The Panic of 1819 (9 page)

The relief bill was thus supported by all sections of the country except New England—evenly split on the issue. The hard-core opposition sentiment was pretty widely scattered geographically, with the exception of the West, although proportionally greatest in New England. The opposition was fairly strong in the South, but not in the important large Middle Atlantic States of New York and Pennsylvania. The West, with the exception of Tennessee, was overwhelmingly for the measure, with even such skeptical Kentuckians as Hardin and Robertson joining in voting for final passage.

Since various proposals for debtors’ relief legislation in the states caused indignant opposition in such places as New York City, one might be wondering why the New York representatives agreed to the measure. Perhaps one reason was that much of the public lands were held by eastern speculators. Another reason was that, after all, this particular debt was owed to the federal government itself, so that relief laws or changes in the contract by the government were directly the government’s concern as one of the parties to the contract. There was not here a question of interference in
private
debt contracts. Hence the disposition, in Congress and out, was to let the relief advocates have their way in this case without much opposition.

Even Hezekiah Niles, influential editor of
Niles’ Weekly Register
, who had no use for debtors’ relief legislation, reluctantly approved of this bill, although he was critical of the public land speculators and apprehensive that the debtors would relinquish the poorest land to the government.
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And so the public land debtors gained their desired relief measure with little opposition. Large numbers of debtors took advantage of the relief relinquishment provision; half of the public land debt in Alabama—which in turn constituted half of the nation’s total—
was paid up within a year. Yet most of those who relinquished the land continued to cultivate it and treat it as their own.
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The major arguments for land debt relief—the plight of the debtors, the distressed conditions, lower prices—could be used on behalf of other, more far-reaching, measures for debtors’ relief, private as well as governmental. They were so used, both for direct relief measures designed to aid the debtor directly and for monetary proposals aimed partly or sometimes wholly at debtors’ relief. Against these proposals, the opposition was far more vocal and vigorous.

The immediate and pressing problem for debtors was the legal judgments accumulating against them for payment of their debts. Consequently, they turned to the state legislatures, which had jurisdiction over such contracts, to try to modify the provisions for payment. The proposed laws either postponed legal executions of property or prohibited sales of debtors’ property below a certain minimum price. The moratoria were known as “stay laws” or “replevin laws,” which postponed execution of property when the debtor signed a pledge to make the payment at a certain date in the future. Minimum appraisal laws provided that no property could be sold for execution below a certain minimum price, the appraised value being generally set by a board of the debtors’ neighbors. Such laws had been an intermittent feature of American government since early colonial Virginia.
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The eastern states were heavily embroiled in controversy over debtors’ and monetary legislation. Delaware, for example, was hard hit by the depression, and its relatively commercial New Castle County, in the north, had a particularly heavy incidence of suits for debt payments. As the Delaware legislative session opened at the beginning of 1819, New Castle County was a hub of agitation for
debtors’ relief legislation. Its Representatives Henry Whitely and Isaac Hendrickson submitted petitions from over 450 citizens asking for some sort of relief to debtors of banks. Finally, the Delaware House created a committee headed by Representative Henry Brinckle to consider the issues raised by these petitions, as well as banking proposals which will be considered below.
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The committee took only a week to issue its report.
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It noted that among the major relief legislation proposed were some acts that would prohibit execution of judgments completely, and some that would compel creditors to take such property at a minimum appraised valuation. The Brinckle Committee rejected all such proposals on grounds of unconstitutionality and because suspension of execution would endanger the position of creditors and impair the good faith of contracts.

As was the case in most states where relief proposals were debated, the report provoked a storm. Two members of the five-man committee, headed by New Castle’s Representative John T. Cochran, moved rejection of the paragraph condemning relief laws. The motion was defeated by a vote of sixteen to four.
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The dispute, therefore, cannot be simply described as a geographical split within the state, since the majority of each county voted down the amendment.

The large eastern state of New Jersey gave serious consideration to stay laws on executions. A Committee of Inquiry was appointed by the New Jersey General Assembly, 1820 session, to consider a stay law, which would have postponed executions if the creditor
refused to accept the debtors’ property at or above a minimum appraised value. A report strongly in the negative was delivered by Representative Joseph Hopkinson, and this served to send the bill down to a two-and-a-half-to-one defeat in the House.
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The arguments of the Hopkinson Report were a well-considered statement, typical of the opposition to debtors’ relief legislation, as well as to proposals to increase the money supply. The report began with assurances that the committee was deeply sensitive to the prevailing financial embarrassments, and that they had given due weight to the numerous petitions for relief legislation. While the proposed legislation, however, would perhaps alleviate the condition of the debtors temporarily, it would, in the long run, make their distress worse. The contention that relief legislation would eventually intensify the depression was a central argument for the opposition in all the states. The Hopkinson Committee used a familiar medical analogy noting that “palliatives which may suspend the pain for a season, but do not remove the disease, are not restoratives of health; it is worse than useless to lessen the present pressure by means which will finally plunge us deeper in distress.” They added that it was their duty to be truthful with the people and not delude them with promises that could not be kept—even at the expense of their “immediate displeasure”—an indication perhaps that the proposal was popular in New Jersey. The report remarked that suffering men were disposed to complain about their lot and look for rapid remedies rather than admit that the only cure was slow and gradual. As a result they would flee to patent-medicine panaceas, which would only make their condition worse.

Specifically, how would the proposed stay of execution law deepen rather than remedy the distress of the people? First, a stay law would not extinguish the debt, which would still remain outstanding. Second, the real reason for the depression was the lack of
“mutual confidence.” Only such confidence could lead to a revival of credit and activity. But it was clear, declared the Hopkinson Committee, that the distress would greatly increase if a potential creditor were prohibited by law from recovering his loan from a delinquent debtor. A stay law would eliminate rather than restore credit, confidence, and business activity.

Unsuccessful attempts to pass a minimum appraisal law and a stay law also took place in conservative New York State. Ultra-conservative Massachusetts considered but did not pass a stay law. The proposed New York minimum appraisal law, in 1819, provided that in all cases of judgments on houses and lands, the court officer shall appoint three disinterested men—one a representative of the creditor, one of the debtor and one picked by the court officer—to appraise the real estate at its “just and true value, in money.” The creditor, in order to obtain payment, would be obliged to accept the property at such value. This bill was defeated by a three-to-one margin.
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A proposal for a stay law was also offered and rejected by a two-to-one margin. A bill was later passed, however, relaxing the processes against insolvent debtors.
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Maryland, on the other hand, passed a stay law by a near two-to-one majority. It also passed a law in 1819–20 exempting household articles worth up to $50 from sales at execution—a considerable aid to harassed debtors.
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There was much agitation for a special session of the Maryland legislature to enact a stay law. Citizens of rural Somerset County in southeastern Maryland, for example, called for a special session, citing the high proportion of enterprising citizens in serious debt.
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The agitation drew the criticism of the alert, conservative
New York
Daily Advertiser
, Federalist organ for merchants.
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It pointed out that the distress of farmers and those trading with them, stemmed from the low prices of agricultural produce, and no legislative tempering with debt contracts could raise these prices in foreign markets. Furthermore, “the shock which business of every description . . . receives from [these] measures . . . is more than a counterbalance to any monetary relief.” It went on to criticize the debtors for speculations and extravagance.

That the West had no monopoly on debtors’ relief agitation is attested by the furious fight over stay laws in the Vermont legislature. In the fall of 1818, the Vermont House defeated numerous attempts to postpone consideration of the bill, and finally passed it by a three-vote margin.
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The Senate failed to pass the bill in that session, and this precipitated another battle in the 1820 session. Repeated motions to postpone were rejected by two-to-one majorities, and the bill was passed by a similar margin, after limiting amendments to force the debtor to swear to inability to pay and to limit the bill to debtors with families had overwhelmingly failed.
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The Senate still persisted in its failure to pass the bill, however, and so the House finally surrendered in the next session, by a three-to-one majority.
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The legislature finally passed a law staying all executions for debt in the spring of 1822, after the crisis had ended. But that summer, the new law met the fate of many similar state laws, and was declared unconstitutional by the Circuit Court.
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In Rhode Island a unique situation faced the debtors. Since the establishment of Rhode Island’s first chartered bank in 1791, a unique “bank process” privilege had been granted to banks of the state. When obligations to a bank fell due, the bank officers had only to give legal notice to the debtor. The courts were then forced to enter judgment against the defendant immediately and issue executions without the customary legal trial—although the debtor was permitted a trial if he denied the legality of the debt. All other debtors, including banks themselves, were entitled to the usual judicial proceedings. One of Rhode Island’s first acts on the onset of the panic late in 1818 was to repeal the summary bank process laws.
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One of the most interesting of the controversies over the debtor’s relief legislation occurred in Virginia—a stronghold of economic conservatism. Virginia’s leading statesmen were noteworthy for their opposition to fiduciary banking, expansion of paper money, and government interference with the economy.
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Yet, the Virginia General Assembly engaged in a spirited debate over a proposed minimum appraisal law. This law would prevent any sale of property under execution unless the property sold for at least three-fourths of its “value,” as appraised by a governmentally appointed commission.
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The chief advocate of the bill was Representative Thomas Miller, from rural Powhatan County. Miller concentrated on the plight of the large number of debtors.
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In Virginia, he explained, most business was transacted on credit. The farmers, in borrowing to work on their crops, had done so when tobacco sold at $12 a pound, and wheat at $2 a bushel. Naturally they had anticipated that this prosperity would continue. Then, when they had to repay their debts, they were confronted with tobacco at $5 and
wheat at $1. The value of the resources that they could use to pay debts had been reduced by more than half, yet the price of imported articles, such as woolens, sugar, and coffee had remained unchanged. This situation was general throughout the state.

Miller emphasized that the debtors could not be blamed for their plight. The change was a sudden one and was not due simply to their “extravagance.” The expansion of banks and bank credit had raised the prices of property and produce, and induced the people to go into debt. Then, swiftly, the banks stopped expanding and contracted their loans and notes; the result was contraction of money and prices, and a great burden of debt. The responsibility for the debtors’ plight was therefore that of the banks, and not of the debtors themselves. Miller laid blame on the state banks and the Bank of the United States; the latter for serving as an expansionist force from its inception, then initiating the contraction, thereby causing a multiple contraction by the state banks. Since extravagance was not the cause of the crisis, mere calls for “industry and economy” would not effect a rapid cure; and the legislature, which had assured the people that its chartered banks were good for the community, owed it to them to throw them a plank in the present sea of distress.

Miller’s argument is particularly interesting in harmonizing the general anti-bank sentiment in Virginia with an argument for debtors’ relief. The advocates of debtors’ relief laws generally favored monetary expansion plans as remedies for the crisis. In many states the two were tied together, so that creditors were penalized with stay laws if they should refuse the new paper money, which would be loaned to debtors, to enable them to repay their debts. Yet, in this case, in a state of generally anti-paper money opinion, the leading advocates of debtors’ relief linked together
anti
-bank ideas with pleas for a minimum appraisal law.