it also too respectable to cheat its creditors”
Notice.—Managers of Insurance Companies or Savings Banks should be and are likely to be held responsible, by stockholders and depositors, for any losses incurred in the event of their buying or loaning upon any bonds issued hereafter by States which are under the cloud of repudiation.
New York, May 27, 1885.
Hon. Wm. A. Post, Deputy Attorney-General, Albany, N. Y.:
Dear Sir:—I deferred answering your telegram of Saturday until this morning for the purpose of ascertaining whether the bondholders’ counsel would be in readiness to meet you at the time proposed, and only ascertained the fact this morning that he would, so I wired you accordingly. I presume that this Georgia repudiation question comes before you for the purpose of removing the prohibition from the savings banks of this State to their buying or loaning upon Georgia State bonds, owing to that State being under the cloud of repudiation. The prohibition of the savings banks, issued by Mr. A. B. Hepburn, the former Superintendent of the Banking Department, was based upon a thorough and exhaustive examination in reference to all matters appertaining thereto. This I have reason to know, as that gentleman visited New York and took my testimony and others in the case. The State of Georgia has always charged, as the justification for repudiation, that R. B. Bullock, Governor at the time of the issue of said bonds, had issued the bonds without proper legislative authority, and besides had stolen or misappropriated most of the avails. About three years since Governor Bullock visited Atlanta, Ga., and demanded his trial under the several indictments against him. The trial came up soon thereafter, and he was acquitted on all the charges. This gentleman is now a resident of Atlanta, Ga., and is to-day one of its most prominent citizens. It has been also charged that as he was a Northern born man, that he was a “carpet-bag” Governor, and for that reason the bonds were not a legal issue. That attitude is also unwarrantable, as the ex-Governor remained South during the period of the entire war, and took a prominent part on the Confederate side, in giving aid and comfort, and thereby can justly be considered as being a Southerner and not a Northerner in his interests and feelings. Most of the bonds repudiated were passed upon as legally issued and properly signed, by our best lawyers, such as Messrs. Evarts, Southmayd & Choate, ex-Judge Emott, Abbott Bros., E. Randolph Robinson, the brother of Judge Sedgwick, of this city, and others.
Some of these repudiated bonds were also passed upon by the New York Stock Exchange, and because repudiated were afterwards stricken from the list of securities to be dealt in. The face of these securities were worth par a few days prior to their repudiation, and immediately after that Act was passed were reduced to no more than the value of the paper upon which they were engraved. The same may at any time be the fate of any new securities to be issued by that State. Those who had these bonds were and are innocent parties, and among the sufferers are Trust Companies and savings banks. The Metropolitan Savings Bank holds $100,000 of the 7 per cent. Georgia gold bonds, bought about par; the Brooklyn Trust Trust Co. holds $100,000; the Union Trust Co. holds $100,000; the Commercial Warehouse Co. held between $300,000 and $400,000 of the bonds, and their repudiation caused the failure of that institution. The New York State Loan and Trust Co., Henry A. Smyth, President, also had $100,000 of the bonds, which loss was largely instrumental in causing the collapse of that concern. The Broadway National Bank holds $200,000 of these bonds as collateral, upon which they loaned $160,000; Morton, Bliss & Co., Morris K. Jesup, Drexel, Morgan & Co., Ezra A. Boody, George Morgan, son-in-law of J. S. Morgan, of London; J. Bowman Johnson & Co., Richard Irvin & Co., L. Von Hoffman & Co., Russell Sage and many other first-class parties that I can name are prominent sufferers resulting from Georgia’s repudiation; besides which, my firm in 1873 held over $2,500,000 State of Georgia securities, all of which had been paid for or advanced upon, and my firm’s suspension at that time was attributable thereto.
The only way to do, in my judgment, is to make the Southern States which are now under the serious cloud of repudiation, understand that their credit is impaired and facilities for obtaining money materially lessened because of it. Then, realizing that as their position, and finding that they are shut out of the financial markets of the world owing thereto, they will soon make a compromise with their lenient creditors, and remove the blot from their escutcheons. The Federal Government is comprised of the various States of the Union, and to-day enjoys as high a credit as any nation in the world. If the various States comprising the United States are permitted, however, to repudiate with impunity and screen themselves behind their sovereign rights so that creditors have no recourse, the odium will soon fall upon the General Government, and its credit will finally become tarnished if not crippled in consequence. The State of Georgia, as can be proven, received full value. The internal improvements in Georgia bear testimony of this. The taxable property of the State has been immensely enhanced by these improvements, and the debt repudiated is a mere bagatelle as compared with the ability of the State of Georgia to provide for it. She has become rich in late years, and if the stain of repudiation should be wiped out, would stand an excellent chance of becoming a favorite resort for emigration and for the flow of capital. Emigrants from other countries to this, in locating, first look to the credit enjoyed by the State their attention is called to, and if found high, their conclusion is that there is safety for property, and if so, corresponding safety for life; but they will not go to a repudiating State, and in this way the South is held in check in the development of her resources, owing to the want of new blood. The bondholders of the State of Georgia have frequently offered to leave all points at issue in reference to Georgia’s repudiation to the Courts of that State, to the United States District Judge, or to arbitration, the parties to be selected by both sides, all of which has been denied, the reply being the “bonds are repudiated, and we simply will not take any steps to provide for their recognition or payment, and what are you going to do about it?” Under the circumstances, creditors are powerless, of course, to do anything, as the State cannot be sued. If you desire it, I will send you a sample bond of some of the issues repudiated, so that you may see how beautifully the signatures are written, and how firmly fixed the seal of the Commonwealth is placed upon them, besides the magnificent steel engraved workmanship of the Continental Bank Note Company of this city. If there was not a prospect of the State of Georgia being forced by public opinion to provide for these bonds at some future time, they would be worthy to be framed and hung up in our parlors as a complete and fine work of art.
Judge Lochrane, former Chief-Justice of the State of Georgia, has wired me that he will appear before you on Wednesday; Colonel R. A. Crawford, of Georgia, will also do so; Messrs. Abbott Brothers, of this city, and others will appear before you.
You will please append this communication as a part of the testimony, and should you desire more on the subject, call upon me therefor.