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CHAPTER III.

THE MISSISSIPPI UNION BANK BONDS.

THE question of the repudiation of the Mississippi bonds handed to Messrs. Hope & Co. as collateral security by Mr. Jaudon having been much misunderstood, it will be appropriate here to present a copy of the correspondence between that house and Governor McNutt, which, with the details of the transactions of the Bank of the United States furnished in the previous chapter, will throw some light on the affair, and, it is to be hoped, rectify the misapprehensions in reference thereto that have for so long a time taken possession of the public mind. When Messrs. Hope & Co. received these bonds they were tainted with repudiation. The agency of the Bank of the United States in London, which was continued until its directors made an assignment, in the autumn of 1841, had paid the interest on them from the time they passed out of its hands in the latter part of 1839 up to November 1840, the amount being credited against the principal of the loan contracted with Mr. Jaudon by the Messrs. Rothschilds :

To the Governor of the State of Mississippi.

The undersigned, as trustees for the holders of debentures of the Bank of the United States of Philadelphia, on deposit of American State stocks, and amongst others of a considerable amount of bonds of the State of Mississippi, bearing five per cent. interest, issued through the Union Bank of Mississippi, and made payable at the agency of the United States Bank of Pennsylvania, in London, the principal in 1850 and 1858, and the dividends semi-annually in May and November, having been refused payment of the interest due the 1st of this month on said bonds, are compelled to address themselves to the government of the State of Mississippi; and from their confidence in

the faith of that government, they feel convinced that the simple mentioning the fact of the non-payment will be a sufficient stimulus for the government of the State of Mississippi to take immediate measures for the payment of the interest now due and which will further successively become due on those bonds, and to prevent irregularities or demur, so prejudicial to the interest of American credit in general, and to that of the State of Mississippi in particular.

Amsterdam: May 22, 1841.

HOPE & Co.

Executive Department, City of Jackson: July 13, 1841.

GENTLEMEN, I have received your letter, dated Amsterdam, May 22, 1841, post-marked Washington city, June 21, 1841, and bearing the official frank of the Honourable Daniel Webster, Secretary of State of the United States. I have duly considered the contents thereof. Those bonds were not sold in accordance with the constitution and laws of this State; they were delivered by me as escrows, to be sold at not less than their par value, and for cash, as the statute of this State required. The charter of the Mississippi Union Bank prescribes not only the substance but the form of the bonds; and provides that they shall be in the sum of two thousand dollars each, which sum the said "State of Mississippi promises to pay in current money of the 'United States,' to the order of the bank, with interest at the rate of five per cent. per annum, payable half-yearly at the place named in the indorsement of the bonds. The Act further provides that said bonds shall not be sold under their par ' value.' The bonds having been delivered to the managers of the bank to be sold on certain conditions, the State cannot be bound for their redemption, unless the terms prescribed were complied with in the sale. The constitution of this State expressly provides that no law shall ever be passed to raise a loan of money upon the credit of the State, or to pledge the faith of the State for the payment or redemption of any loan or 'debt, unless such law be proposed in the Senate or House of Representatives, and be agreed to by a majority of the members ' of each House and entered on their journals, with the yeas and nays taken thereon, and be referred to the next succeeding

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legislature, and published for three months previous to the next ' regular election in three newspapers of this State, and unless a majority of each branch of the legislature so elected after such publication shall agree to and pass such law, and in such 'case the yeas and nays shall be taken and entered on the journals ' of each House: Provided that nothing in this section shall be 'so construed as to prevent the legislature from negotiating a 'further loan of one and a half millions of dollars, and vesting 'the same in stock reserved to the State by the charter of the 'Planters' Bank of the State of Mississippi.'

Five millions of State bonds, dated June 5, 6, 7, 8, and 9, 1838, were sold by the commissioners appointed by the Mississippi Union Bank to N. Biddle, Esq., on August 18, 1838, for 5,000,000 dollars lawful money of the United States, payable in five equal instalments of 1,000,000 dollars each, on November 1, 1838, and on the 1st days of January, March, May, and July, 1839, and made payable at the agency of the Bank of the United States, in London, in sterling money of Great Britain, ' at the rate of four shillings and sixpence to the dollar, with in'terest payable semi-annually at the same place and rate.' No authority was ever given by an act of the legislature of this State to change the currency in which said bonds were made payable. By selling the bonds on a credit, and changing them from dollars, current money of the United States, to pounds sterling of Great Britain, the following sums were lost:

Interest on five millions State bonds, from June 7, 1838,

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Difference between five millions dollars, principal of State bonds, in current money of the United States and sterling money of Great Britain, at four shillings and sixpence to the dollar

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Difference of interest on $1,250,000 of State bonds,

payable in twelve years, between current money of the United States and pounds sterling of Great Britain, at four shillings and sixpence to the dollar

Carry forward

$100,000 00

33,338 38

24,999 96

16,666 64

8,333 32

$183,338 30

$478,750 00

59,625 00 721,713 30

Brought forward

Diflerence of interest on $3,750,000 of State bonds, payable in twenty years, between current money of the United States and pounds sterling of Great Britain, at four shillings and sixpence to the dollar

721,713 30

363,038 00 $1,084,751 30

From the above statement it will be perceived that 183,338 dollars and 30 cents were lost by selling the 5,000,000 dollars of bonds on a credit, and paying interest thereon from their respective dates; and the further sum of 901,343 dollars was lost by changing the bonds from dollars current money of the United States, to pounds sterling of Great Britain. These two items amount to the enormous sum of 1,084,781 dollars and 30 cents. Surely such a sale cannot be binding on the State of Mississippi. The faith of this State was pledged for the payment of those bonds only on one condition, that they were not sold at less than their par value. The State expected the full amount of those bonds to be paid into the vaults of the Mississippi Union Bank. If the full amount had been received, and the currency in which they were made payable not have been changed, the bank would have been better enabled to indemnify the State.

It appears that the bonds were endorsed in blank by the officers of the bank, and delivered to the commissioners charged with the sale. Neither their power of attorney nor letter of instructions authorised those gentlemen to fill up said endorsement by making the bonds and coupons payable in pounds sterling of Great Britain at the rate of four shillings and sixpence to the dollar. If such a change had been made on the face of the bonds after their execution and delivery to the bank, the parties making the alteration would have been guilty of forgery, and could have been immured in the penitentiary for the offence. It will be no answer to the argument to allege that the endorsement could only bind the Mississippi Union Bank. That institution has undertaken to pay both the principal and interest of the bonds. If the bank is compelled to pay the $1,084,784 30c. for the loss sustained by the credit sale of the bonds and the change in the currency in which they were made payable, her means will be reduced that amount, and the risk of the State

thus greatly increased. The State was willing to entrust her credit to the bank on the conditions prescribed in the charter. The faith of this government has never been pledged for the illegal and fraudulent sale of those bonds.

This is a constitutional government, and all its officers take an oath to support the constitution of the State, and faithfully to discharge the duties of their respective offices. Her chief magistrate is required to take care that the laws be faithfully executed. He would be recreant to his trust and violate his official oath were he to suffer the laws of the land to be trampled upon and the constitution disregarded.

The contract for the sale of the State bonds shows that the statutes of the State in relation to the bonds were made a part of the contract. The purchaser was well aware of the conditions on which they were issued, and knew that the purchase was neither sanctioned by the constitution and laws of this State nor of Pennsylvania. The contract was guaranteed by the Bank of the United States. The whole of the purchase-money was paid by that institution. The name of Mr. Biddle was merely used in the contract as a device to get round that clause in the charter of the Bank of the United States which prohibits her from dealing in State stocks. The currency in which the bonds were made payable was changed from dollars to pounds sterling to give a false colouring to the transaction, and make it appear that the bonds were sold at par value. The principle is universal, that fraud vitiates all contracts. The commercial law of this State relative to negotiable paper is different from that of most other countries. The transfer of bonds and notes does not prevent the drawer from setting up any defence against an innocent purchaser which could be more available against the original payee.

The State, therefore, denies all obligation to pay the bonds held in trust by you, for the following reasons :—

1st. The bonds were sold on a credit.

2nd. The currency in which the bonds were made payable was changed from current money of the United States to pounds sterling of Great Britain, at the rate of four shillings and sixpence to the dollar.

3rd. The contract of the sale was fraudulent.

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