Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1874-07-28

THE BONDS
which have been thus renewed under the
provisions Of the funding law, were all
issued before the war, TO establish the Bank
of Tennessee, for the construction of the
Capitol, and the building of turnpike roads,
and large majority of the coupons funded
were from the same class of ante-war
bonds, against which no possible question
could arise. Not one bond issued since the
close of the war has been funded under the
act, nor can be.
The past-due debt amounted to less than
S7,O00,0OC, and, as l believe, less than
S6,5O0,OO0. But this amount could not be
paid at once without paralyzing industry
and bringing distress TO the country. Com
plants are made of tax of forty cents on
the hundred dollars, which is barely sulf-
cient for the current interest. To have de-
voted the entire tax to the payment Of this
past-due debt would have required five years
10 extinguish it, and in the meantime the
current interest would have matured to
the amount of S6O00,000. To have left
these bonds and coupons unproyided for
while resuming the payment Of interest
would be like an individual who makes
provision for payment of debts not yet due,
but fails TO provide for those of equal digni-
ty already past due. The State found her,
self like many solvent individuals who
having large property, have no money with
which TO pay past-due debt, and like any
business man in your commercial circles
surrounded by these unusual and untOward
circumstances, she proposed to her creditors
10 renew her past-due obligations at their
face TO some future day, and in the mean
time, pay interest for the forbearance, trust
ing to renewed prosperity and increased
business to meet her obligations, thus do
ing Justice as between creditor, and
preserving intact her own faith and
honor. And this very process of in
dividual adjustment of debts by re-
newing them, is essentially funding"
The State under the operation Of this
funding bill, instead Of paying her ma
tured debt, renews it, payable at future
day, and obiigates herself, inthe meantime
TO pay interest upon it. Before the CON-
yening of the next General Assembly the
law will have been fully executed, and the
people Of the State through their chosen
representatives have plighted the faith and
honor Ofthe State to compliance with its
provisions. There is a striking feature in
the practical results of this legislation
which has not vet been considered. IL will
not be questioned by any well informed
legal mind, that as a legal proposition, all
of this due obligation bore interest from its
maturity until redeemed by the State. In
the case of the city Of Nashville, vs.. the
First National Bank, adjudged by the
Supreme Court at the December term, 1872,
| il is held. that the coupons of the bonds of
the city Of Nashville bore interest fiOm
maturity. and the terms and language of
those coupons do not differ, in any
| essential particular, from our coupons.
Now, the holders Of our past-due bonds
and coupons, in consideration of the pledge
of the State to commence paying interest
| the first Of July, 1874, and her solemn
promise 10 continue its payment as it &c
crues, were willing TO, and did, accept our
new bonds for the face OF their securities.
| They thereby lost, and the State saved,
| this item of interest. But the creditor
gave it up, under a contract with the State.
| that he should receive interest regularly
upon his new bonds. Had this contract
not been made, the creditor could, and
doubtless would, have demanded of the
State this large amount of interest.
THE FOLLOWING TABLE
shows the amount already saved to the
State by this means upon the securities al
ready funded, as well as the amount that
will be saved, when the funding is com
pleted:
| SAVING OF INTEREST BY THE FUNDING
BILL.
The creditors of the State have submit
ted to loss Of interest on paSt-due bonds
and coupons, thus far funded, as follows:
| On past-due Bank of Tennessee
bonds maturing in 1868 ........... 6,555 20
On turnpike bonds maturing from
July, 1858, 70 January, ls74........ 7O,59O 20
On capitol bonds maturing from
EMarch, $50, TO January, lSI4..... Al, $50 90
Total loss OF interest on bOnds SIIs,g25 %
Interest on coupons maturing from
July, 1852 70 January, 1ST4......... 1861 81
Total on bonds and cOupOEs....... Ss22, $50 81
This amount is upon such bonds and
coupons as have already been funded. Up
on the bonds and coupons that may yet be
presented, a saving of interest in the same
proportion will likewise be made.
on bonds yet to he presented. .......s 100000
on coupons yet TO be preSented...... l4l,7 $50 90
500 500 o.
Aggregate amount saved. ,l2I,9I2 81
And while this amount is a clear gain
to the State, the interest to be paid on the
new bonds is only the same interest for
which the State was bound on the old secu-
| rites. And while this large amount has
been saved, the execution of the funding
act has cost the State less than four thou
sand dollars. The popular error, that the
whole debt of the State, which is assumed
| TO be SIS, 100000, has been postponed forty
years, and that at the end of that period the
State will have paid $60,OOO,OO0 of interest
without reducing the principal, grows out
of a misconceptiOn of the practical effects
of the law, and is completely re-
| futed by this statement of the
facts. The eleventh section of the act,
provides ''that the bonds that may fall
due between the first day of July, 1874, and
| the first day of July, 1884, shall be fund
| able, at the option of the State, in bonds
authorized by the first section of this act"
The construction given to this section by
| the Executive Department is that this OPP
ton of the State must be declared by the
| General Assembly; so that the bonds ma
turing between those dates, amounting to
SSH, 600, can either be funded or pai6, as
the General Assembly in its wisdom may
| declare. And so of the S43S,000 of bonds
that mature after July, 1884, and prior to
1892. And the balance, which mature be-
1
will also be the subject Of future legisla-
tion. All
THE FUNDING BONDS
| already authorized, which will amount, as
already shown, to less than $1,000, 900, are
redeemable at the option of the State. So
that neither the funding bill nor the re-
sumption OF interest payment can, in tho
least, embarrass the payment of the princi-
pal, whenever the condition of our finances
will justify such policy. The third sec
ton of the act pledges ''the faith, honor
and credit of the State for providing
sinking fund for paving the principal as
well as the current interest; and the peo-
pie are not hindered by this act from levy
ing tax at any time for the payment of
all or any pant of the principal, and they
will never find difficulty in redeem
ing bonds to the extent of their abil-
| ity TO do 60, gut tie friends OF
this measure and Of State credit believed
the burden upon the taxpayer would be too
great to provide at once for sinking fund
to pay the principal Of the bonds. They