It is impossible to read this paragraph without a feeling of profound mortification at seeing the low and miserable condition to which the public credit had sunk, both at home and abroad; and equally mortifying to see the wretched expedients which were relied upon to restore it: a government bank, issuing paper founded on its credit and revenues, and a hypothecation of the lands, their proceeds to help to bolster up the slippery and frail edifice of governmental paper: the United States unable to make a loan to the amount of one-fourth of its revenues! unable to borrow five millions of dollars! unable to borrow any thing, while the overloaded governments of Europe could borrow as much as they pleased. It was indeed a low point of depressed credit—the lowest that the United States had ever seen since the declaration of Independence. It was a state of humiliation and disgrace which could not be named without offering some reason for its existence; and that reason was given: it was the "disastrous prostration," as it was called—the crimes and bankruptcy, as should have been called, of the Pennsylvania Bank of the United States! that bank which, in adding Pennsylvania to its name, did not change its identity, or its nature; and which for ten long years had been the cherished idol of the President, his Secretary of State, and his exchequer orator on the floor of the House—for which General Jackson had been condemned and vituperated—and on the continued existence of which the whole prosperity of the government and the people, and their salvation from poverty and misery, was made to depend. That bank was now given as the cause of the woful plight into which the public credit was fallen—and truly so given! for while its plunderings were enormous, its crimes were still greater: and the two put together—an hundred millions plundered, and a mass of crimes committed—the effect upon the American name was such as to drive it with disgrace from every exchange in Europe. And the former champions of the bank, uninstructed by experience, unabashed by previous appalling mistakes, now lavish the same encomiums on an exchequer bank which they formerly did on a national bank; and challenge the same faith for one which they had invoked for the other. The exchequer is now, according to them, the sole hope of the country: the independent treasury and hard money, its only danger. Yet the exchequer was repulsed—the independent treasury and gold was established: and the effect, that that same country which was unable to borrow five millions of dollars, has since borrowed many ten millions, and is now paying a premium of 20 per centum—actually paying twenty dollars on the hundred—to purchase the privilege of paying loans before they are due.
[CHAPTER CX.]
REPEAL OF THE BANKRUPT ACT: MR. BENTON'S SPEECH; EXTRACTS.
The spectacle was witnessed in relation to the repeal of this act which has rarely been seen before—a repeal of a great act of national legislation by the same Congress that passed it—by the same members sitting in the same seats—and the repeal approved by the same President who had approved the enactment. It was a homage to the will of the people, and the result of the general condemnation which the act received from the community. It had been passed as a party measure: its condemnation was general without regard to party: and the universality of the sentiment against it was honorable to the virtue and intelligence of the people. In the commencement of the session 1842-'43, motions were made in both Houses to repeal the act; and in the Senate the practical bad working of the act, and of the previous act, was shown as an evidence of the unfruitfulness of the whole system, and of the justice and wisdom of leaving the whole relation of debtor and creditor in relation to insolvency, or bankruptcy, to the insolvent laws of the States. In offering a petition in the Senate for the repeal of the act from the State of Vermont, Mr. Benton said:
"He would take the opportunity which the presentation of this petition offered, to declare that, holding the bankrupt act to be unconstitutional at six different points (the extinction of the debt without the consent of a given majority of the creditors being at the head of these points), he would vote for no repeal which would permit the act to continue in force for the trial of depending cases, unless with provisions which would bring the action of the law within the constitution. To say nothing, at present, of other points of unconstitutionality, he limited himself to the abolition of debts without the consent of a given majority of the creditors. This, he held, no power in our country can do. Congress can only go as far as the bankrupt systems of England and other countries go; and that is, to require the consent of a given majority of the creditors (four-fifths in number and value in England and Scotland), and that founded upon a judicial certificate of integrity by the commissioners who examined the case, and approved afterwards by the Lord Chancellor. Upon these principles only could Congress act: upon these principles the Congress of 1800 acted, in making a bankrupt act: and to these principles he would endeavor to conform the action of the present act so long as it might run. He held all the certificates granted by the courts to be null and void; and that the question of the validity would be carried before the courts, and before the tribunal of public opinion. The federal judges decided the alien and sedition law to be constitutional. The people reversed that decision, and put down the men who held it. This bankrupt act was much more glaringly unconstitutional—much more immoral—and called more loudly upon the people to rise against it. If he was a United States judge, he would decide the act to be unconstitutional. If he was a State court, and one of these certificates of discharge from debts should be pleaded in bar before him, on an action brought for the recovery of the old debt, he would treat the certificate as a nullity, and throw it out of court. If commanded by the Supreme Court, he would resign first. The English law held all bankrupts, whose certificates were not signed by the given majority of the creditors, to be uncertificated; and, as such, he held all these to be who had received certificates under our law. They had no certificate of discharge from a given majority of the creditors; and were, therefore, what the English law called 'uncertificated bankrupts.' He said the bankrupt systems formed the creditors into a partnership for the management of the debtor's estate, and his discharge from debt; and, in this partnership, a given majority acted for the whole, all having the same interest in what was lost or saved; and, therefore, to be governed by a given majority, doing what was best for the whole. But even to this there were limitations. The four-fifths could not release the debt of the remaining fifth, except upon a certificate of integrity from the commissioners who tried the case, and a final approval by the Lord Chancellor. The law made itself party to the discharge, as it does in a case of divorce, and for the sake of good morals; and required the judicial certificate of integrity, without which the release of four-fifths of the creditors would not extinguish the debt of the other fifth. It is only in this way that Congress can act. It can only act according to the established principles of the bankrupt systems. It had no inherent or supreme authority over debts. It could not abolish debts as it pleased. It could not confound bankruptcy and insolvency, and so get hold of all debts, and sweep them off as it pleased. All this was despotism, such as only could be looked for in a government which had no limits, either on its moral or political powers. The attempt to confound insolvency and bankruptcy, and to make Congress supreme over both, was the most daring attack on the constitution, on the State laws, on the rights of property, and on public morals, which the history of Europe or America exhibited. There was no parallel to it in Europe or America. It was repudiation—universal repudiation of all debts—at the will of the debtor. The law was subversive of civil society; and he called upon Congress, the State legislatures, the federal and State judiciaries—and, above all, the people—to brand it for unconstitutionality and immorality, and put it down.
"Mr. B. said he had laid down the law, but he would refer to the forms which the wisdom of the law provided for executing itself. These forms were the highest evidences of the law. They were framed by men learned in the law—approved by the courts—and studied by the apprentices to the law. They should also be studied by the journeymen—by the professors—and by the ermined judges. In this case, especially, they should be so studied. Bankruptcy was a branch of the law but little studied in our country. The mass of the community were uninformed upon it; and the latitudinarians, who could find no limits to the power of our government were daringly presuming upon the general ignorance, by undertaking to confound bankruptcy and insolvency, and claiming for Congress a despotic power over both. This daring attempt must be chastised. Congress must be driven back within the pale of the constitution; and for that purpose, the principles of the bankrupt systems must be made known to the people. The forms are one of the best modes of doing this: and here are the forms of a bankrupt's certificate in Great Britain—the country from which our constitution borrowed the system. [Mr. B. then read from Jacob's Law Dictionary, title Bankruptcy, at the end of the title, the three forms of the certificates which were necessary to release a debtor from his debts.] The first form was that of the commissioners who examined the case, and who certified to the integrity of the bankrupt, and that he had conformed in all particulars to the act. The second form was that of the certificate of four-fifths of his creditors, 'allowing him to be discharged from his debts.' The third was the certificate of the Lord Chancellor, certifying that notice of these two certificates having been published for twenty-one days in the London Gazette, and no cause being shown to the contrary, the certificates granted by the commissioners and by the creditors were 'confirmed.' Then, and not till then, could the debtor be discharged from his debts; and with all this, the act of 1800 in the United States perfectly agreed, only taking two-thirds instead of four-fifths of the creditors. Congress could only absolve debts in this way, and that among the proper subjects of a bankrupt law: and the moral sense of the community must revolt against any attempt to do it in any other form. The present act was repudiation—criminal repudiation, as far as any one chose to repudiate—and must be put down by the community."
On the question for the repeal of the act, Mr. Benton took occasion to show it to be an invasion of the rights of the States, over the ordinary relations of debtor and creditor within their own limits, and a means of eating up estates to the loss of both debtor and creditor, and the enrichment of assignees, who make the settlement of the estate a life-long business, and often a legacy to his children.
"A question cannot arise between two neighbors about a dozen of eggs, without being liable to be taken from the custody of the laws of the States, and brought up to the federal courts. And now, when this doctrine that insolvency and bankruptcy are the same, if a continuance of the law is to be contrived, it must be done in conformity with such a fallacy. The law has proved to be nothing but a great insolvent law, for the abolition of debts, for the benefit of debtors; and would it be maintained that a permanent system ought to be built up on such a foundation as that?
"Some months ago, he read in a Philadelphia paper a notice to creditors to come forward for a dividend of half a cent in the dollar, in a case of bankruptcy pending under the old law of 1800, since the year 1801. And, three or four days ago, he read a notice in a London paper, calling on creditors to come in for a dividend of five-sixths of a penny in the pound, in a case of bankruptcy pending since the year 1793. Here has been a case where the waste of property has been going on for fifty years in England, and another case where it has been going on in this country forty-one or forty-two years. He had been himself twenty-three years in the Senate, and, during that time, various efforts were made to revive the old law of 1800 in some shape or other; but never, till last session, in the shape in which the present law passed. And how could this law be expected to stand, when even the law of 1800 (which was in reality a bankrupt law) could not stand; but was, in the first year of its operation, condemned by the whole country?"
The passage of the act had been a reproach to Congress: its repeal should do them honor, and still more the people, under whose manifest and determined will it was to be done. The repeal bill readily passed the Senate, and then went to the House, where it was quickly passed, and under pressure of the previous question, by a vote 128 to 98. The history of the passage of these two measures (bankrupt and distribution) each of which came to an untimely end, is one of those legislative arcana which should be known, that such legislation may receive the reprobation which it deserves. The public only sees the outside proceeding, and imagines a wise and patriotic motive for the enactment of important laws. Too often there is neither wisdom nor patriotism in such enactment, but bargain, and selfishness, and duresse of circumstances. So it was in this case. The misconduct and misfortunes of the banks and the vices inherent in paper money, which had so long been the currency of the country, had filled the Union with pecuniary distress, and created an immense body of insolvent debtors, estimated by some at five hundred thousand: and all these were clamorous for a bankrupt act. The State of Mississippi was one of those most sorely afflicted with this state of things, and most earnest for the act. Her condition governed the conduct of her senators, and their votes made the bankrupt act, and passed the fiscal bank through the Senate. Such are the mysteries of legislation.
A bankrupt act, though expressly authorized by the constitution, had never been favored by the American people. It was tried fifty years ago, and condemned upon a two years' experience. Persevering efforts had since been made for a period of twenty years to obtain another act, but in vain. It was the opinion of Mr. Lowndes, expressed at the last session that he served, that no act framed upon the principles of the British system would ever be suitable to our country—that the complex and expensive machinery of the system, so objectionable in England, where debtors and creditors were comparatively near together, would be intolerable in the United States, where they were so widely separated, and the courts so sparsely scattered over the land, and so inconvenient to the majority of parties and witnesses. He believed a simple system might be adopted, reducing the process to a transaction between the debtor and his creditors, in which courts would have but little to do except to give effect to their agreement. The principle of his plan was that there should be a meeting of the creditors, either on the invitation of the failing debtor, or the summons of a given number of creditors; and when together, and invested with power to examine into the debtor's affairs, and to examine books and take testimony, that they themselves, by a given majority of two-thirds or three-fourths in value, should decide every question, make a pro rata division of the effects, and grant a certificate of release: the release to be of right if the effects were taken. This simple process would dispense with the vexatious question, of what constitutes an act of bankruptcy? And substitute for it the broad inquiry of failing circumstances—in the solution of which, those most interested would be the judges. It would also save the devouring expenses of costs and fees, and delays equally devouring, and the commissioners that must be paid, and the assignees who frequently become the beneficiaries of the debtor's effects—taking what he collects for his own fees, and often making a life estate of it. The estate of a bankrupt, in the hands of an assignee, Mr. Randolph was accustomed to call, "a lump of butter in a dog's mouth;" a designation which it might sometimes bear from the rapidity with which it was swallowed; but more frequently it was a bone to gnaw, and to be long gnawed before it was gnawed up. As an evidence of this, Mr. Benton read a notice from a Philadelphia paper, published while this debate was going on, inviting creditors to come forward and receive from the assignee a dividend of half a cent in the dollar, in a case of bankruptcy under the old act of 1800; also a notice in a London paper for the creditors to come in and receive a dividend of five-sixths of a penny in the pound in a case depending since 1793—the assignees respectively having been administering, one of them forty-one years, and the other fifty-two years, the estate of the debtor; and probably collecting each year about as much as paid his own fees.