The Valley Virginian. [volume] (Staunton, Va.) 1865-1895, 1881-01-20
NO. 43

OIIne measure as IL was perfected and came iron
d the syndicates. That this was mere broker
job was obvious upon its face, and it was soon d
: veloped that the peeler creditors were to b,
atrociously yictimized. These, as has beer
said, had received only the equivalent of two
!, years interest in eight years, and on each O.
3 their one-hundred- dollar bonds there was over
due and unpaid thirty-six dollars in interest
This portion Of the debt was chiefly held by
guardians and other fiduciaries, under pro-
, vision OF our code requiring them to SO invest
their trust funds, and the nature of their secu-
rites had not, as general thing, been changed
under any OF the previous bills. This bill au-
thorizes financiersto invest their funds under
II without the usual interposition of any Court.
But mark how the peeler holder was placed at
the mercy of the syndicate. Anxious to ex-
} change his helpless bonds for the better ones
, provided BY this bill, he naturally applied to
the financial officers of the State to have it
done. These at once informed him Tor herr
that they had nothing to do with it, except az
directed and required by Mr.. McCulloch's
AGENT through whose office all the funding
must be transacted. Calling on this agent, he
was there informed that his 'peeler bonds
could not be funded unless accompanied by
fconsOl Bonds in the proportion of two dollars
in consols- to one In 'peelers. Not having the
consols., nor the means, or authority to pur-
chase them, the 'peeler holder had no recourse
l
them. But who would buy bonds SO unpro-
ductive, and which had been put at such dis
advantage by the McCulloch bill? Mr.. NIcCul-
loch's agent! He would relieve the peeler
| holder OF his unmarketable bonds and for
every one hundred dollars Of principal. having
| upon it accrued and unpaid interest amount
ing to thirty-six dollars, fundable at fifty cents
| in the dollar (making a new capital of one
hundred and eighteen dollars) the agent of the
tIun fni1r6 Oll
ninety-six dollars less than the fundable value
OF the security! 1t was monstrous, to be sure
but what remedy had the 'peeler holder against
these brokers into whose hands the State had
delivered him? Into whose keeping had been
confided the honor and honesty of the public
faith? He had to submit and take what they
offered him or hold ON to bonds that were
worthless in his hands, and for which other
wise the bill made no manner of provision.
The McCulloch syndicates, meantime looking
forward to this speculation had taken advan-
tage of the depression of consol-bonds in the
market, consequent on the result of our State
election of 1877, and had provided themselves
with supply OF these bonds to enable them
to proceed in their scheme. They had also
provided in their bill that in making up the
first installment OF eight millions to be funded
by the LIST of January, 1880, the accrued inter
est to be capitalized at fifty cents in the dollar
might be employed as 'peeler principal and as
the coupons representing this interest were not
receivable tor taxes and was six years in ar
rears, the syndicates purchased large amount
OF them for their purposes at seven to ten cents
in the dollar. They actually did make up their
first lnstalment of eight millions by using this
'peeler interest to the amount of about one
million dollars.
In looking at this process, with respect to
the holder OF the 'peeer bonds the question
naturally arises that if he were not an unwil-
ling victim OF force, what is meant by force in
this connection? He was certainly no volun-
tary party to the arrangement which excluded
him from fair participation in the funding,
which repudiated absolutely one-half of his
interest," and which gave the syndicates such
complete mastery of his bonds. His consent
was not sought, although he was as meritorl-
GUS as any other of the creditors of the State;
his bonds resting in the faith OF the same peo-
pie, being part of the same debt, and calling
for the same rate of interest as the sconsols."
But he was marked as McCulloch's game, and
when he was forced to accept twenty-four dol
lars from the syndicates for his bond and &C
crued inferred, fundable at one hundred and
eighteen dollars. the syndicates funded the
same and sold the new bond at market rates
for fifty-nine dollars and forty cents-thereby
realizing profit of thirty-1ive dollars and
forty ceLts on an Investment of twenty-i0Gr
dollars. 1t is easy to see that by like process
with the whole ten millions of the 'peeler debt
the syndicates could have Melted three million
five hundred thousand dollars on that alone,
without reckoning their commissions and
profits from other sources in this funding Job,
of which they had the complete monopoly,
without restriction as to per cent. They
were in no sense the agents of the State.
In effect. the assignees. The bill was not
only forcible in the hands OF the syndicates
as against the peeler creditors, but also as
against the consol creditors and the State
herself. The force here was principally
provided in the tax certificates heretofore
alluded to- whose issue was compulsory In de-
fault of money in the Treasury to meet any
payment of accrued interest under the bill;
and as interest was payable every six months,
with default assured in advance at every such
period, these certificates, to be sold at seventy
five cents in the dollar, were issued semi-annu-
ally and redeemed at six months, thus subject
ing the State, as long as the process was posi-
ole, to an eXaction of five and half per cent
per month or sixty-six and tWo-thirds per
cent. per annum to raise means to pay three
per cent. interest upon the bonds issued under
the bill. How much better and more direct,
and how much more compatible with honesty
and fair dealing with the taxpayers, who at
last would bear the burden of the eXtortion-
it were, to raise the rate Of taxation, the ne
cessity for which this ruinous provision con-
fesses, And just here we might inquire how
iOuS IL WOulu tdkc ny tilS pIOCGSS u ueStrOy
the vitals of State long since in the throes of
bankruptcy, and unable to make buckle and
tongue meet-by deficiency reaching nigh
upon one million OF dollars annually? But
as measure OF torclblY persuasion and specu-
lation they were needed For it is to be OBJ
served that for the purpose of coercing the
consideration, who relied upon the sale ofhis
tax coupons in the market, and for the further
purpose of specializing in the certificates them
no 1U0u11 fox fay
certificates at seventy-fve cents on the dollar
in payment of their interest; and thus equip
ped they were able to compete with the tax
coupons, as their tax certificates were equally
valuable in payment of taxes and other dues 10
the State, and as the syndicate could not only
afford to sell them at seventy-fve cents on the
dollar, but at any lower rate that might be
necessary to drive the consol-h holders to accept
the bill and the terms the syndicate chose to
offer it. At seventy-fve cents, however, they
brought the value OF the cOnSOl-cOupOn, al
ready reduced to four and half per cent,
down to three, the lowest rate borne by the
McCulloch bonds. This the Funders Tor debt
payers and brokers designated as feature of
persuasion; )" but it is evident enough that it
answered all the purposes of force and that it
was designed to compel the consideration to
yield to the syndicates While, therefore, the
'peeler-creditOr was horribly outraged by this
Dill, it in no less certainly, though in less de-
gree and in less direct manner, Was Jllly pre-
pared to command the submission of the con
sol-creditor or to sacrifice him. 1t is to be
noted, too, that while the consideration only
got a portion of his tax coupon, after paying
commissions to brokers to sell it at deprecia-
ted rate, his bond was subject to taxes which
further diminished his net percentage and
reduced the value of his bond; whereas the
McCulloch bonds were exempt from all taxa
ton, and were armed with the power to COM
Il 10 - Al c.J n