"Section 4.—That hereafter the sum of thirty cents for each hundred dollars' worth of all taxable property shall be paid into the State treasury; and no more than forty cents for each hundred dollars' worth of such taxable property shall be levied and collected for county purposes."
It was a loose document. The governor was to determine the "amount" of bonds "necessary," and the sums for which they should be issued. Interest was to be paid only upon the "lawful" debt; and the governor was left to determine what part of it was lawful, and what unlawful. The last section lays a specific tax; but the proceeds are in no way connected with the "interest bonds."
"Mr. Lincoln said he submitted this proposition with great diffidence. He had felt his share of the responsibility devolving upon us in the present crisis; and, after revolving in his mind every scheme which seemed to afford the least prospect of relief, he submitted this as the result of his own deliberations.
"The details of the bill might be imperfect; but he relied upon the correctness of its general features.
"By the plan proposed in the original bill of hypothecating our bonds, he was satisfied we could not get along more than two or three months before some other step would be necessary: another session would have to be called, and new provisions made.
"It might be objected that these bonds would not be salable, and the money could not be raised in time. He was no financier; but he believed these bonds thus secured would be equal to the best in market. A perfect security was provided for the interest; and it was this characteristic that inspired confidence, and made bonds salable. If there was any distrust, it could not be because our means of fulfilling promises were distrusted. He believed it would have the effect to raise our other bonds in market.
"There was another objection to this plan, which applied to the original bill; and that was as to the impropriety of borrowing money to pay interest on borrowed money,—that we are hereby paying compound interest. To this he would reply, that, if it were a fact that our population and wealth were increasing in a ratio greater than the increased interest hereby incurred, then this was not a good objection. If our increasing means would justify us in deferring to a future time the resort to taxation, then we had better pay compound interest than resort to taxation now. He was satisfied, that, by a direct tax now, money enough could not be collected to pay the accruing interest. The bill proposed to provide in this way for interest not otherwise provided for. It was not intended to apply to those bonds for the interest on which a security had already been provided.
"He hoped the House would seriously consider the proposition. He had no pride in its success as a measure of his own, but submitted it to the wisdom of the House, with the hope, that, if there was any thing objectionable in it, it would be pointed out and amended."
Mr. Lincoln's measure did not pass. There was a large party in favor, not only of passing the interest on the State debt, which fell due in the coming January and July, but of repudiating the whole debt outright. Others thought the State ought to pay, not the full face of its bonds, but only the amount received for them; while others still contended that, whereas, many of the bonds had been irregularly, illegally, and even fraudulently disposed of, there ought to be a particular discrimination made against these, and these only. "At last Mr. Cavarly, a member from Green, introduced a bill of two sections, authorizing the Fund Commissioners to hypothecate internal-improvement bonds to the amount of three hundred thousand dollars, and which contained the remarkable provision, that the proceeds were to be applied by that officer to the payment of all interest legally due on the public debt; thus shifting from the General Assembly, and devolving on the Fund Commissioner, the duty of deciding on the legality of the debt. Thus, by this happy expedient, conflicting opinions were reconciled without direct action on the matter in controversy, and thus the two Houses were enabled to agree upon a measure to provide temporarily for the interest on the public debt. The Legislature further provided, at this session, for the issue of interest bonds, to be sold in the market at what they would bring; and an additional tax of ten cents on the hundred dollars' worth of property was imposed and pledged, to pay the interest on these bonds. By these contrivances, the interest for January and July, 1841, was paid. The Fund Commissioner hypothecated internal-improvement bonds for the money first due; and his successor in office, finding no sale for Illinois stocks, so much had the credit of the State fallen, was compelled to hypothecate eight hundred and four thousand dollars of interest bonds for the July interest. On this hypothecation he was to have received three hundred and twenty-one thousand six hundred dollars, but was never paid more than two hundred and sixty-one thousand five hundred dollars. These bonds have never been redeemed from the holders, though eighty of them were afterwards repurchased, and three hundred and fifteen thousand dollars of them were received from the Shawneetown Bank for State stock in that institution."1
1 Ford's History of Illinois.