Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1874-12-17
THE NEW ENGLISH Way TO PAY
OLD SOUTHERN DEBTS.

q lew WcChS dSO a AeAOA1AOA0 vi
respondent of the Nel0 York Herald
stated that the foreign bondholders of
the Southern States had proposed,
through an accredited agent, TO fund
the entire debts Of those States at a
reduced rate of interest, within the
capacity of each to pay. The scheme
involves over $50, 600 of debt, and
while the correspondent claims that it
is admitted to be feasible, and viii af-
ford the Southern States an opportu-
nifty to revive their credit as well as to
pay their debts, be insists that the
nsodus operdndi is generally misunder-
stood and widely misconstrued. Legis-
ton is to be had which will compel
each state to comply rigidly with the
terms of the compact, and which will
enforce prompt collection and pay
ment Of the interest on the new bonds
as it falls due. The machinery provided
for the collecting of the tax to pay the
interest and raising proper sinking
fund for the new bonds is a provision
that every year the States shall levy
tax and collect it through the proper
officers. This tax is to be levied and
collected separately and distinctly
from all other State taxes, and the
money raised by it is to be kept apart
and sacredly appropriated to the pay
ment of the interest and the raising of
a sinking fund. So far as can be as
certained with the limited information
at hand, the scheme of the American
Bond Funding and Banking Associa-
ton, Limited, of London, is to revive
the credit of the Southern States by
funding their debts and placing them
on the markets of the world on favor
able basis, alike beneficial to the bond
holder and the creditor. The cores
pondent gives the following as the
ORIGIN AND HISTORY OF THE SCHEME
The Council of Foreign Bondholders of
the London Stock Exchange have for some
years been struggling with the difficulties
presented by the default in the payment Of
the interest on the debts of the Southern
States of America, and their action cul-
minated last spring in resolutions de-
nouncing Virginia for not complying with
the terms of her own funding bill of 1870.
4 . 81
largely interested in Southern securities,
and they consulted with lawyer formerly
resident of Chicago and now Of London,
whom the Times calls 'ths leading
authority on American railway securities"
This gentleman for twenty-five years had
been employed by English bondholders to
enforce their rights against railways, cities
and counties of Iowa, Illinois and Wiscon-
sin. He had been the pioneer in all that
litigation whereby the Supreme Court Of
the United States had been got to decide
that municipal and other bonds, when
issued by political corporations, are bind
ing upon the whole property Of the citizens
and can be collected through the courts.
The Supreme Court of Iowa had originally
held the same way, but the people made a
new Constitution and elected a new SUI
preme Court which reversed the former de-
cisions; and the aid of the Supreme Court
of the United States was therefore neces-
Sary TO protect the rights of the bOndhold-
ers. In some Of this litigation, where the
courts would order the mayor and city
council to levy tax and pay a debt and
those authorities would refuse to do so, be-
cause they were restrained by Injunction
from the State court, the Federal Court
would put the whole city government in
Jail until they did levy the necessary tax.
In some cases the court would direct its
marshal to levy and collect such tax as was
necessary to pay the debt. This line of
decisions governs the policy to be pursued
by the foreign bOndholders; and they fur
ther decide that when bonds are issued,
and the law which authorizes the issue also
provides tax to pay the interest on them
aud a sinking fund to pay the principal
when due-then such law is contract be-
tween the State and the bondholder, and
CANNOT BE REPEALED OR MODIFIED,
but that the tax thus provided must be
collected, and the proceeds applied to the
use to which il is pledged. Upon the prin-
ciple of these decisions, which was applied
to the Southern debts, it has been arranged
u uDdL al AnE uCBLS Vi al AlitSt STATES Oaa
the terms proposed. For this purpose this
American Bond-funding and Banking As
sCciatiOn has been organized with sufficient
capital To accomplish its objects. Its capt.
taiists are among the strongest firms in
Europe interested and dealing in American
securities the ROthschilds, Gilliatts and
Earrings, of London, besides some of the
most influential financial firms of Germa-
ny. They have had the law above referred
to prepared, and they propose to a State
that if she will agree to its provisions and
surrender to them the entire control Of its
debt, then this association binds itself to
receive these new bonds and to return to
the State the old bonds i'm exchange as soon
as they can get possession of them. The
proposed new bond is to be made payable
in LondO 1 in gold coin 50 as to meet the
legal tender decisions of the Supreme
Court, ard the rae Of interest will vary in
each state according to her ability to pay.
The syndicate controlling this association
in London hold large quantities of South
ern securities. With their influence in
financial circles they expect TO place these
new gOid bonds on the market on the most
advantageous terms. They will be perfect
" secured, the interest will always be
promptly paid in London, and they expect
TO sell them at much higher rate than the
present dishonored bonds can be made to
bring. A gold bond payable in London is
considered worth more than one-fifth more
than gold bond payable in New York,
and, as proof of this, they refer to the fact
that before the war the State bonds paya-
bic in London bearing five per cent.
brought as much as bonds of the same
State payable in New York bearing six
per cent, and then both bonds were paya-
BILE in gold.
THE SOUTHERN DEBT.
The Originators of this scheme, in which
so much legal ability is involved and which
so great financial influence is supporting,
propose TO handle the following debt:
Alabama. ..--.-.......-....S s,47S,OIs
----.----------...... 5,545.OOO
L lOrlua- -...s.......--.-...... l,SoS, GU
'feiI -.....-s.-ss...--.s... o,.b5.JO
Louisiana. 24,O93 ,4O7
Mississippi. .......-...-...-........s. 2,s73,61s
North Carolina. 2l,OOO,OOO
South Carolina ...-...........-..... 1865, 500 |
Tennessee