The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1892-01-14
WILDCAT FINANCE.

The only limit on the volume OF the note
issue was the discretion of the president
and directors, who were elected annually
By the legislature. The capital. which
was not limited in amount, was TO De
furnished entirely by the state. The bank
began business in 1875 on Slo0, 900 Of state
stock, redeemsbIe IN ten years and bearing
interest not exceeding s per cent. Three
wears later 10000 more of state stock,
redeemable in twenty years, was issued.
In the same year other public funds
aggregating $4,000 were added to the
capital. Five years later about $4,000
Of state university funds were trans
ferred 70 the bank as capital. Between
1882 and 1885 four branches of the state
bank were established in as many cities,
and state bonds 10 the amount of s., 300, 900
were issued 10 supply them with capital.
No limit was placed on the amount Of
money that the president and directors
could borrow of the bank. 50 they bor-
rowed all they wanted and loaned it where
they liked. The state bank had, in 1896
capital Of 53,646 and a circulation Of
s273, 507. In 1887 the capital of the state
bank and its branches had reached 1882
$50, and the circulation s4,576, 752. The
notes discounted and bills purchased in
1926 amounted to $i4s, $50; in 1887 they
amounted to si7, $50, 9S3. A commission
which had been appointed, because of al
legged bank frauds, to investigate the char
acter of these notes and discounts esti-
mated that over 5000 900 of the 81 ,693,-
9S3 were worthless. The bank, there
fore, had nearly s7,00o,oO liabilities
greater than its assets. The legislature
of 1896 was SO infatuated that il abolished
direct taxation and set aside 500, 900 of the
bank money to pay the state expenses.
The legislature of 1887 assembled in special
session and authorized the state TO loan
This was in June. In December following,
q further loan of 81. 10000 was made.
These extreme measures only postponed
the inevitable collapse, while adding
greatly TO its disastrous consequences. In
1912 the charters of the branch banks were
repealed, and in 1s45 that of the state bank
expired by limitation.
The total loss to the state OF Alabama,
principal and interest, up to June, 1891,
was over s3l. 600 900. and the amount of in
terest which the taxpayers are called upon
annually to pay On account of the lost
funds and outstanding bonds is estimated
at over S271 900 year. In recent speech
which Governor Jones, of Alabama, made
in Camden county, he placed the total
amount of taxation for these objects at
$685., 900 year, or nearly 81, 900 day.
Governor Jones, of Alabama, in his pub
lie addresses against the sub-treasury
scheme, says that this terrible experience
of the state demonstrates the folly of a
government attempting to carry on bank
ing business with public funds managed
or controlled by its politicians"
The experience of Mississippi with cheap
money was even more disastrous than that
of Alabama. In 1888 the state came to the
aid of the Planters bank of Mississippi,
which had been chartered three years be-
fore, by issuing 81, 00O, 900 worth of bonds,
at per cent. interest, to be used as the
banks capital. Nine new banks were
chartered the next year, and in 1884 the
state chartered q bank of its own, called
the union Bank of Mississippi" and
issued IS. 000.000 worth of bonds at per
cent, most of which were sold in Holland
at their par value. 1.-THE close of 1899 the
twenty-six banks in the state professed TO
have a paid-up capital of over $50, OO0, 900,
loans and discounts exceeding SIS, oO0, 900,
note circulation exceeding SIS, 900, 900,
and deposits aggregating nearly So 0o0, 900.
As the free white population of the state
at that time was only 10000, the alleged
paid-up capital per head equaled $3.50,
loans and discounts S2s5, and the circula-
non, including deposits, $40, the largest
per capita circulation ever known. The
entire system collapsed when every
body believed himself rich and sure
to get richer, and it was then
discovered that all of the boosted SEC, 00o,-
coo of paid-up capital, with the exception
OF the money that had been borrowed on
the bonds of the state, consisted OF "stock
notes" which had been paid in for capital,
the banks discounting them and the pro-
ceeds going 10 pay for stock subscriptions.
This was simply an exchange of one form
of credit for another. Absolutely no
money had gone into the banks EXCEPT
that obtained by the sale of state bonds.
The s4S, 900, 600 OF loans were never paid.
the S23 600, 900 Of notes and deposits never
redeemed. Lands became worthless for the
reason that no one had any money TO pay
for them. The only personal property left
was slaves, to save which such numbers of
people fed with them from the state that
the common return upon legal processes
was in the very abbreviated form of &c.
T. T., gone to Texas.
The state legislature in 1912 adopted an
act of reputation. The bondholders had
the question of the constitutionality of the
bonds brought before the highest court in
the state, and obtained decision in their
favor, the court affirming their constitu-
tionality and declaring them to be binding
obligations upon the state; but no execu-
ton could issue against the state, so the
bondholders could get no money back. As
late as 1853 some of the bondholders, by
persistent efforts. obtained from the legis-
iature an act referring the question of pay
ment 10 the people. The people voted
that the bonds should not be paid.
Alabama, 70 her honor, did not repudiate
her debt, while Mississippi today feels the
effect upon her state credit of this act of
reputation.
THE FUTURE OF ENGLAND.