The situation, however, called for more than mere sympathy. Victims of exorbitant interest charges were to be met with, during the first third of the nineteenth century, on every hand, in Illinois. There, as elsewhere, capital when staked against the hazards of pioneer ventures exacted heavy tolls. Banks and “moneyed institutions,” so-called, were restricted, it is true, by an act passed in 1819, to returns not exceeding six per cent; but under that same law other investors expressly had leave to make contracts without any limitations upon the extent of their charges, and for the most part—needless to say—they took advantage of the privilege. Rates running all the way from one hundred and fifty to three hundred per cent were not uncommon in the placing of loans, while the customary figures hovered about fifty per cent. The oppression and suffering which these burdens entailed gave rise to clamorous demands for relief. Yet the way out seemed far from plain. How borrowers could be protected against ruin due to extortion, without being plunged as hopelessly into disaster through ill-advised legislation which, by discouraging lenders, might cut off all supplies, was the form which the problem took.
It appears to have been presented from many angles during the canvass of 1832; and Lincoln, as a raw candidate for the Legislature, had taken a hand, even then, in the solution. What he proposed was thus set forth among the postulates of that first formal political document, his “Address to the People of Sangamon County”:—
“It seems as though we are never to have an end to this baneful and corroding system, acting almost as prejudicially to the general interests of the community as a direct tax of several thousand dollars annually laid on each county for the benefit of a few individuals only, unless there be a law made fixing the limits of usury. A law for this purpose, I am of opinion, may be made without materially injuring any class of people. In cases of extreme necessity, there could always be means found to cheat the law; while in all other cases it would have its intended effect. I would favor the passage of a law on this subject which might not be very easily evaded. Let it be such that the labor and difficulty of evading it could only be justified in cases of greatest necessity.”[v-24]
A singular programme, truly, yet what could one expect, in those times of loose financiering, from an embryo prairie politician just pipping his shell? Older heads—in fact, seasoned lawmakers and economists without number, from the very beginning of commercial history down to the present day—hardly make a better showing when it comes to devising how this “tooth of usury,” as an eminent Lord Chancellor once said, may “be grinded that it bite not too much.” Lincoln’s naïve plea that means could be found, when necessary, “to cheat the law, while in all other cases it would have its intended effect,” reveals a certain uneasy sense of the fatal weakness running through all such legislation. And one is at a loss what to marvel over most,—the candor with which he admits this defect, or the childlike disregard of public ethics involved in his awkward attempt to meet the difficulty by suggesting occasional violations of the statute.
That subterfuge reminds us of a story, as Abe himself used to say,—one of his own, in fact. He told it, not long afterwards, on the stump, at the expense of an opponent who gave equivocal answers to some searching questions. This man, Lincoln said, was like a hunter he had once known. Boasting of his marksmanship on a certain occasion, and telling how he brought down an animal during the season when a calf might easily be mistaken for a deer, the fellow concluded his recital with the fine flourish: “I shot at it so as to hit it if it was a deer, and miss it if a calf.”
What might pass for a hit-or-miss bill, limiting the rate of interest to not more than twelve per cent, became a law during the following winter. But as Lincoln had failed of election to the Legislature which enacted this statute, none of its shortcomings can fairly be laid, except in a remote sense, at his door. Such was not the case, however, with several important financial measures adopted by the succeeding sessions that he did attend. We have seen how he plunged into the excesses which grew out of the “internal improvement” craze, and though many fellow-members of both parties are also chargeable with what took place, few if any of them were more active than he in shaping the course of this hapless legislation. It was under his leadership that the “Long Nine” exerted their very considerable influence, as has been told, to put the so-called “system” through. And a merry dance they had, without too much thought concerning who should pay the fiddler. Soberer men, trying here or there in small numbers to block the way, were swept aside. An infatuated Assembly, hardly stopping to count the cost, voted appropriations for public works aggregating over ten millions of dollars;[v-25] and interest-bearing securities were authorized to an amount not exceeding eleven millions. Of this sum, eight millions were to be borrowed for the works, two millions for the State Bank of Illinois, and one million for the Bank of Illinois at Shawneetown. These two institutions became the fiscal agents of the State, with a proviso that their net earnings should be applied to the payment of interest, as it accrued, on “improvement” bonds. Nothing could have been simpler and—less dependable. The debt so created—at least such part of it as found a market—was out of all proportion to the young State’s proper credit or resources. Consequently, when financial ruin swept over the continent in the spring of 1837, not many Commonwealths were, relatively speaking, more deeply involved than Illinois.
To meet what looked like an impending crisis, Governor Duncan called a special session of the General Assembly in the following July, and urged either modification or repeal of the “internal improvement” acts. But his efforts were fruitless. The Legislature refused to destroy or mar its handiwork. Most of those jocund castle-builders could not bring themselves to believe that the ambitious structure which they had begun to rear with so much pride was, after all, a mere house of cards, shaking in the first gust of bad weather and ready to fall about their ears. Prophecies of such a disaster met, as might have been expected, with stubborn optimism, especially from the ranks of the Whig minority. They stood pledged as a political unit to the policy of munificent public works; and enough Democrats felt similarly committed to join them in bringing about a rejection of the Governor’s plea.
More than that, during the following sessions, under Lincoln’s guidance—for he had meanwhile become the recognized leader of his party in the House—these “improvement” men, still bat-eyed, reached the climax of their folly, and actually enlarged the scope of the enterprise by nearly one million dollars. The rest is soon told. Hardly had this last reckless step been taken when a wave of that utter demoralization which marked the panic struck Illinois with crushing force. Improvement bonds could no longer be sold except at ruinous discounts. Some of the securities had been entrusted to bankers who failed, while other parcels were moved under circumstances which smelt strongly of fraud.
Collections, moreover, seemed impossible. The treasury of the State was nearly empty. Its credit, if not quite gone, was badly shaken, and so were all its fond illusions. The dazzling game had, in fact, come to an end. Without funds or prospects for raising any, the famous “system” collapsed. Obviously what the situation now required left but slender choice of action. The mischief already done had to be undone, as fully as circumstances would allow, and the “internal improvement” laws must be repealed. Yet the Whigs did not take kindly to this programme. They gave ground sullenly, Lincoln voting against repeal with the rest of his party through several sessions, until at last the logic of events forced them to help their Democratic colleagues put the whole deplorable business “down in a lump,” as he himself expressed it, “without benefit of clergy.”[v-26]
Unfortunately there was one detail that could not be put down so summarily. The public debt, which had been piled up with such assurance, remained to perplex its crestfallen creators. They discovered, too late, that bonds can be more easily voted than annulled; and while casting about for a way out of their dilemma, they found themselves facing an interest day with no adequate balance in sight to pay the bill. For a brief period Illinois honor hung in the balance. Some of these precious legislators wished to repudiate the entire indebtedness outright—principal as well as interest; others, not quite so shameless, proposed that the Government, disregarding face values, should deal with the bonds on the basis of what it had received for them when they were sold; while still others favored discrimination against such of the securities only as had been disposed of illegally or acquired by questionable means.