The Panic of 1819 (11 page)

In the spring of 1821, public pressure erupted for relief legislation by the state, and the pro-relief forces agitated for a special session of the legislature.
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Many newspaper articles, in April and May of 1821, cited the mass of unpayable debts and urged governmental relief. The author of one such article signed himself “Nine-Tenths of the People.”
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There had been rumors of a special session since early March, and the supporting articles were responses to these rumors.

Opposition to such legislation, however, was also vocal. As early as August 16, 1820, thirteen members of the grand jury of St. Louis—the urban center of Missouri—denounced any stay or minimum appraisal law. They declared that stay laws for
land
debts alone (which were being proposed) would be special privilege for
landholders.
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Opposition was expressed on constitutional grounds also. A citizens’ meeting in May at Boonville, Cooper County, in central Missouri, denounced any debt interference legislation as immoral and unconstitutional. The sacredness of contracts was emphasized in an article in the
Missouri Gazette
, in March; the author declaring that only regular bankruptcy laws were just, and that the only leniency should be by voluntary act of the creditors themselves.

Other writers stressed the pernicious economic effect of stay and other debtors’ relief laws. They declared that creditors would cease to lend their money, and that such laws would interrupt business calculation and discourage regular trade. The laws would only aggravate the crisis further.
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Despite this strong opposition, on April 24 the Governor called a special session to be convened on June 1, ostensibly only to consider imminent statehood. The conservative forces sensed that the major aim was relief, however, and became very vocal in opposing the expected storm. The Jackson
Independent Patriot
, from rural southeastern Missouri, and the St. Charles
Missourian
took the lead in expressing fears of a replevin law. This opposition was echoed by most of the other leading newspapers, such as the
Missouri Intelligencer
and the St. Louis
Enquirer.
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The fears of the conservatives proved justified. In his message of June 4, Governor Alexander McNair cited the “Pecuniary embarrassments . . . heretofore unknown to us,” and five days later a
debtors’ relief bill was introduced in the House.
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The bill, which became law in this session, provided for a two-and-one-half-year moratorium for executions on
land
debts only. Under the law, the debtor could at any time replevy all land sold at sheriff’s auction by a mere payment of his debt plus 10 percent interest. The theory of the legislation was that most Missourians in the state were landholders, and that therefore this form of relief was particularly needed. It was hoped that in two and one half years revived prosperity would permit the farmer-debtors to keep their land. The special session also established a state loan office to issue paper money, reduced the penalties of imprisonment for debt, and exempted various personal necessaries from forced sales at auction.

The major act of the special session was the establishment of the loan office. When the fall session convened in November, the relief forces were anxious to enlarge the system through a strong stay and minimum appraisal law. This law was desired for its own sake, as well as to assist circulation of the new notes, and to supersede the previous law that applied only to land. The proposed law became the most vehemently debated issue of the fall session. Governor McNair’s opening message was extremely cautious. He hoped for “some effective plan of relief” which would “blend with our humanity for the unfortunate debtor a due respect for the principles of the Constitution and the rights of creditors.”
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On this hotly controversial issue, the Governor was leaving the initiative strictly to the legislature. The battle was extremely close in the House, which at one time rejected the bill by a tie vote of 21 to 21, but the bill finally passed, after high pressure by the relief forces, on a vote of 23 to 18. The bill barely passed the Senate by a vote of 7 to 5 and became law.
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The voting on the stay-minimum appraisal law, as well
as on the loan office bill, cut sharply across sectional lines. The constituencies, such as St. Louis, Jackson, and Boonville, were closely divided within themselves.
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Considered by the relief forces—headed by Representative Duff Green—as the climax of the relief program, this law featured a minimum appraisal provision.
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In each township, the county court was to appoint three people to appraise the worth of the debtor’s property. The creditor was forced to accept the property at least at two-thirds of the official value. On the other hand, if, at the public sale, the property sold for
more
than two-thirds the official appraisal, the creditor was still entitled to only two-thirds of the sale price, while the debtor could keep the remainder. If the creditor refused to accept the property under this provision, the debtor was granted a stay of two and one half years in payment.

This was a very strong minimum appraisal law, yet the relief forces were not satisfied. They were disappointed that the law did not force the creditor to accept the new loan office certificates as an alternative to the two-and-one-half-year stay. Without such a clause the law was too narrow of application. Consequently, the relief forces were able to pass a supplementary stay law, which gave the creditor the choice of accepting two-thirds of the appraised value of the property
in loan-office certificates
at par or suffer a two-and-one-half-year stay.
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Again, the division in the legislature was very close, 17 to 15 in the House and 6 to 4 in the Senate, and again the voting cut across sectional lines in every county.
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During the course of relief agitation in the summer and fall of 1821, the bulk of the Missouri press swung over to support the relief program. The opposition branded the relief laws as the work of selfish groups of “spendthrifts” and “big speculators” working their influence on the state legislature. The theme of the opposition, as in the case of public land debtors described previously, was that the law was being pushed by bankrupt speculators and spendthrifts, and not by the “honest” debtors, although no criterion was laid down to distinguish between these groups of debtors.
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The speculators were also accused of buying the support of the press.
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Another common opposition theme held that pressure for relief came from the
wealthy
debtors rather than from the mass of poor. Thus, the
Missouri Republican
declared that the relief legislation was intended to preserve the “wealthy debtor in his palace,” and that, in general, it benefited the dishonest man and burdened the just.
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As was the case with most debtors’ relief and monetary expansion laws passed in this period, the stay laws ran into trouble with the courts and were declared unconstitutional by the State Circuit Courts in July, 1822. The furious relief advocates called for a purge of the judiciary, and the battle over the relief issue continued to rage.
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In the fall of 1821, before the climactic stay law legislation, the elections, drawn on the relief question, had yielded victory for
the relief forces. Thus, in October, 1821, Pierre Chouteau, merchant and son of an eminent family in the state, ran as a debtors’ relief candidate. He defeated Robert Walsh, running in opposition in a special election for State Senator from St. Louis. A similar victory for the relief forces was gained in Howard County, a rural district in central Missouri, adjacent to Boonville. Now, after the court decision and a turning of the tide in public opinion, the general election to the legislature on August 7, 1822 hinged directly on relief as the critical issue. The relief forces advocated constitutional amendments to smash judicial opposition to the relief laws, while the opposition advocated repeal of the entire relief structure. The elections were a victory for the anti-relief forces. The pivotal city of St. Louis returned three reliefers and three anti-reliefers in the House, and John S. Ball, an anti-reliefer, to the State Senate; and in another special Senatorial election in St. Louis, in October, 1822, an anti-reliefer triumphed.
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Sensing the political currents, Governor McNair, who had started it all the previous year, strongly recommended, in his opening message of November 4, the elimination of the chaos by repealing all of the relief laws.
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He declared that they had not proved successful in alleviating the financial distress, and that, furthermore, the crisis was ending from natural causes. In final analysis, the only true remedies were the gradual ceasing of speculation, a change from luxury to economy, avoidance of debts or extravagance, and a growth in industry and enterprise. The legislature lost no time in complying with McNair’s wishes. On November 27, a bill to repeal the stay-minimum appraisal laws was introduced and passed by a large majority.

In early 1821, Louisiana passed—with little or no controversy—a stay law suspending execution sales for two and one half years and imposing a minimum of personal property that could be retained by the debtor.
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Relatively developed, compared to the other western states, were Tennessee and Kentucky. These were the best-known centers of debtors’ relief agitation and legislation. Tennessee had experienced a pronounced boom since the war with the opening of new lands, increased production of cotton at booming prices, and a great expansion of the credit system.
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The monetary contraction and the fall in the cotton price wreaked extensive damage on the numerous debtors, particularly in the cotton-growing regions. Insolvencies and forced sales abounded.
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As in many other states, debtors turned to the state legislature for aid.
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The center of relief agitation was the predominantly cotton-growing middle Tennessee, particularly Nashville, the most populous city in the state. The acknowledged leader of the relief agitation was the wealthy, influential merchant and politician, Felix Grundy of Nashville. Grundy, formerly Chief Justice of the Kentucky Court of Appeals and a leading Representative in the Tennessee legislature, became a candidate again for his old post as State Representative in the summer of 1819, basing his campaign on a
relief platform.
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The relief proposals centered on the banking system and on stay laws for debts. Many other legislative candidates also ran on a relief platform and were active in proposing plans of action. Many of the candidates gathered in the Davidson County courthouse (Nashville is in Davidson County), on July 19, to discuss the need for relief. They were supported by the influential Nashville
Clarion
, which urged the legislature to suspend execution of debt judgments.
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Grundy and numerous other reliefers were elected, and, soon after the legislature opened, Grundy opened the relief struggle by introducing a set of resolutions.
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The resolutions began by pointing to the distress prevailing in the state, which “requires the early and serious attention of the legislature.” The Grundy resolution did not mention a stay law, but implied it and urged that creditors be prohibited from forcing debtors to pay in
specie
. It advocated forcing creditors to accept the notes of state banks at par or forfeit their debt.

Following up his resolutions, Felix Grundy introduced a bill in the Tennessee House staying all executions of judgments for two years, unless creditors accepted notes of the leading banks in the state at par.
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Passage of this bill in October, 1819, by an overwhelming vote of 24 to 10 in the House and a similar majority in the Senate, constituted the first major victory for the debtors’ relief
forces in Tennessee.
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Another conditional stay law passed in the 1819 session was one introduced by Representative William Williams, of Davidson County. This provided that when a
bank
was the creditor and refused to accept at par, in payment of a debt judgment, either its own notes or the notes of the two leading banks in Tennessee, the execution would be stayed for two years. This bill was passed overwhelmingly with very little opposition. Another aid to the debtors passed in this session was a bill by Williams tightening the usury laws, by setting maximum rates of interest on loans.
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During early 1820, relief agitation grew in strength, this time centering on proposals for a new state loan office or bank to issue inconvertible paper along with further stay provisions. The reliefers called for a special session in the spring of 1820. It is interesting to note the Nashville
Clarion
proudly proclaimed that several men of wealth had taken the lead in the call for an extra session. Typical of the appeals for a special relief session was the petition of citizens from Williamson County, adjacent to Davidson.
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The petition pointed to the great decline in the price of produce, to the contraction of bank credit, and to the consequent multiplying suits for debt payment. Blame was laid on the “avidity of the creditors to collect,” which seems to increase “in an inverse ratio to the ability of the debtor to pay.” Unless relief were offered quickly, warned the petition, most of the citizens would suffer insolvency and ruin. East Tennessee, the region centering on Knoxville as its leading city, was largely opposed to the relief program and to the proposed special session.
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Typical was the vigorous disapproval of the Knoxville
Register
.
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It declared that the people were opposed, and charged that the huge number of petitions for relief and a special session, as described in the Nashville press, had come from only three counties endorsed by “but half a dozen signatures.” The honest, the industrious, the prudent citizens needed no relief and desired no special session. The demand for relief, charged the
Register
, was coming from those who had made purchases without capital, and lived in luxury beyond their means. “Now that they have run their race, they wish the Legislature to pass a law that they may keep their honest creditor from recovering his debts.” A grand jury from Sumner County, adjacent to Davidson County, declared that those seeking relief were not the poor and needy but those large businesses and speculators who had extended their credit with the banks; moreover, only these wealthy debtors would benefit from relief.
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The
Courier
, from Murfreesboro, a town near Nashville, replied that the debtors’ distress was not owing to their own imprudence but to a “fall of foreign markets, and the domestic scarcity of a circulating medium,” resulting in a great fall in the value of property. Legislative interference, it concluded, was necessary to save the people from bankruptcy and ruin.
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The East Tennessee opposition had a different view of the consequences of stay legislation. Thus, the Knoxville
East Tennessee Patriot
admitted that a stay law might give temporary relief to some people, but warned that its impairment of contracts would lead to increased rather than diminished bankruptcies.
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The East Tennesseans had even made a strong but unsuccessful effort to nip the debtors’ relief campaign in the bud by sending Enoch Parsons, losing gubernatorial candidate in 1819, to Nashville to campaign against Felix Grundy’s election.
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