The Panic of 1819 (8 page)

Two days after the President’s message, Senator Richard M. Johnson of Kentucky presented a resolution to permit debtors to relinquish a prorated part of the land which they had purchased, in proportion to their failure to pay, while obtaining title to the remainder of the land outright. Thus, a purchaser who was one-quarter in arrears could relinquish one-quarter of his land to the government and acquire clear title to the rest.
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It quickly became evident that this measure was the major concern of the movement for relief of the public land debtors. Shortly afterward, similar resolutions were presented by Senators John W. Walker of Alabama, James Noble of Indiana, and Jesse B. Thomas of Illinois.
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The Walker Resolution
provided for complete forgiveness of any interest due on the outstanding debt—a move to cancel the existing 6 percent interest charged on installments due. Important support for the bill came in the annual report to the Senate, on December 5, 1820, by Secretary of the Treasury William H. Crawford.
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Crawford repeated President Monroe’s argument that much of the public land had been bought at very high prices during a boom period. Crawford was at pains to separate such debt relief from legislative interference with private contracts. But it was certainly legitimate, he asserted, for the government, as a creditor, to relax its own demands. Crawford proposed to allow proportional relinquishment of the unpaid portion of land, a 25–37½ percent forgiveness of the total debt, and permission for the borrower to pay sums due in ten equal annual installments without interest.

The resolutions were referred to the Senate Committee on Public Lands and were the signal for a deluge of petitions on behalf of the measure from all of the western states, where the public land debtors were concentrated.
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Several western state legislatures—Alabama, Missouri, and Kentucky—sent resolutions asking for passage of the measure. The resolutions mentioned not only the decline of prices but also other aspects of the depression: The Kentucky legislature cited the unexpected depression of earnings, profits, property values, wages, and the depreciation of local currencies as helping to impose a burden on the debtors, and thus increasing the need for relief. The Alabama legislature cited the “great diminution of the circulating medium.” The authors of the various resolutions did not engage in sustained reasoning to bolster their views.

The relief bill was reported to the Senate by Chairman Thomas of the Public Lands Committee on December 28. It followed the
Crawford proposals closely. The major provision was the permission to relinquish the unpaid proportion of the land and attain clear title to the remainder for all those who had purchased public land before July 1, 1820. The bill also discharged the interest in arrears on the outstanding debt and added two further provisions: (1) the remainder of the debt could now be paid in eight annual installments, without interest charges, and payment of the full debt was extended for those who did not wish to take advantage of the relinquishment provision; (2) the grant of a special discount of 37½ percent for debtors who would pay promptly.

Senator Thomas, in his opening speech for the bill, warned that unless the relief were granted, all public land sold on credit would be forfeited to the government.
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He emphasized that the “capacity of the community to purchase” was now greatly diminished, compared to the capacity at the time the land was obtained. At the time when most of the debt was contracted the “price of produce of every description was more than 100% higher than at present.” Shortly after the bulk of the purchases, prices of produce fell to less than half their previous height. The burden on the debtors was aggravated by the fact that the banks, in their expansion during the boom, had liberally furnished money to the purchasers of public lands, inducing them to bid up the prices of the land to great heights. During the crisis, bank facilities were withdrawn, and banks were becoming bankrupt, their notes no longer receivable. The resulting destitution of the debtors, concluded Thomas, required governmental relief.

The major controversy over the bill was the question of which groups of debtors merited the relief. As reported by the committee, relief provisions would be restricted to those who had
originally purchased the land from the government
. They did not apply to those who had bought the public land with its outstanding indebtedness from
the previous purchasers rather than from the government directly. Illinois Senator Ninian Edwards immediately called for the extension of the relief clauses to all public land holders.
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Edwards insisted that the greatest sufferers were those latecomers who had bought the land at a very high price from the original purchasers; in many cases, the original purchasers had sold the land at a great profit to the newcomers, and yet only the original purchasers could benefit from the bill.

In his argument for the relief bill as a whole, Edwards went into great detail to excuse the actions of the debtors. The debtors, like the rest of the country, had been infatuated by the short-lived, “artificial and fictitious prosperity.” They thought that the prosperity would be permanent. Lured by the cheap money of the banks, people were tempted to engage in a “multitude of the wildest projects and most visionary speculations,” as in the case of the Mississippi and South Sea bubbles of previous centuries. Edwards sternly reminded the Senate that the government itself had encouraged public land purchases by making some of its bonds and other claims upon it receivable in payment for the lands.
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He also pointed to the distress prevailing among the debtors citing: the bank failures; the great contraction of the money supply; the loss of property values; unemployment; and general despair, as well as the fall in prices, all highlighting the need for governmental relief. Senator Thomas was apparently convinced by his colleague, and moved to extend the application of the relief bill to all holders of public land. The amendment was adopted by the Senate.
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The Thomas and Edwards arguments for relief legislation were repeated by Senator Johnson of Kentucky, who added specifically, in excuse for the debtors, that their distress was not caused by their
“own imprudence” but by unforeseen changes in the economy, in prices, the money supply, and the state of the markets.
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Senator John Henry Eaton of Tennessee wanted a further restriction on the scope of the relief.
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He moved an amendment to restrict relief to the
actual settlers only
, thus withholding relief from the mere “speculators” in the public lands. No one rose to defend his amendment, which was subjected to a storm of criticism from western Senators and from one New Englander.
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Leading the attack was Walker of Alabama. He saw no reason why the government should discriminate among the purchases since they were sold to the highest bidders in good faith, and saw no reason why there should be a particular premium on settlement. His other major argument was that the government itself had fostered speculation on public lands. The Eaton Amendment was quickly rejected, but another amendment by Eaton drew more support and split the western delegation.
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This was a provision to grant special relief to the actual settlers by forgiving them an additional 25 percent of their unpaid debt. The amendment, however, was finally rejected.

Aside from the passage of an amendment, offered by Senator Nicholas Van Dyke of Delaware, placing a maximum limit on the size of the purchase to which the relief would be applied, the bill passed through the Senate with little opposition. It passed by a vote of thirty-six to five, and none of the five opponents spoke against the principle of the bill.
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Meanwhile, Representative John Crowell of Alabama had taken the lead of the pro-relief forces in the House of Representatives by submitting a similar bill to the House Public Lands Committee soon after the President’s address.
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When the House received the Senate bill, the committee reported it out very quickly without amendments. The House debate was distinguished by the one reported speech in Congress opposing the
principle
of the entire bill.
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Interestingly, this statement came not from some ultra eastern congressman far removed from the scene of the public land holders and their problems but from Representative Robert Allen of mid-Tennessee, a state that had been one of the centers of pro-relief agitation. Allen declared himself opposed completely to the whole principle of legislative interference with debt contracts. “If the people learn that debts can be paid with petitions and fair stories, you will soon have your table crowded,” Allen charged. The next step would be debtors demanding refunds of their previous payments. Indeed, where was the line to be drawn? Furthermore, such legislation constituted special privilege for public land debtors. To the argument that the debtors had not got the money for payment Allen calmly retorted that, in that case, the government would get the land back, and would therefore not be the loser.

In addition to these general arguments against government interference with contract, Allen hit hard at the speculation issue, which had been prominent in the Senate debates. He declared that no group could be less deserving of relief than the bulk of the public land purchasers. Allen, indeed, used the same set of facts that had been employed by Thomas and Edwards to denounce rather than excuse the debtors. He declared that the debtors had formed companies, had borrowed heavily from the banks in order to buy public land, and thereby these speculators had bid the land away from the actual settlers. The speculators had gone into debt never intending to pay the price anyway, but only to sell them for a higher price to others. Allen was sure that the actual settlers were a thrifty lot who
did not run into debt. In a later speech, Allen retorted that the advocates of the bill, in pleading for the wretched and the poor, did not realize that the really poor never bought land.

There was far more active opposition to the relief bill in the House than in the Senate, and it was a minority of western representatives that took the lead in the opposition. Besides Allen, Representatives William McCoy from wealthy, rural Fauquier County, Virginia, and Benjamin Hardin of rural Nelson County, Kentucky, worked hard to defeat or limit the bill, but without success.
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Kentucky Representative George Robertson from rural Garrard County, tried to amend the bill to exclude speculators from its benefits and confine the bill to actual settlers, but the amendment lost by a small majority. Robertson was a leading lawyer who later became Chief Justice of the Kentucky Court of Appeals. The only victory for the anti-relief forces was the defeat of an attempt to make the reduction in debt unconditional instead of as a bonus for prompt payment.
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The only reply by the relief forces was that of Thomas Metcalf, from commercial Lexington, Kentucky, who declared that relief was called for particularly since the government’s own policies had “beguiled” these debtors into error.
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The bill finally passed the House on February 28 by a vote of 97 to 40.
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Following is a geographic breakdown of the roll-call vote in the House (bearing in mind that the negative was only the hard core
of the greater opposition which had made itself felt in the voting on amendments):