CHAPTER XXXII NATIONAL BANKRUPTCY
I have, since I have been in the Senate, taken great interest in the passage of a bill for a system of National Bankruptcy. The Constitution gives Congress power to establish a uniform system of Bankruptcy. The people of Massachusetts, a commercial and manufacturing State from the beginning, have always desired a Bankrupt law. They were large dealers with other States and with other countries. Insolvent debtors in Massachusetts could not get discharge from their debts contracted in such dealings. The Massachusetts creditors having debts against insolvents in other States found that their debtors under the laws of those States either got preferences or made fraudulent assignments which they could not detect or prevent.
On the other hand, the bankruptcy laws have always been unpopular in many parts of the country. The Democrat who strictly construed the Constitution did not like to see this power of Congress vigorously exercised. The National Courts, who must administer such laws, were always the object of jealousy and suspicion in the South and West. The people did not like to be summoned to attend the settlement of an estate in bankruptcy, hundreds and hundreds of miles, to the place where the United States Court was sitting, in States like Texas or Missouri. The sympathy of many communities is apt to be with the debtor, and not with the creditors, who were represented as harpies or vultures preying on the flesh of their unfortunate victims. A good example of this prejudice will be found in an extract from the speech of Senator Ingalls, of Kansas. He said in defending what was known as the equity scheme:
"The opposition arose first, from the great wholesale merchants in the chief distributing centres of the country. They have their agents and attorneys in the vicinity of every debtor, obtaining early information of approaching disaster, and ready to avail themselves of the local machinery of State courts by attachment or by preferences, through which they can secure full payment of their claims, to the exclusion of less powerful or less vigilant but equally meritorious creditors. Naturally they want no Bankrupt law of any description.
"Second. From the disabled veterans of the old army registers; from the professional assignees and wreckers of estates, who, by exorbitant fees and collusive sales of assets to convenient favorites, plundered debtor and creditor alike and made the system an engine of larceny and confiscation.
"Third. From those who desire, instead of a system for the discharge of honest but unfortunate debtors upon the surrender of their estates, a criminal code and a thumb-screw machine for the collection of doubtful and desperate debts. They covet a return to the primitive practices which prevailed in Rome, when the debtor was sold into slavery or had his body cut into pieces and distributed pro rata among his creditors.
"Fourth. From those timid and cautious conservatives who believe that nothing is valuable that is not venerable.
"Like the statesman described by Macaulay, they prefer to perish by precedent rather than be saved by innovation. They adhere to ancient failures rather than incur the risk of success through venture and experiment.
"Fifth. From Boards of Trade, Chambers of Commerce and other ornamental organizations who, being entirely uninformed on the subject, permit themselves to become the conduits through which the misrepresentation and animosity of avaricious creditors and rapacious attorneys are discharged upon Congress and the country."
I had moved in the Senate, in 1882, a bill favored by the merchants and manufacturers of Massachusetts, which was largely the work of Judge John Lowell, of the United States Circuit Court, one of the most accomplished lawyers of his day, as an amendment to a bill which Mr. Edmunds, Mr. Davis and Mr. Ingalls had reported as a Subcommittee to the Senate Judiciary Committee, and which had been reported from that Committee to the Senate.
The Lowell Bill was on my motion substituted for the report of the Judiciary Committee, by a majority of three. This bill was extensively discussed in June and December. But I was unable to secure its passage. It passed the Senate, but it did not get through the House.
I have had the Parliamentary charge of all Bankruptcy measures in the Senate from that time. After the failure of the Lowell Bill, the Boards of Trade and Chambers of Commerce, and other like associations throughout the country, took up the matter very zealously by employing an able lawyer, the Hon. Jay L. Torrey of Missouri, to present the matter in the two Houses of Congress. He was thoroughly acquainted with the principles and history of Bankruptcy laws in this country and England. But he had no compromise in him. He insisted on the Bill which he drew, which was a modification of the Lowell Bill, without being willing to make any concession to objection or difference of opinion in Congress, or out of it. He said he would have a perfect law, or none at all. The measure as he drew it was apparently very austere and harsh to the debtor. It enumerated a large number of offences for which the debtor was to be punished by fine and imprisonment, and by a denial of his discharge. Mr. Torrey's provisions were not very unreasonable. But they made it seem as if the Bill were a penal code for the punishment of fraudulent debtors. A simple provision that any debtor who wilfully should make false answer to any question lawfully put to him by the Court, or who wilfully concealed or attempted to conceal any property from his assignee should lose his discharge and be punished with a proper and moderate punishment, would have answered the whole purpose. I take some blame to myself for not insisting more strenuously upon modifying Mr. Torrey's measure. But he constantly visited different Senators and Representatives and came back to me with glowing accounts of the prospects of the Bill, and of their promises to support the Bill. He was also the agent of the business organizations of the country who had passed resolutions in favor of the measure as he had drawn it. It seemed to me therefore that if I should get the Bill amended and then it got lost, I should incur the great reproach of having obstinately set up my judgment against that of this large number of the ablest men in the country, who were so deeply interested in the matter. So the Bill, though brought up and pressed Congress after Congress, failed until Mr. Torrey enlisted in the Spanish War.
I then introduced a Bill in a softened and modified form. It was attacked in that form by Senator Nelson of Minnesota, a very excellent lawyer and gentleman of great influence, in the Senate. He succeeded in having the Bill modified and softened still more. The Bill then passed and went to the House which, under the leadership of the Judiciary Committee, substituted the original Bill.
Mr. Nelson and I, with Mr. Lindsay of Kentucky, were put on the Conference Committee in the Senate, with Mr. Henderson, afterward Speaker, Mr. Ray of New York, now Judge of the U. S. District Court, and Mr. Terry of Missouri, on the part of the House. We struggled nearly the whole winter. Mr. Nelson and Mr. Ray took the burden of the contest upon their shoulders. Their attempts at compromise reminded their brethren of the old scientific problem—"What will happen when an irresistible force encounters an immovable obstacle." But both gentlemen, each exceedingly firm in his own opinion when he thought he was in the right, were wise and reasonable and conscientious men. So at last they agreed upon the present Bankruptcy Bill, which became a law July 1, 1898. It was on the whole satisfactory to the country, except for one clause in it, which was interpreted by the United States Supreme Court in a manner contrary to the understanding and expectation of the framers of the Bill.
A law was passed February 7, 1903, correcting this and some minor defects. It is hoped, though we cannot be sure in such a matter, that a permanent system of Bankruptcy, so essential to all commercial, indeed to all civilized nations, is now established, and will be maintained in the United States.