The Panic of 1819 (10 page)

The same argument was advanced by another leading supporter, Representative William Cabell Rives of Nelson County.
⁴⁴
He denounced the banks and called the relief law essential to the
salvation of the people. In lurid terms he denounced the shylock creditors, who were bent on extracting their pound of flesh from the hearts of the people.
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The most comprehensive attack on the relief proposal came from Representative William Selden, of Henrico County, a middle-sized farming county adjacent to Powhatan and similar in the composition of its population.
⁴⁶
He recognized that the value of money had changed, but asserted that it was not subject to regulation by the government. The value of money depended on the quantity of circulating medium and the quantity of goods; “money itself is an article of traffic” like any other. “Human legislation on this subject is worse than vain.”

Selden proceeded to attack the idea of special privilege legislation for any class of citizens, such as farmers or debtors. The fact that debtors might be in the majority does not make such legislation just. Such class legislation would confiscate the property of the creditor and ruin the merchants who gave credit to their customers. Selden stressed the importance of personal responsibility for contracts and actions; the debtor should “pay the consequence of his own folly of imprudence.” In short, freedom of contract must be maintained; “Leave men alone to make their own contracts, and leave contracts alone when they are made.”
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Representative Robert T. Thompson, of wealthy Fairfax County, added another argument against the law. Objecting to the appraisement provision, he declared that property had only one value: the “price which it could command” at a fair public sale, and that its value could not be determined by any commission. Furthermore,
Thompson wondered why there was no pressure for acceleration of debt payment during boom periods. He concluded by urging that the legislature let the “cure . . . go on,” this cure being the elimination of the common habits of extravagance and luxury.

The outcome of the debate was rejection of the minimum appraisal bill by a vote of 113 to 74.
⁴⁸
The relief forces, however, tried again with two proposed stay laws in the 1820–21 session. These were rejected by a narrow margin.
⁴⁹

The conservative attitude toward the financial difficulties was reflected in the message to the Virginia legislature of Governor James P. Preston.
⁵⁰
The embarrassments were caused by general imprudence, extravagance, love of ease, and an inordinate desire to grow rich quickly. Preston declared that the remedy for the crisis was a return to the old habits of industry and economy.
⁵¹

North Carolina, plagued by a rapid fall in prices and land values, and beset by bankruptcies and failures, also saw a controversy over a stay law. Governor John Branch, in his message to the legislature in the 1820 session, proposed a stay and a minimum appraisal law to appraise the debtor’s property at its “intrinsic value.” There was too much opposition, however, for the bill to pass. Branch did succeed in passing a stay law for debtors who had purchased former Cherokee Indian land from the state.
⁵²

The pivotal state of Pennsylvania, which gave a great deal of thought to proposals for remedying the depression, considered stay laws and minimum appraisal laws. A minimum appraisal law was first
suggested by two Representatives from widely separated rural areas, John Noble and James Reeder.
⁵³
They urged a law forcing creditors to accept the real estate of debtors at a value set by an official. If they refused, execution of the judgment against the debtor was to be stayed for three years. Their major argument was that, while debtors generally had enough
paper currency
to have discharged the debt, the widespread depreciation of paper had placed a danger of forced sales on a great portion of Pennsylvania farmers and rural citizens.

The legislature never considered this bill seriously, despite the fact that Governor William Findlay urged its passage.
⁵⁴
Attempts to pass such legislation were killed by the reports of several special committees on the economic distress in the next sessions of the legislature. One report was submitted by the fiery Representative William Duane, editor of the daily Philadelphia
Aurora
—the old stronghold of arch-Republicanism.
⁵⁵
Duane, as chairman of the Special Committee on the General State of the Domestic Economy, declared that widespread distress prevailed among creditors, farmers, and mechanics throughout the state. In county after county, citizens testified to daily sacrifices of property and defaults on debts. Granting that a minimum appraisal law would afford some relief to specific debtors, such a law would be economically unsound, as well as an unjust special privilege for the debtor. Duane, like Hopkinson in New Jersey, declared that one of the greatest obstacles to a return of prosperity was the “absence of credit or confidence,” and nothing could better delay a revival of confidence than such a measure.
⁵⁶
The famous Raguet Report, in the 1821 session, also rejected such debtors’ legislation, but, without engaging in analysis of the proposal, stated simply that it was impracticable and dishonorable.
⁵⁷

Despite this recommendation, Pennsylvania passed a minimum appraisal law in March, 1821, providing that bankrupt property must be sold for two-thirds of its assessed valuation, else the debt would be stayed for one year.
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Further, the legislature, without controversy, modified the provisions of the execution laws in order to alleviate some of the burdens of the insolvent debtors. Specifically, a defendant could prevent sale of his landed property, if the property was considered to be unprofitable.
⁵⁹

One of the most acute and original critiques of stay and minimum appraisal legislation was the product of “A Pennsylvanian” writing in the conservative—formerly Federalist—Philadelphia
Union
.
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“A Pennsylvanian” noted that these laws were being advocated in many petitions to the legislature. Aside from their impairment of contract, such laws would, rather than relieve the distress, have a “most pernicious effect.” For the distress was caused by two factors, a lack of money and a lack of confidence. Such laws would not increase the amount of money in circulation, and therefore would not relieve the first cause. On the other hand, they would destroy the little confidence that now remained; they would induce the withdrawal of large amounts of capital now employed and mitigating the distress. The withdrawn capital would

be either invested in the public funds or perhaps [be driven] to other states, where a higher rate of interest
already holds out a sufficient temptation, and the people are too wise to destroy public confidence by laws impeding the recovery of debt.

“A Pennsylvanian” pointed to United States and City of Philadelphia 6 percent bonds being currently at 3 percent above par—indicating a great deal of idle capital waiting for return of public confidence before being applied to the relief of commerce and manufacturing. Thus, in the process of criticizing debtors’ relief legislation, the “Pennsylvanian” was led beyond a general reference to the importance of “confidence” to an unusually extensive analysis of the problems of investment, idle capital, and the rate of interest.

In the heavily indebted agricultural states of the West, there was greater agitation for debtors’ relief legislation. These states passed more such legislation than the eastern states, but generally only after an intense and continuing controversy. Although the relief sentiment was greater in the West, there were strong groups of advocates and opponents in each state.

Although Ohio was hit very heavily by the crisis, debtors’ relief proposals did not make too much of an impact or generate great controversy. Ohio had had a minimum appraisement law since its inception as a state in 1803. The law set a minimum price at forced sale at two-thirds an official appraisal of the debtor’s property—the appraisement to be performed by a board of the debtor’s neighbors. If the auction sale brought less, the property would be retained by the insolvent debtor.
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The laws were effective in shielding the debtor, although there were complaints that often the officials’ appraisals were at a very low value, hardly higher than the market value itself.
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In other cases, where appraisals were set at a high value, there were complaints in the press that creditors were being victimized. The Cleveland
Herald
cited one case of a creditor
obliged by the law to accept miscellaneous articles of personal property (such as watches, dogs, barrels) at an inflated value or be forced to wait at least six months to collect. The
Herald
called for repeal of the appraisement law.
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In sum, the plight of the debtors in Ohio was urgent, but their attention was concentrated on measures other than direct intervention in debt contracts.
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Thinly populated and overwhelmingly rural, Indiana was also heavily in debt and hard-hit by the economic crisis. As soon as the crisis struck, Indiana moved swiftly to pass debtors’ relief legislation. The main argument was that such laws benefited debtor and creditor alike, since the creditors could only be harmed by the ruin of their debtors, a ruin inevitable should the rapid debt-collection system remain in effect.
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In 1819, the Indiana legislature passed two relief laws; one increased the amount of personal property exempted from execution sales; the other stayed executions for one year unless the creditor agreed to accept at par the new paper money of the State Bank of Indiana, or to accept at par money of the other chartered banks in the state.
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The measures passed in the Senate with only one dissenter.
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On January 18, 1820, Indiana passed a minimum appraisal law providing for sales at a value of two-thirds of appraisal value and a one-year stay for creditors refusing these terms. The opposition to the Indiana relief laws centered
on the banking proposals and the State Bank paper, rather than on the stay provision itself.

In the next session, the Indiana legislature passed a stronger minimum appraisal law, patterned after the Ohio measure. It provided that, in the case of insolvency, the sheriff request seventy-five freeholders to estimate the value of the debtor’s property, and then the property could not be sold for less than two-thirds of this appraised value. If the property did not sell for at least this amount, the debtor was granted a year’s stay. With almost all the freeholders being debtors, the appraisals were generally set at a very high rate, discouraging almost all forced sales.
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In 1824, amid revived business activity, the anti-reliefers succeeded in repealing the appraisement law.

In Illinois, the major concentration in the state legislature was on the establishment of a new state-owned bank for issuing large amounts of paper money. The debtor’s relief legislation was originally linked with the new bank. It provided that if creditors refused to accept the new state bank paper as payment for their debts, all executions would be stayed for nine months. Furthermore, the debtor would have the right to reclaim the property (to
replevy
) if he made full payment within three years. Thus, Illinois enacted the equivalent of a three-year stay of execution if the creditor refused to accept the new paper at par for payment of the debt.
⁶⁹
Even if the creditors accepted the notes, however, the debtors could claim rights of replevy for sixty days and judgments were stayed for one month. Debt contracts explicitly made in gold and silver, and which therefore had to be repaid in kind, were stayed for a period of one to five months. As further relief for all debtors immediate judgment could
only be rendered against one-third of a debt, while all real estate, except that previously mortgaged, was exempted from judgments.
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Interestingly enough, the most bitter opponent of the inconvertible bank paper plan—Representative Wickliff Kitchell, of rural Crawford County in eastern Illinois—introduced a substitute debt-relief program of his own, albeit more modest than the three-year replevy law. Kitchell proposed a flat one-year stay on all executions for pending judgments on past debts. The execution would apply if the creditor swore that the property was in danger of being lost, in which case the debtor would have the right to replevy the property for one year, and for two years for debts over $500. There would be no stay or replevy for debts contracted in the future. The substitute bill was rejected in the Illinois House by a vote of 16 to 10. However, the legislature passed an additional mandatory nine-month stay law on all pending executions.
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Extreme western Missouri, just in the process of becoming a state, was the scene of one of the most comprehensive programs of relief legislation, and also of one of the most vigorous controversies over relief. Missouri had had particularly widespread speculation in land, and incurred heavy indebtedness in the course of this speculation.
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Most of this speculation during the prosperous postwar years, in town lots as well as in farms, was predicated on a continued heavy wave of migration to the West by men with money to spend. The wave came to a halt during the depression, adding to the crisis and fall in prices, and spreading insolvency among the debtors and landholders in the state.
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One striking result during the era (and this was also true in Illinois) was the large number of ghost
towns—built during the boom—now mute evidence of the highly erroneous expectations of a few years before. As was the case throughout the West, a good part of the indebtedness was committed in public lands and was owed to the federal government. We have already seen the action that the government took to relieve this problem. This relief did not solve the problem of the private land-debtors or of the merchants deeply in debt, who had anticipated heavy demand from relatively well-to-do immigrants. The press reported widespread imprisonments for debt and noted that few could afford to attend the sheriff’s sales to purchase the debtors’ property. There were many cases of forced sale of land for tax delinquency. Close to the barter of the frontier, it is not surprising that many business firms announced their willingness to take produce in payment of debts.