The Panic of 1819 (12 page)

While the opponents of debtors’ relief charged that wealthy debtors were behind the movement, the relief forces made a similar charge. The Nashville
Clarion
, ignoring the eastern Tennessee opposition and its own praise for the wealthy supporters of relief, bluntly charged that the only opposition to relief came from land speculators and the “monied aristocracy of Nashville” opposed to the relief of the people.
¹⁰⁹
In fact, much vigorous opposition to debtors’ relief centered in Nashville and Davidson County itself, despite the fact that the relief forces stemmed from that area. The Nashville
Gazette
retorted to the
Clarion’s
charge that in the opposition there were “men who have money—and men who have none.” The opposition to relief legislation cut across lines of wealth.
¹¹⁰

Governor Joseph McMinn, elected in 1819, granted the wish of Grundy and the relief forces, and called a special session for June 26.
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In his opening address, McMinn pointed to the unprecedented general pressure and urged that debtors be saved from destruction.
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“The people should be made to see,” he declared,

that public agents . . . have not abandoned them in their affliction. Men’s confidence in each other’s solvency will be restored; the thirst for purchasing at sheriff’s sales will be allayed; treasures which are now hoarded up to be used in fattening on calamity will be drawn out and again circulated in the ordinary channels of useful industry.

Thus, McMinn emphasized the ending of hoarding as a prime element in recovery. The relief advocates agreed with their opponents
that the restoration of confidence was important to recovery, but urged that only aid to debtors would accomplish this end.

To gain the objective of relief, Governor McMinn advocated a loan office measure to increase the supply of paper money, a stay law, and a minimum appraisal law. The major controversy in that session was the loan office bill. He recommended a stay law as a corollary to the loan office bill, providing for a stay of execution for two years, unless the creditor were willing to accept the new paper notes at par in payment for the debt. McMinn further suggested a minimum appraisal law which would compel the creditor to accept the debtors’ property at a valuation fixed by a governmentally appointed committee of arbitration.

The next day, June 27, Felix Grundy moved to refer the three proposals of the Governor to a Joint Select Committee on the Pecuniary Distress. The committee included the leading anti-relief stalwarts in the legislature, in addition to Grundy. But the McMinn-Grundy leadership counted on Representative Samuel Anderson, from Robertson County in mid-Tennessee, to cast the deciding vote in favor of the relief proposals. Instead, Anderson turned against the stay and appraisal bills and caused alarm in the relief camp by submitting the committee report on the next day, rejecting any stay or minimum appraisal law as “inexpedient and unpolitic.”
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Grundy acted swiftly, however, and a day later succeeded in “packing” the committee with four more of his supporters, with Grundy himself becoming chairman. Backed by petitions from citizens of Warren and Smith Counties (in mid-Tennessee) supporting the relief proposals, Grundy reported the stay and loan office bill to the House on July 4. He allowed the minimum appraisal bill to die in committee, rejecting it as too extreme.

In the debate on and eventual passage of the bills, most of the effort was centered on the loan office. The stay law was opposed almost singlehandedly by Representative Williams, now a staunch
opponent of relief. He moved to strike out the requirement that the creditor must receive loan-office notes or suffer a two-year stay in execution. This amendment was overwhelmingly defeated by a vote of 14 to 3, despite a petition from rural Giles County of mid-Tennessee, condemning the law as “impolitic and improper.”
¹¹⁴
Williams tried a similar motion a week later, but lost by a vote of eleven to four, and the stay provision became law along with the new state bank.
¹¹⁵

Although the relief movement triumphed in 1819 and 1820, the climate of public opinion had changed sharply by mid-1821. The new state bank and its paper were not faring well, the nationwide depression was receding, and the Supreme Court of Tennessee handed down a decision in June declaring the stay provision unconstitutional for compelling acceptance of the new bank notes. In the gubernatorial campaign of the summer of 1821,
both
candidates vigorously opposed the relief program. Colonel Edward Ward and William Carroll were wealthy merchants and prominent citizens of Nashville, and both were firm friends of Andrew Jackson. It is instructive that Carroll ran his campaign as the “people’s candidate” against the wealthier Ward.

Carroll’s decisive victory in the gubernatorial race did not intimidate Governor McMinn, who, in his farewell message to the legislature, again urged a minimum appraisal law, and also suggested a replevin law, so that the debtors could win back their forfeited property.
¹¹⁶
McMinn’s proposals were referred to Felix Grundy’s Committee on Pecuniary Embarrassments, and Grundy’s report signaled the turn of the tide for the relief movement in Tennessee.

Grundy noted that the greatest distress during the crisis had been caused by the large accumulated debt. He declared that, since 1819, three-fifths of the debt owed to easterners had been liquidated, and that this relieved the pressure on the numerous Tennesseans in debt to eastern creditors. The economy was reviving, and the situation was no longer grave. He therefore rejected an appraisal law as a violation of contract, but staunchly defended the worth of the stay law in averting debtors’ ruin.
¹¹⁷
Later, Grundy attacked the courts for ruling against the stay laws, and was joined by the Knoxville
Intelligencer
and the Nashville
Whig
.

The anti-relief tone of the new administration was set by Governor Carroll’s opening address.
¹¹⁸
It was mainly devoted to paper money, but he also attacked the stay and proposed appraisal and replevin laws as violations of contract.
¹¹⁹
Carroll declared that the relief measures had brought momentary relief for some, at the expense of increasing the general distress, and had caused the ruin of thousands through sudden fluctuations of credit and extreme depreciation of currency. The debtors’ situation was still troublesome despite Grundy’s optimism, and the press continued to advertise many sheriff’s sales. The relief forces again tried to pass a stay and an appraisal law, but without success. As a matter of fact, Grundy managed to push through another minimum appraisal law in October, 1823, but the court decision effectively ended any such stay law in Tennessee. By the fall of 1822, Governor Carroll could report a virtual ending of the economic crisis in Tennessee.
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The citizens of the state of Kentucky found themselves heavily burdened with insolvent debtors and forced sheriffs’ sales for execution of suits against debtors.
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As in Tennessee, the major focus of agitation on the state level was the banking system; but agitation over stay laws was also widespread. In Kentucky, a stay law had long been embedded in the state’s legislation. As early as 1792, the state had passed a minimum appraisal law; and it had passed a stay law in 1814–15, providing a twelve-month stay should any creditor refuse to accept at par the notes of the state’s leading bank—the Bank of Kentucky—and a mandatory three-month stay even if the creditor accepted the notes.
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The campaign of the relief forces was waged largely over stay-replevin legislation, and the elections in the fall of 1819 were an overwhelming victory for the relief forces. In the bitter fights over proposed stay legislation, two new newspapers were inaugurated in the city of Frankfort: the
Patriot
, to support the relief program, and the
Spirit of ’76
, to oppose it.
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The first relief act to pass was an “emergency” stay law, staying all executions for sixty days; this was passed on December 16, 1819.
¹²⁴
Governor Gabriel Slaughter, opposed to relief, vetoed the law, but the legislature was able to override the veto. A very strong stay law was passed the following
February 11, providing a mandatory one-year stay of execution
if
the creditor accepted Bank of Kentucky notes at par in payment, or a two-year stay if the creditor refused.

The crisis was intensified by the alarm felt by creditors at this law and by their growing reluctance to lend.
¹²⁵
The depression continued in full force during 1820, and the reliefers began to concentrate their attention on proposals for a new state bank. Postponement of payment does not after all liquidate the debt burden, and it has been estimated that over $2 million of debt was under execution in this period. A bank was expected to grant indirect but effective relief by supplying new money to debtors. Passage of such a measure was assured by the election of Governor John Adair, a leader of the relief forces. A bank was established and, further, a new stay law passed on Christmas Day, 1820. The new law extended existing provisions, but now provided a stay of two years, unless the creditor accepted either Bank of Kentucky or the new state-owned Bank of Commonwealth notes. The law gave preference to the new bank by continuing the mandatory one-year stay even if the creditor accepted Bank of Kentucky notes, while only imposing a three-month stay for acceptance of Bank of Commonwealth notes. This was succeeded by a full mandatory twelve-month stay in February, 1820. Further relief to debtors was granted by a law exempting various tools and implements from forced sale for debt payments and by special stays for executions on real estate.

Throughout 1820, the cherished goal of the relief forces was the passage of a general “property law,” which would have been the most drastic relief legislation in the nation. This would have indefinitely postponed all sales of property under execution. However, this ambitious attempt never came to a vote. In the fall of 1821, the legislature moved again to block the infuriated creditors; by December, 1821, a minimum appraisal law was passed. It prohibited the sale of property at forced sale for less than three-quarters the value
set by a jury, unless the creditor agreed to receive Bank of Commonwealth or Bank of Kentucky notes in payment.
¹²⁶

For a few years, the debtors reaped a substantial harvest from the stay and from bank legislation. The Bank of Commonwealth notes soon depreciated to half, as compared to specie. The juries and judges of Kentucky during 1821 and 1822 adopted a “scaling system” in their verdicts on damages and executions for debt contracts. For example: if a creditor sued a debtor for payment on a debt of one hundred dollars, and the debtor had already paid fifty dollars, the magistrate or jury “assumed” that the fifty “dollars” paid consisted of specie rather than notes (which, of course, was not the case), on the grounds that there was no proof to the contrary. Then, as a one dollar specie was now worth two dollars of Commonwealth notes, the debt was judged fully canceled, and, in addition, a judgment for court costs was levied against the creditor.
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The proponents of debtors’ relief argued that the legislature was obliged to provide relief in times of distress. Indeed, they considered themselves generous for not going so far as to repudiate all private debts completely.
¹²⁸
The opposition assailed the measures as repudiating contracts, and asserted that the only remedies to help the debtors in the long run were thrift and industry. Stay laws were attacked as leaving the creditors’ property in the hands of speculators and as greatly hampering credit.
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The bitterness of the opposition increased as the relief system continued, and, as the economy recovered, it succeeded in turning the relief tide. As early as the 1822–23 session, the legislature reduced the stay provision from two years to one year, and by 1824 the stay laws were repealed.
¹³⁰
In the
meanwhile, the decision of the state courts that the relief legislation was unconstitutional precipitated a vigorous and prolonged political controversy over the judiciary, the anti-reliefers finally winning by 1826.

One of the most interesting approaches to the problem of debtor’s relief was that of Amos Kendall, at this time editor of the influential Frankfort
Argus of Western America
, and later one of the chief theoreticians of the war against the Second Bank of the United States. Kendall, though not completely opposed to relief, was disturbed at some of the extreme stay legislation, particularly the proposed property law, which would have repudiated all debts. In a series of articles in the
Argus
,
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Kendall considered one of the favorite relief arguments: that debtors were unduly burdened because they had borrowed when the money unit had a lower value in purchasing power, and must now repay their debt when money had a higher value. Kendall began with a discussion of utility, developing in essence the subjective theory of value and the law of diminishing utility. He deduced that, since value depended on the desires of men, and since these desires were always changing, desires and values could not be reduced to any standard of measurement. A unit of measure was always fixed, and yet all values were continually changing. Hence, there was no such thing as a standard of value, and money could not be used for such a standard. Turning to money, Kendall traced its development from barter and indirect exchange, until the money-commodity became a general medium of exchange. This process revealed that money was simply a commodity, albeit the most useful and exchangeable one—a commodity the value of which was always changing. Therefore, money could by no means serve as a standard of value, and from this Kendall deduced that the relief argument, resting on the assumption of money as a standard of value, was untenable.
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In the following year, Kendall denounced wasteful governmental expenditures and concluded emphatically that the legislature could not
relieve debts. “The people must pay their own debts at last.” They must rely on their own power and resources and not on that of the banks or legislature.
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