Chapter XXVII: Georgia Repudiation Bonds (1)

HOW A SOVEREIGN SOUTHERN STATE CHEATED THE NORTHERN MEN WHO HELPED HER
IN DISTRESS.—A NEW WAY TO PAY OLD DEBTS.—CANCELLATION BY REPUDIATION
OF JUST CLAIMS FOR CASH LOANED TO SUSTAIN THE STATE GOVERNMENT,
BUILD PUBLIC SCHOOLS AND MAKE NEEDED IMPROVEMENTS.—BOTTOM FACTS OF
THE OUTRAGE.—THE RECENT ATTEMPT TO PLACE A NEW ISSUE OF GEORGIA
BONDS ON THE MARKET, WHILE THE OLD ONES REMAIN UNPAID.—THE CASE
BEFORE THE ATTORNEY-GENERAL OF THE STATE OF NEW YORK.—HE EXAMINES
THE LEGAL STATUS OF THE BONDS IN CONNECTION WITH THE SAVINGS
BANKS.—HIS DECISION PROHIBITS THESE INSTITUTIONS FROM INVESTING THE
HARD EARNINGS OF THE WORKING PEOPLE IN THESE DOUBTFUL AND DANGEROUS
SECURITIES.—A BOLD EFFORT TO HAVE THE FRESH ISSUE OF GEORGIA PAPER
PUT UPON THE LIST OF LEGITIMATE SECURITIES OF THE NEW YORK STOCK
EXCHANGE FIRMLY OPPOSED AND EVENTUALLY FRUSTRATED.—REFLECTIONS ON
THE BAD POLICY WHICH ADVOCATED REPUDIATION AND HAS INJURED GEORGIA
CREDIT IN THE EYES OF THE WORLD.—GENERAL OBSERVATIONS UPON THE
NATURE OF REPUDIATION OF STATES’ DEBTS, AND THE MORAL INFLUENCE ON
THE GENERAL CREDIT OF THE UNITED STATES.—SUCCESSFUL APPEAL OF
BONDHOLDERS OF THE REPUDIATED BONDS TO THE STOCK EXCHANGE.

One of the saddest events of my business experience arose from the purest motives on my part, to aid the South in the work of reconstruction, in the way of which, as I have stated in the previous chapter, President Johnson threw the greatest obstacles.

I ventured my money and offered my friendship at a time when that section of the country stood in need of both money and friendship, and used my best efforts to bring about the return of such feelings of fraternal harmony as should exist among all the citizens of this great country. For these kindly offices I was treated with the basest ingratitude by some of the Southern States.

I held a large amount of Southern securities, all issued for full value received, which went into the internal improvements of that section, enhancing the taxable value of its property. These securities bore the great seals of the Sovereign States of Georgia and Alabama.

The dishonor attaching to repudiation in these instances has been brought out in more glaring colors, from the fact that these States have long since become abundantly able to liquidate their obligations, and to erase the black spot from the escutcheons of their chivalrous people.

The people themselves are not so much to blame as the disreputable politicians into whose hands the management of their affairs had fallen.

It is of the sovereign and high-toned State of Georgia that I have most occasion to complain. On account of the bad faith of that State, through her political managers, I suffered a terrible reverse in my fortune, which came near crushing out my financial existence.

It is not, therefore, surprising, I think, that having placed my faith in the integrity of that State and the promises of its officials and governing power, and having been so basely deceived, that I should now be aroused to act in self defence, fight for my rights and do all in my power to cause the bonds or securities for which I paid good money to be redeemed, and to have my just claims satisfied. It has therefore, been incumbent upon me to leave no stone unturned in fighting this battle, with the hope of recovering the money, or a part of it, that was filched from me through the ostensible defalcations of these sovereign and chivalrous States.

About thirteen years ago the repudiation which has reflected such disgrace upon the South became prevalent in that section, and took the character, for a time, of a severe financial epidemic.

It was for this reason that the Legislature of the State of New York, as well as the legislatures of several other States, considered it necessary for the protection of the savings banks, which are the custodians of many hundreds of millions, chiefly of the hard earnings of the working people, to prohibit these institutions from investing in, or loaning upon, the securities of any State in the Union that had within ten years previously repudiated any of its lawful obligations.

The laws of the State of New York, in chapter 409, section 260, of the laws of 1882, provides that savings banks shall be prohibited from investing money in stocks or bonds of any State which, in the language of the statute, “has within ten years previous to making such investment by such corporation defaulted in the payment of any part of either principal or interest of any debt authorized by any legislature of such State to be contracted.”

It was for this reason that the newly issued securities of some of the Southern States have been unable to find a resting place in the monied institutions of the North.

The State of Georgia, recently finding that she had some obligations becoming due, and seeing that money was cheap in the North, and that more than ten years had expired since she repudiated her former obligations, thought there was a good opportunity of issuing a fresh batch of these so-called securities, similar to those that had been dishonored in 1873.

The politicians of Georgia thought there was a good opening in the State of New York to remove the restriction placed upon the savings banks in 1882. They saw that the Governor and the Legislature were both Democratic, with a Democratic Attorney-General also, and therefore determined to take advantage of this political condition, which they supposed was highly favorable to their scheme of stealing a march upon the holders of the old repudiated bonds of Georgia, who had been chiefly instrumental in getting the act passed for the safety of savings banks’ depositors in the State of New York.

The Georgia politicians aimed at having the restriction of the savings banks removed, so far as it related to their State, in order to afford them an opportunity of issuing several millions of 4½ per cent. bonds for the purpose of taking up an old issue of the 7 per cent. bonds, thus effecting a considerable saving to the taxpayers of their State in this reduction of interest.

With the purpose of having this matter arranged as quietly as possible, two of the ablest lawyers of the State of Georgia were surreptitiously sent to Albany to make argument before the Attorney-General, Mr. Denis O’Brien, and to attempt to convince that official, in a very plausible manner, why the restriction should be removed from the savings banks in the case of Georgia. No opposition was expected, and the enthusiastic hope was indulged by those who were engineering the scheme that upon this _ex-parte_ statement of these astute Georgia lawyers a favorable opinion would be elicited from the Attorney-General of this State, which would justify the Superintendent of the Bank Department in issuing an order to remove the restriction which precluded the savings banks of New York from investing in Georgia bonds, on the ground that the State had not repudiated within ten years. The repudiation could be traced back thirteen years, instead of ten.

Pursuant to this application, a small item of a few lines appeared in one of the Atlanta papers, which stated that Mr. Calhoun had just returned from Albany, having made a very strong and forcible appeal to the Attorney-General there, urging him that the restriction on the part of the savings banks be removed so far as Georgia was concerned.

This item was telegraphed to me, and on receiving the despatch I notified the holders of the repudiated bonds, and wired the Attorney-General asking him when a hearing of the other side could be had.

When the day arrived for the hearing before the Attorney-General, Mr. Calhoun was surprised to find that there was any opposition to his application, as the business had been so quietly managed that it was supposed by the Georgia members of the Bar that the bondholders would hardly be apprised of it until everything should be fixed according to the pre-arranged programme, and in favor of the repudiating State obtaining fresh and unlimited credit without settling up the old score. Mr. Calhoun was assisted in his able argument on the sovereign right of repudiation by the Hon. N. J. Hammond, Member of Congress and ex-Attorney-General of Georgia.

In reply to these great lights of the Southern Bar, whose genius would have shone more brilliantly in an honest cause, I made the following address:

Henry Clews’ speech before the Attorney-General of the State of New York, June 20, 1885:

The original act of repudiation by the State of Georgia has been
repeated each six months since that period to the present date,
by the refusal of the State to recognize and pay the coupons on
said bonds as they matured. This alone repeats the repudiation
of that State twice each year for the past ten years at least,
and therefore is a continuance of the repudiation from the time
of the original vile act up to the present date; besides which,
the bonds repudiated had twenty years to run. The maturity of
said bonds does not expire until 1890. The repudiation should be
considered, therefore, as continuous during the entire period,
from the date of the issue of said bonds until 1890, five years
hence. If it is to be accepted that the test of a State’s credit
is to be able to show a record free from fresh repudiation for a
period of ten years, and that repudiation is not a continuous
repudiation until such obligations are fully settled and
provided for, what is to prevent a State from negotiating a
fabulously large amount of bonds, and thereby place an amount
sufficiently large in her treasury to admit of bridging over for
the required ten years, and, after making such ample provision,
then pass an act, as heretofore, repudiating the bonds issued,
and keep repeating it each decade? Supposing the same rule held
good with a bank robber—and there is, as far as integrity goes,
really no great difference between the two, only one seeks
protection in Canada and the other behind her sovereign rights,
which is her Canada refuge. The robber breaks into a savings
bank, guts it of several millions of dollars, flees to Canada,
and there lives in affluence for ten years. How silly it would
appear if, after ten years, provided he could show a record free
from thieving during that time, he had the legal right then to
come back, and thereby be entitled to a clean record as an
honest man, and in consequence be accorded a high credit. The
position of the State of Georgia in assuming such a role, in
coming here at this time to ask our savings banks to aid her in
such a nefarious business, simply lacks a parallel for audacity.
The management of savings banks must be conducted so as to
inspire confidence with the depositors and with the entire
community also. It is necessary, especially at panic periods,
for full confidence to be felt in the investments of such
institutions. If the prohibition is removed, as is now sought to
be, and savings banks be permitted to invest in Georgia
securities, and one of them should buy $500,000 of the bonds, I
venture the prediction that such an investment will sooner or
later form the basis of a rumor which will cause a panic among
its depositors and break that institution. This would result in
a most serious disaster to probably thousands of poor people
whose money had been lodged there for safe-keeping. The mere
whisper during a panic that a certain institution had $500,000
of Georgia bonds, and they were about to be repudiated, would
bring about just such a disaster as I have stated.

I ask your Honor if it would be wise for any savings bank to be
permitted by the Superintendent of the Banking Department to
become thus exposed to ruin? A State that is abundantly able to
meet her obligations and dishonors them is too despicable for
either credit or tolerance in a civilized community, and it is a
disgrace to the nation that States comprising it have the power
to make such obligations and repudiate them at will and screen
themselves behind their sovereign rights, whereby they cannot be
sued, and in consequence leave the outrageously wronged innocent
bondholders without means of redress whatsoever. If the United
States Government ever expects to obtain that permanent high
credit in the money markets of the world to which the immense
resources of this magnificent country justly entitle her, the
great and growing evil of State repudiation must be remedied.
For States to repudiate with impunity, as the State of Georgia
has done, leaving no means whatever for redress on the part of
the victimized creditors, is a blot upon the escutcheon of the
whole country. This is not a fight, your Honor, on the battle
field against the South; it is a fight on the financial field,
and, as it is second only in importance to the other, it must be
settled, and now is the time to strike the blow, as it will do
the most good in that direction. We, the creditors of Georgia,
have not only borne the loss and hardship of having our
securities made valueless by a legislative body, and many of us
ruined thereby, but we have also been vilely defamed—being
branded as conspirators to rob the State—simply because we were
found to be holders of these dishonored bonds. This has been
done by the State to cover up her own infamy, and make it appear
that we were the guilty parties and not the State. The attitude
of the State of Georgia, your Honor, is not unlike that of a
pickpocket, who, after rifling his neighbor’s pockets, is the
first to cry “stop thief” to elude detection. All that the
bondholders ask and claim is to have the entire case submitted
to a proper judicial tribunal. This right we have been denied by
the State, and the Constitution leaves us powerless to enforce
it. The State simply says, the bonds are fraudulent and we will
not pay them. It is a very remarkable circumstance, however,
that there has not been a single one of the numerous officials,
from ex-Governor Bullock down, who were connected with the issue
of these so-called fraudulent bonds, prosecuted to conviction in
the thirteen years that have intervened since their issue. Still
these bonds are all repudiated on the ground of being
fraudulently issued, and the innocent bondholders alone are made
to suffer the harsh penalty imposed for having staked their
money on their belief in the honor and integrity of the people
of Georgia, which it is quite apparent are now _non est_.

I addressed a letter to your Honor on May 27th last, which
contains important information in connection with these
repudiated bonds. I ask permission to read this letter at the
present time, so that it may become a part of the evidence in
this case.

The following circular letter contains a variety of opinions analyzing the true relations of the State of Georgia to her creditors, and clearly setting forth the nature of her liability in the matter of the repudiated bonds in connection with the house of which I was the head:

REPUDIATION ROBBERY BY THE “SOVEREIGN” STATE OF GEORGIA.

“_The divine doctrine of State Sovereignty, which makes a State
too dignified to be sued for its debts, ought to make
it also too respectable to cheat its creditors_”

NOTICE.—Managers of Insurance Companies or Savings Banks should be and are likely to be held responsible, by stockholders and depositors, for any losses incurred in the event of their buying or loaning upon any bonds issued hereafter by States which are under the cloud of repudiation.

* * * * *

NEW YORK, May 27, 1885.

HON. WM. A. POST, _Deputy Attorney-General, Albany, N. Y._:

DEAR SIR:—I deferred answering your telegram of Saturday until
this morning for the purpose of ascertaining whether the
bondholders’ counsel would be in readiness to meet you at the
time proposed, and only ascertained the fact this morning that
he would, so I wired you accordingly. I presume that this
Georgia repudiation question comes before you for the purpose of
removing the prohibition from the savings banks of this State to
their buying or loaning upon Georgia State bonds, owing to that
State being under the cloud of repudiation. The prohibition of
the savings banks, issued by Mr. A. B. Hepburn, the former
Superintendent of the Banking Department, was based upon a
thorough and exhaustive examination in reference to all matters
appertaining thereto. This I have reason to know, as that
gentleman visited New York and took my testimony and others in
the case. The State of Georgia has always charged, as the
justification for repudiation, that R. B. Bullock, Governor at
the time of the issue of said bonds, had issued the bonds
without proper legislative authority, and besides had stolen or
misappropriated most of the avails. About three years since
Governor Bullock visited Atlanta, Ga., and demanded his trial
under the several indictments against him. The trial came up
soon thereafter, and he was acquitted on all the charges. This
gentleman is now a resident of Atlanta, Ga., and is to-day one
of its most prominent citizens. It has been also charged that as
he was a Northern born man, that he was a “carpet-bag” Governor,
and for that reason the bonds were not a legal issue. That
attitude is also unwarrantable, as the ex-Governor remained
South during the period of the entire war, and took a prominent
part on the Confederate side, in giving aid and comfort, and
thereby can justly be considered as being a Southerner and not a
Northerner in his interests and feelings. Most of the bonds
repudiated were passed upon as legally issued and properly
signed, by our best lawyers, such as Messrs. Evarts, Southmayd &
Choate, ex-Judge Emott, Abbott Bros., E. Randolph Robinson, the
brother of Judge Sedgwick, of this city, and others.

Some of these repudiated bonds were also passed upon by the New
York Stock Exchange, and because repudiated were afterwards
stricken from the list of securities to be dealt in. The face of
these securities were worth par a few days prior to their
repudiation, and immediately after that Act was passed were
reduced to no more than the value of the paper upon which they
were engraved. The same may at any time be the fate of any new
securities to be issued by that State. Those who had these bonds
were and are innocent parties, and among the sufferers are Trust
Companies and savings banks. The Metropolitan Savings Bank holds
$100,000 of the 7 per cent. Georgia gold bonds, bought about
par; the Brooklyn Trust Trust Co. holds $100,000; the Union
Trust Co. holds $100,000; the Commercial Warehouse Co. held
between $300,000 and $400,000 of the bonds, and their
repudiation caused the failure of that institution. The New York
State Loan and Trust Co., Henry A. Smyth, President, also had
$100,000 of the bonds, which loss was largely instrumental in
causing the collapse of that concern. The Broadway National Bank
holds $200,000 of these bonds as collateral, upon which they
loaned $160,000; Morton, Bliss & Co., Morris K. Jesup, Drexel,
Morgan & Co., Ezra A. Boody, George Morgan, son-in-law of J. S.
Morgan, of London; J. Bowman Johnson & Co., Richard Irvin & Co.,
L. Von Hoffman & Co., Russell Sage and many other first-class
parties that I can name are prominent sufferers resulting from
Georgia’s repudiation; besides which, my firm in 1873 held over
$2,500,000 State of Georgia securities, all of which had been
paid for or advanced upon, and my firm’s suspension at that time
was attributable thereto.

The only way to do, in my judgment, is to make the Southern
States which are now under the serious cloud of repudiation,
understand that their credit is impaired and facilities for
obtaining money materially lessened because of it. Then,
realizing _that_ as their position, and finding that they are
shut out of the financial markets of the world owing thereto,
they will soon make a compromise with their lenient creditors,
and remove the blot from their escutcheons. The Federal
Government is comprised of the various States of the Union, and
to-day enjoys as high a credit as any nation in the world. If
the various States comprising the United States are permitted,
however, to repudiate with impunity and screen themselves behind
their sovereign rights so that creditors have no recourse, the
odium will soon fall upon the General Government, and its credit
will finally become tarnished if not crippled in consequence.
The State of Georgia, as can be proven, received full value. The
internal improvements in Georgia bear testimony of this. The
taxable property of the State has been immensely enhanced by
these improvements, and the debt repudiated is a mere bagatelle
as compared with the ability of the State of Georgia to provide
for it. She has become rich in late years, and if the stain of
repudiation should be wiped out, would stand an excellent chance
of becoming a favorite resort for emigration and for the flow of
capital. Emigrants from other countries to this, in locating,
first look to the credit enjoyed by the State their attention is
called to, and if found high, their conclusion is that there is
safety for property, and if so, corresponding safety for life;
but they will not go to a repudiating State, and in this way the
South is held in check in the development of her resources,
owing to the want of new blood. The bondholders of the State of
Georgia have frequently offered to leave all points at issue in
reference to Georgia’s repudiation to the Courts of that State,
to the United States District Judge, or to arbitration, the
parties to be selected by both sides, all of which has been
denied, the reply being the “bonds are repudiated, and we simply
will not take any steps to provide for their recognition or
payment, and what are you going to do about it?” Under the
circumstances, creditors are powerless, of course, to do
anything, as the State cannot be sued. If you desire it, I will
send you a sample bond of some of the issues repudiated, so that
you may see how beautifully the signatures are written, and how
firmly fixed the seal of the Commonwealth is placed upon them,
besides the magnificent steel engraved workmanship of the
Continental Bank Note Company of this city. If there was not a
prospect of the State of Georgia being forced by public opinion
to provide for these bonds at some future time, they would be
worthy to be framed and hung up in our parlors as a complete and
fine work of art.

Judge Lochrane, former Chief-Justice of the State of Georgia,
has wired me that he will appear before you on Wednesday;
Colonel R. A. Crawford, of Georgia, will also do so; Messrs.
Abbott Brothers, of this city, and others will appear before
you.

You will please append this communication as a part of the
testimony, and should you desire more on the subject, call upon
me therefor.

I have the honor to remain,

Your obedient servant,

HENRY CLEWS.

* * * * *

EDWARD BRANDON, ESQ., _Chairman of the Committee on the
Admission of Securities to the N. Y. Stock Exchange_:

DEAR SIR:—It is currently reported that the State of Georgia is
about to apply to your Committee to list a new issue of bonds.
In behalf of myself and others who have suffered most seriously
by that State’s unwarrantable repudiation of bonds, which have
as full a right to an equal standing as representing the credit
of the State of Georgia as possessed by the new bonds to be
issued, and fully realizing that the cruel fate of the former
merely represents what may be that of the latter, I claim the
right, as a member of the New York Stock Exchange, as a sufferer
to the extent of several millions of dollars by the State of
Georgia’s bad faith, to protest against the admission of any new
securities hereafter to be issued by that State until her
repudiated bonds are recognized and provided for.

Yours very truly,

HENRY CLEWS.

Ex-Governor Bullock’s Democratic successor, soon after he was elected to that position, appointed as Attorney and Agent for the State of Georgia, one of the State’s ablest lawyers, a gentleman distinguished as having been a member of the Confederate Congress, to investigate all the business transactions between Henry Clews & Co. and the State of Georgia. Under his signature as Attorney and Agent for the State, he makes the following statement: “I would say, with a great deal of pleasure, that after a very thorough and complete examination of the books of account, papers and correspondence of Messrs. Clews & Co., so far as they relate to transactions of that house with the State of Georgia during Governor Bullock’s administration, I am satisfied that in all the dealings of that firm with the State of Georgia, they have acted with both fairness and liberality, and I am convinced that in all these matters Mr. Clews did nothing that would not bear the closest scrutiny, and he did nothing, in my opinion, to affect his character for integrity and fair dealing. I make this statement with the more pleasure because I began this examination of accounts of Clews & Co. under impressions very unfavorable to Mr. Clews.”

* * * * *

The opinion of ex-Governor Brown, now our able senior United States Senator, was asked by thirty-five members of the Legislature of 1873. In the course of a comprehensive and exhaustive argument, the distinguished Senator says: “The State will be driven to abandon this position (legislative repudiation) and to permit a case to be made by her creditors to test the validity of these bonds in the courts of the country, or she must stand dishonored in the estimation of all good men, and her credit must sink to a ruinous depth.”

* * * * *

The late ex-Governor Alexander H. Stephens, ex-Vice-President of the Southern Confederacy, is on record as saying, in reference to this repudiation, that it is “nothing short of public swindling. Not less infamous than obtaining money under false pretences.” But the partisan feeling was then so intense that even the lamented ex-Governor Jenkins was hardly accorded a respectful hearing in the Constitutional Convention, of which he was president, when he plead against sweeping repudiation without granting the holders a judicial hearing. Ex-Governor Jenkins said on that memorable occasion: “Now, sir, I take this ground: that for the proper examination and investigation oi these claims, neither the Legislature nor this Convention, nor the people themselves, are a proper tribunal to decide these matters. They ought to be examined and determined judicially. It will now, I presume, be admitted that the five years’ time between legislative and constitutional convention repudiation was not allowed to pass unnoticed by the parties having these bond claims against the State. Having waived our sovereignty in the past to allow the State to be sued in every county in the State on claims for small-pox expenses, I submit that our sovereignty ought not to be plead to bar so important an issue as that now under consideration. The State can, in no event, be put to loss. The whole State has been largely benefited by the legislation and by the executive action which was subsequently repudiated. We have been for fifteen years past collecting annual taxes on fifty millions of enhanced value of our taxable property; an increase which is directly traceable to the good effects of the new railroads built under that legislative and executive authority. Shall we—can we honestly receive these benefits and repudiate our liabilities?”

* * * * *

An interview with ex-Governor Rufus B. Bullock, of Georgia, May 29th, 1885:

A reporter called upon ex-Governor Bullock at his rooms, Fifth Avenue Hotel, and obtained the following interview:

Governor Bullock: “Any information in my possession is at your
service. I have published from time to time, over my own
signature, my views on this subject, and I have no objections to
repeating them. I desire to say, however, that I am in no wise a
party to the recent proceedings which have been had before the
Attorney-General of New York. I was in the city on private
business and without any previous knowledge of the proposed
hearing. I attended the hearing out of curiosity, expecting to
hear an argument by ex-Chief Justice Lochrane, and while there
was invited by the Acting Attorney-General to respond to his
inquiries. This I did with the result as reported in your
valuable paper. During my administration in 1868-’69-’70 and
’71, bonds of the State were issued for State purposes, and the
endorsement of the State was placed upon certain railroad bonds
under the authority of law.

During the wild excitement that resulted in and followed the
overthrow of the Republican government in Georgia, nearly all
the acts of Republican administration were repudiated, among
them its financial transactions, and up to this day and hour the
questions of fact have never been permitted to reach any
judicial tribunal.

The people of New York State are fair-minded, law-abiding and
honest, and whenever they can be informed of the truth will
fearlessly follow it; but with regard to the real merits of this
repudiation, no light has reached them because our courts have
been closed.

It is asserted by the holders of these repudiated
obligations—and in this assertion I concur—that every bond was
issued in accordance with law, and that the State is now in the
enjoyment of the benefits resulting therefrom. In the exciting
times to which I have referred, a majority of the then
Legislature decided that the State was not bound by the acts of
its predecessors, and therefore these obligations were null and
void.

This is, of course, a question of law, and not of legislation. I
am sure that now, when partisan passion has subsided, both
parties to this controversy would cheerfully acquiesce in any
decision reached by our Supreme Court, and that the holders of
these defaulted securities would accept whatever is awarded them
in a long term bond at a low rate of interest, and on such an
adjustment all parties, at home and abroad, could unite in
maintaining the high financial credit to which the Empire State
of the South would then be entitled.

In December of last year the Atlanta _Constitution_, discussing
this subject, used the following language: “The burden of his
complaint is, that the bonds have never had a hearing in court.
This comes with poor grace from the ex-Governor, who, when the
validity of the bonds issued under his administration was being
discussed by the legislative committee, was absent from this
country, his whereabouts unknown, and his testimony not
procurable. The bonds were ‘in court’ then, and as Governor
Bullock was not present with his evidence when it was needed, he
should not complain that a new hearing is not had for his
benefit.” To this I made reply, which the _Constitution_ kindly
published, and I will thank you to copy as follows: “I desire to
say that I was not absent from the country. My whereabouts were
known, and my testimony was before the committee in the full and
complete report of the financial condition of the State which I
made to my successor, sustained by the official records of the
Executive and State Departments. I never received a request from
that committee to come before them in person, and my presence
would not have added to the information in their possession.
Every request received by me from my successors, to aid in their
investigations, has been promptly complied with. In accordance
with such request I met Dr. Bozeman, financial agent,
Attorney-General Hammond and Governor Smith, in New York, and
also subsequently, Colonel Snead, Attorney for the State, and
Colonel Kibbe, chairman of committee. No fact within my
knowledge has ever been withheld, nor have I ever neglected any
proper opportunity to contradict the statement that any of the
bonds issued during my administration and reported to my
successor were ‘bogus.’ But, Mr. Editor, the question is, shall
a debtor pass on the validity and enforce judgment against his
own indebtedness? I submit that a legislative investigating
committee is not ‘a court’ in the sense that its findings are
conclusive on questions of law. To hold a question so decided to
be _res adjudicata_, is to sustain a legislative usurpation of
the judicial functions of the government. If your position be
well taken, that because the Legislature has decided against the
bonds, the case is _res adjudicata_, and the judiciary is
precluded—of what avail is our constitutional guarantee that the
executive, legislative, and judicial branches of the government
shall be separate and distinct, and that neither shall encroach
upon the functions of the other? What protection has a citizen
for his property if a legislative decision upon a legal question
must be regarded as final _res adjudicata_?

Does not the taking of other people’s money to build up our
railroads, and refusing those people a hearing in courts of our
own creation, before judges of our own election, indicate a want
of confidence in the justice of our cause? The Territory and
State of Minnesota used other people’s money to open up her
lands by the construction of railroads, just as Georgia did,
pledged the faith of the State for repayment, and then
repudiated, just as Georgia did. After twenty years’ delay,
justice has been done, and her obligations, as ascertained
through her court, have been paid. I have faith to believe that
the Empire State of the South will eventually keep pace with her
sister States in the Union in meting out exact justice through
her courts to every man, come from whence he may.

* * * * *

Hon. Wm. A. Post, Deputy Attorney-General of this State, by
appointment, visited this city last Friday to take evidence on
the Georgia repudiated bond question, the object being to
determine the legal status of a new issue of bonds by the State
of Georgia in connection with the savings banks of this State.
Owing to the repudiation of that State, at present these
institutions are debarred from investing in bonds of any
repudiating State, and the effort now is being made by the
representatives of the State of Georgia to remove that barrier,
so that the savings banks can be gutted of their surplus means
and filled up with the bonds issued by that State, which are
more than likely to share the wicked fate of repudiation, as
previous issues to the extent of $8,000,000 have done. The
savings banks managers, even in the event of obtaining a
decision authorizing them to take Georgia bonds for investment,
should be held personally liable for any losses that may fall
upon such institutions if they hereafter invest the funds of
widows and orphans in a security which, judging from past
experience, is almost sure to be wiped out and made worthless.
Mr. Clews charged that Mr. Calhoun’s appearance in representing
the State before the Attorney-General at Albany was a
surreptitious proceeding, and was only heard of by mere chance
by the holders of the repudiated bonds through a squib in a
Georgia paper. He also stated that the bondholders had patiently
waited twelve years for their money, and no body of creditors
had ever been so lenient as those of the State of Georgia, and
justice demanded that these long-suffering and much-defamed
creditors should be settled with prior to the financial world
according to the State of Georgia a sufficiently high credit to
admit of her floating any new issues of bonds. A motion was made
to adjourn the meeting until the 20th, which Mr. Post said he
would accede to after asking ex-Governor Bullock a few questions
in relation to the connection of the firm of Henry Clews & Co.
and the State of Georgia during the time he was its Governor. He
desired to make these inquiries now, as the ex-Governor was
present and might not be at the adjourned meeting. Mr. Clews
requested permission to state that his firm—Henry Clews &
Co.—had never been agents for the State of Georgia, but merely
acted for her as bankers and brokers. The agent of the State
during the entire period of Governor Bullock’s term of office
was the Fourth National Bank of this city. He stated that his
firm received no bonds, excepting by purchase or as collateral,
and advanced money to the State as it was needed. At one time
the State owed for said advances as much as $1,650,000; the
money so advanced was stated by Georgia’s officials as required
to meet the expenses of the government of the State. Ex-Governor
Bullock fully ratified Mr. Clews’ statement. He admitted that
the Fourth National Bank was the State financial agent, and that
he had placed a large quantity of bonds with Henry Clews & Co.
to market and as collateral for advances. “I will say,” said the
Governor, “that every dollar secured on the sale or pledge of
these bonds was received by the State, and it was expressly
agreed that the firm of Henry Clews & Co. should hold all the
bonds in their hands as security for the indebtedness due them
by the State of Georgia.”

* * * * *

GEORGIA’S OUTLAWED BONDS.

Newspapers in Atlanta, Savannah and other parts of Georgia have
violently assailed _The Graphic_ for its comments on the new
issue of Georgia State Bonds as affected by the repudiation of a
former issue. These journals are short-sighted, as are the
people of Georgia who imagine that they save money by outlawing
the obligations of their State issued in the usual manner. We
will not impute deliberate dishonesty to them, but they
certainly do not place their own motives in a favorable light
when they exclude the holders of the repudiated bonds from even
the right to present their claims before the civil courts of
Georgia. Ex-Governor Bullock has been berated in the same
connection, and he cogently replies:

“I have no pecuniary interest in the repudiated bonds or
obligations. I have no lot or part in any scheme or combination
by or through which public attention is or has been called to
this matter. My attitude is that of a private citizen who has as
high a regard for the honor and good name of Georgia as any man
within her borders. I never obtrude “the bond question” upon the
public attention. But when my official action is attacked in
that connection I shall never fail to assert and re-assert that
the financial statement made by me to my successor in office was
the exact truth and that its correctness never has and never
will be successfully controverted. In that financial statement
were many of the State obligations, which in a time of great
public excitement and partisan zeal were ‘outlawed’ by the
action of a political body, and up to this day and hour the
holders of such obligations have been denied that cool,
dispassionate hearing of their claims which our courts alone can
give. My ‘attitude’ is that Georgia is too great, that she
stands too prominent in this country and in the world at large
to accept the position of being a semi-annual defaulter and
refusing to the creditor a hearing in her own courts. It is idle
for me to assert or for you to deny the validity of the
defaulted securities. That is a question of law, and no Georgian
can defend his State while she slams the door of our courts in
the face of our creditors. I assert that it does make a vast
difference to Georgia whether her new securities are listed at
the Exchange in New York. Our own people or other people can, of
course, buy and own them, and I know the interest and principal
will surely be paid, but unless the bonds are ‘listed’ they are
not, in mercantile parlance, a ‘good delivery,’ and will not
stand abroad as they should, equal with the best State in the
Union.”

A State which once repudiates its obligations cannot be trusted
not to do the same thing again. What guarantee can any investor
have that the bonds which Georgia is now trying to put upon the
market may not be outlawed by the next Legislature? The
_Graphic_ has no interest in the matter beyond that of upholding
public morals, the good name of the State and the rights of
swindled creditors. The State which repudiates is as foolish as
the imbecile who cut off his nose to spite his face.—_N. Y.
Graphic_, June 6th, 1885.

* * * * *

The extreme care with which so-called securities or new issues
of bonds are scrutinized in this market nowadays is shown in the
opposition which has sprung up to the proposed listing on the
New York Stock Exchange of $3,500,000 new Georgia State bonds.
While money is a glut in the markets and our banks are now
carrying a larger idle reserve than ever before known in the
history of business, there is no disposition to permit Southern
repudiators to come in and secure any part of the funds. The
application to the Attorney-General to permit our savings banks
to “invest” in the bonds, and the request that they be listed in
the Stock Exchange, aroused New York bankers to action, and
their opposition has been so far very effective. It has had this
good, at least, that it has revived attention in regard to the
repudiation of old obligations of Southern States. By its act of
repudiation, Georgia mulcted the New York investors to the tune
of millions. I know of one banker who now holds more than
$2,500,000 of these bonds, on which there is an interest
accumulation of twelve years’ duration, and at least three
leading financial institutions were carried to the wall by the
same means. Now, it is considered very poor grace for the modern
Christian statesmen of Georgia to pass around the hat again. Let
the State first repudiate its repudiation, pay up old scores,
and then it will be quite early enough to ask for further loans.
The argument that the credit of the State is really benefited by
the repudiation, as she has so much less obligations to meet, is
a quaint one, and worthy the source from which it emanates. This
is not the sort of “prosperity” that invites further investment
of Northern funds.—_Syracuse, N. Y., Sunday Herald._

* * * * *

GEORGIA BONDS.

When a Georgia bond is put on the market, our Democratic friends
cry out “Great is the Credit of Georgia.” They claim that
Georgia pays all of her obligations whenever they are due,
knowing their claim to be utterly false. Georgia has not only
repudiated legal obligations, in the hands of innocent
purchasers, but she denies the parties who have paid value for
her bonds the right to take the judgment of her own courts on
the validity of those bonds. So in the bond business the State
of Georgia acts not only the role of the thief and robber, but
also of the coward. The man who claims that Georgia meets all
her obligations is simply a liar.

* * * * *

Respecting State securities, investors are showing a very proper
discrimination against the issues of States tainted with
repudiation. The action of the Superintendent of the Banking
Department of this State, in forbidding savings institutions
from investing in the new issues of the bonds of Georgia, has
attracted attention to the danger of investments thus tainted,
and is very generally approved by the investing public as a
check to future acts of this kind. The disposition shown by
certain managers of savings banks to put the funds in their
charge into such doubtful securities should be strongly
condemned; and it is a question whether it is not necessary, as
a protection to such depositors, to make such a use of the
deposits of the poorer classes a penal offence.—_Weekly
Financial Circular of Henry Clews & Co., June 6th, 1885._

* * * * *

HOW THE GEORGIA BONDS WERE NEGOTIATED.

The following circular explains the manner in which the Georgia bonds were negotiated with my firm:

NEW YORK, July 3, 1885.

HON. WM. A. POST,

_Deputy Attorney-General, State of New York_:

The firm of Henry Clews & Co. did not solicit the account of the
State of Georgia, but it was opened at the request of Mr. I. C.
Plant, the leading private banker of Macon, Ga., and the most
influential and affluent banker of the State of Georgia then and
at the present time. Mr. Plant was brought to my office by Mr.
P. C. Calhoun, President of the Fourth National Bank, which
institution was the financial agent of the State of Georgia at
the time. Mr. Calhoun introduced Mr. Plant to me, by giving that
gentleman a very strong endorsement, and stated that Mr. Plant
was in this city for the purpose of raising money for the State
of Georgia, which money was required to pay off the members of
the Legislature. Mr. Calhoun stated that his bank had loaned to
Mr. Plant $400,000 on currency 7 per cent. Georgia bonds, and as
money was very stringent at the present time and the calls were
very numerous, he felt as though $400,000 was as much as he
ought to loan in any one quarter. “But if you have any money,
Mr. Clews, that you are willing to loan at the present time, if
you will accommodate Mr. Plant, it may result in your doing some
good business with the State of Georgia. I would say,” said he,
“that you cannot advance money in any quarter where it would be
safer than to loan on the Georgia State bonds which Mr. Plant
will offer you. I know the State of Georgia well. I have ridden
on horseback over almost every foot of ground in the State in my
early life in my collecting trips. My father was in the saddlery
and hardware business, and the larger part of his business was
in that State. I know the people of this State; and as an
evidence of my opinion of the future of this State and its
bonds, I will say that if I had my choice to put my money into
these bonds of the State of Georgia, or those of the State of
New York, to leave to my family, I would give the bonds of
Georgia the preference, for the reason that her debt is so small
as compared with the debt of the State of New York at the
present time, and the future of the State of Georgia is destined
to be one of great prosperity.” Mr. Plant then said: “Mr. Clews,
Mr. Calhoun has advanced $400,000 towards the amount I need, and
I want $250,000 in addition. I know the money market is very
tight [as it was at that time, money being worth 7 per cent. per
annum and 1 per cent. per day commission]; still, I think, if
you will loan this money to the State of Georgia, that it will
enable you to make a connection which will prove profitable to
you in the end.” I said: “Very well, Mr. Plant, I will make the
loan to the State of the $250,000 which you require.” Mr. Plant
then said: “Well, place it to the credit of the State of
Georgia, and I will bring in 500,000 of Georgia 7 per cent.
currency bonds, the same character of bonds which have been
lodged as collateral with the Fourth National Bank. I will go at
once to the Fourth National Bank, where they are, and bring them
down here;” which he did. The $250,000 was then placed to the
credit of the State and a telegram to that effect was sent to
the Governor, and it was at once drawn out on the official
drafts of the State. This started a correspondence with Governor
Bullock, in his official capacity, he being entirely unknown to
me before. Other applications were then made direct by the
Governor for additional loans, which were made from time to
time, until the amount so advanced reached to $1,650,000. After
receiving, in addition to the 500,000 bonds referred to, 800,000
more of similar bonds came into our possession from time to time
as collateral, being put up at 50 cents on the dollar; and when
we afterwards received a large installment of the gold quarterly
7 per cent. bonds, having at that time an excess of collateral
in our hands, we voluntarily forwarded to the State 500,000 of
the Currency 7s. This was precisely and exactly the way my
firm’s connection was commenced with the State of Georgia. Mr.
I. C. Plant, who is still a banker of Macon, Ga., I am sure,
will testify to the correctness of my statements.