f lililfllillilill^illlllll '-'f*#l'^-'^vf^..^'':"^ Ml I In III II I'r II 1 1 1 I II :-■//<;■ -'v»/'.''.*'>"."-''. '•''.■?'-■.-■',"■'' /- /f£ • PUBLICATIONS OP THE VANDERBILT SOUTHEEN HISTORY SOCIETY. Na 3. THE CREDIT SYSTEM AND THE PUBLIC DOMAIN. (;. 1\ KMEKICK, Pii.L).. ! \anderbili i n ii'ii -s it\ NASHVILLE, TENN. : CrMBHKi.AM* Presbyterian PuBj^iSHiNGlfeuaE. 1899. ivLIBRAKTr VANDERBILT UNIVOJSITY @ no- 3 eXCHANGE PUBLICATIONS OF THE YANDERBILT SOUTHEEN HISTORY SOCIETY. No. 3. THE CREDIT SYSTEM AND THE PUBLIC DOMAIN. C. F. EMERICK. Ph.D., Instructor in Economics-^ Vanderbilt Lhiiversity NASHVILI.E, TENN. : Cumberland Presbyterian Publishing House. 1899. 2 ^^ :; .^^ <-^ke^Cf^dii Sy^^^^n and the Public Domain. home in large part out of the returns of his labor. But that credit was less suited to a government selling land to its sub- jects than to the business transactions of everyday life appears to have occurred to only a few/ The actual working of the system soon revealed its defects. This is disclosed by the following table : ^ Year. Acres Sold. Due from Indi- viduals. Arrearage. 1803 199,080 $1,092,390.17 $40,218.35 1804 373.611 1,434,212.50 176,778.02 1805 619,266 2,094,305.85 384,799.11 1806 473.211 2,245,557-58 243.933-18 1807 358.372 2,265,219.92 315.312.12 1808 213.472 2,180,425.86 586,817.05 1809 231,044 2,186,186.71 886,841.92 I8I0 235,879 2,036,837.37 702,557.91 I8II 288.930 1,970,912.91 656,603.64 These figures indicate the rapid evolution of a debtor class upon the public domain. From 1803 to 1805 the debt almost doubled. More noteworthy is the remarkable growth of arrear- ages. In 1809 these were Iwenty-two times greater than in 1803. Note. — The above table covers sales south as well as north of the Ohio river. There were none of the former till 1803. In that year land offices were opened in Mississippi Territory, but no statement of sales appears to have been made iill 1807.3 The figures for that year include all sales since the opening of the land offices. The principal facts are ao follows : '* Year. Acres Sold. Due from Indi- viduals. Arrearage. 1807 74.192 $111,9/3.50 1808 17,892 138,752.85 1809 87,635 273,482.85 $ 36,166.88 1810 77,035 390,195-33 80,413.13 I8II 81,913 474,541.23 148,190.72 'Annals of Congress, 1789-'91, cols. 1069, 1070; ibid., 1796-'97, cols. 2209, 2210. = American State Papers, Finance, Vol. II., pp. 52, 53, 151, 152, 147, 148, 210, 211, 252, 253, 313, 314, 315, 379-82, 445, 446, 502, £03 ; Public I^ands, Vol. I., p. 909. ^Annals of Congress, 1802-1803, Appendix, col. 1594. * American State Papers, Finance, Vol. II., pp. 253, 315, 381, 382, 446, 503. The Credit System and the Public Domain. -^ The movement is subject to fluctuations, but the general trend is unmistakable. The amount due and the arrearage are doubt- less connected with the yearly acreage sold. Thus the great in crease in sales ending with 1807 resulted in an enormous growth in both of these items ; likewise the falling off in sales following that year resulted in their decline. Much the greater part of the debt overdue rested upon those who who were hopelessly in- volved^ Nearly three-fourths of the arrearage in Ohio in 1805 was due from those who had paid but one instalment." The number of tracts in the same State annually offered for sale on account of failure in payment was estimated in 1812 at 1,020.3 The forfeitures accruing to the United States, July i, 1813 to Sept. 30, 1814, amounted to $23,589.33. In the greater number of cases this loss fell upon purchasers of a quarter rather than of a half or whole section.* The credit system was earl}^ recognized as ill advised. In 1797 a motion extending the time of credit from one to four years was defeated in the House Committee of the Whole ^ The op- position argued that " nothing more would be received of the purchasers than the first deposit, if so long a credit were given" ; ^ and that *' instead of money the}^ should have petitions sent in for a prolonging of the time of payment." ' Though a supporter of this motion, Gallatin in 1804/ 1806,' and 1808'° rec- ommended the abolition of the credit system. The House Com- mittee on Public Lands in 1806," 1809," and 1812'^ made a simi- lar recommendation, and the Senate Committee in 1812"* ex- pressed the same opinion. The dealings of debtor and creditor with each other are subject to more or less friction, and for the relationship of government and subject to be subjected to such a strain was soon perceived to be eminently unwise. Any gov- ernment in becoming indebted to large numbers of its own sub- jects strengthens itself by the ties of self-intere.st. Reverse the case and the fealty of the average citizen is weakened. '^ In 1806 ' Ibid., Public Lands, Vol. I., p. 287; Vol. II., pp. 730, 731. ^bid., Vol. I., p. 287. 3 ibid., Vol. II., p. 441. *Ibid., Vol. II., p. 891. 5 Annals of Congress, l796-'97, col. 2209. ^ Ibid. " Ibid. ^American State Papers, Public Lands, Vol. I., p. 183. 9 Ibid. , p. 287. -^ Ibid. , p. 910. " Ibid. , pp. 286-'7. '^ Ibid. , pp. 909-' 10. •3 Ibid., Vol. II., pp. 730-'31. '-(Ibid., pp. 439-'41. '5Niles' Register, Vol. XVII., 1820, p. 11; see also Annals of Con- gress, 1796-'97, col. 2209, and 1819-'20, cols. 445, 447, 1820, 1872-'77. y^. The Credit System and the Piiblic Domain. Gallatin said : ** The accumulation of a debt * * * which is every- day increasing in amount and extending to a greater number of persons may ultimately create * * * a powerful interest hostile to the Federal Government."^ More than two thousand heads of families in Ohio were public land debtors in 1805.^ The num- ber in all the States and Territories in 181 2 was seven to ten thousand.^ The act of 18044 endeavored to check the rapidly growing evil •of delinquencies by exempting payments from interest if made when due ; s otherwise interest was to be charged from the date •of purchase. How inadequate this remedy proved is shown by 'the table given above. In 1809 Congress began to pass various act of relief extending the time of payment.^ With few exceptions these applied only to persons holding 640 acres or less — an attempt to favor the settler as opposed to the speculator.^ Such measures, however, wei% mere palliatives. Leaving the credit system still intact, they did not remove the cause of the disease. Rather did they aggravate the difficulty by encouraging the opinion that govern- ment was a lenient creditor in enforcing its demands. That they afforded relief to some is not denied, but in so doing they inten- sified the trouble they were devised to alleviate. By holding out to venturesome spirits the hope of gain, coupled with a guaran- tee against loss, they put a premium upon the spread of the credit system. As a consequence, it extended more and more over Ohio, Indiana, Illinois, Missouri, Alabama, Mississippi, Louisiana, and Michigan.^ Nor was this experience of the national government excep- tional. The land debt south of the French Broad and Holston in Tennessee was a source of annoyance to the State for twenty years:' The expense of legislating upon petitions for relief by 1833 exceeded the amount still due.'= The experience of Ken- ^ American State Papers, Public Ivands, Vol. I., p. 287. ^Ibid. 3 Ibid., Vol. II., p. 440. 4 Annals of Congress, 1803-'04, col. 1290. ^American State Papers, Public I^ands, Vol. I., p. 909; Vol. II., p. 256. ^Donaldson, The Public Domain, p. 205 ; Annals of Congress, 1820, .cols. 1869, 1891. 7 Donaldson, op. cit., p. 205. ^Ibid. 9 Senate Journal, Tennessee, 1829, p. 103. ^° House Journal, Tennessee, 1833-'34, p. 11. The Credit System and the Public Domain. 5 tucky in exploitino^ her public domain is even more to the point. In this State relief was granted again and again until it came to be expected almost as a matter of course. In the Green river country any one opposed to such a measure stood but little chance of election to the legislature. The influence of the debt also ex- tended to other legislation. The votes necessary to enact meas- ures that otherwise would have failed were procured in exchange for votes granting indulgence to land debtors. Legislation thus tended to become a matter of bargain and sale rather than of public policy.' Whenever government ceases to act as the arbiter of diflfer- ences, and permits itself to become a party to them, it inevita- bly compromises the dignity of its position. The limited means of many to whom credit was extended ^ made this especially true in the sale of the public lands. The House Committee on the subject, in 1806, said : "Although no sales have yet taken place, there is no doubt but some must be made, or the lands revest to the United States, if the law is rigidly executed. * ^ ^ it ap- pears doubtful whether ^ ^ ^ an attempt to sell would be at- tended with success. * ^ ^ Few men are willing to incur the resentment of their neighbors, by bidding for their prop- erty at a public vendue, even when other neighbors are the creditors ; and, when the public is concerned, scarcely a man will be found hardy enough to do it. The lands will, therefore, in many instances, revert to the government, encumbered by the occupancy of a tenant who ought to be evicted before another sale should be made. It might be added that few strangers would run the risk of bidding for property at a vendue, when the united interest of the whole neighborhood was opposed ta the sale." 3 In 1812 the Senate Committee observed: "There can scarcely be imagined a situation better calculated to rouse the feelings or mislead the mind of an individual whose hopes have been blasted in a purchase of land. He has made his pur- chase, and with difficulty paid his first instalment. * * * The credit allowed by law (five years) expires ; his land is adver- tised for sale; he is threatened with the loss of all he has paid, whether one. two, or three instalments. But this is not all ; his labor for five years, which has put his land in a state of ' Annals of Congress, 1819-'20, col. 447; ibid., 1820, col. 1875. = Flint, Recollections of the Last Ten Years, 1826, pp. 40, 41. 3 American State Papers, Public Lauds, Vol. I., pp. 236, 287. -6 The Credit System and the Public Domain. cultivation, and placed around him the comforts of life where a- wilderness existed before, is also to be lost, and his family turned out of a home to seek some new situation." ' The year 1814 witnessed the beginning of a great increase in the sales of the public lands. In that year 864,536 acres were sold, or 245,370 more than in any year since 1796. During the succeeding five years the sales assumed vast proportions, in 18 19 reaching 5,475,648 acres.^ These figures were not surpassed till 1835.3 Still more noteworthy was the increase in the purchase money offered. During the thirteen years ending with 18 13, this averaged $735,292. In 18 14 it leaped to $1,784,560, forty-four per cent more than in any year preceding. Within the next four years it twice doubled, and in 1819 jumped to $17,681,794. Moreover, in 1818 and '19 there was a marked increase in the average price offered per acre. In no year prior to this had it reached $2.40, but during these years it rose to $3.16. More than two-thirds of the public land disposed of till June 30, 1820, was sold during the six years ending with 1819 ; and more than three-fourths of all purchase money off"ered was for this land.* The most remarkable increase took place in Alabama and Mis- sissippi. In these States the sales, i8i6-'iq, averaged 1,000,000 :acres, fifteen times the average from 1807-16. Of $17,656,549 purchase money, ninety-seven per cent was for sales during the four years prior to 1820. The average price per acre for 18 18 :and '19 was $4.51.5 The land office at Huntsville, Ala., Was the center of most reckless land speculation. The lands sold at that office, January I, to September 30, 1818, averaged $7.78, and for the year ending September 30, 18 19, $6.16 per acre.^ Sales at ten to twenty dollars per acre were common ; at twenty-five to thirty dollars, somewhat less common,? and occasionally as high as seventy,^ seventy - 'Ibid., Vol. II., p. 440. ^bid., Vol. VIII., p. 2. 3 Iceport of Commissioner of General Land Oflfice, 1841, p. 22. ^American State Papers, Public Lands, Vol. VIII., p. 2. 5 Ibid., Vol. III., p. 420. ''Ibid., Finance, Vol. III., pp. 287, 432; Public Lands, Vol. V., pp. ^77, 383-385. 7 American State Papers, Public Lands, Vol. III., pp. 555-558; Vol. JV., p. 805 ; Niles' Register, Vol. XI., 1816, p. 107. ^Niles' Register, Vol. XIII., 1817, p. 62. The Credit Sy stein a7id the Public Domain. 7 eight,' and even one hundred and twenty dollars^ were bid. In one instance a planter bought a quarter-section of cotton land at one hundred and twenty-seven dollars per acre.^ Spec- ulation in town sites and lots was of the wildest kind. A com- pany paid two hundred and fifty-one dollars an acre for a half- quarter-section. As much as $3,500 w^ere bid for one lot.* In a memorial to Congress m 1830, the general assembly of Alabama said: "In the years 1818, 1819, and 1820, ^ ^ ^^ competition for Alabama lands was without a parallel. Sales w^ere made at prices so far above the true value of the lands, or above that value at which they had been estimated by reasonable men, that the people of the surrounding country, not engaged in the trans- actions of the day, attributed it to a frenzy among the bidders. Good lands were then bid ofif at prices varying from thirty to fifty dollars per acre, when lands of the like quality, equally productive and suitable for cultivation, could be purchased in the neighboring States at or about one-fourth part of what it was agreed to be paid for them in Alabama." 5 St. Charles, Missouri, witnessed a similar experience. "A very large tract of land was cried for sale ^ * * and the only limits and bounds given were, that it was thirty miles north of St. Louis. * * ^ But a purchaser soon appeared, who bid ofif the tract. * * ^ There were people who offered immense tracts of land the titles to which were contingent. ^ ^'' * Often the same tract was offered for sale by two and even three claimants. The whole county of St. Charles, containing a number of thousands of inhabitants, was ofi"ered for sale, by wdiat was called the Glamorgan claim, and thirteen hundred dollars were paid [for it] on the spot." ' In addition to credit, high prices for produce, profuse emis- sions of banknotes,^ the Yazoo land scrip, emigration to the West, and the auction system, contributed to this mania for speculation. Cotton sold from twenty to thirty cents per ' Annals of Congress, 1819-'20, col. 446. abid., Vol. XV., 1818, p. 116. ^McMaster, History of the People of the United States, Vol. IV., p. 396. -^Ibid. 5 American State Papers, Public I^ands, Vol. VI., pp. 142, 143. ^ Flint, Recollections of the Last Ten Years, 1826, p. 199. 7 American State Papers, Public Lands, Vol. IV., p. 805; Vol. V., p. 377; Vol. VI., p. 10. 8 The Credit System and the Public Domain. pound.' The prices of tobacco and breadstuffs were also high." During and immediately after the war of 1812, the notes of banks receiving and reissuing treasury notes were accepted in payment of all public dues. This promoted excessive is- sues.^ Besides, payment for public land was a constant drain upon the money of the West, and the temptation to fill the vacuum with over issues was strong. * The bills of many local banks made a place for themselves by depreciating and driving from general circulation the notes of specie-paying institutions.^ The years i8i5-'iq were prolific in banks. A petition to Congress of Alabama land debtors alluded to the recent establishment of seventy new banks.^ In 18 15 and '17 no less than twelve banks of issue were established in Tennessee.^ The legisla- ture of Kentucky, at the session of 181 7-' 18, chartered forty banks,^ and in 1820, as a relief measure for their victims, established the Bank of the Commonwealth of Kentucky.' Banks were established on a sum of money sufficient to pay for engraving the plates and to purchase the paper for notes. The Secretary of the Treasury, W. H. Crawford, in 1820 said : " Banks have been incorporated, not because there was capital seeking investment ; not because the places where they were established had commerce and manufactures which required their fostering aid; but because men without active capital wanted the means of obtaining loans, which their standing in the community would not command from banks and individ- uals having real capital and established credit.'"" The note cir- culation of the country increased from forty-five million dollars, in 1812, to one hundred million dollars in 1817." To get their •Ibid., Vol. v., pp. 377, 378; Vol. VI., p. 10; Atinals of Congress, 1819-20, col. 446 ^Niles' Register, Vol. XVI., 1819, p. 386. 3 Annals of Congress, 1819-'20, col. 465; ibid., 1820, col. 1892. *Ibid., 1820, col. 1885. 5 American State Papers, Finance, Vol. III., p. 263. <*Ibid., Public I^ands, Vol. IV., p. 805 ; Annals of Congress, 1819-'20, col. 446. 7 Phelan, History of Tennessee, p. 259. ^ Sumner, Andrew Jackson, p. 120. 9 Ibid., p. 124. '"American State Papers, Finance, Vol. III., p. 494. " Sumner, History of American Currency, p. 80. The Credit Sy^te7?i and the Public Domain. 9 notes into circulation, the banks competed in offering borrowers favorable terms. As a consequence, the use of credit was great- ly extended ' and an upward impetus was given to prices. This in turn encouraged all to get into debt, and sharpened the pub- lic appetite for still further issues of bank notes.= The scrip issued in settlement of the Yazoo claims, was re- ceivable in payment for Alabama and Mississippi lands.3 This increased the rage for land speculation.^ Of $4,691,784.38 re- ceived for Alabama lands during the four and half years pre- ceding June 30, 1820, $2,100,892.44 — forty-four and seven tenths per cent — were Yazoo land scrip.= The volume of western emigration ebbed and flowed with prosperit\^ in the older States. Indian uprisings on the frontier sometimes checked its flow ; but it always regained its ground, and at times the highways wxre thronged with families moving to the west.'' The movement was the outgrowth of a nation seeking its economic ends along the line of least resistance. Oc- casionally it became so vast as to alarm the Atlantic states. In 1815. a legislative committee, in a report to the legislature of North Carolina, said : " Within twenty-five \'ears past, more than two hundred thousand of our inhabitants have removed to the waters of the Ohio, Tennessee, and Mobile ; and it is mortifying to wit- ness the fact, that thousands of our wealthy and respectable citi- zens are annually moving to the west ^ ^ * and that thousands of our poorer citizens follow them. "7 The following year a similar view was expressed in a report to the Virginia House of Dele- gates.^ During i8io-'20 the population of the public domain states and territories increased from 671,804 to 1,653,147 ; nearly tw^o and one half times. The more noteworthy increases were : Ohio, 230,760 to 581,434; Indiana, 24,520 to 147,178; Illinois, 12,- 282 to 55,211; Missouri, 20,845 to 66586; Mississippi and Ala- ^ American State Papers, Public Lands, Vol. VT., p. 12. ^Sumner, Andrew Jackson, p. 121. 3 American State Papers, Public Lands, Vol. II., pp. 877-'87; Hildreth, History of the United States, Vol. IV., pp. 227, 582, 642; Vol. V., pp. 474-'5, 541-'2; Vol, VI., pp. 48, 464 ; McMaster, History of the People of the United States, Vol. III., pp. 131-'2, -♦American State Papers, Public Lands, Vol. IV., p, 805 ; Vol. V., p. 377 ; Vol, VI., pp. 10, 12, 52 ; Annals of Congress, 1819-'20, col. 44b. 5 American State Papers, Public Lands, Vol, V., p, 385, * McMaster, op, cit,, Vol, IV,, pp. 381-'8. 7Niles' Register, Vol, IX,, 1816, Supplement, p, 165, ^bid,, p. 150. lo The Credit System and the Public Dotnain. bama, 40,352 to 203,349; Louisiana, 76,556 to 153,407; Tennes- see, 261,727 to 422,813/ As a consequence, in the decade end- ing with 1820, seven states — Louisiana, Indiana, Mississippi, Ill- inois, Alabama, Maine and Missouri — entered the Union. ^ In no decennial period before or since have there been so many ac- cessions to the family of states. Lastly, in offering the public lands at auction to the highest bidder, instead of at a fixed price, the government threw wide open the door to speculation. Competiiton among buyers forced the price to the upmost limit, and under the impulse of the mo- ment men made the most extravagant offers. No doubt specu- lation would have seized upon the land in any event, but the auction system promoted it by permitting it to enter so early in- to the sales. The seed of industrial ruin had now been sown and the harvest was close at hand. During the four years ending with 1818, the debt due from individuals for public lands had increased from $3,042,613.89 to $16,794,795.14.3 Failure to meet payments became so common that the receipts were prin- cipally confined to the first instalments on the annual sales.-* In seven years ending September 30, 18 18, the reversions aggre- gated 698,336 acres, ^ and in eighteen years the forfeitures amounted to $402,855.75.^ Relief acts were passed almost year- ly. Niles' Register said : " The statute book is disgraced by such acts : we would seriously advise the passage of an act di- recting that the debtors for lands should satisfy their debts sixty days after it is convenient." ^ In the early part of 18 18, the Sec- retary of the Treasury, in self-defense, instructed collectors and receivers of public money to receive nothing in payment of du- ties, taxes and public lands but current specie and bills of banks maintaining specie paj^ments.^ This added to the embarrassment of the land debtors.^ Then came the panic of 1819.'° Early in ^bid., Vol. XXI., 1822, p. 346. "^ MacCouti's Historical Geography of the United States, pp. 33-36. 3 American State Papers, Finance, Vol. III., p. 718. -* American StatePapers, Public Lands, Vol. III. , p. 419. s ibid. , p. 420 . nbid., Vol. IV., p. 911. 7 Vol. XXI., 1821, p. 277. ^American State Papers, Finance, Vol. III., p. 263; Public Lands, Vol. IV., p. 2; Niles' Reg-ister, Vol. XIX., 1820, p. 48. 9Niles' Reg-ister, Vol. XV., 1819, p. 77; Vol. XIX., 1821, p. 132; An- nals of Congress, 1819 '20, col. 465 ; ibid., 1820, col. 1892. '° Sumner, History of American Currency, p. 79. The Credit System and the Public Soniain. 1 1 that year ""the price of all articles produced in the western states fell so low as scarcely to defray the expense of transportation to the ports from whence they were usually exported to the for- eign markets. This condition of things, which had not been an- ticipated when the debt for the public lands was contracted, produced the most serious distress at the moment, and excited alarming apprehensions for the future."' The price of cotton fell more than fifty per cent.^ Growers endeavored to recoup them- selves by planting a larger acreage, but this only drove the price still lower untiP it had fallen more than twenty cents per pound.* In Alabama, where cotton was the sole dependence for cash, this meant widespread ruin. " Many banks, too tedious to mention, [shut] up shop, leaving the little circle, in which their notes were received, in a state of itwiiderment that a bank should break. . . . Begotten in iniquity, they died in corruption." ^ The note circulation of $100,000,000 in 18 17, dwindled to $45,- 000,000 in 1819.^ Prof. Sumner says: "Stagnation and dis- tress lasted throughout 1820. Prices were at the lowest ebb and liquidation w^ent slowly on. Wheat was at 20 cents per bushel in Kentucky. A man in Western Virginia stopped Niles' Register because one barrel of flour used to pay a year's subscription ; now three bafrels would not. At Pittsburg, flour was $1.00 per barrel ; boards 20 cents per hundred; sheep, $1.00." 7 All this was disastrous to land debtors. The reversions in 18 19 amounted to 365,020 acres — two and four tenths times as much as in any year preceding.* In addition to the instalments which fell due upon sales of former years, the amount paid into the Treasury lacked $1,146,000 of the legal minimum payable on the land sold that year.^ The balance due in 1820 amounted to $21,- 213. 350.17 '' — more than one-fifth of the national debt." Fifty- ' American State Papers, Finance, Vol. III., p. 718 ; see also Flint, Recollections of the Last Ten Years, 1826, pp. 247-'8. ^American State Papers, Public Lands, Vol. VI., p. 12 ; Vol. IV., p. 805. 3 Ibid. , Vol. VI. , p- 12. ^ Ibid. , p. 10. 5 Niles' Reg-ister, Vol. XVIII., 1820, p. 364; see also Flint, Recollec- tions of the Last Ten Years, 1826, p. 212. ^Suuiner, History of American Currency, p. 80. "Ibid., p. 82. 8 American State Papers, Public Lands, Vol. III., p. 420. 9ibid., Vol. Vin.,p. 2. ^°Ibid., Vol. IV., p. 795. "Public Debt of the United States, 1791-18%, Statistical Bureau, Treasury Department, Feb., 1897, p. 1462. 12 The Cfedit System and the Public Doynain. two per cent of this vast sum rested upon Alabama lands.' This was $8,500,000 in excess of the debt for the same. number of acres in other States.'' The time was now ripe for action, and the remedy applied by- Congress was two-fold : First, the repeal of the credit system ; second, provision for the liquidation of the debt. The latter without the former would have aggravated the trouble. The stock argument against repeal was, that without credit, men of small means could not become purchasers, and that the growth of the West would be retarded.3 The law of 1820, in providing for cash sales, met this by so reducing the price per acre and the minimum tract subject to purchase that whereas $80.00 were re- quired for the first instalment on a quarter section, one hun- dred dollars now paid in full for eighty acres.'* This measure passed the House by a vote of one hundred and thirty-three to twenty-three ; and in the Senate only seven votes out of a total of thirty-eight were cast against it.s With the exception of one vote in the Senate and seven in the House, the opposition to cash sales came entirely from the West.^ It should not be in- ferred, however, that the Trans-Alleghany States were a unit for the credit system, as they really gave a majority of one against it. Still the temper of western sentiment was such that its representatives, who had voted for cash sales, felt called up- on to justify their course.? To liquidate the debt was far more difiicult. Nearly a dozens acts were passed for this purpose. The first — that of 1821 — of- fered three plans of relief: (i) Relinquishment of a part of one's purchase, and application of payments made thereon to that re- tained. (2) Payment of amount due, less a discount of thirty- seven and a half per cent. This placed the public land debtors on an equality with purchasers after the abolition of the credit system. At that time the minimum price per acre was reduced from two dollars to one dollar and twenty-five cents. (3) The 'American State Papers, Public Lands, Vol. IV., p. 795. = Ibid., p. 805. 3Niles' Reg-ister, Vol. XVIII., 1820, p. 388 ; Annals of Congress, 1820^ cols. 1878-'83. ^Niles' Register, ibid. 5 Annals of Congress, 1019-20, col. 489; ibid., 1820, col. 1901. <^ Annals of Congress, 1819-'20, cols. 9, 10, 23, 448, 489, 700, 701, 726, and ibid., 1820, col. 1901. 7 Ibid, 1820, cols. 1883, 1884. The Credit System and the Public Domain. 13 privilege of a further credit.' For the benefit of those who failed to take advantage of these provisions they were re enacted in 1822," and again in 1823.^ Even then purchasers of 126,933 acres, on which $103,806.58 had been paid, were unprovided for.-* Within seven months, or by September 30, 1821, the balance due fell to $11.957,430.39^ — nearly fifty per cent. During the following year there was a further decline to $10,572,378.61.^ This marked encouraging progress. In the next eighteen months, however, the debt decreased but $351,104.61.^ Moreover, under the act of 1821, further credit had been taken on 3,588,558 acres upon which there was a balance due of $6,740,358.18.^ Ninety- two per cent of this rested on land upon which but one-fourth of the purchase money had been paid.^ Such a heavy indebtedness rendered reversions and forfeitures inevitable. Some further plan of liquidation was evidently necessary. This was the pur- pose of the acts of 1824'^ and '26," which enabled those who had taken an extension of credit to complete payment by either ot the plans offered in 182 1. The acts of 1822 and '23 had done this, but they did not require the relinquishment of enough to enable payment to be made in full. As a consequence, the debt declined successively to $7,955,831.03,''' December 31, 1825, and $4,305,365.28,'^ September 30, 1827. Still liquidation was incom- plete. Besides, in the eight years ending with 1829, 687,384 acres further credited reverted, and $741,290.71 were for- feited.'^ Seventy-five per cent of the forfeitures were in Ala- bama, and eighty per cent of the remainder were distributed about equally in Ohio, Indiana, and Illinois.'' It was apparent that further legislation was needed, and Congress passed the acts of 1830 and 1831. These applied to lands further credited which had reverted. The principal ' Annals of Congress, 1820-'21, Appendix, col. 1795 sq. = Ibid., 1822, Appendix, cols. 2591, 2592. 3 Ibid., 1822-'23, Appendix, col. 1408; American Slate Papers, Public Ivands, Vol. III., p. 641. 4 American State Papers, Public Lands, Vol. IV., p. 770. 5 Ibid., Vol. III., p. 645. ^bid., Vol. IV., p. 795. 7 ibid. 8 Ibid., Vol. III., p. 630. 9 Ibid. '° Annals of Congress, 1824, Appendix, cols. 3219,3231, 3232. ^'Ibid., 1825-'26, Appendix, pp. XII., XIII. = American State Papers, Public Lands, Vol. IV., p. 911. Ibid., VoL V.^ pp. 3, 802. '*Ibid., Vol. VI., p. 18. '5 ibid. 14 The Credit System and the Public Domain. feature of the former provided for liquidation by abatement. By this method titles were completed upon payment of one dollar and twenty-five cents per acre, in addition to that already paid — the total not to exceed $3.50 per acre/ Purchas- ers of high-priced lands were the chi^ef beneficiaries of this pro- vision/ The act of 1831, therefore, declared purchasers at less than $14, "entitled to patents-^ in all instances where one dollar and twenty-five cents, or a greater sum, per iacre, shall have been paid [or where payment to that amount shall be made]. "3 The act of 1830 also authorized the issuance of certificates for the amount forfeited on reverted lands, which had sold at not to ex- ceed $2.50 per acre. These were receivable in payment of pub- lic lands. The act of 1828 had provided for this in all cases where further credit had not been taken."^ To sum up : 4,602,573 acres were relinquished ; ^ seventy per cent of the debt was liquidated in this way ; ^ fifteen and two- tenths per cent by cash and discounts; ^ six and four-tenths per cent by abatement ; ^ and the remainder in one or another of the following ways : (i) cancellation of indebtedness on land upon which certificates for forfeitures were issued ; (2) cash incidental to abatement ; (3) cash without discount on instalments ; 9 (4)- reversions.'" The purchase price of land relinquished, averaged higher than of that retained. Under the laws of 182 1, '24and '26 the prices per acre respectively were : Three dollars and fifty- four cents, and three dollars and eleven cents ; " two dollars and ninety cents, and two dollars and fifty-three cents ; " three dollars and fourteen cents, and two dollars and thirty-four cents. '^ The contrast was greatest where speculation had been most unre- strained. In Alabama, under the acts of 1824 and '26, the figures were : Three dollars and ninety-eight cents, and three dollars ' Congressional Debates, 1829-30, Appendix, p. XIII. =" American State Papers, Public I^ands, Vol. VI., p. 216. 3 Congressional Debates, 1830-31, Appendix, col. 17. *Ibid., 1827-28, Appendix, p. X-XIII.; American State Papers, Pub^ lie Lands, Vol. V., p. 12. 5 American State Papers, Public Lands, Vol. VI., p. 456. 6 Ibid., and Vol. IV., p. 795. 7 American State Papers, Public Lands, Vol. VI., p. 456, and VoL IV., p. 795. 8 Ibid. 9 Ibid., Vol. VI., p. 11. '° Ibid., Vol. VI., pp. 18, 456. "Ibid., Vol. III., p. 629 ; Vol. IV., p. 482. "Ibid., Vol. IV., pp. 770, 794. '3 ibid., Vol. V., p. 3. The Credit System and the Public Domain. 15 and forty-one cents ; ' four dollars and thirty-six cents, and three dollars and twenty-eight cents.= The government sold 19,399,- 158 acres under the credit system for $47,689,563.09, but, owing to reversions and relinquishments, parted title with but 13,642,- 536 acres, for which $27,900,379.29 were received. ^ The system was at its worst in Alabama: of 3,999,245 acres sold, 1,842,535 were relinquished— nearly three times as great a percentage as in other states.*' The above pages point to but one conclusion. The sale of the public lands on credit was a disastrous failure. It intro- duced antagonistic interests between government and subject. The rapid growth of the debt, and especially of ihe payments defaulted upon, soon attracted the attention of thoughtful ob- servers. It engulfed large numbers in hopeless debt and called for the repeated intervention of the government to save men from the consequences of their own acts. Laws for this pur- pose were in force during nearly half the life time of the credit system ; even then reversions and forfeitures were not uncom- mon. Instead of subserving the interest of the Treasury, it yielded the government an annual stream of uncollectable claims, and fully twelve years were required to clear away the wreckage which it left in its wake. Of all the states, Alabama was the worst sufferer. The credit system also promoted the wild speculation in West- ern lands which preceded the panic of 1819. The only limit to purchasers which it imposed, was the ability to make the first payment. In doing this, many settlers expended their last cent, relying upon the produce of their industry to meet instal- ments as they would fall due.5 Further, credit fired the imagi- nations of men and led them to offer prices greatly in excess of cash values.^ It may have hastened the settlement of the West, but subsequent history has shown that other means, fully as effective and unattended with so many evils, may be used for this purpose. ^ No doubt the sale of land on credit would have worked better ' Ibid., Vol. IV., pp. 770, 794. ^Ibid., Vol. V., p. 3. 3 Donaldson, The Public Domain, p. 203. * American State Papers, Public Lands, Vol. V., p. 385: Vol. VI., p. 456. 3 American State Papers, Public Lands, Vol. II., p. 888. 6 Annals of Congress, 1820, col. 1880. i6 The Credit System and the Public Domain. if conditions had been other than they were. If half the pur- chase money in place of one-fourth had been required in cash ; if security other than the land had been given; or, if transportation had been less primitive, the results would have been less disas- trous. The conclusion seem unavoidable, however, that the system itself was at fault. In lecommending its repeal in 1819, the Senate Committee on Public Lands, said : " It cannot be be correct policy to persist in the continuation of a system so much affected by circumstances as that under consideration, which requires the frequent aid of mitigating expedients to pre- serve its existence, and to prevent its oppressive effects on a considerable portion of the community. ^ ^ >i^ Judging from the experience of the past, without any assurance of a more favorable state of things in the future, it may be concluded that the system of credit is not well adapted to the circumstances of the country, and will be injurious so long as commerce is liable to fluctuation."^ C. F. Emerick. American State Papers, Public lyands, Vol. III., p. 413. LOAN DEPT. This book is due on the last date stamped below, or on the date to which renewed. Renewed books are subject to immediate recall. so^c'ss^^ ^^c.CV^r . V ■RC W^Tf^ i*a JAN \i \m uoan D^ Fffr* ^ fipgrpn y ^^^ U m ji W=^ W^ ^^ 1970 65 LD 21A-50m-9,'58 (6889sl0)476B General Library University of California Berkeley Stockton, Calif. PAT. JAN. 21, 1908 868011 THE UNIVERSITY OF CAUFORNIA UBRARY m.