Fifty years in Wall Street

by Henry Clews

About thirteen years ago the repudiation which has reflected such disgrace upon the South became prevalent in that section, and took the character, for a time, of a severe financial epidemic.

It was for this reason that the Legislature of the State of New York, as well as the legislatures of several other States, considered it necessary for the protection of the savings banks, which are the custodians of many hundreds of millions, chiefly of the hard earnings of the working people, to prohibit these institutions from investing in, or loaning upon, the securities of any State in the Union that had within ten years previously repudiated any of its lawful obligations.

The laws of the State of New York, in chapter 409, section 260, of the laws of 1882, provides that savings banks shall be prohibited from investing money in stocks or bonds of any State which, in the language of the statute, “has within ten years previous to making such investment by such corporation defaulted in the payment of any part of either principal or interest of any debt authorized by any legislature of such State to be contracted.”

It was for this reason that the newly issued securities of some of the Southern States have been unable to find a resting place in the monied institutions of the North.

The State of Georgia, recently finding that she had some obligations becoming due, and seeing that money was cheap in the North, and that more than ten years had expired since she repudiated her former obligations, thought there was a good opportunity of issuing a fresh batch of these so-called securities, similar to those that had been dishonored in 1873.

The politicians of Georgia thought there was a good opening in the State of New York to remove the restriction placed upon the savings banks in 1882. They saw that the Governor and the Legislature were both Democratic, with a Democratic Attorney-General also, and therefore determined to take advantage of this political condition, which they supposed was highly favorable to their scheme of stealing a march upon the holders of the old repudiated bonds of Georgia, who had been chiefly instrumental in getting the act passed for the safety of savings banks’ depositors in the State of New York.

The Georgia politicians aimed at having the restriction of the savings banks removed, so far as it related to their State, in order to afford them an opportunity of issuing several millions of 4½ per cent. bonds for the purpose of taking up an old issue of the 7 per cent. bonds, thus effecting a considerable saving to the taxpayers of their State in this reduction of interest.

With the purpose of having this matter arranged as quietly as possible, two of the ablest lawyers of the State of Georgia were surreptitiously sent to Albany to make argument before the Attorney-General, Mr. Denis O’Brien, and to attempt to convince that official, in a very plausible manner, why the restriction should be removed from the savings banks in the case of Georgia. No opposition was expected, and the enthusiastic hope was indulged by those who were engineering the scheme that upon this ex-parte statement of these astute Georgia lawyers a favorable opinion would be elicited from the Attorney-General of this State, which would justify the Superintendent of the Bank Department in issuing an order to remove the restriction which precluded the savings banks of New York from investing in Georgia bonds, on the ground that the State had not repudiated within ten years. The repudiation could be traced back thirteen years, instead of ten.

Pursuant to this application, a small item of a few lines appeared in one of the Atlanta papers, which stated that Mr. Calhoun had just returned from Albany, having made a very strong and forcible appeal to the Attorney-General there, urging him that the restriction on the part of the savings banks be removed so far as Georgia was concerned.

This item was telegraphed to me, and on receiving the despatch I notified the holders of the repudiated bonds, and wired the Attorney-General asking him when a hearing of the other side could be had.