Diary in America, Series One

by Frederick Marryat

Volume Three—Chapter Two.

Remarks—Credit.

In the state of New York they have abolished imprisonment for debt; this abolition however, only holds good between the citizens of that state, as no one state in the Union can interfere with the rights of another. A stranger, therefore, can imprison a New Yorker, and a New Yorker can imprison a stranger, but the citizens of New York cannot incarcerate one another. Now although the unprincipled may, and do occasionally take advantage of this enactment, yet the effects of it are generally good, as character becomes more valuable. Without character, there will be no credit—and without credit no commercial man can rise in this city. I was once in a store where the widow who kept it complained to me that a person who owed her a considerable sum of money would not pay her, and aware that she had no redress, I asked her how she would obtain her money. Her reply was—“Oh, I shall eventually get my money, for I will shame him out of it by exposure.”

The Americans, probably from being such great speculators, and aware of the uncertainty attending their commerce, are very lenient towards debtors. If a man proves that he cannot pay, he is seldom interfered with, but allowed to recommence business. This is not only Christians like, but wise. A man thrown into prison is not likely to find the means of paying his debts; but if allowed his liberty and the means of earning a subsistence, he may eventually be more fortunate, and the creditors have a chance of being ultimately paid. This, to my knowledge, has often been the case after the release had been signed, and the creditors had no farther legal claim upon the bankrupt. England has not yet made up her mind to the abolition of imprisonment for debt, but from what I have learnt in this city, I have no hesitation in saying, that it would work well for the morals of the community, and that more debts would eventually be paid, than are paid under the present system. Another circumstance which requires to be pointed out when we would examine into the character of the New York commercial community, is, the difference between their bankrupt-laws and those of England. Here there is no law to compel a bankrupt to produce his books; every man may be his own assignee, and has the power of giving preference to one creditor over another; that is to say, he may repay those who have lent him money in the hope of preventing his becoming a bankrupt, and all other debts of a like description. He may also turn over his affairs to an assignee of his own selection, who then pays the debts as he pleases. A bankrupt is also permitted to collect his own debts.

The English bankrupt laws were introduced, but after one year’s trial they were discontinued, as it was found they were attended with so much difficulty, and, what is of more importance to Americans, with so much loss of time. Again, in America, if a person wishes to become a special partner (a sleeping partner) in any concern, he may do so to any extent he pleases, upon advertising the same, and is responsible for no more than the sum he invests, although the house should fail for ten times the amount.

Here is an advertisement of special partnership.

“Co-partnership. Notice is hereby given, that a limited partnership hath been entered into by Lambert Morange, DN Morange, and Samah Solomon, of the city of New York, merchants, in pursuance of the provisions of the revised statutes of the city of New York. The general nature of the business of said co-partnership is the manufacturing and selling of fur and silk hats. The said Lambert Morange is the special partner, and as such, hath contributed the sum of ten thousand dollars in cash to the common stock: the said DN Morange and Samah Solomon are the general partners; and the said business is to be conducted under the name and firm of DN Morange and Solomon; said co-partnership is to commence on the 14th day of March, 1837, and to expire on the 14th March, 1840.

“March 14th, 1837. L. Morange. D.N. Morange. Samah Solomon.”

That this loose state of the bankrupt law may be, and has been a cause of much dishonesty, is true, but at the same it is the cause of the flourishing state of the community. The bee can always work; indeed the bankrupt-laws themselves provide for a man’s not starving. In the city the bankrupt’s household furniture is sacred, that his family may not be beggars; and in case of the bankruptcy of a farmer, he is permitted, not only to retain the furniture of his cottage, but even his plough, with a proportion of his team, his kine and sheep, are reserved for him, that he may still be able to support his family. Surely this is much preferable to the English system under which the furniture is dragged away, the hearth made desolate, and the children left to starve, because their father has been unfortunate. Is it not better that a little villainy should escape punishment, than that such cruelty should be in daily practice? I say a little villainy, for if a man becomes bankrupt in New York, it is pretty well known whether he has dealt fairly with his creditors, or has made a fraudulent bankruptcy: and if so, his character is gone, and with it his credit, and without credit he never can rise again in that city, but must remove to some other place.

In England, character will procure to a bankrupt a certificate, but in New York it will leave him the means of re-commencing business. In England, it is a disgrace to be a bankrupt; in America, it is only a misfortune; but this distinction arises from the boldness of the speculations carried on by the Americans in their commercial transactions, and owing to which the highest and most influential, as well as the smaller capitalists, are constantly in a state of jeopardy. I do not believe that there is anywhere a class of merchants more honourable than those of New York. The notorious Colonel Chartres said that he would give 20,000 pounds for a character, because he would have made 100,000 pounds by it. I shall not here enter into the question, whether it is by a similar conviction, or by moral rectitude of feeling, that the merchants of New York are actuated; it is sufficient that it is their interest to be honest, and that they are so. I state the case in this way, because I do not intend to admit that the honesty of the merchants is any proof of the morality of a nation; and I think I am borne out in my opinion by their conduct in the late state of difficulty, and the strenuous exertions made by them to pay to the uttermost farthing, sacrificing at times twenty per cent—in order to be enabled to remit money to their London and Liverpool correspondents, and fulfil their engagements with them.