Summary of Debt
| Class One | $11,667,470 | ||
| Class Two | 1,156,000 | [1630] | |
| Class Three | 2,573,093 | ||
| Class Four | 14,641,000 | ||
| Total | $30,037,563 | [1631] |
The interest on this debt at the legal rate of 8 per cent would be over $2,000,000, more than twice the total yearly income of the state. The commission and the legislature declared that in the present condition of the finances the state could not pay the interest, that it would be several years before the state could pay any interest at all. Moreover, it could not recognize as valid many items in the great debt. After conference with the representatives of the more innocent creditors, the debt was thus adjusted:—
I. (a) The state proposed for the next few years to confine its attention to paying domestic claims and to retiring state obligations. (b) New bonds were issued to the amount of $7,000,000, to be exchanged for outstanding state bonds sold by the state to bona fide purchasers. These bonds, known as Class A, were to draw interest for five years at 2 per cent, for the next five years at 3 per cent, at 4 per cent for the next ten years, and thereafter at 5 per cent. These bonds were issued to the most innocent creditors and constituted the least questionable part of the debt.
II. On the $1,192,000 railroad debt of Class Two the state accepted a clear loss of one-half, and issued $596,000 in bonds, known as Class B, to be exchanged at the rate of one for two. These bonds drew interest at 5 per cent.
III. Class Three was the worst of all, and none of the items were at the time recognized, though the commissioners were authorized to take $310,000 of Class A bonds and distribute the amount among the innocent holders of the $650,000 bonds sold by Henry Clews when held by him as collateral. The other Clews claims were emphatically repudiated as fraudulent.
IV. Class Four was more complicated. (a) The state gave $1,000,000 in bonds, Class C, drawing interest at 2 per cent for five years and at 4 per cent thereafter, to the holders of the Alabama and Chattanooga first mortgage indorsed bonds. The state was then relieved of further responsibility. (b) To the holders of the $2,000,000 state bonds issued to the Alabama and Chattanooga road, and which the commissioners were inclined to consider fraudulent, the state transferred its lien on the property of the Alabama and Chattanooga road, provided the bonds be returned to the governor.
The claims of the holders of the indorsed bonds of five other railroads were left for future settlement. They were declared fraudulent, and the state finally declined to recognize them. The Montgomery and Eufaula road had a loan of $300,000 in state bonds and an indorsement of $960,000. The road was sold for $2,129,000, and the state was secured against further loss.[1632]
This act of settlement caused the issue of $8,596,000 in bonds. There were besides several millions more in bonds, state obligations, claims, etc. The Commission reported that the innocent holders of the bonds were very reasonable in their demands.[1633] Henry Clews declined to give the Commission any information in regard to his agency for the state, but the Commission declared that he had in his possession, or had transferred improperly, coupons on which interest had been paid, and which he had not surrendered to the state. They recommended a fresh repudiation of any claim founded on Clews’ securities.[1634] The Commission also discovered that Josiah Morris & Company of Montgomery had possession of $650,000 in state bonds which they refused to release without legal proceedings.[1635] There is not available sufficient evidence on which to base an account of the history of town and county debts. Some towns, unable to pay, gave up their charters; others still pay interest on the carpet-bag debt. For years in several counties the income was not large enough to pay the interest on its Reconstruction debt.
After the arrangement of state obligations, the state debt soon rose to par and above. The Democratic administration was economical even to stinginess. Salaries were everywhere reduced 25 per cent, the pay of the members of the legislature from $6 to $4 per day, and mileage from 40 cents to 10 cents.[1636] The people of the state even complained of too much economy. It was said that a “deadhead” could not borrow a sheet of writing paper in the capitol, nor in a county court-house.