Wednesday, November 23.
Repeal of the Bankrupt Law.
The House resolved itself into a Committee of the Whole, on the resolution, offered by Mr. Newton, for repealing the Bankrupt law.
The resolution was advocated by Messrs. Newton, Elliot, Smilie, Hastings, Stanford, and Randolph; and opposed by Messrs. Jackson, Early, Skinner, and Eustis.
The advocates of repeal observed that though the resolution had lain on the table for a considerable time, purposely with a view to collect public opinion, no remonstrance hostile to it had been received from any part of the Union, and that this circumstance indicated the unfavorable sentiment entertained of the bankrupt system; and that even among those most materially interested in its provisions, a dead silence prevailed. Some gentlemen were averse to the repeal, inasmuch as the law would expire by its own limitation, in a few years; but the House should recollect that in the mean time they were responsible for all its evils and iniquities. If, too, it should be suffered to die a natural death, the inevitable effect would be that those who are now struggling to avoid bankruptcy will precipitate themselves into such a situation as to avail themselves of its benefit.
With regard to the principle of the present bankrupt system, and probably of any other bankrupt system that could be devised, it was unjust, inasmuch as it favored one class of citizens, the merchants, at the expense of all other classes; to advance the interest of the first it sacrificed the interests of all the other members of the community. To prove this, it was only necessary to illustrate it by the common case of a merchant availing himself of the benefits of bankruptcy, and thereby cancelling the demands of the mechanic or the farmer who might be his creditor; and of the same individual mechanic or farmer, the debtors of another merchant, remaining his debtor with their property subject at any period of their life to his seizure. In the case of the insolvent merchant his debts were totally discharged; whereas in the case of the insolvent mechanic and farmer, they were of eternal obligation. The preferable system was that established by the several States, which existed before the bankrupt system, and which still existed, extending to all insolvent debtors the same relief.
It was contended that the partial operation of the bankrupt system had the most mischievous influence on the morals of the mercantile world. That it operated as an impunity to fraud and negligence; that it created extensive credits, and excited a spirit of the most prodigal expenditure; that although the American merchants were probably the most honest and certainly the most able and enterprising in the world, the facility with which credits were obtained, and the impunity with which risks were incurred, had, under the auspices of this law, introduced into their private expenditures a ruinous extravagance; and that nothing was more common than to see a merchant, of but small capital, living at an expense superior to that of the European trader who had realized his plum, and at an expense which shamed the frugal disbursements of the affluent planter. What were the effects? The scene of luxury and splendor was enjoyed for a few years, and was succeeded by a failure. Did it become the Legislature to encourage, or repress this spirit?
The principle of the bankrupt system was inequitable as it regarded the relation of debtor and creditor. However it might be averred to the contrary, it was a truth that its provisions operated to the advantage of the debtor, and of course to the detriment of the creditor. There was no weight in the remark that the commission was taken out at the instance of the creditor, as that was merely a nominal act, a creditor usually being made use of who was the friend of the bankrupt. That it operated to the benefit of the debtor was clear from its liberating all his future acquisitions, after availing himself of the benefit of a commission, from seizure: whereas, under an insolvent law, the person alone was released. That hence sprang up a ten-fold temptation to fraud under this act, over that which existed under the common insolvent laws. For that under the latter an insolvent debtor, if guilty of a fraudulent concealment of property, could at any future period be called upon to satisfy the claims of his creditors by a delivery of his visible property; while, under this law, the bankrupt may live in the greatest splendor, even ostentatiously displaying his property, without rendering it liable to seizure. Fraud once successfully perpetrated and concealed, every restraint is removed; and so deleterious had this effect been that it had manifestly inflicted a deep wound upon the confidence of man with man in the ordinary transactions of life.
It was further contended, that while justice and humanity dictated the liberation from arrest of the body of the unfortunate debtor, justice inhibited the exoneration of property from going to satisfy just debts; that the obligation, wherever the ability existed, to pay just debts, was eternal, and that this law, in having a retro-active effect, was unjust. Evils infinitely greater had been inflicted by inconsiderate and fraudulent debtors taking refuge in the provisions of the bankrupt law than from all the inhumanity exercised by merciless creditors over unfortunate debtors. That the principle of the bankrupt law was also retro-active, inasmuch as it destroyed the grade of dignity existing in many of the States, by which a bonded debt obtained a preference over an open account; that it absolutely impaired the subsisting contract between the person holding and the person signing the bond.
It was remarked that the principle of the bankrupt law, however good in theory, could never be carried into effect, as had been proved by a long course of British experience, without a recurrence to those sanguinary laws which they had introduced for the prevention and punishment of fraud, but which were so abhorrent to our code of laws that public opinion could not tolerate them.
The expenses of going through the forms of bankruptcy constituted no inconsiderable objection to the system. The appointment of a Commissioner was understood to be in no small degree lucrative, and the various processes through which the bankrupt was compelled to go, in practice, reduced the little property he had left to a state still less. Indeed, from the practical effects of the system, it would appear that it had been made more for the emolument of the Commissioner than for the benefit of the creditor.[7]
However necessary this system might be in England, who owed almost the whole of her prosperity to trade, it became not a nation, the leading feature of whose character was agriculture, to tread in her footsteps; but, on the contrary, to avert rather than to hasten the period when such a system would be rendered necessary; that, in truth, the spirit of trade in this country was sufficiently vigorous, and only required the common protection given to all other occupations, to prosper to every beneficial purpose.
In the commercial world, the honest, though unfortunate merchant, had nothing to fear from his creditors. A long experience had shown that the mercantile world felt with sympathy and acted with magnanimity to the unfortunate. In addition to these objections, it was urged that the bankrupt law was injurious, as it enlarged the sphere of the Federal courts. The constitution was a system of compromise. Many powers were given without a view to their immediate exercise. It did not, therefore, follow that, because the power given to establish a uniform system of bankruptcy was given, it must now be exercised. The powers of the General Government, if not too great, were sufficiently great. It became Congress, therefore, neither to take from nor add to the powers of the State courts. To increase the powers of the Federal courts, through the operation of the bankrupt system, was to derogate from the powers of the State courts. The State tribunals were weak enough, without thus trenching upon them.
The authorities under this law not only went to enlarge the powers of the Federal Government generally, but particularly to the extension of executive power. The appointment of Commissioners of Bankruptcy was an additional weight thrown into the scale of executive patronage. The power of that department ought to be viewed with an eye of jealousy, and the House, however willing to allow to it the enjoyment of all fair and necessary power, ought vigilantly to guard against its undue increase. It might be answered that this evil might be removed by placing the appointment of the Commissioners in the hands of the courts. But this would not be the effect. The Judicial Department, in the aspect of its political weight, was not to be contemned. So long as it remains, as fixed by the constitution, it will rest for support somewhere—it will naturally ally itself to some other department of the Government, and the inducements to such alliance will be most naturally held out by the Executive; but however peculiar circumstances might at this time indicate otherwise, such a tendency was a kind of political gravity, which, however it might for a time be checked, would eventually exert its influence.
On the other hand, the opponents of the repeal observed that the silence of the public on the subject indicated neither hostility nor opposition to the present system of bankruptcy; if it indicated any prevailing sentiment, it was that of confidence in the judgment of their representatives. If the system really was so unpopular as some gentlemen had represented it to be, their tables would ere this have been covered with memorials for its repeal, whereas not a single petition to that effect had been presented during the session.
They contended that it would be true policy to suffer the act to expire by its own limitation. Little more than two years would elapse before the arrival of that period. This conduct was dictated by the undisputed fact that the present system had been adopted as an experiment. Hence the limitation of the act. This experiment was now in a fair course of trial. Little more than three years had elapsed since its commencement, and sufficient time had not yet passed to test the goodness or the badness of the principle it involved. It was a fact that the distresses of the commercial world called forth such a system when it was formed in the year 1800; it was a fact that it had done much good; and it might be that a system of bankruptcy, improved to the extent of which it was susceptible, would be of permanent utility. Amendments, radical amendments, the system certainly required; and should the House determine not to destroy it, the amendments could and doubtless would be made.
It was believed that the general sentiment of the nation concurred in the propriety of affording some relief to the distresses of the commercial world. On the form and extent of that relief great contrariety of opinion existed. It was the opinion of well-informed merchants and of the best writers, that a greater relief should be afforded to the misfortunes of men engaged in trade than in other occupations. To the argument that the proper relief to be extended should be left to the determination of the States, the objection that the laws of the different States were on this point various and contradictory, was conclusive. Trade, of all human occupations, embraced the widest range. Its operations were confined to no particular State or climate, but pervaded the whole world. It was of great importance then, if practicable, that laws in relation to it should be equally wide with this extensive range. Though this was utterly impracticable, yet it was practicable to make the same laws pervade a whole nation. Of this opinion were the venerable patriots of 1789, who framed the constitution; such was the spirit of the constitution itself; and such its language in speaking of uniform laws respecting imports, bankruptcies, and intercourse between the several States. Not that the power to pass such laws was imperative: but they manifested the sense of that body and the spirit of the instrument, that all laws on those subjects should be uniform throughout the United States.
To the argument, that the exoneration of property from the payment of just debts was a violation of justice, it was replied, that however correct the principle might be in ordinary cases, it did not hold in commercial concerns. In other employments an inability to comply with contracts was generally the result of idleness or imprudence; but so great and inevitable were the risks attendant on commerce, that no human prudence could guard against them.
Of trade, credit was the life; without it, it could not exist. In this country, too, it was the great source of revenue. How impolitic then was it, in a country where the whole of the revenue, and much of the wealth of its citizens, depended upon trade, to adopt regulations which would repress mercantile exertion and enterprise.
It was contended, that it was not true that the principle of a bankrupt law operated in favor of the debtor; the reverse was the case, and constituted one of the strongest arguments of its superiority to insolvent laws, under which the time of surrender was left to the option of the debtor; whereas, under a bankrupt law, the creditor, whenever he had reason to apprehend the fraud or failure of his debtor, could take out a commission under the bankrupt law; the creditor may arrest the prodigal or unjust career of the debtor; while, under the insolvent law, the debtor rarely surrenders his property, until he has squandered nearly the whole, or until he has made a fraudulent transfer of it. Such was the operation of the principle of a good bankrupt system; with regard to the present it was admitted that its provisions were unfair, and operated frequently the other way.
A leading argument in favor of a bankrupt system was that it multiplied checks against fraud; there would of course be less temptation to commit fraud, as the chances of concealing it diminished. In most countries the terrors of an awful punishment awaited the commission of fraud under this act, even the terrors of death. Though it might not be sound policy in this country to make punishments so terrible, yet it was always within the power of the Legislature to make transgressions so penal, as to guard against the apprehended evils.
It was contended that one great object of the constitution in bestowing this power on the General Government was the establishment of national credit upon the broad principles of justice; such was the effect of the system of bankruptcy by which the same obligations were imposed upon the merchants of all States in their relation to each other, and towards foreigners. Remove this system, and you virtually re-enact the partial and varying laws of the different States. In Virginia, for instance, the person only of the debtor is liberated, while in Maryland both person and property are liberated. Will not the citizen of one State acquire advantages over the citizen of another, and will not foreigners have reference in their dealings to the laws of the States, and prefer dealing with the citizens of that State where there shall exist the greatest security for the recovery of their debts? Will not the citizen of one State remove into another, and evade the operation of the laws of the States where contracts were made? The friends of the repeal say the bankrupt system is retrospective in its operation. That was true, inasmuch as it changed the relations of debtor and creditor. But what will the repeal do? Contracts have been made under the contemplated existence of the act for a fixed period. By repealing it before that period arrives, you likewise change again the relations of debtor and creditor.
About four o’clock, the debate being closed, the question on the resolution to repeal, was taken and carried in the affirmative, ayes 94.
The Committee rose, and the House immediately took up their report, on agreeing to which the yeas and nays were required, and were, yeas 99, nays 13, as follows:
Yeas.—Willis Alston, jun., Nathaniel Alexander, Isaac Anderson, John Archer, Simeon Baldwin, David Bard, George M. Bedinger, Silas Betton, Phanuel Bishop, William Blackledge, John Boyle, Robert Brown, Joseph Bryan, William Butler, George W. Campbell, Levi Casey, William Chamberlain, Martin Chittenden, Thomas Claiborne, Matthew Clay, John Clopton, Frederick Conrad, Jacob Crowninshield, Richard Cutts, Samuel W. Dana, John Davenport, John Dawson, William Dickson, Thomas Dwight, John B. Earle, James Elliot, John W. Eppes, William Findlay, John Fowler, James Gillespie, Calvin Goddard, Peterson Goodwyn, Edwin Gray, Andrew Gregg, Thomas Griffin, Gaylord Griswold, Roger Griswold, Samuel Hammond, Wade Hampton, John A. Hanna, Josiah Hasbrouck, Seth Hastings, Joseph Heister, William Hoge, David Holmes, Walter Jones, William Kennedy, Nehemiah Knight, Michael Leib, Joseph Lewis, jun., John B. C. Lucas, Andrew McCord, David Meriwether, Nahum Mitchell, Thomas Moore, Jeremiah Morrow, Anthony New, Thomas Newton, jun., Gideon Olin, Beriah Palmer, John Patterson, John Randolph, jun., John Rea of Pennsylvania, John Rhea of Tennessee, Jacob Richards, Cæsar A. Rodney, Erastus Root, Thomas Sammons, Thomas Sanford, Ebenezer Seaver, John Smilie, John C. Smith, John Smith of Virginia, Richard Stanford, Joseph Stanton, William Stedman, James Stephenson, John Stewart, Samuel Taggart, Benjamin Tallmadge, Samuel Tenney, David Thomas, Philip R. Thompson, Abram Trigg, John Trigg, Isaac Van Horne, Joseph B. Varnum, Matthew Walton, John Whitehill, Marmaduke Williams, Richard Winn, Joseph Winston, and Thomas Wynns.
Nays.—John Campbell, Joseph Clay, Peter Early, William Eustis, Daniel Heister, Benjamin Huger, John G. Jackson, Thomas Lowndes, William McCreery, Nicholas R. Moore, Joseph H. Nicholson, Tompson J. Skinner, John Smith of New York.
Ordered, That a bill or bills be brought in, pursuant to the said resolution; and that Mr. Newton, Mr. Hammond, Mr. Tallmadge, Mr. Van Cortlandt, and Mr. Marmaduke Williams, do prepare and bring in the same.