Issues of Bonds and Notes
The convention authorized the general assembly of the state to issue bonds to such amounts and in such sums as seemed best, thus giving the assembly practically unlimited discretion. But it was provided that money must not be borrowed except for purposes of military defence, unless by a two-thirds vote of the members elected to each house; and the faith and credit of the state was pledged for the punctual payment of the principal and interest.[410]
The legislature hastened to avail itself of this permission. In 1861 a bond issue of $2,000,000 for defence, and not liable to taxation, was authorized at one time; at another, $385,000 for defence, besides an issue of $1,000,000 in treasury notes receivable for taxes. Of the first issue authorized, only $1,759,500 were ever issued. Opposition to taxation caused the state to take up the war tax of $2,000,000 (August 19, 1861), and for this purpose $1,700,000 in bonds was issued, the banks supplying the remainder. There was a relaxation in taxation during the war; paper money was easily printed, and the people were opposed to heavy taxes.[411]
In 1862 bonds to the amount of $2,000,000 were issued for the benefit of the indigent. The governor was given unlimited authority to issue bonds and notes, receivable for taxes, to “repair the treasury,” and $2,085,000 in bonds were issued under this permit. These bonds drew interest at 6 per cent, ran for twenty years, and sold at a premium of from 50 per cent to 100 per cent. Bonds were used both for civil and for military purposes, but chiefly for the support of the destitute. Treasury notes to the amount of $3,500,000 were issued, drawing interest at 5 per cent, and receivable for taxes. The Confederate Congress came to the aid of Alabama with a grant of $1,200,000 for the defence of Mobile.[412] In 1863 notes and bonds for $4,000,000 were issued for the benefit of indigent families of soldiers, and $1,500,000 for defence; $90,000 in bonds was paid for the steamer Florida, which was later turned over to the Confederate government.[413] In 1864 $7,000,000 was appropriated for the support of indigent families of soldiers, and an unlimited issue of bonds and notes was authorized.[414] In 1862 the Alabama legislature proposed that each state should guarantee the debt of the Confederate States in proportion to its representation in Congress. This measure was opposed by the other states and failed.[415] A year later a resolution of the legislature declared that the people of Alabama would cheerfully submit to any tax, not too oppressive in amount or unequal in operation, laid by the Confederate government for the purpose of reducing the volume of currency and appreciating its value. The assembly also signified its disapproval of the scheme put forth at the bankers’ meeting at Augusta, Georgia—to issue Confederate bonds with interest payable in coin and to levy a heavy tax of $60,000,000 to be paid in coin or in coupons of the proposed new issue.[416]
The Alabama treasury had many Confederate notes received for taxes. Before April 1, 1864 (when such notes were to be taxed one-third of their face value), these could be exchanged at par for twenty-year, 6 per cent Confederate bonds. After that date the Confederate notes were fundable at 33⅓ per cent of their face value only.[417] After June 14, 1864, the state treasury could exchange Confederate notes for 4 per cent non-taxable Confederate bonds, or one-half for 6 per cent bonds and one-half for new notes. The Alabama legislature of 1864 arranged for funding the notes according to the latter method.[418] The Alabama legislature of 1861 had made it lawful for debts contracted after that year to be payable in Confederate notes.[419] Later a meeting of the citizens of Mobile proposed to ostracize those who refused to accept Confederate notes. Cheap money caused a clamor for more, and the heads of the people were filled with fiat money notions. The rise in prices stimulated more issues of notes. On February 9, 1861, $1,000,000 in state treasury notes was issued, and in 1862 there was a similar issue of $2,000,000 more. These state notes were at a premium in Confederate notes, which were discredited by the Confederate Funding Act of February 17, 1864. Confederate notes were eagerly offered for state notes, but the state stopped the exchange.[420] December 13, 1864, a law was passed providing for an unlimited issue of state notes redeemable in Confederate notes and receivable for taxes.
Private individuals often issued notes on their own account, and an enormous number was put into circulation. The legislature, by a law of December 9, 1862, prohibited the issue of “shinplaster” or other private money under penalty of $20 to $500 fine, and any person circulating such money was to be deemed the maker. It was not successful, however, in reducing the flood of private tokens; the credit of individuals was better than the credit of the government.
Executors, administrators, guardians, and trustees were authorized to make loans to the Confederacy and to purchase and receive for debts due them bonds and treasury notes of the Confederacy and of Alabama and the interest coupons of the same. One-tenth of the Confederate $15,000,000 loan of February 28, 1861, was subscribed in Alabama.[421] In December, 1863, the legislature laid a tax of 37½ per cent on bonds of the state and of the Confederacy unless the bonds had been bought directly from the Confederate government or from the state.[422] This was to punish speculators. After October 7, 1864, the state treasury was directed to refuse Confederate notes issued before February 17, 1864 (the date of the Funding Act) in payment of taxes except at a discount of 33⅓ per cent. Later, Confederate notes were taken for taxes at their full market value.[423]
Gold was shipped through the blockade at Mobile to pay the interest on the state bonded debt held in London. It has been charged that this money was borrowed from the Central, Commercial, and Eastern banks and was never repaid, recovery being denied on the ground that the state could not be sued.[424] But the banks received state and Confederate bonds under the new banking law in return for their coin. The exchange was willingly made, for otherwise the banks would have had to continue specie payments or forfeit their charters. And to continue specie payments meant immediate bankruptcy.[425] After the war, the state was forbidden to pay any debt incurred in aid of the war, nor could the bonds issued in aid of the war be redeemed. The banks suffered just as all others suffered, and it is difficult to see why the state should make good the losses of the banks in Confederate bonds and not make good the losses of private individuals. To do either would be contrary to the Fourteenth Amendment.
The last statement of the condition of the Alabama treasury was as follows:—
| Balance in treasury, September 30, 1864 | $3,713,959 | |
| Receipts, September 30, 1864, to May 24, 1865 | 3,776,188 | |
| Total | $7,490,147 | |
| Disbursements, September 30, 1864, to May 24, 1865 | 6,698,853 | |
| Balance in treasury, September 30, 1864, to May 24, 1865 | $791,294 |