the State.
Those not repudiated of these issues have since and are now daily quoted at the N. Y. Stock Exchange, the price being at the present time nominally about 112.
I have only noted a part of the bonds repudiated by the State of Georgia, so that you may be convinced of the fact that the bonds are out-and-out State bonds and just as good an obligation issued under the great seal of the commonwealth of Georgia and as absolutely binding upon the State as the new bonds which are now attempted to be listed; and should the latter be listed, the chances are that they will share the same fate as those noted.
If a State can issue such obligations, and wipe them out by an act of repudiation with impunity, and the Stock Exchange ignore such shameful conduct, there will then be no safety in buying bonds issued by any State, as it is thereby made to appear that there is no stain left upon her escutcheon, the evidence of which is that the N. Y. Stock Exchange has backed them up in their action. Under the Constitution which gives sovereign rights to States a citizen holding these repudiated obligations cannot sue a State, therefore there is no redress for a great wrong done.
I shall be glad to appear before your Committee and give you all the evidence in the case before you decide upon the application now before you to admit $3,300,000 Georgia 4½ per cent. bonds.
Very respectfully yours,
HENRY CLEWS.
* * * * *
A REMINDER TO SENATOR EVARTS.
In connection with this Georgia bond affair, even at the expense of stringing the subject out to a considerable length, I cannot omit the following communication to Senator Evarts on the subject:
NEW YORK, April 13, 1886.
_Hon. William M. Evarts, Washington, D. C._:
DEAR SIR—It is quite generally understood, from information lately received here from Washington, that there is soon to be sprung upon Congress a bill providing for large appropriations for the improvement of rivers and harbors and other so-called public improvements in the South. There is a feeling of strong opposition in financial circles in this city against the justice of the General Government making such appropriations to many of the Southern States at the present time. This opposition is based upon the fact that the State of New York contributes by taxation about one-fifth of all the revenue raised in this country which provides for the expenses incurred in carrying on the Government, so that whatever moneys are spent for the so-called public improvements, at least one-fifth of the amount is extracted from the pockets of the citizens of this State, through taxation; and as many of our citizens have been so villainously victimized by the repudiation of the Southern States, especially by the State of Georgia, it is but just and fair to these victims, therefore, that no appropriations of money for the purposes named should pass Congress for the benefit of any State which is at present under repudiation. It is eminently proper that Congress should take a stand against this, as the very people who have been so robbed are to pay the cost. A large number of them have been ruined, as a penalty for believing in the honor and good faith of Southern States, and while such claims remain unpaid, it certainly does appear harsh that these citizens should be taxed by the General Government and compelled to contribute to funds to be appropriated for the benefit of States now in default of both principal and interest for bonds issued by them under proper legislative authority and bearing the great seal of the commonwealth. The money paid for these bonds by confiding people has gone into public improvements in those States. If the Government desires to make appropriations, they should be made to the holders of these bonds, and the share to the various States be in their own bonds in place of money. The States thereby would take the place of the present holders. When repudiated bonds are all extinguished it will be time for the Government to begin the appropriation of money direct. No greater public improvement for the South, as well as for the credit of the entire country, would equal the removal from the various States of the blot of repudiation which now stains their escutcheons, and reflects most injuriously upon the credit of the General Government itself.
Yours very respectfully,
HENRY CLEWS.
* * * * *
ANOTHER STRONG PROTEST.
September 2, 1886.
_James D. Smith, President of the Stock Exchange_:
DEAR SIR—I beg to hand you herewith a memorial in relation to the new issue of Georgia bonds, signed by a number of the largest and most important firms and corporations in this city, most of whom are connected by membership with the Stock Exchange, and all of whom, like myself, are victims of the State of Georgia’s repudiation.
I understand that the subject of admitting this new issue of these bonds is to come up for consideration at the next regular meeting of your committee. Will you do me the favor of presenting this petition at said meeting? Hoping this matter will receive your favorable consideration and influence, I have the honor to remain,
Yours very respectfully,
HENRY CLEWS.
_To the Governing Committee of the New York Stock Exchange_:
We, the undersigned, holders of repudiated bonds of the State of Georgia, have learned that an application has been made for listing upon your Exchange new issues of bonds of that State.
We respectfully urge upon you that so long as the name of Georgia remains dishonored by repudiation, you should stamp upon such application your absolute disapproval, and thus maintain the well known and uncompromising hostility which the New York Stock Exchange has always shown against bad faith and dishonest practice.
August 24, 1886.
RICHARD IRVIN & CO., MORTON, BLISS & CO., JAS. B. JOHNSTON, S. W. MILBANK, HENRY CLEWS & CO., HALLGARTEN & CO., FULTON BANK OF BROOKLYN, By J. A. NEXSEN, Cashier, WALTER S. JOHNSTON, Receiver Maine National Bank, MORRIS K. JESUP, JAMES R. JESUP, DREXEL, MORGAN & CO., FOSTER & THOMSON, NATIONAL BROADWAY BANK, By F. A. PALMER, Prest., L. VON HOFFMAN & CO., RUSSELL SAGE, C. F. TIMPSON & CO., HERMAN R. LE ROY, SAMUEL RAYNOR & CO., THE N. Y. WAREHOUSE & SECURITY CO., By S. C. KNAPP, Secretary, COMMERCIAL WAREHOUSE CO., J. F. NAVARRO, Prest.
The petition of these gentlemen was granted, and true to its honorable record, the Governing Committee of the Stock Exchange refused to have anything to do with the bonds of the repudiating State of Georgia.
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CHAPTER XXVIII.
ANDREW JOHNSON’S VAGARIES.
“SWINGING AROUND THE CIRCLE.”—HOW MR. JOHNSON CAME TO VISIT NEW YORK ON HIS REMARKABLE TOUR.—THE GRAND RECEPTION AT DELMONICO’S.—THE PRESIDENT LOSES HIS TEMPER AT ALBANY AND BECOMES AN OBJECT OF PUBLIC RIDICULE.—HIS PROCLAMATION OF “MY POLICY” IRONICALLY RECEIVED.—RETURNS TO WASHINGTON DISGRACED.—THE MASSACRE OF NEW ORLEANS.—THE IMPEACHMENT OF THE PRESIDENT.
As I have attributed the ill luck of myself and others in certain business ventures in Southern securities to President Andrew Johnson, it will be necessary to describe some of the vagaries of that gentleman which had such a ruinous effect upon the investments of Northern men in the South.
In common with several other Wall Street men, I had an idea that the President might be favorably affected by the social influence of the North, if that were brought to bear upon him in the right way. So when we heard that he had been invited to attend the laying of the corner-stone in the erection of a monument to the memory of Stephen A. Douglas, at Chicago, I got up a paper signed by several Wall Street men and other prominent citizens, urging the President to accept said invitation and also invited him to stop at New York, on his way to the West.
The invitation was graciously accepted, and preparations were made at once to give him a suitable reception. It was hoped that this demonstration of our good will would have the effect of smoothing down the asperities of the President, and that it might remove any harsh feelings that he entertained towards the members of Congress who represented the Eastern and Western sections, and hence prove a means of inducing him to advise the people of the South, over whom he had considerable influence, to lay aside their sentiments of hostility and attend to their business interests in a manner that should redound to the mutual benefit of the two great sections of the country. This was in 1866.
The President left Washington about the end of August, accompanied by General Grant, Admiral Farragut, Secretary Wells, Postmaster Randall, and a few others of less note.
When the party arrived in New York it was joined by Secretary of State Seward.
The preparations for the President’s reception were on a magnificent scale for that time, and the people turned out _en masse_ eagerly to do honor to the Executive of the nation. There was a grand procession which conducted him to the City Hall, where he was received by the officials of the City and State, and the procession afterwards escorted him to Delmonico’s, at Fourteenth Street and Fifth avenue, where a dinner was served in the most sumptuous style, with every mark of honor and respect befitting the distinguished guest and his numerous friends.
There was an address of welcome pertinent to the occasion, and the President responded in a very happy style. This was said to have been one of his best efforts in oratory, in which he was, at times, exceedingly forcible and persuasive.
He was always pithy and powerful, and there has perhaps never been a President who produced stronger, more brilliant, and more argumentative state papers than Andrew Johnson.
The audience at Delmonico’s was thoroughly delighted with him, the dinner came off in a way that left nothing to be desired, and everything seemed to indicate that the presidential visit would be a potent influence in creating a new era of harmony between the two hostile divisions of the country.