WHAT' S 0S OUI TRUE POLICY?
IT IS HEREIN CONSIDERED:
BY A.VIRGINIAN.
ESTABLISHMENTS OF CREDIT.
"To conclude: No man can by care-taking (as the Scripture saith) add a cubit to his
stature in this little model of a man's body; but in the great frame of kingdoms, it is
in the power of' prifces or estates to add amplitude and greatness to their kingdoms.
For by introducing such ordinances, constitutions and customs as we have now touched,
they may sow greatness to their posterity and succession. BUT THESE THINGS ARE COnMONLY NOT OBSERVED, BUT LEFT TO TAKE THEIR CHANCE."
Bacon's Essays (XXIX).of the True Greatness of Kingdoms and Estates.
"I have but one lamp by which my feet are guided, and that is the lamp of experience. I know of no way of judging the future but by the past."
Patrick Henry.
RICHMOND:
GARY & CLEMMITT' PRINTERS.




Entered in the year 1866, according to the Act of Cingress,
BY NATHANIEL TYLER,
In the Clerk's Office of the United States District Court for the Eastern District of Virginia.




PREFACE.
The following work is an attempt to survey the whole
policy of the country, and to examine what measures are
best suited with the public interests. It was the original
intention to hate brought out this work in two or more
octavo volumes. This design was soon found impracticable; for the Author, incessantly diverted from this subject
by professional duties, was unable to complete the whole
work Within a reasonable period of time; whereas the con-dition of the country imperatively demanded the adoption
of measures to restore something like organization to society, revenue to the public treasuries, and activity to trade.
Amid these'circumstances the Author has decided to issue
his work in the form of pamphlets, because he thought he
discovered (if he may make such a public declaration without immodesty) in the measures he suggested, schemes
which were likely to alleviate in a sensible degree some of
our present sufferings.








CHAPTER. I.
ESTABLISHMENTS OF CREDIT.
"To conclude: No man can by care-taking (as the Scripture saith) add a cubit
to his stature in this little model of a man's body; but in the great frame of
kingdoms, it is in the power of princes or estates to add amplitude and greatness to their kingdoms. For by introducing such ordinances, constitutions and
customs as we have now touched, they may sow greatness to their posterity and
succession. BUT THESE THINGS ARE COiSMMONLY NOT OBSERVED, BUT LEFT TO
TAKE THEIR CHANCE."
Bacon's Essays (XXIX) of the True Greatness of Kingdoms and Estates.
"I have but one lamp by which my feet are guided, and that is the lamp of
experience. I know of no way of judging the future but by the past."
Patrick Henry.
An attentive observer of those vicissitudes which are as
tides in the mysterious ocean- of human affairs must be
struck by the revolution which within the last twenty-or
shall I not rather say ten? —years has taken place in the
social and political world. Down to this period of time the
thoughts of statesmen were absorbed by war or diplomacy
or politics proper.  All other interests were neglected.
This revolution was brought about by the general introduction of steam into the places of labor, and by the great
extension of the applications of iron to man's service.
These events introduced radical changes in trade, and, as
an inevitable consequence, into the whole organization of
society.  These changes have been made in a democratic
direction.
The extensive character of the machinery required to:whisk through space, almost with the velocity of a cannonball, multitudes of men and mountains of freight-to forge
those massive pieces of metal we require to plate our ships
and throw our shells-to spin textile fabrics to most deli



6             ESTABLISHMENTS OF CREDIT.
cate gossamer-and to drive ocean steamships (whose necessities require that they should be towns and coal pits)
across stormy seas, demanded even more money than a
Coutts or a Rothschild could supply. Bankers then took
lessons of Nature. She formfs mighty rivers with accumulated rain-drops and melted snow-flakes. They imitated
her example. They transformed banks from reservoirs of
money, fed by one enormous purse, into lakes of money,
fed by a great many small purses. Banking became democratic. Bankers sought that capital, which was more than
their wealth could furnish, in the principle of association.
The huge machines which required so much capital to
call them into existence, demanded more laborers than the
ruder engines they displaced had found necessary. The
new exigencies of trade likewise increased the number of
men brought together, Toilers counted their fellows and
found them many.  Union gave them strength. The attrition of the workshop brightened their minds. Meantime
machines continually waxed more powerful and more adroit.
Each day they asked of the laborer less muscle and more
brain. The primeval curse was modified. Man earned his
daily bread mbre by the sweat of his brain than by the
sweat of his brow. Tasks were daily wrought which imagination had never dared set the Titans. The task masters set over these mighty machines (to this position the
humblest laborer was promoted) found their wages and
their sequent comfort and capital and social position increasing.  Labor became aristocratic-and this change,
too, was democratic, for it embraced all the lower classes
of the community in the general promotion. These new
interests increased in power. They challenged the attention of governments, which were called upon either to
facilitate their means of acquiring additional capital, or to
exercise checks upon their proceedings, to preserve from
waste the estates of citizens confided to them, or to protect
citizens from their selfishness.




ESTABLISHMENTS OF CREDIT.             7
It behooves every statesman to ponder and to second this
great change. Such conduct is in a particular manner the
duty of our statesmen at this period of our history. Our
fields are desolated. Our homes are laid waste. Our cities
are blackened by fires and scarred by shells. Our trade is
disorganized. Our citizens are in circumstances of straitened fortune. Our statesmen ought, at least for the present, to keep their eyes fixed on these economical wants.
They ought not to allow all their thoughts and their whole
policy to be engrossed by mere party quarrels. They ought
to give, perhaps the first place, to those great questions of
political economy on whose true solution the wealth, power
and influence of modern States rest. Their right comprehension alone can retrieve our marred fortunes and raise us
to that pitch of material prosperity to which we are justly
entitled.
The government must no longer stand entirely aloof as
it did before the war, and allow the citizens to trust to their
own unaided resources. I am no friend to centralization.
I am no advocate of a continual interference of the government in the affairs of men. God forbid!  The policy
I advocate has no such tendency. It is neither the English
system of almost absolute non-interference of the government, nor is it the French system, where the government
does everything and leaves the subject little else to do but
pay taxes and pour out blood. The English system has
been pursued here, because we failed to distinguish those
differences which exist between us and the mother country
in consequence of a dissimilar social and political organization. We have not those measures of primogeniture and
entail which in England so foster the accumulation of capital in private hands, and local pride, and local attachment,
and local public spirit, as to render State interference useless. Nevertheless, note how the causes to which I have
alluded are driving even the imperial government to interference with trade: here lines of steamships are subsidized;




8             ESTABLISHMENTS OF CREDIT.
there children are shielded from the rapacity of parents;
yonder poverty is protected from exhausting demands upon
the human frame; elsewhere travellers are guarded from
imperfect machinery and overcrowding. A hundred calls
are made on government which never reached the ears of
States in our youthful days. The French system is still
less suited with our genius. WVe have reached manhood
and would revolt from the French go-cart and apron-strings,
even though they promised to lead us to affluence of wealth.
We must give a considerable place to these new interests
in our scheme of public policy; and we must take care that
no profligate adventurer drags them into the strife of party.
We must, so far as we may, extrude and keep them from
the taint of politics, in order that men shall not differ in
opinion simply because the man who broached the subject
was a Democrat and he who heard him happened to be a
Republican.
"There are," I read the other day, "large and every day
increasing interests, happily now disengaged from all tinge
and taint of political passion, which yet concern the life
and welfare of the whole nation, not less extensively and
profoundly than politics themselves. We are past that
stormy period of a nation's history in which the struggle
for liberty and security absorbs all the energies and passions
of life. Political action and the laborious and difficult duties of government have ceased to be the end and have become the means of progress......  They leave without
anxiety the guardianship and amendment of our constitution and laws to the authority which has so long maintained
and exercised them, and devote all their energies to the
richer and more grateful fields of commerce, science, literature, art and religion. These are the true interests of a
nation. To these politics, and government, and war, and
diplomacy are but the scaffolding and defences. Upon the
advance of these really depend the progress and happiness
of a people."




ESTABLISHMENTS OF CREDIT.              9
Look where we may at this particular conjuncture, our
attention is most earnestly challenged by financial questions.
We are not yet able to discover our circumstances of fortune with anything like accuracy. Nevertheless, all of us
know that there are great quantities of paper money to be
withdrawn from circulation, an immense floating debt to
be consolidated, and the ruin which has desolated so many
homes to be repaired. There are few men but lose all
heart when they reckon the amounts of these liabilities.
I confess I survey this sea of pecuniary liabilities, not only
without dismay, but without loss of composure. The closer
I examine our situation, the firmer does my confidencegrow. We have but to use the machinery of trade to see
the expanse of debt-broad and deep as it is-speedily
drained. It is true we do at present lack this machinery.
Let us forge it at once. Let us animate it with the spirit
of association. Let us foster the energy of individual dollars. Let us impress on our mind that no fortune in the
world, not even the fortunes of all the Rothschilds, are
equal to the fortune of every body. Bearing this in mind,
let us found and foster joint stock companies. The more
numerous and prosperous these establishments are, the
wealthier our citizens will grow, the more will they consume and produce, and consequently the greater will be the
yield of taxation, while its burden presses still lighter on
every head. We all require as individuals-as citizens of
THE COMMONWEALTH-as citizens of the United States-organization of credit and of clapital. We must forge machinery to collect the money which lies idle in every pocket,
and metamorphose it into the most potent fairy of modern
times-capital. We require the extension of that fertile,
that democratic principle of association, which, wherever
it has been introduced and fairly tried, has wrought wonders far beyond the loftiest flight of Arabian Nights Entertainment.
At the present time an Agricultural Real Estate Loans
2




10            ESTABLISHMENTS OF CREDIT.
Company and an LTrban Real Estate Loans Company are of
prime importance to us. We all require ready money.
The farmer needs it to re-stock his estate, and bring it back
to its old state of improvement, and to pay off debts incurred during the war, (when his fields yielded nothing,)
and to meet his current expenses until crops can be harvested and brought to market. The town landlord needs
it to place himself in position to meet the requirements of
trade, to repair the ravages of war, and to meet those engagenlents he postponed until the restoration of peace.
These most admirable establishments of credit are unknown here: but they are ancient elsewhere.
They have inl Prussia for nearly one hundred years conferred incessant advantages upon the people-although
their organization was imperfect-during all the wars, all
the revolutions, and all the commercial crises which have,
within this century, repeatedly shaken that kingdom to its
foundations.
Their origin will recommend them to us.
The Seven Years' War had brought Silesia to the very
verge of ruin. Every body was nigh insolvent. The contending armies had desolated every field. Agricultural
productions were so cheap as to leave no profit to the
farmer.  Money was scarce and commanded between
twelve and fifteen per centum interest. The nobility had
obtained a stay-law giving them three years' grace to pay
off their debts. The humbler classes of society were
plunged into the deepest distress.
The sight of all this misery inspired a Berlin merchant
named B-iring with a scheme for its relief. He discovered
that the chief cause of the distress flowed from lack of
confidence. He banded all debtors together and presented
to the capitalist the responsibility of all in place of the responsibility of single individuals. All guaranteed the debts
of each one. Frederick the Great at once saw the advantages of the scheme, approved it and lent the associa



ESTABLISHMENTS OF CREDIT.           11
tion 300,000 Prussian crowns ($225,000) at two per cent.
Other capital was obtained. Interest fell at once from
twelve and fifteen per cent. to five per cent., and, besides,
years were given to the debtors to pay off their debts.
The success of this establishment was so great that similar institutions were founded throughout Prussia, I may
say in a very short time, when one considers how slowly
every good idea makes its way among that slave of routine-Man. One was established at Brandenburg in 1777;
another in Pomerania in 1781; a third at Hamburg in 1782;
a fourth in Western Prussia in 1787; a fifth in Eastern
Prussia in 1788; a sixth in Schleswig and Holstein in
1811; a seventh in Mecklenburg in 1818; an eighth in
Posen in 1822; a ninth in Poland in 1825; a tenth in Bremen in 1826; an eleventh in Bavaria in 1826; a twelfth in
Wurtemburg in 1827; a thirteenth in Hesse Cassel in 1832;
a fourteenth in Westphalia in 1835; a fifteenth in Hanover
in 1842; a sixteenth in Saxony in 1844; a seventeenth in
France in 1852; and, lastly, an eighteenth in England in
1864. I shall not pursue their progress beyond Europe.
I am anxious to show by these chronological particulars of
their progress, how they have crept into favor, and how
experience has approved them for valuable establishments.
Of a truth the value of this association is recommended
in the strongest manner by this gradual adoption first by
one neighbor and then by another. It proves that the tree
was judged by its fruit. Its value to us at the present time
is avouched by the circumstances under which several of
those States adopted it. I have mentioned the causes which
led to its foundation in Silesia. The distress caused by the
insurrection of 1825 directed the attention of the Poles to
it. The prostration of agriculture during the agitated
years of 1848-49-50-51 led the French government to introduce it into France: "as you, sire, (the French Emperor) saw the admirable working of this institution in Germany."




12            ESTABLISHMENTS OF CREDIT.
Shall I exhibit the value of this Association by another
light?  Remember the agitated history of Europe during
the last fifty years. There have been wars, revolutions,
famines and commercial crises. Very well, notwithstanding these convulsions which destroyed so many other things,
this Association not only escaped bankruptcy in every country where it was established, but it held its own position
without once resorting to the extreme measures of the law
to force its debtors to the punctual discharge of engagements. Furthermore, such is the stability of this Association, so great is the confidence it every where begets, that
in agitated periods of time, when trade is stagnant and
speculation paralyzed, its bonds have commanded higher
prices in market than public securities themselves. I go
no further back than 1848. In this revolutionary year the
three-and-a-half per cent. bonds of the Real Estate Loans
Company of Silesia and Pomerania were worth 93; the
Western Prussian Real Estate Loans Company's bonds
were worth 83; the Eastern Prussian Real Estate Loans
Company's bonds were worth 96; while the bonds of the
Prussian government were worth only 69, shares in the
Bank of Prussia were worth only 63, and railway shares
were worth only between 30 and 50.
Is this evidence of the value of this establishment insufficient?  I adduce additional testimony to its worth.
Herr Bulow I(ummerow, an eminent Prussian authority,
speaking of the Prussian Real Estate Loans Company,
said: "Land bonds effectually establish the credit of every
owner of real property, inasmuch as he is enabled by their
instrumentality to command a certain sum of ready money
in proportion to the value of his estate. And while on the
one hand the proprietor isfree from the annoyance of having any loan on his estate suddenly called in, on the other
hand the capitalist need not be paid off against his will.
Every owner of property is thereby furnished with means




ESTABLISHMENTS OF CREDIT.             13
of improving his estate, and paying off, if advisable, any
joint partners or co-heirs thereof that may exist."
John Stuart Mill says: "In Germany, one of the safest
and most usual investments for small sums is a kind of land
bond. The mortgages there were divided into shares, and
the documents which conferred the right to those shares
were very generally in use as investments by all classes,
and were found very convenient and increased very much
the facilities of mortgaging land for its value."
"I move the second reading of the Mortgage Debentures
Bill. A measure of a similar nature passed this House last
year as a private bill and went up to the House of Lords.
There the objection was raised that the subject-lmatter of
the bill was not one which ought to be dealt with by a private act. The bill was therefore dropped and a public bill,
very much of the same nature, was introduced, and after
undergoing very minute scrutiny and criticism was passed
by their Lordships. The constitution of the Select Committee which reported in favor of that bill showed with
what authority the present measure came before the House.
The noble lords who sat upon it were the Lord Chancellor,
Lord Derby, Lord Granville, Lord Stanley of Alderley,
Lord Grey, Lord Redesdale, Lord Overstone, Lord Portman, Lord Devon, Lord Donoughmore, Lord Malmesbury
and Lord Cranworth....   A great deal has very properly
been done by this House to extend the credit of personal
property and to facilitate the sale and transfer of securities
affecting personal estate; there has been an enormous extension of trade, and the applications of the principle of
limited liability to the industrial pursuits of the country
have enabled aggregations of small capitalists to engage in
operations which could formerly be carried on only by merchants, bankers and large capitalists; the powers of trustees have been greatly enlarged, so that they might now invest funds in railway debentures and other securities which
fifty years ago were never to be found within the limits of




14            ESTABLISHMENTS OF CREDIT.
a deed of trust.. The advantageous rates of interest, combined with the security which many undertakings offered,
also materially affected the land credit of the country, because persons who had money to dispose of found it advantageous to invest in railway debentures or to embark in
foreign, colonial or Indian loans. All these circumstances
have of late years been constantly at work and have been
yearly and almost daily narrowing the circle from which
money could be obtained on mortgage of interests on landed
estates. I do not mean to deny that it is still easy to
obtain a first mortgage within any moderate limit as to
amount; but I have it from very high authority that if
there is any prior charge upon the estate, even ordinary
small family charges, the difficulty of effecting a mortgage
or borrowing money upon the security of the estate is enormous. The fact is that the great bodies who mostly undertake that sort of business have their tables so covered with
applications that they pick out the plums and throw the
others aside. If nothing is done to remedy these evils,
they will go on increasing; for looking at the present state
of commercial and monetary affairs in this country, I see
no probability of any thing occurring to increase the value
or facilitate the operations of land credit."-Lord Naas,
House of Commons, 15 Feb. 1865.
This admirable establishment of credit not only relieved
the distress superinduced by war in Prussia. It wrought a
great social revolution there. Prussian peasants were mere
tenants of the farms they cultivated. The fee was vested
in noble families. Rent was paid in a variety of feudal
services and fines which were more or less vexatious. That
yearning after absolute possession of land which is ilmplanted in every breast, and which the longest lease fails to
satisfy, could not be.gratified. The peasant was too poor
to purchase his farm and to compound for all these services
and fines until the Real Estate Loans Company came to his
assistance. Its assistance was so effectual that at the pre



ESTABLISHMENTS OF CREDIT.            15
sent day there is scarcely a peasant in Prussia who is not
the lord of the fields he cultivates. In Austria the same
social transformation is at present taking place under the
auspices of a Real Estate Loans Company.
When  one considers the passion-it almost reaches
phrenzy-man has for the possession of land and (compared with the income yielded by other investments) the
insignificant revenue it returns on the capital placed in it;
and, furthermore, when one considers the importance of
agriculture in every society, the value of a Real Estate
Loans Company, even in periods of long unbroken peace
and prosperity, may scarcely be over-estimated. Adam
Smith gave it for his opinion that the capital of money borrowed on land could never be re-paid, because all the revenue arising from the property would be absorbed to pay
the interest accruing annually, and nothing would be left to
pay off the capital. A later political economist of authority said; "If you do not afford the means, if you do not
give agriculture capital at a low rate of interest, landed
proprietors cannot avoid bankruptcy."  Of a truth, how
may the agriculturist free himself from debt, if he has bor.
rowed money at six per cent. interest to the full value of
his estate, while the latter yields only four or five per cent.
at the utmost?  He cannot possibly extricate himself unless
a Real Estate Loans Company comes to his relief.
Let me now exhibit the foundations on which this most
admirable establishment of credit is built.
It lends money to the owners of real estate and agrees to
hold them quit of the re-payment of the capital lent, upon payment of interest.
This seems a paradox. It is nevertheless a very plain
truth. So no one could make the egg stand on end until
Columbus broke it.
The debt-interest and capital-is extinguished in the
first place by the payment of interest as interest, and in the
second place by the accumulation of the interests at com



16                 ESTABLISHMENTS  OF CREDIT.
pound interest. Take an example by-way of illustration.
John Doe borrows $100 of a Real Estate Loans Company,
payable, say, in  forty-seven  years.   The  Company  will
charge him  for this term  of years-for the rates of interest
charged will differ with the number of years for which the
money is borrowed; being higher as they are less and
lower as they are greater-the Company will charge him
for this term  of years eight per cent. interest per annum,
of which
6 per cent. will go to pay interest on the capital lent;
1 per cent. will go to defray the Company's expenses of administration;
1 per cent. will go to form the sinking fund;
Total, 8 per centum per annum.
John Doe will pay this interest semi-annually, say four
dollars on the first of January and four dollars on the first
of July of every year.* The first year-if we suppose the
loan to have been made on the first of January-there will
be only one-and-a-half per cent. interest carried to the
sinking fund. This will accrue on the hundred dollars
borrowed and on the fifty cents paid to the  sinking fund
on the first of July: for a dollar a year being paid for the
sinking fund, fifty cents will be paid  at the expiration of
the first six months; these fifty cents will at once be placed
at interest.  Thus it is seen that the interest is reckoned
semi-annually, and the interest accrued is likewise put out
at interest semi-annually.  This would give the following
results:
1st year.........................................  $1.0150
2d  "..............................................  2.0450
3d"                                        3.1086
3d...~.~.........1...?.........,..............  3.1086
4th  "...............4.............   4.2196
5th..............................................  5.3649
6th    "...............................................  6.5456
* To avoid intricate calculations, I suppose the interest paid semi-annually.
It ought to be paid monthly, as I hope to demonstrate.




ESTABLISHMENTS OF CREDIT.                                               17
7th year......................................                  7.7628
8th   "..............................................    9.0075
9th    "...............................................   10.3008
10th...............................................   11.6330
11th...............................................   13.0074
12th   "............  14.3243
13th "...............................................  15.7819
14th"............................................... 17.2845
15th   "..........18.8305
16th.................................................  20.4273
17th...............................................  22.0730
18th   "...............................................  23.7600
19th...............................................  25.5070
20th   ".............................................      27.2870
21st   "...............................................  29.1450
22d "..............................................  31.0600
23d................................................  33.0640
24th   "...............................................        35.1000
25th................................................     37.1990
26th   "...................................  39.3630
27th   "                                                        41.6240
27th   ".................................................    41.6240
28th...............................................  43.3920
29th   "...............................................  45.7480
30th   "..............................................48.1760
31st...............................................  50.6790
32d   "...............................................  53.2590
33d   "..............................................   55.9190
34th  "...............................................  58.6610
35th   "...........................6.........  1.4880
36th..............................................  64.4020
37th "................................................  67,4070
38th "................................................  70.5040
39th "................................................  73.6970
40th "........                                 76.9890
41st "..................................................  80.3820
42d ".................................................... 83.8650
43d ".................................................... 86.4700
44th "................................................  90.1560
45th "..............................................  93.9560
46th   "................................  97.8740
47th "................................................. 101.9130
Thus, in somewhat less than seven-and-forty years John
Doe will have entirely cleared himself of debt upon the
3




18           ESTABLISHMENTS OF CREDIT.
mere payment of eight per cent. per annum interest. The
Company undertakes at its own risk the management of
the sinking fund.
Suppose John Doe had borrowed from a money-lender
these $100 at six per cent. per annum and for as long a period of time. He would pay $276 interest in the course of
the forty-seven years, and at this expiration he would be
required to return the $100 originally borrowed; that is to
say, he would pay the money-lender $382 for the loan.
Now he pays the Real Estate Loans Company (if he borrows from it) only $376 (multiply 47 years by 8 per cent.);
consequently he saves six. dollars, that is six per cent. on
the whole sum. If he had borrowed $100,000 he would
have saved $6,000, besides having the use of the whole
capital, and having the certain enjoyment of a long period
of timhe to clear himself.
It may be objected that a landlord whose real estate
yields less money than would suffice to pay the interest on
his debts could not possibly procure the additional sum of
money required to form a sinking fund. But the rule of
all Real Estate Loans Companies is never to lend an
amount of money on any one estate above one-half of the
confessed value of the estate mortgaged. The landlord's
ability to pay the Real Estate Loans Company is therefore
secured before the loan is made to him, and no loss can fall
on the Company from this source.
It may be said that the Real Estate Loans Company will
be of little service to men who owe as much money as their
estate is worth. I am afraid it is unquestionably true that
the Real Estate Loans Company will not be of much assistance to men in desperate circumstances of fortune. I
never heard of any Company that could assist such men.
They are the quarry of Shylock.
Nevertheless, the Real Estate Loans Company may be of
much more service to men in deeply embarrassed circumstances of fortune than might at first be supposed. John




ESTABLISHMENTS OF CREDIT.           19
Doe owes $100,000. He possesses an estate worth $100,000.
He feels the weight of years growing heavier upon him,
and he would extricate his estate from debt, that when he
goes hence he may leave his children in some happier condition than penury. At present his situation would be
utterly hopeless. Every year sees him sinking deeper into
the slough of debt. His estate yields $6,000 revenue annually; the interest on his debts absorbs all of it. If we
had a Real Estate Loans Company in THE COMMONWEALTH
he might mortgage his estate for $50,000. He would with
this sum of money immediately discharge $50,000 of debt.
This leaves him with $50,000 of floating debt due within a
short period of time, and a consolidated debt of $50,000,
which will be paid off in insensible instalments in the course
of seven-and-forty years. He resolutely sets to work to
transform the floating debt into a consolidated debt. As
he pays the Real Estate Loans Company he borrows from
it. The Company lends without hesitation, because the
value of the pledge remains undiminished. He perseveres.
In process of time he will have the satisfaction of seeing
his estate cleared of debt. It is a long and painful task,
but it is less painful than despair and absolute poverty.
Long and painful as the process is, perseverance will at
last be rewarded with an unencumbered estate of $100,000.
The prize is worth the struggle.
The long and certain period of time granted to borrowers
by the Real Estate Loans Company is a very great advantage to the farmer, He can feel no fear of commercial
crises, or of the lender's death, or of changes in the latter's
fortune or position; therefore he need never dread a harsh
or unexpected foreclosure of the mortgage. These conditions offer particular advantages to persons engaged in industry or trade.
A young man sets out in life. His first wish naturally is
to purchase a home for his wife, as young as himself, and
for the children he hopes to assemble around him. He has




20            ESTABLISHMENTS OF CREDIT.
some capital; but he is wisely averse from taking it out of
his thriving business. Hie buys a house suited with his
means. He at once mortgages it for half its value to the
Real Estate Loans Company, and returns to his business
capital this money which yields him in trade twelve per
cent. interest. If he is as prosperous as Hope promised,
he may, whenever he pleases, redeem the mortgage. If
misfortune overtakes him, he has a home for his family,
which will not cost him more than ordinary house-rent.
The only way in which persons pursuing trade or industry should purchase their homes is this way of paying for
them in a term of years. It may be laid down as a general
rule, I had almost said as an axiom, that a person in trade
or industry should never sink any portion of his capital in
real estate. He should never own the house he lives in, or
the shop or office he occupies; because the money requisite
for the purchase of a house could be a great deal more profitably employed in trade, and because one of the cardinal
maxims of trade is that the trader should keep every dollar
of his capital constantly under complete control. All men
know that real estate cannot be sold at a moment's notice,
especially in periods of crisis which are precisely the epochs
when people in trade require every cent of their capital.
Now if a person pursuing industry or trade has fortyseven years to pay for his house, and the money borrowed
therefor costs him less or scarcely more than the house-rent
he now pays, reason will warrant his purchase of a home
for his family. He will not act judiciously in surrendering
the advantages of a house furnished by borrowed capital at
a low rate of interest.
In Europe people engaged in trade never think of investing any portion of their capital in real estate, although in
Europe money to any amount is always to be had at a low
rate of interest. This resolution is one source of the great
wealth of the English people. There none but exceedingly
rich people buy land. They wisely prefer renting even




ESTABLISHMENTS OF CREDIT.           21
their farms to buying them. They remember Adam Smith
says, the tenant-farmer is a man who trades on borrowed
capital-borrowed capital held at a low rate of interest,
and whose principal he is never expected to re-pay. The
English people rent their farms and invest their capital in
securities, which return twice, thrice, or many more times
as much interest as land yields. We ought to learn with
greater docility the lessons taught by Europe. They are
dear-bought lessons, purchased by a thousand years' experience.
Every person familiar with the conditions of trade in the
South-West, knows what an enormous tax is levied by factors on planters for the advances made the latter. Ten,
twelve, fifteen and more per cent. are the common rates of
interest charged for these loans. Besides, the planter is
placed completely in the power of the factor. The crop is
often sold to satisfy the exigencies of the latter's situation.
This custom is likewise most oppressive to the factor. It
obliges him to keep at command a large amount of capital,
and exposes him to a variety of hazardous risks. Let a
Real Estate Loans Company be established at New Orleans
(to instance one of the great cotton and sugar markets), and
this most pernicious custom of trade will entirely disappear.
We all know the serious embarrassments of our millers
and tobacco manufacturers at particular seasons of the year.
They are obliged to purchase in a few months the raw materials which are to supply their manufactory during a whole
year. They have a great capital locked up in the buildings
necessary to their business. The banks are costive. If we
had a Real Estate Loan Company they might easily mortgage their establishment for and procure half the money it
cost. This measure would put them at ease. They might
extend their field of operations and concurrent wealth.
They would be paying eight per cent. for the use of money
which would be yielding them twelve or more.
I can conceive only one class of landlords who may find




22            ESTABLISHMENTS OF CREDIT.
embarrassment in using Real Estate Loans Companies.
These are tenants for life. I am sensible of the delicacy of
this subject. May we not introduce a law providing that
tenants for life, who contemplate permanent improvements
of the estate, (such as building warehouses or dwellinghouses), which cannot but tend to increase the value of the
property, may go into court and pray for an order authorizing them. to pledge not only their own interest, but the
estate in remainder?  Besides, there is life insurance to
assist tenants for life. No Real Estate Loans Company
would be likely to refuse a loan to a tenant for years of good
character, who, at the same time that he mortgaged his
estate, transferred to the Company a policy of life insurance
equal to the whole amount borrowed.
As this establishment of credit solved in Prussia, and is
solving in Hungary, the question of serfdom, so it may rid
us forever of the formidable Negro Question.
It will enable us to place their fate in the hands of the
negroes themselves. We may with its assistance be enabled
to pass through the great social revolution, in whose midst
we are, without a shock, almost without a jolt of the vehicle
of State. It will transport all of us-white and blackfrom slavery to freedom  by insensible changes. It will
attach the negro to the soil, and give our landed proprietors
a sufficient, supply of suitable labor. It will, at the same
time, raise the negro to independence of fortune, and, in
process of time, to those social and political advantages
which flow from the possession of wealth. What is more,
it will do all these things wtthout costing us a single cent.
These ends are to be attained by pursuing this course.
Establish an Agricultural Real Estate Loans Company in
each State. Give each head of a family of negroes, and each
unmarried male negro, who may be 18 or more years of age
in the current twelve month, a farm of twenty acres. This
farm to be allotted him, if possible, on the estate where he
has lived and labored. His old master should allot these




ESTABLISHMENTS OF CREDIT.          23
farms. The negro may appeal from this allotment to the
county court, or may decline to accept it. These farms to
be formed entirely of fields which have been under cultivation, and to contain no wooded land. The present landed
proprietor to build on this farm a log cabin and shed, such
as we see used for negro quarters and cow-house, on all our
plantations. These habitations will, of course, be rude and
rough; but they will not be ruder or rougher than the
dwellings we see free negroes inhabit, and the abodes of the
best European peasantry. It should be recollected that at
present the all-important point is to make a beginning, to
place the negro on the path which leads to wealth, and leave
the rest to his own exertion. As he waxes rich he will grow
fond of comfort, and, in course of time, he will have a home,
which the white laborer of the North may look upon with
envy.
The proprietor of the land shall receive for each messuage
two thousand dollars in cash. The negro will obtain this
money by mortgaging his estate to the Agricultural Real
Estate Loans Company. I have already said it is one of the
fundamental principles of these establishments of credit
never to lend a sum of money exceeding one-half of the
value of the whole estate mortgaged. Therefore the Federal Government must come to the negro's assistance. As
the whole United States have taken a deep interest in the
negro's emancipation, it would be manifest injustice to throw
whatever risk of loss may exist on a part merely of the
country. It would, too, be impolitic to make the neighborhood, in which the negro must work out his temporal salvation, pay the penalty for his misfortune or misconduct.
Besides, the negro-known only in slavery —has no credit.
iHe can give none of those moral guarantees of honesty
which almost every white man may command. The negro,
if unsupported by no powerful patron, could probably obtain
no money from Real Estate Loans Companies on his mortgaged property. There is as yet no market in the Southern




*24           ESTABLISHMENTS OF CREDIT.
States for such small farms. Therefore the Federal Government must guarantee the negro's whole debt.
The negro would give to the Real Estate Loans Company,
from which he borrowed the money, a first mortgage on his
farm, accompanied by his wife's relinquishment of all dower
rights thereon, quoad the Company. As it would be advisable for him to borrow the first year's interest of the loan,
he would, with the aforesaid deeds, give the Company 395
bonds for $14 40, payable respectively from month to month,
according to their date, and one bond for $3l 40, payable
396 months after date. This last bond would be for thirtyone dollars and forty cents, because at the expiration of the
thirty-third year there would still be a balance of seventeen
dollars due, and it would be advisable to pay this balance at
once, instead of extending the instalments beyond the thirtythird year. Thus, if this arrangement is adopted, in 1898
all these negro families will possess a valuable farm in fee
simple, upon payment of less rent than the ordinary tenant
for a term of years pays. While the negro lodges these
securities with the Real Estate Loans Company, the State
Government would likewise give the Real Estate Loans
Company its bonds in the same number and for the same
amounts, to wit: 395 bonds for $14 40, (fourteen dollars and
forty cents), and one bond payable 396 months after date
for $31 40, (thirty-one dollars and forty cents); the former
payable respectively from month to month, according to
their date, if the negro failed to meet his engagement. As
the negro from month to month cancelled his bonds, the
State bonds should be cancelled and returned to the proper
authorities. The Federal Government in turn would give
the State Government 395 bonds for $14 40, and one bond
payable 396 months after date for $31 40; the former; payable respectively from month to month according to their
date, if the negro failed to meet his engagement. As the
negro from month to month cancelled his bonds, the Fede



ESTABLISHMENTS  OF CREDIT.                      25
ial bonds should be cancelled and returned to the Secretary
of the Treasury.
In this manner the Federal Government would be relieved
of all care, except to ascertain, in. the ii rlst instance, the number of messuages alloted.  In thle place of one distant government, there would be fifteen governmlents familiar with
persons, things, and a.ll ot.her particul.ars, directly interested
in the success of the scheme, and able to take efficient measures suited with. local circumstances.  They would be able
to exercise constant superintendence over tb e whole m easure.
Thev would be in constant, confidential communication with
all parties.  They would avoid the mistale into which system-mongers at Washington would be sure to fall, of pursuing the same plan in Maryland and in. louisiana, in Kentucky and in Texas.  In this way the chances of the success
of the scheme would be sensibly increased.
Thus the landed proprietor would receive bis $2,000 in
cash; the negro would be in. possession. of a valuable fee
simple estate upon payment of a mere rent of $172 80; and
the Federal Government would  settle forever the Negro
Question without spending another cent. * At least I am
- The late Count de Gasparin (who had taken part in public life) discussed in
one of his works the best method of raising laborers from serfdom to freedom.
The method I have sugge.s;ed to public attention did not present itself to his
mind; but the very objeci;ions which he urges to all the methods he coald discover, as well as the advantages b.e saw in them, will go to demonstrate the e:xcellence of the plan above mentioned. I beg permission to quote his remarks:
"When serfs are freed (it will be noticed he is discussing serfdom and not
the slavery of one race by a superior race; if this remalrk be borne in mind,
his observations will appear still more forcible when applied to th.e circumstances which environ us), they become masters of'their person and of their
time; but legal servitude scarcely ceases before they feel the full weight of the
servitude necessity imposes on them. Placed upon a soil of which no portion
belongs to them, deprived of the support which their lord was accustomed to
provide, if no new methods of existence be opened to them, they will curse the
day on which a pretended blessing was inflicted on them. Should the landlord
undertake to farm his estate by taking his old serfs as hirelings?  If be does,
he is placed in an unfavorable position compared with landlords who farm their
4




26                ESTABLISHMENTS OF CREDIT.
persuaded, by the experience of the world, that it would lose
nothing.  I am convinced with Arthur Young: " The magic
of property turns sand to gold.  Give a man the secure possession of a bleak rock and he will turn it into a garden.
Give him  a nine years' lease, and he will convert a garden
into a desert."
Besides, the negro children will annually be attaining
manhood. In the new villages, as in our older cities, the
sons of thrifty parents will oust the indolent, and fulfil the
estate in other portions of Europe long since rid of serfdom. Because he cannot choose the best workmen, he is obliged to employ all his old serfs, under
pain of seeing his estate and neighborhood and himself lose a population which
may become useful to him. He must hire all their time, because they will not
elsewhere find any other sort of work. Now what difference is there to either
party between such a condition and slavery: the lord obliged to feed and hire
his old serfs, the serfs unable to get work, except from their old lord, and looking to him for their support? The name of the relations alone is changed;
because the immense extent of the country, the obstacles to men's change of
residence when they possess no capital, perhaps laws restraining their liberty
of going and coming, the common interest of lord and serf to discourage emigration and to refuse foreign peasants, destroy every incentive to activity and
energy, and every germ of happiness and progress. Such a system of farming
can offer no advantages, unless there exists a free competition between land
owners and laborers. It can never be useful to either party except upon this
condition. But after the abolition of serfdom, society must pass through other
stages of progress before it can enjoy this free competition between demand
and supply. If a better order of society is sought, the policy pursued should
be to create personal property among the old serfs, to await from those vicissitudes of life brought by procession of time a real division of land, and in the
mean time to create an artificial division of the landed property. Should the
system by which the tenant gives so many days' labor to the lord's land be
adopted? In other words, should lords exchange the obligation of supporting
the serfs for a new contract by which they agree to give serfs a certain portion
of ground to cultivate on their own account upon condition of exonerating the
lords from their support, and further upon condition of giving the lords labor
for a certain number of days in payment of this land?  This is a real progress
compared to the method last discussed. The interests of the lord and those of
the serf are separated; each of them becomes individualized; the serf knows
that the labor he bestows on the land granted him is a pledge of his ease and
comfort; he labors harder to make it more fruitful. The land brings forth
more abundantly when tilled by freemen's hands, and, if the conditions of the




ESTABLISHMENTS  OF CREDIT.                       27
contract sloth failed to perform. White emigrants, also,
will be pouring in, and will be too glad to secure a farm  on
these terms. Again —every year that passes away will make
the farm  more valuable to the negro: he will put his money
and his labor into it, all which he may lose if he fails to keep
his engagements. Lastly, those laws which are provided in
all of the States for the punishment of vagrants and vagabonds will spur the laziest negro to thrift.
lease are fair, the serf's estate will daily be more embellished. Will this be the
case with the land remaining in the lord's hands? The hands which were free
three days of the week become slaves' hands' the other three days. The serf
learns to distinguish between the labor he bestows on himself and the labor he
bestows on his lord, and this distinction will be fatal to the lord's interests.
The lord has thrown off the burden of supporting his serf, and this certainly is a
great point gained; but the estate still in his possession is far from yielding him
what it would bring under a different system. If the lord is wise, he will
soon abandon this system of rent paid by labor; or, which is still better, he
will never have any thing to do with it. This feudal system does not differ
from the plan of leases for several lives or for a great many years except in
this particular: In the former, the grant of lands made in consideration of a
certain portion of the fruits or of rent in money is forever and is a definitive
alienation of the real estate. This method presents many advantages to the
freed serf. He becomes in reality the owner of the land he cultivates. The
lord, however, loses all hope of increasing his revenue in the future; and nowa-days, when landed proprietors observe the facility with which, after a long
period of time has elapsed since the original growth, the tenant comes to look
on the estate as belonging to him in fee simple, and the rent, which is the condition of its enjoyment, as wrung from him by duress, it is doubtful if many
lords would agree to adopt this method again, although it is the surest and
quickest method of rapidly ending serfdom and of obtaining for the landlord a
revenue equal or superior to that which he enjoyed before the abolition of serfdom. Leases for several lives or for a great many years have not all the advantages of the tenure just described either by way of securing the good cultivation of the land or securing the tenant's enjoyment of the improvements he
may have made. The tenant knows perfectly well that he is not the tenant in
fee simple, and when the end of the lease draws near he is prone to neglect or
to injure the land. Nevertheless, this method is a practicable and advantageous mode of abolishing serfdom. Lastly comes the system of farming in
partnership. If we compare it to the system by which the tenant gives so
many days' labor to the lord, it is easy to see that farming in partnership is far
more profitable to the lord. In this partnership farming, the tenant-farmer




28                 ESTABLISHMENTS  OF  CREDIT.
It should not be forgotten that all these negro landed proprietors have a family.  They will make their children work-*.
cannot possibly distinguish in his labor which will enure to his and which will'
enure to his landlord's profit.  This impossibility obliges him to exert the same
industry in every thing relating to the farm; and if the quantity of land he
cultivates is in proportion to. his strength, he draws from it every thing that
may in reason be hoped. This system is also more favorable to the farmer than
the system by which the tenant gives so many days' labor to the lord.. The
faormer works at the most favorable period sure that lie will not be obliged to
inter-rupt his occupations in order to labor for another. I-Ie is protected from
feeling aversion for that labor in stranger's service in which he can feel no real
affection. The time given usefully to his own farm is in no wise diminished,
and by relieving him from the ungrateful task of laboring for a stranger he is
protected from the danger of bringing into his own service those careless and
lazy habits he may bave contracted in that distasteful task. I therefore think
the advantage is altogether with the system of partnership farming, compared
to such task-work. As for the system of long leases, I must confess it is much
more to the interest of the tenant than either plan.  Becoming, so to say, a
landed proprietor at once, and paying a rent whose rati.o to his productions decreases with the progress of his agricultural labor and skill. the tenant's position is a great deal happier.  The landlord, however, does' not equally find his
advantage in it."-Gaspari',n's Partnership Pcarrming, Cchap. XII.
Need I pause to point out how the scheme I recommend in the text has all
the advantages and none of the disadvantages of the methods examined by
this author? The negro.becolnes a tenant in fee simple at once upon condition
of pasying off the debt charged upon his estate.  He has nothing whatever to
do with his old master. His revenue is dependent solely upon himself.
XIf any person be disposed to question the ability of negroes to earn $172 80
in the course of a year, and at the same time to live in comfort, let him look at
the condition of affairs established in Louisiana. There these rates of wages
have been adopted:
Male hands... $10 a month, first class..(..      $ 8 t"    "  second class.
"    i"    $ 6 "    "   third class.
Female hands $ 8 "    "  first class.. $ 6 "    "  second class..... $ 5 "    "  third class.
Boys under 14 $ 3" month.
Girls under 14 $ 2 "    "
There are deductions made in cases of sickness, and one dollar poll tax is
levied on every negro between the ages of 18 and 50. Take a family of five
negroes, husband, wife, one son and two daughters. The husband and wife




ESTABLISHMENTS  OF CREDIT.                      29
The latter ought to pay all the rent.  I reckon, too, upon
the happiest results flowing from the moral influence of the
old master and his famlily.  He will teach these improved
methods of cultivation.  I-e will warn those of the consequences of their idleness.  He will assist the unfortunate,
and enable theml  to  extricate themselves from  temporary
embarrassment.  Ile will protect his old dependents agcainst
all the world.  HIIe will'"stand master" for them.  He will
employ in his remaining fields the supernumeraries of their
families, and so aid theln inl reaching independence of fortune.  He will be the Rtoman patron.  They will be the
African client.
In this manner the old master will not only be protected
against loss, and the negro put into a position where he may
acquire wealth, but the white population will be enabled to
supply the other establishments of credit with the capital
they require.  They will be able to grant new farms to white
or black purchasers without the intervention of the Federal
Government.  They will be in position to introduce steam
machinery to supply labor whenever it may prove inadequate.  They will be able to build the necessary shops and
stitheys required by the new village, and to erect the cotton
gin and press, or other necessary works.  They will be in
position to enter into contract of henrico* with the negro,
remain at home to attend to the farm. The son earns only $6 a month, and
the two daughters earn only $5 each; this places'the family in possession of
$192 a year, and no account whatever is taken of the produce of the farm. It
is true, the daughters will, in course of time, leave the paternal house; but the
son will marry and bring his wife to supply their places, and as he increases in
skill and strength his wages will increase.
X Contract of henrico, or, as it is commonly called for sake of brevity, henrico
is an agreement by which capitalists place in farmers' hands cows, sheep, hogs,
mares, goats, bees, and the like animal stock, upon condition that one-half of
all their increase be given to the capitalist, and that at the expiration of a given
period of time stock equal in kind, quality and number to that which was originally furnished, or their equivalent in money to be agreed upon at the signature of the contract of henrico, shall be returned to the capitalist. Whatever




30            ESTABLISHMENTS OF CREDIT.
or buy his crops to their common advantage. They will be
able to lay out the new village with taste, separating the
opposite rows of detached cabins by a square 50 or 100
yards wide, filled with trees, and bordered on both sides by
a road. The trees will give health and shade and privacy,
and adorn the village more than sculpture or architecture
could hope to do.
After this provision has been made for the negroes, there
will still remain valuable estates of improved land in possession of the white population. They will retain considerable tracts of forests, which will prove at once a source of
revenue to them. The negroes will buy from them wood
and fuel for carpentry.
I take THE COMMONWEALTIH for instance. We had in
1860, as appears by the last census, (I quote from tables
given in National Almanac), 11,435,954 acres of improved
lands in farms. There were 490,865 slaves of both sexes.
I reckon five persons to each family. Every body familiar
with negroes knows that this figure is considerably below
the average number which composes a negro's family. I
make no allowance for domestic servants or artisans employed in towns; neither do I consider the losses which our
negro population have sustained by deaths and by removals. Taking the above-mentioned figures for true, we
should have 98,173 families, each of which is to be provided
with twenty acres of land. These families would require
1,963,460 acres. We should still have left in white hands
9,472,494 acres of improved lands in farms, 19,578,946
acres of unimproved lands in farms, and 8,250,380 acres of
unimproved lands not in farms. These last figures, I ought
to add, I do not give with implicit confidence. The phrase
used in the National Almanac, "unimproved lands in fiarms,"
leads me to infer that the unimproved lands not in farcms are
loss may occur by death or otherwise is borne solely by the farmer. When
farmers have no capital this contract is found advantageous.




ESTABLISHMENTS OF CREDIT.             31
excluded from the return, especially as Lloyd in his Map of
the Southern States gives 39,265,280 acres as the superficies
of THE COMMONWEALTH.  His Historical and.Descriptive
Sketch, however, abounds with inaccuracies.
The following table exhibits the quantity of land left in
the hands of the white population of the other States. I
repeat, these figures fail to represent the real quantity, because I have purposely omitted all allowance for deaths,
removals, domestic servants, factory people and artisans.
I have reckoned each negro family as composed of only five
persons, which I believe is 50 per cent. below the average
number. I have, too, discarded the fractions of families,
and given the next higher figure. Thus, in Maryland there
are 17,4573 families of five persons each. I set them down
for 17,458 families. The above-mentioned reserves show
why I have admitted the figures for the District of Columbia and for Louisiana, although they are manifestly absurd.
The great majority of negroes in both 1places is composed
of domestics and artisans, who have good homes and are
earning good wages. They do not require a messuage.




40,                                         4 E.
q   I                             I  2
THE COMMOWEALT:E.................... 1,435,954 1,963,460 9,472,49.4 19,578,'346 249,483 241,382 490,865 98,173 $196,346,000.
STATES.                                                     229,193 233,005 462,198 92,438 18      000
_C~n  5-~n..,
CCC,,        CC.,a C                                             0
Delaware................................  637,065    7,200  629,865   367,230  860    938[ 1,798/  360       720,000     Z
District of Columbia.........................  16,267{  12,740    3,527    16,789   1,212   1,973   3,1.85   637   1,274,000
Maryland....................................... 3,002,269  349,16012,653,109[ 1,833,306  44,313  42,876  87,189/ 17,45   34,916,000
North Carolina...................................  6,517,28411,324,240]5,193,044 17,245,685 1 166,469i 164,590 331,059} 66,212} 132,424,000  E
South Carolina............................   4,572,06011,609,640 2,962,420 11,623,8601 196,571/ 205,835/ 402,406/ 80,482/ 160,964,000
Georgia.......,......................  8,062,75811,848,76016,213,998 18,587,732] 229,193 233,005} 462,198] 92,438 184,376,000  1
Florida.................................6.7..6,462  246,980  429,4841 2,273,008  31,348  30,397  61,745/ 12,349  24,698,000  M
Alabama.......;.......,...,,...........6,462,98;171,740,32014,722,667 12,687,913 21 7,766] 217,314] 435,080, 87,016 174,032,000 }
Mississippi...........................................  5,150,008 1,750,540 3,399,468 11, 703,556 219,301} 217,330} 437,631{ 87,527} 175,054,000  H
Louisiana.........              2,734,9011 1,326,920 1,407,981} 6,765,879 171,9771 159,749/ 331,726 66,346 132,692,000
Texas..................................   2,649,207] 730,280 1,918,927 20,486,990  91,1891 91,377 182,566 36,514  73,028,000
Arkansas.......................................   1,933,036  444,460]5,488,576] 7,609,938  56,174  54,941 111,115 22,223  44,446,000
Tennessee................................... 6,897,974/ 1,102,880 5,795,049 13,4571,9601 136,3701 139,349 275,719 55,144 110,288,000
Kentucky.....   7,644,217  881,94016,792,277 11,519,059 113,009 112,474 225,483 44,097  88,194,000
Missouri                             6,246,871  459,74015,787,131 13,737,939 1 57,3601 57,571 11-4,031 22,9 87] 45,974,000




ESTABLISHMENTS OF CREDIT.           33
One thing is essential to the success of this plan: The
management of the whole question must be left to the local
authorities; or, if undertaken by the government, it should
only be with caution and forbearance. There must be no
fanatical intermeddling. Instances of individual hardship,
which, unfortunately, occur under the best governments,
must not be exaggerated into examples of general rule;
neither must they be accepted as good ground of reason for
Federal interference. Statesmen ought to remember that
in our imperfect human institutions we have sometimes
only a choice between evils. Painful as it may be to the
heart, it is occasionally true wisdom and mercy to shut the
ear to the solitary scream of distress when we see that to
relieve it we must plunge unnumbered innocent people into
even deeper woe. As the Indians in the Northern States
and the Chinese in California, so the negroes in the Southern States must be left to the management of the people
most immediately concerned. All that the Federal government should ask is their freedom and their trial by jury
upon every accusation. The local governments should constitute all the negroes as infant wards of chancery. They
should be made incapable of contracting any debt, except
for the necessaries of life, unless with the consent of court,
to be obtained in each instance. They should be incapable
of selling or renting their land without decree of court.
In fine, they should be made, as I have said, infant wards
of chancery. The State attorneys in the counties should be
made ex officio of"counsel, without fee to them, in order to
protect them effectually against fraud and oppression. The
State attorneys should give them legal advice when necessary, and should prosecute or defend their actions. No
process of law should be taken for served on a negro until
service should likewise be made on the State attorney for
the county. Whenever a negro is the object of a criminal
prosecution, the State attorney for the county should appoint some lawyer of standing at the bar to conduct the
5




34            ESTABLISHMENTS OF CREDIT.
defence, and this defence should be gratuitous. I know
too well the generosity of my brethren of the Southern bar
to question the alacrity and zeal with which this defence
will be conducted. Weakness or poverty never stretched
out hands to them in vain.'I suggest that the appointment
should be left in the hands of the State attorneys rather
than in the judges'; (as precedent would require,) in order
to give the defence more time for preparation. If the negro fails to pay his taxes or the periodical instalments of
his debt to the Real Estate Loans Company, or to other
creditors admitted by the court of chancery, he and all the
members of his family, or so many of them as need be,
may, in the discretion of the court, be hired out to the
highest bidder until such liabilities shall be discharged.
[No such decree, however, shall be made until the negro
shall have been heard by counsel, which counsel shall be
appointed in the same manner as in criminal prosecutions,
whenever taxes or the periodical instalments due the Real
Estate Loans Company are sought to be recovered; otherwise the State attorney shall be of counsel to the negro.
Need I say that under all these circumstances it would
be extremely unadvisable to invest tile negro with the right
of suffrage? We must choose between securing the negro
social independence and giving him a shadowy political
right. I call his right of voting shadowy, because what
are the negro votes in the South compared with those of
the white population?
I am far from advancing these as final measures. I am
too sensible of the perpetual fluctuations of all earthly things
to raise barriers, or to forum channels, and look upon them
as things eternal. I believe, however, that at the present
time to ask more, or to give less than I here suggest, would
be to breed mischief. I am only contending for the policy
of leaving the election of the measures to be adopted to the
local authorities. The negro has no better, no kinder friends
than his old white neighbors. ILong before he could ap



ESTABLISHMENTS OF CREDIT.            35
proach the polls in the North he voted in North Carolina.
Mr. T. W. Conway, the superintendent of labor in Louisiana, has recorded in his last annual report that the negro
fares every way better at the hands of a Southern than at
the hands of a Northern master.
No unprejudiced man can conceal from himself that the
negro may not for years-probably never may-be treated
in everyrespect as the equal of the white man. The Chinese
cannot rise to the level of the white man in Australia or in
California. It was only yesterday it was a capital offence in
New York city to possess a black skin. Old prejudices and
old relations cannot be effaced in a single day. It may be
well for all of us to bear in mind Demosthenes' wise remark:
"There are things which may be the objects of prayernever of law."
Do not wrest the power of Congress to jurisdiction over
the qualifications of voters in the several States. Our incomparable Fathers, after solemn debate, determined that
this subject should be left to the States themselves. They
so provided in the Constitution.
If in these lawless times this consideration prove no valid
objection, it would perhaps be well for those who urge the
extension of the right of suffrage to the negro to remember
the ink is not yet dry on the statutes, which in Connecticut,
Ohio, Illinois and Indiana, invested this right in the negro.
Is it statesmanship to force an unpalatable measure upon a
people of eight millions, when it was only yesterday, and
amid the unreasoning excitement of party passions, the
North itself could bring its consent to such measures? Be
patient. No man who knows the history of political parties
can doubt that a little sooner or a little later agitation will
be raised in the States themselves to extend the suffrage to
the negro. Such is the recklessness of party spirit everywhere, that it will make any bid to command even temporary success.
The cry may be raised-it has beei raised-that the Vir



36            ESTABLISHMENTS OF CREDIT.
ginia doctrine of States' Rights, established by Jefferson
and by Madison, are a danger to the Union. Had our incomparable Fathers laid the foundations of States' Rights
less deep or less firmly, the war just ended would have had
a very different issue. The Federal States could never have
assembled such hosts, nor have found creditors for such
amount of debt had not the Federal Government been supported by twenty other governments possessing immense
local power, local treasuries in which the vicinage placed
implicit confidence, animated by lofty local pride, which
embraced every particular of the public service, and stimulated each State to ardent rivalry of patriotic energy with
every other in support of the common cause.
The strength of the States will, under every conceivable
circumstance, give strength to the Central Government.
At the same time the strength of the States will make armed
opposition to the Central Government weak. It divides the
opposing foe. It creates in their midst more than one nucleus of dissatisfaction. It paralyzes that unity of action
and policy which is indispensable to successful armed resistance. It constrains the Executive to measures and concessions, which gratify local whims, or interests, or jealousies,
and militate against the public policy. These truths were
self-evident in the South from the beginning of the war.
Herein lay our fatal weakness.
The lessons taught by the war are not that States' Rights
are pernicious-far otherwise!-but that the Union can
never be dissolved except by the majority or by a more formidable minority than the Southern States constituted;
and that the majority of the people of the United States
hold the Union as something even dearer than those principles of self-government on which our immortal Fathers
built their political fabric.
Let it be remembered, too, that it is scarcely possible any
question may arise which can so unite as many as thirteen
States. No question may hereafter arise which shall threaten




ESTABLISHMENTS OF CREDIT.            37
the domestic tranquility, lives and fortunes as the Slavery
Question.
While these Real Estate Loans Companies are useful to
the borrower, he obtains loans without the intervention of
a third party. He avoids the unexpected or harsh foreclosure of the mortgage. He obtains the advantage of
liquidating his debt by payment of small sums of money.
lie is taught the importance of order, and the value of even
the most insignificant sums of money. Lastly, the value of
his real estate is increased, because all real estate is rendered
more marketable.
I say while these Real Estate Loans Companies are useful to the borrower, they are too singularly advantageousto
the lender. They shield him from the odium (not always
unattended with peril) which so stupidly attaches to the money-lender, especially when he forecloses mortgages in an
apparently harsh manner. They afford him a safe investment. They guarantee him payment of interests as regularly as those paid by a well-ordered public treasury. They
relieve him of a constant supervision of the property pledged.
They avert from him the annoyances of complicated legal
arrangements. They save him all fees and commissions.
The experience of other countries during a century, filled
with vicissitudes, avouches that they will most assuredly do
all of these things.
I come now to an establishment of credit, which I would
have presented, in the first place, had I not laid stress upon
opening the chapter with an establishment, whose merits
were cofifirmed by time and by experience in more than one
nation.
The institution next to be considered has, I believe, its
parallel no where. Nevertheless, I am persuaded it may not
be looked upon with those cold eyes which commonly greet
experiments and new inventions. It is built on no novel
theory. It rests upon the same foundation on which Real
Estate Loans Companies are raised. It is reared on as firm




38            ESTABLISHMENTS OF CREDIT.
ground as that on which they stand. It is but an extension
of their principle.
It is its application to Public Debts.
The reader is now familiar with the principles of these
establishments of credit: namely, they lend money on approved security, and hold the borrower quit of the repayment of the capital upon payment of interest. We have
seen that the application of this principle saves the debtor
at least six per cent. If applied to the Public Debt, it will
be found to save the Treasury a still larger amount of money. It relieves the Treasury of the staff of clerks required
to prepare every two years hundreds of thousands of bonds,
of the cost of the paper and of the engraving and printing
of these bonds, of the commissions paid to agents for their
sales, of advertisements in the newspapers, of the staff of
clerks required to manage the Sinking Fund, of brokers'
commissions on purchases made for the Sinking Fund, etc.
The Treasury will be able to reckon on the immediate supply of its wants, instead of waiting six or eight or more
months, as is now necessary, until the bonds have been taken
up by individuals.
No man who observes the tendency of trade can close his
eyes to the fact that capitalists daily require a larger return
on their investments. They have lying all around them a
choice of enterprises which yield seven, eight and ten per
cent. annually, and lack no guarantee of safety. They conseqilently disdain public securities, which yield only six per
cent. Did not the Federal government during the war pay
as much as twelve and fifteen and even more per cent. interest on the money it procured?  This phenomenon is not
visible in this country alone. It is seen even in England,
where there is a greater accumulation of capital than in
any other country of the world. A competent authority
recently said:
" One distinctive feature noticeable in the late altered appearance of the money market is the gradual, and it would




ESTABLISHMENTS OF CREDIT.             39
seem permanent, fall in the value of consols. The drooping condition of prices is consequently forcing the fact upon
attention, whether the rate of three per cent. in the face of
other more profitable investments will keep consols and
similar English securities in the position they have hitherto
maintained. A return of five or six per cent. is now so
commonly looked for, and the recent dividends of the banks
and other financial companies have been so satisfactory,
that the low rates for government securities are any thing
but encouraging.."-Bankers' Mffagazine (London) September,
1864.
Italy is obliged to pay above ten per cEit.; Turkey,
Egypt, Austria and nearly all the countries of South
America pay more than twelve; and Mexico and Spain
pay fifteen per cent. for the money they borrow.
Public Loans Companies will correct this tendency of
trade. While they will enable the Treasury to borrow at
less than six per cent., and thereby save millions of dollars
annually, they will enable capitalists to reap twelve, fifteen
and twenty per cent. on their investments.*  Public credit
will annually be improved. The sum of money at the
command of the Treasury will annually increase in amount.
These establishments of credit will have the happiest influence at the present moment. They will relieve the market of paper without lessening the supply of money at the
command of trade. The banks, instantly relieved from the
burden of the bonds which they carried during the war,
will afford to trade the assistance of their whole capital.
Commerce and industry will at once resume their old activity and scatter their manifold blessings on every side of
us. Public Loans Companies would free us from the enormous amount of money we export to satisfy the interest
due on bonds held by foreign capitalists, and which sensi* The manner in which this revenue is obtained will appear when I come to
treat of the organization of these Companies.
-— I




40             ESTABLISHMENTS OF CREDIT.
bly increases the balance of trade against us and concurrently the rates of foreign exchange; because this apparent
export is really nothing but a payment for imported capital.
The Public Loans Companies would take our public
loans at these rates:
6 per cent. will be charged to pay interest on the capital lent;
1 per cent. will be charged to defray the Company's expenses;
1 per cent. will be charged to form the sinking fund;
Total, 8 per cent. per annum.
The Public Loans Companies will, in consideration of
the payment of this sum annually for forty-seven years, re.
lease their creditors from payment of the capital loaned.
If longer time for payment be asked, the charge will be
less; if shorter time be required, the charge will be greater.
Apply this to the 7.30 loan. I am persuaded that I do
not exaggerate when I say it costs the Treasury a considerable sum of money above 8 per cent. It was sold below par
because it was sold for paper money when gold was many
per cent. higher than paper; a considerable commission
was paid the agents who sold it; a good deal of money was
spent in advertisements, clerk hire, paper, engraving and
printing. If we had Public Loans Companies, we should
pay not only less than the charges now annually paid on this
loan, but by payment of this smaller sum be exonerated altogether from payment of the capital. As it is, we not only pay
heavier annual charges than Public Loans Companies
would make, but we must pay the whole capital besides.
The Public Loans Companies offer another advantage.
Suppose we had a debt of $3,000,000,000 at six per cent.
interest. It will cost the treasury, if it be paid off at the
end say of forty-seven years, $180,000,000 annually, which,
multiplied by forty-seven, gives $8,460,000,000 as the
amount of interest money which we shall pay during this
period of time: and at the expiration of this time we must
further pay the capital borrowed, say $3,000,000,000, mak



ESTABLISHMENTS OF CREDIT.           41
ing in all $11,460,000,000. If we had Public Loans Companies we should pay $240,000,000 of interest annually, say
$11,280,000,000, and not a cent more. This would be a
clear gain of $180,000,000 to the nation-nearly $4,000,000
annually —that is, an economy of six per cent. on the whole
loan. Add to this clerk hire, and the expenses of paper,
engraving and printing the many thousands of bonds required under the present system, and the commissions to
agents during forty —seven years —all of which charges Public Loans Companies will save the Treasury —and you have
a still larger per centum economized.
Besides, the Treasury has the further advantage of annually consolidating its credit. Under the present system
the interests annually paid leave thle debt just where it was.
Under the proposed system the national credit would be
strengthened not only by the development of the country's
resources, but by the progressive diminution of the debt.
The nation at large would likewise derive sensible profit
from this continual monthly return of the eapital and interest. The money-market would constantly be buoyed up
by the ebbless flood-tide, and whenever the exigencies of
State rendered a new appeal to public credit desirable, the
demand would instantiy be answered. Thus establishments
of credit would, in periods of peace, be founded and annually strengthened, which, during war, would enable the
public Treasury to meet all the requirements of a state of
hostilities without disturbing the currency or the banking
operations of the country. They would substitute for the
stupid scheme of national banks, broad, sound, powerful
establishments, which no commercial crisis could paralyze,
no vicissitudes of trade impair.
Everybody knows how embarrassed States and counties,
small towns, railway and other joint-stock companies firequently are when they would procure money. They are,
for the most part, known only in their immediate neighborhood, which is neither large nor wealthy. We all have an
6




42            ESTABLISHMENTS OF CREDIT.
instinctive aversion from lending our money to distant creditors; we are not familiar with the value of the security they
offer. Public interests frequently suffer from this state of
things. WVe have no great bankers, and we lack those
wealthy establishments of credit which exist in older countries where generation after generation have accumulated
capital. This want of capital is the plague of a new country.
All of these embarrassments will be removed by the
establishment of Public Loans Companies. They will lend
money to all of these applicants. Their innumerable species of securities will disappear from the market-unity is
an element of strength on the Stock Exchange. Stoelk or
bonds of the Public Loans Companies will represent all of
them. Each public security will thus, by the principle on
which insurance companies are founded, give strength to
the other, and public confidence in the Public Loans Companies will be increased by the variety of their debtors, and
by their constantly augmenting guarantee funds.
In this way we shall enjoy the double blessing of important savings to the public, and of sensible increase of wealth
in all classes of the community. If this be not the true
policy of governments, I must confess I scarcely know
wherein public policy lies.  As citizens become more
wealthy, so the State grows stronger; contentment becomes
more general, crimes diminish, public tranquility and security increase, and the area and yield of taxation augment
daily in importance.
I believe that if I except real estate, no great interest of
nations may be found which has commanded as little favor
with capitalists as the Maritime interest.
This is inexplicable. Shipping is with Agriculture the
most important interest in a community. The modern system of insurance has disarmed all the elements. Bottomry
and respondentia bonds have, from the earliest days of commercial maritime adventure, been of custom, and have
passed in the world of trade for most trust-worthy securities.




ESTABLISHMENTS OF CREDIT.              43
W;hen one recollects the strenuous efforts made to encourage this branch of trade, the profits made, and the immense capital required to engage in foreign voyages, it does
seem most extraordinary that bottomry and respondentia
bonds should not have furnished capitalists or statesmen
with a hint of the true way of fostering this important public interest.
Marine Loans Companies should be established on the
principles of the Real Estate Loans Companies.  These
companies should lend money on vessels. As vessels are by
their nature perishable, and deteriorate annually in value,
money may not be lent upon them for so long a period of
time, or so cheaply as upon real estate and public or jointstock securities. No loan on maritime bottoms should exceed fifteen years and six months, and the rate of interest
charged should probably not be less than twelve per cent.
per annum, say
6 per cent. for interest on capital or money borrowed by the Company
to lend to the ship-owner;
1 per cent. for the Company's expenses;
5 per cent. for the Sinking Fund;
Total, 12 per cent.
Upon payment of this annual rate of interest for fifteen
years and six months, the borrower would- be exonerated
from payment of the capital borrowed.
As only one-half of the value of the land mortgaged
would be advanced by the Real Estate Loans Companies, so
only one-half of the value of vessels would be advanced by
the Marine Loans Companies. As the mortgagor of real
estate would be required to transfer policies of fire insurance,
covering all the property pledged, so the mrnrtgagor of vessels must transfer his policies of marine insurance to the
Marine Loans Company. If the vessel be engaged in
trade, other than coasting trade, the mortgagor shall obtain
from insurance offices guarantee of payment of bottomry or




44            ESTABLISHMENTS OF CREDIT.
respondentia bonds. It is the interest of insurance offices
to undertake payment of these obligations for a proper
premium.
It will at a glance be seen that no security offered could
be more satisfactory than that which is above-mentioned.
Here, as in Real Estate Loans Companies, and indeed in all
the establishments of credit mentioned in this chapter, the
borrower gives for guarantees not only the property pledged,
but all his property and his good name. In both instances
the value of only one-half of the property pledged is borrowed. If vessels are exposed to the perils of the sea,
marine insurance companies protect the lender from loss on
this score. If they annually deteriorate in value, the amount
due on them annually decreases; and it is fair to presume
that the owner who pledged them annually betters his fortune, so that this risk is next to nothing. Let me illustrate
this last assertion by an example: Richard Roe owns a ship
which costs him $60,000. He borrows $30,000 on it. He
becomes a bankrupt at the end of five years, and does not
distribute among his creditors one cent on the dollar. During these five years the Marine Loans Company has been
receiving annually five per cent. on the whole loan, and at
the expiration of this time has received above twenty-five
per cent. of the whole loan, (because this money has been
invested in new loans as fast as it has been received).
Therefore if the ship which cost $60,000 sells for $22,000,
the Company will lose nothing. At the present time such
a depreciation of vessels as I have admitted, for argument's
sake, is unprecedented. It will be impossible when Marine
Loans Companies are established. As similar companies
enhance the value of real estate by making it more marketable, so these companies will enhance the value of vessels
by opening a larger market for them, by enabling smaller
capitalists to become ship-owners, and by enabling larger
capitalists to extend their transactions wvithout fear of a sudden contraction of the money-market. So the very estab



ESTABLISHMENTS OF CREDIT.,          45
lishment of these companies will remove the only objection
to their foundation.
Twelve per cent. per annum may seem an exorbitant rate
of interest. But I believe it is not an unusual rate in the
money-market when the security offered consists of this
description of property. Besides, the twelve per cent. inlterest charged by the Marine Loans is really less than a
borrower pays when he borrows money under ordinary conditions at six per cent.
Suppose John Doe borrows $30,000 for fifteen years and
six months at twelve per cent. He pays $55,800. Let him
borrow $30,000 at six per cent. Hle pays $27,900 interest,
and returns the capital borrowed, say $30,000, which makes
in all $57,900 he pays to the lender. It thus appears that
the system of the Marine Loans Company enables the borrower to save on this one transaction $2,100, which is no
less than seven per cent. of the capital borrowed. John
Doe finds another advantage in borrowing from the Marine
Loans Company. If he borrows money from a banker at
six per cent., he will pay $900 every six months, or $1,800.
On the other hand, on the money borrowed from the Marine
Loans Company, he pays $300 a month. Everybody knows
that it is much easier to pay a smaller sum monthly, than to
procure a large amount of money once or twice a year.
I would exhibit some other advantages of this establishment of credit. Suppose Richard Roe has $100,000. He
is a ship-owner in good credit. He builds an Eastindiaman,
which costs him $100,000. He pays cash for it. Ie mortgages it to the Marine Loans Company for $50,000. He
returns to the ship-builder, and orders a second Eastindiaman, to cost $100,000. He makes these terms: $50,000
are to be paid in cash, and $50,000 thirty days after the
delivery of the vessel. He mortgages this second vessel for
$50,000 to the Marine Loans Company, and pays his debt
to the builder. He pays the Marine Loans Company.$12,000
annually in monthly instalments of $1,000 each, while he




46            ESTABLISHMENTS OF CREDIT.
receives interest on $200,000 at the rate of twelve or fifteen
or more per cent. He has, besides, at the expiration of
fifteen years and six months, two ships worth even then some
twelve or fifteen thousand dollars apiece. He would also
have saved the per centum which ship-owners annually lay
aside to compensate the deterioration of their property.
Again-a steam-ship company is formed to establish a
line of these vessels, say between New York and Liverpool.
The capital is $5,00q,000,    of which $1,000,000 is paid up,
and the remaining $4,000,000 is not called, but remains
with the proprietors of shares in the manner hereinafter
mentioned. These $4,000,000 are borrowed from the Public Loans Company, which will lend to joint-stock companies the full amount of their subscribed capital. The
steam-ship company has ten vessels worth $500,000 each.
It wishes five more. These it obtains by mortgaging their
fleet of ten vessels to the Marine Loans Company. All this
is done with a paid-up capital of only $1,000,000, consequently every cent earned by the steam-ships, after the interest to the Public Loans Company and to the Marine
Loans Company shall have been paid, will go to the proprietors of shares. It is probable they will earn some sixteen or twenty per cent. a year.
What immense advantages, too, are given to men of energy
and enterprise by such a company! It enables them  to
obtain capital, which they could not possibly procure with
our present organization of credit. It will give a powerful
stimulus to our whole maritime, lake and fluvial navigation.
It may be objected that when a great steam-ship company
miscarries, so many bonds (the guarantee of the uncalled
capital) will be thrown upon market as to produce a heavy
fall in prices. Thereby the bonds will be sacrificed, and the
proprietors of share will be ruined.
To weigh this objection, let us ascertain the course of
events, should this deplorable contingency occur. What
proceedings would the companies of credit take?  The fleet




ESTABLISHMENTS OF CREDIT.              47
of fifteen vessels would be sold.  They fetch, say, $250,000
each. This will be $3,750,000 to be carried to assets. Be
it remembered, that every month since the loans were contracted, they have constantly been diminished.  Therefore,
when I put down the debt due the Marine Loans Company
at $2,500,000, I greatly exaggerate the actual debt. It will
have tables, which have been prepared, to meet an event of
this kind, or the desire of a ship-owner to cancel all liabilities by anticipation. It will refer to these tables to discover
the amount actually due. It will pay itself out of the proceeds of the sale of the fleet.
To avoid perplexinlg matters, say its debt was $2,500,000,
there wvould remain $1,200,000, after the sale of the steamships, to pay off the $4,000,000 due the Public Loans Company. IRemember; that the Sinking Fund has every month
been lessening this debt also.
The Public Loans Company will require $2,800,000 more
to satisfy its claim  in full. If the proprietors of shares
have managed the company judiciously, there will be a Reserve Fund (which ought to be established in every joint
stock company to provide for contingencies) sufficient to discharge this balance of debt. If there is no such fund, and
if the propi'ietors of shares are unable to subscribe this
amount of money among themselves to save their bonds,
two courses remain to the Public Loans Company.
These bonds may be sold. As these bonds are issued by
at least four different companies,* there will be only $700,000
worth of bonds of each company. Surely such an amount of
money could not glut the market. If there was danger of
this glut, another course would be pursued.  The Public
Loans Company would make the trustee of the bankruptcy
mortgage these bonds to the Public Securities Company,
*See a little further on, when I treat of the organization of these establishments of credit. I shall in another chapter propose the extension of this
organization to all joint stock companies.




48            ESTABLISHMENTS OF CREDIT.
(for they would be mortgaged to the former Company*),
and pay the debt due it. The trustee would leave the bonds
in mortgage, (the loss would be only one-half of one per
cent. per annum, as the interest on the bonds would compensate the interest paid the Public Securities Company),
and wait until the state of the market warranted their sale.
I put things at the worst, that the reader may see the working of these admirable establishments of credit, even under
the most unfavorable circumstances.
Before I turn to another subject, I would call attention to
the inadequate protection aflordedby existing legislation to
mortgagees' of vessels. The provision of the statute which
requires the mortgage to be recorded in the customs-house
of the port to which the vessel belongs is insufficient. The
mortgage should be endorsed on the vessel's papers, and the
mortgages of all vessels should be recorded in some office
at Washington. I shall revert to this subject.
I come now to establishments of credit founded on the
ordinary principles of such Companies. They lend money
at a little more than six per cent. interest, and require the
return of the capital borrowed.' Foremost among them are Warrant Loans Companies.
They would lend money on the warrants of goods, wares
and merchandise stored in public warehouses. Our tobacco
notes offer a familiar example of warrants.  THE COMMONWEALTH, however, issues notes, and owns warehouses, only
for tobacco. I would extend this system which we have
found to work so well. Wheat, flour, corn, meal, bacon,
wool, lard, oats, cotton, potatoes, barley, cheese, hops, flax,
sugar, manufactured goods of cotton, flax, wool and silk,
iron, copper, lead, in raw and manufactured states-in fine,
all the articles of commerce should be accepted in THE
COM1MONWEALTH'S warehouses, and their value be accurately
*I shall explain in the succeeding chapter where these securities shall be
lodged.




ESTABLISHMENTS OF CREDIT.           49
appraised by sworn officers.  Warrants negotiable and
transferable in the offices of the warehouses (that is, in the
office of the warehouse which issued the warrant) should
thereupon be issued.
The Warrants Loans Company would advance money on
these warrants when transferred to them and accompanied
with a policy of fire insurance. This advance should be
not more than sixty per cent. of the appraised value of the
warehoused article. This money should be lent for any
period of time not exceeding a twelvemonth. It would be
lent at the rate of six per cent. per annum, and one-half of
one per cent. commission.
To appreciate the importance of the advantages which
Warrants Loans Companies would afford industry and trade,
we have but to glance at our millers and tobacco manufacturers. I would instance only these two examples. Our
millers and tobacco manufacturers are obliged by the course
of trade to lay in during a comparatively brief season that
supply of wheat, or corn, or tobacco, which is to keep their
machinery in activity all the year round. They are obliged
at times to strain to the utmost limit their credit at the
banks; to press their correspondents for advances (whereby
they in a measure place themselves in the latter's power),
and are not unfrequently compelled to force their merchandise upon an unfavorable market.
All is uncertainty to them. Bills payable for heavy
amounts of money may be falling due. The rumblings of
a distant, but fast approaching, financial crisis may be audible. The money-market is uneasy. The courts of bank
directors are growing timid. This embarrasses our millers
and tobacco manufacturers, or drives them to suspension of
payments, or obliges them to restrict their purchases and
their manufactures. The prices of our agricultural productions fall-there are no buyers in the market.
If we had a Warrant Loans Company, nothing of the
sort could be apprehended. Our millers and tobacco man7




50            ESTABLISHMENTS OF CREDIT.
facturers would invariably pay cash for the raw material.
The farmers would receive their money at once. Our millers and tobacco merchants would leave or carry their
wheat, or corn, or tobacco to the warehouses, receive warrants for it, and obtain money on these warrants. The
wheat, or corn, or tobacco would be withdrawn from the
warehouse as the service of the mill or factory might require.
As soon as the raw material has undergone the process
of manufacture, the owner would carry it back to the warehouse, get new warrants, and obtain another and greater
advance upon it-for it has become more valuable by the
addition of machinery and skilled labor. The miller or
tobacco manufacturer would never be pressed for money.
He could await the turn of the market. He would feel no
uncertainty.
Thus the private capital of the miller or tobacco merchant would be enabled to fill the part which it ought to
play-the part of balance. In no commercial country ought
individual capital be required to bear the whole operation
of trade. It ought in certain proportion to be carefully invested and held in reserve, in order to meet the balance of
loss, should the adventure or adventures of trade miscarry.
Credit should bear the burden of trade. And in this country, so new and so poor, where we are without those accumulations of capital which generations of men have amassed
in Europe, it is even more necessary than elsewhere that
individual capital should be freed so as to play its true part
in the commercial world.
These Warrants Loans Companies are eminently democratic, as indeed are all the establishments of credit suggested in this chapter; because they afford every possible
assistance compatible with the canons of political economy
to the small capitalist, without driving him to the usurer or
to disreputable and hazardous commercial expedients.
I would not exercise the reader's patience by many other




ESTABLISHMENTS OF CREDIT.           51
examples, and yet I would bring before him one more instance: Just see how impossible it is, under the present organization of credit, for a man of ordinary means to enter
the tobacco trade. It is well known that tobacco is coming
to market all the year round. True, in October, Noveimber, December, January February and March, no considerable portion of the crop comes to market. Nevertheless,
even during these months many thousands of dollars' worth
of tobacco do come to the warehouses.
Under existing circumstances the small capitalist cannot
enter the market, because the banks never discount paper
running longer than ninety days. If he enters the tobacco
market, he must resort to the hazardous expedient-hazardous because it depends entirely upon the good pleasure
of the bank directors-of accommodation paper. He renews this paper every ninety days, if the digestion of the
bank directors continues good. He of course pays interest
upon it. HIe is under the additional obligation of paying
some wealthy capitalist to endorse for him, or of exchanging endorsements with some commercial friend in the same
position as himself. Thus the risks of trade are doubled,
for he stakes all he has on his friend's commercial adventures.
As the first shipments of tobacco to Europe are not made
before July or August, he must, under the most favorable
circumstances, renew his note at least twice. If he would
enter the market at the beginning of the season, he must
renew his note above three times.  As accommodation
notes cannot be discounted from  week to week, he is
obliged to lay in a supply of money. He thus pays (or at
least loses) twelve per cent. per annum interest on his money, because he not only pays the batnk interest on the money borrowed, but his money lies idle in bank or in the
warehouse awaiting a favorable market. If he cannot renew his notes, he is obliged to ship his tobacco to New




52            ESTABLISHMENTS OF CREDIT.
York, to draw on his consignee for an advance, sell the
draft, and take up his note.
Establish a Warrants Loans Company, and we entirely
change this state of things. The small capitalist will begin
to make his purchases on the first of October. Whenever
a hogshead of tobacco suited with his business appears in
market he will buy it. He will get the note, carry it to the
Warrants Loans Company, and obtain an advance upon it
for such time as he may desire. I-e will be at liberty at
any time to pay his note upon payment of the interest accrued. When he thinks the time for shipment come, he
will pay the money borrowed, receive his warrant, and ship
his tobacco. There will be no risk whatsoever. Trade itself
will be rendered less hazardous. The man of small capital
will be enabled to embark a considerable amount of money
in legitimate business. The man of large capital will be
enabled to increase his adventures without periodically exposing his interests to the caprices of trade or of a court
of bank directors. Trade will be improved, and the general
prosperity of THE COMMONWEALTH advanced.
This establishment will enable retail tradesmen to carry
on their business with less capital. Instead of going to the
wholesale dealer twice a year as they do now, they will buy
from him only when their stock of any particular article is
exhausted. The wholesale dealer will go to the bonded
warehouse, repay the money borrowed, and withdraw the
required article.
When I have mentioned Public Securities Loans Companies, I shall have ended the list of new establishments
of credit which I could desire to see founded among us.
They would lend money on THE COMMONWEALTH'S, the
United States' and States' bonds; on Railways' Real Estate Loans Companies', Public Loans Companies', Maritime
Loans Companies', Warrants Loans Companies', and other
joint stock companies' bonds or shares, in the same manner the Warrants Loans Companies would lend money on




ESTABLISIHMENTS OF CREDIT.           53
warrants issued by the public warehouses. The former
would, however, lend a larger per cent. of the value of
shares and other like securities pledged to them than the.
latter ought to lend on perishable objects. Public Securities Loans Companies might, perhaps, safely lend ninety
per cent. of the market value of the first description of securities I have above mentioned, and eighty per cent. of
the current market quotations of other bonds, and seventy
per cent. of the market value of the shares of joint stock
companies. These rates would of course be determined by
the Public Securities Loans Companies. They would vary
with the credit of the Company which issued the bonds.
There would of course be some joint-stock companies
whose bonds and shares would not be accepted as securities
on any terms. Prudence would lead the Public Securities
Loans Companies to lend the full market value on no securities whatsoever.
The object of the Public Securities Loans Companies is
to furnish the trading community with facilities which
banks cannot grant without peril, and which at epochs of
crisis (when these facilities are most needed) no bank will
grant, because their struggle then is to curtail the issue of
their notes as much as may be. The concurrent condition
of a bank's solvency is its ability to call in its loans within
a limited period of time.
These establishments of credit are under no such condition. They have no paper money afloat in the market.
Their bills payable (which are their bonds) are due at certain epochs, for which they have ample time to make preparation. No such thing as a "run" on them is possible.
They are most active at periods of crisis, because the security of their transactions increases in proportion to the violence of the crisis. Lending money on securities according to their current market value, the greater will be the
value of the pledge in proportion to the loan granted upon
it, because in times of commercial crisis almost all bonds




54            ESTABLISHMENTS OF CREDIT.
and shares decline. At the same time these Public Securities Loans Companies will check this downward tendency
by preventing forced sales.
They will greatly strengthen our trade in other ways.
They will enable our merchants and others to keep their
whole capital active. They will invest nearly their whole
capital, if, indeed, they do not invest all of it in Public Securities. 3Banks and Warrants Loans Companies will provide them with the money required to carry on their business. They will trade altogether on borrowed capital, which
the profits of trade will pay for. When losses are sustained,
or a commercial crisis occurs, they will pledge a portion of
their Public Securities, and obtain the required sum of money. The certainty of profits, large profits —at least twelve
per cent. a year-by cautious trading, will beget caution.
The large profits they make will make them wealthier; that
is, stronger. I would illustrate this by an example:
John Doe has $100,000. It is invested in bonds of the
Virginian Agricultural Real Estate Loans Company. During December, January, February and March, he buys cotton to ship to Liverpool. The money he requires for these
adventures he borrows from the Alabamian Warrants Loans
Company and from the Virginian banks. In April, May,
June, July and August, he buys tobacco to ship to Liverpool.
The money he requires for these adventures he borrows
from the Virginian Warr ants Loans Company and from our
banks. It will be observed he saves a great many days'
interest by borrowing the money only as he requires it. He
clears twelve per cent. profit on his adventures. He probably does not pay the Warrants Loans Companies and the
banks five per cent. interest on the whole amount of money
adventured. He receives six per cent. on his money invested
in bonds. His capital will, therefore, yield him at least
thirteen per cent. revenue.
If John Doe, with our present organization of credit, were
to place $100,000, or even half his capital in Virginian six




ESTABLISHMENTS OF CREDIT.           55
per cent. stock, he would run risk of most serious embarrassment. Suppose we are in a commercial crisis. The
money-market is tight. HIe has already discounted as much
paper as the banks will take, and they are locking the door
of their vault. His Virginian stock is as useless to him as
if it were locked up in real estate. There is nobody in
Richmond who can take $50,000 worth of any species of
property at five minutes' notice.
The banks would refuse to lend on them, as they should
do. This is not the function of banks. The Bank of England never lends money on Consols, except at the quarterly
settlements, when the Transfer-Books are closed.  The
Bank of France (which I believe is the only bank that does
lend money on shares) finds itself unable to lend above
$6,000,000 upon Government stock, and $10,000,000 upon
Railway bonds at any one time, and is greatly embarrassed
to lend even these insignificant amounts of money, although
its capital is $36,500,000. I say insignificant amounts of
money, because there are Government stock in the French
market to the amount of $1,800,000,000, and Railway bonds
and shares to the amount of $1,400,000,000. Those loans
are as much relief to the commercial world as if the Bank
of Virginia were to lend half a dollar on Virginia bonds.
This inability of the Bank of France to advance money on
shares is alleged by the most competent financiers to be the
true cause of the stagnation in which the French markets
have languished since the issue of the securities by which
money was procured to pursue French public policy and to
build the French railways.
The object for which banks are established is to grant
short credits. Long credits are no more within the scope
of their operations than glass-making is within the range of
the potters' occupations. There ought to be a division of
labor in the world of finance, just as there is in the world
of industry. It is even more necessary in the former than
in the latter. The Public Securities Loans Companies, by




56           ESTABLISHMENTS OF CREDIT.
introducing this division of labor in our world of finance,
would offer us protection against commercial crises. I have
shown how they were in no danger of a "run," and how
they steadied the market of all kinds of Public Securities.
They would, moreover, supply trade with an immense
amount of capital, without resorting to the issue of papermoney, and consequently lessen all tendency to an inflation
of the currency. Again, they would enable banks to invest
their idle funds in Public -Securities (although with our present organization of credit it would be madness in them to
do so) by giving them assurance of facility of borrowing on
them whenever a period of pressure came.
The Public Securities Loans Companies would advance
money on the above-mentioned descriptions of stocks, shares
and bonds, the latter being pledged to them. I have not
thought it worth while to say that the promissory, negotiable and transferable note of the borrower would always be
given whenever a loan was made from any of the establishments of credit mentioned in this chapter. The money'lent by the Public Securities Loans Companies should be
lent for any period of time not exceeding a twelvemonth.
It would be lent at the rate of six per cent. per annum and
one-half of one per cent. commission.
The advantages to the nation of these several establishments of credit cannot easily be overrated. If war should
I(Heaven forbid!) exist, the Treasury would supply its wants
from month to month by contracting loans with the Public
Loans Companies. There would be no issue of paper money. The Public Loans Companies would issue bonds.
These bonds would find general favor, because trade would
be contracted. (Commercial men would the more readily
invest their floating capital in them, because the Public Se-:'curities -Loans Companies would enable them to use their
capital whenever occasion might arise. The same reason
would persuade banks to place their idle funds in those
bonds. All, or -a greater part of the interest money paid




ESTABLISHMENTS OF CREDIT.            57
by the nation, would be used in. providing new loans.
These transactions would be going on at the same time in
every State, and thus there would be placed at the command of the Treasury a constant and almost inexhaustible
supply of money. The power of the country would be increased a hundred-fold. One of the most eminent financiers of modern times said: "Cannon and artillery are not
enough to give power to a nation. It does require cannon,
but it requires credit, too. Credit is a species of artillery."
This is the artillery I invite the country to forge.
I have postponed consideration of the organization of
these establishments of credit in order to present the general principles of their arrangement without repetition and
without obscurity-so far forth at least as I may be able to
avoid them.
It would be good policy to charter in each State only one
Company of each of the establishments of credit mentioned
in this chapter. It would be injudicious to open all the
doors to speculators upon these subjects. The Real Estate
Loans Companies may involve with its welfare the fortune
of every family among us. The Public Loans and the
Public Securities Companies will prove the foundations
which sustain our public credit. It is consequently of public interest that no discredit be thrown on these establishments. Discredit is sure to be thrown on them were we in
every State to found rival Companies. In the eagerness of
competition for business, they would be tempted to sacrifice
the safe principles on which these establishments are
founded. Ruin would encompass us on every side. We
know the heartless greed of speculators.
Each Company should be chartered with a capital of
$100,000,000, and with powers to issue bonds to ten. times the
amount of its capital and reserve fund. Whenever the reserve fund is equal in amount to the capital and bonds issued, the surplus may be distributed annually among the
proprietors of shares —otherwise the reserve fund should
8




58            ESTABLISHMENTS OF CREDIT.
not be touched.  The losses should fall on. the annual receipts of the Company. I need scarcely say that none of
these Companies will at the outset or for many years to
come require such a capital. lNevertheless, I think it judicious to give them the amplest powers at their establishment, that they grow with the exigencies of the country
withllout making repeated applications to the State Legislatures for modifications of their charter.
These Companies should be built on a democratic basis.
It is matter of astonishment that in a country like ours
no pains are taken to enlist the co-operation of the laboring classes in our great public enterprises. It is lamentable
that no poor man can share their profits. One of the great
dangers of democracy is a stupid envy of the wealthy, because this sentiment strikes at the foundation of the public
prosperity.  The existence of this sentiment is visible even
in this new country. The attempts made in some of the
Northern States to pass laws restricting profits on railways,
insurance and other joint-stock, have no other origin.> Let
us eradicate this sentiment from among us by enlisting all
classes of our fellow-citizens in profitable investments, and
so promote a conservative spirit and a love of order and
of law throughout the whole nation.
This extension of the prerogatives of wealth to all classes
in the community is one secret of the quiet which has existed in France dclunring the last fourteen years-the first
time since 1770 so long a period of tranquillity has been
witnessed in that country. The humblest classes in France
have been made proprietors of public stock. The latter
has been divided into amounts as low as eleven dollars,
paid in instalments spread over many montlhs, to meet poverty's limited resources.
In Europe this principle is introduced in practice more
and more every day, with the most beneficial results.
Above 2,000 shares of the Bank of France are held by its
servants, from  the humblest'"runner" to the governor




ESTABLISHMENTS OF CREDIT.             59
himself. Messrs. John Crossley & Sons, the eminent carpet manufacturers of Halifax and Kidderminster —who own
the largest carpet mills in the world-have transformed
their firm into a joint-stock company, with a capital of
$8,250,000, in shares of $75 each. They hold $6,600,000
of these shares, and in allotting the remaining shares preference was given to the 4,400 managers and operatives in
their employment. I might instance many other examples.
I would see this eminently democratic principle carried
out everywhere here. It would not only multiply in a most
wonderful manner our resources of capital, but it would
foster a spirit of energy and enterprize among our fellowcitizens which could not fail to produce the happiest results.
Therefore all shares in these establishments of credit
should be of the value of twenty-five dollars.  Of this
amount five dollars should be paid in money, and the remaining twenty dollars should consist of four bonds of five
dollars' value each, issued by any one of the above-mentioned establishments of credit, exclusive of the company
in which the share or shares are taken, and no two of them
shall be of any one company's issue. Or, the twenty dollars of subscribed but uncalled capital may be deposited in
the Savings' Bank under conditions hereinafter set forth.
One of the latest approved principles of the organization
of joint-stock companies is the division of the capital stock
into two unequal portions. The smallest portion is money
paid by the proprietors of shares.  This forms the " paid-up
capital."  The largest portion remains unpaid, but the proprietors of shares are liable for its whole amount. This
forms the " subscribed but uncalled capital."
It is evident that this principle is not so satisfactory as it
ought to be. It is not always just. It is sometimes a delusion.
Many proprietors of shares in these companies may be
mere men of straw. The substantial men who may be conversant with finance will get rid of their shares upon the




60            ESTABLISHMENTS OF CREDIT.
approach of the company's insolvency. Therefore when
the association becomes bankrupt, the scrupulous and the
ignorant proprietors of shares (who are often widows or
orphans, or other persons as little able to bear losses,) are
stripped of all they put into the company. The others
escape with trifling loss. The creditors of the company, who
trusted to the subscribed capital to secure their debts, find
themselves painfully deceived.
This principle is, nevertheless, an excellent one. We
should adopt it, but we should guard against its abuse. We
shall take all necessary precautions when we require the
subscribed capital to be guaranteed by collateral security.
This precaution enhances the value and enlarges the
market for the bonds which these establishments of credit
may issue. When each proprietor of shares in all of them
must be the holder of bonds of four other companies, a
great demand for their bonds is created, and it will increase
as the companies augment their capital. The bonds so deposited will yield the holder above six per cent. interest,
because they enable him to receive a portion of the large
and annually increasing dividends of the company in which
he may be a share-holder, while at the same time he receives
interest onthem. Bonds of four different companies should
be required in order to check the partiality with which some
of them may be regarded, and to give as much stability as
possible to each company. It is not likely that five companies will simultaneously become bankrupt.
All the above-mentioned establishments of credit should
issue bonds in amounts of five dollars and upwards, as
might suit with purchasers' convenience.  These bonds
should be of three sorts: personal, to bearer and mixed.
The personal bonds should be issued in the name of the
purchasers. They should be transferable only in the office
which issued them. Their coupons of interest should be
paid only to him, or to a person provided with his power of
attorney to receive the interest. These bonds would suit




ESTABLISHMENTS OF CREDIT.           61
with widows, single ladies, persons living on their income,
proprietors of shares, and others who may desire to protect their property frorn all risk of loss. The bonds to
bearer should be issued'" to bearer," and their coupons of
interest should be payable to the holder. These bonds
would suit with persons in trade, banks or insurance companies, who would invest their idle money in them, and
desire some security readily passed from hand to hand.
The mixed bonds should be issued in the name of the purchaser, and be transferable only at the company's office, but
the coupons should be payable to the bearer. These bonds
would suit persons who live on their income, and who desire to be relieved from trouble in collecting interest without
greatly diminishing the security offered by personal bonds.
It would be found convenient were all establishments of
credit to adopt uniform colored papers for these bonds, each
sort of bond having its particular color.
The holders of bonds would be at liberty to transform his
bonds into either of the other two species, as might suit his
convenience. All bonds should have twenty-four coupons
of interest attached to them-that is, coupons for two years.
Five cents should be paid for each bond (whatever its
amount or species may be) when purchased or renewed.
This fee would be charged simply to save the company
from the expense of printing and stationery.
The dividend on shares and the interest on bonds should
be paid monthly. There are four reasons to recommend
this course. In the first place, it will increase the profits of
the companies by giving them the use of the interest-money
during a longer period of time than they would otherwise
obtain. The interest would, of course, begin to accrue from
the day the bond was issued, but payment would not commence until the thirteenth month afterwards. It would
then continue to be made monthly, so long as the bond was
in existence. The renewal of the evidence of the bond




62            ESTABLISHMENTS OF CREDIT.
every two years (when the coupons were exhausted) would
not be considered a renewal of the bond.
Let me explain this by an example: John Doe bought on
the 1st of January, 1865, a bond for $200, issued by the
Virginian Public Loans Company. It carries six per cent.
interest a year. He receives no interest (although it commenced running on the 1[st of January, 1865,) until the
1st of January, 1866, when he receives one dollar; on the
1st of February, 1866, he receives another dollar, and so on
every month afterwards, until the bond is cancelled. When
the bond is cancelled, he, of course, receives all the interest
due upon it to the day of its destruction.
In the second place, this monthly distribution of dividends and interest will prove advantageous to the moneymarket. When these payments are made semi-annually, or
annually, as is the present custom, they periodically tighten
the money-market for some weeks before, and for some
weeks after these distributions. The companies withdraw
fi;om trade the amount of money required to pay this interest, and these dividends some tinme before they are paid.
As all joint-stock companies are simultaneously engaged in
making this provision, the supply of moneyv is sensibly
diminished. The tightness of the money-market continues,
because all the money so husbanded is lost to trade. It is
distributed among bond and share-holders, and it is lost to
trade until it returns through trade's innumerable channels
to the money-market. HIundreds of millions of dollars are
annually lost to the commercial world by this periodical
stringency of the money-market. This loss and inconvenience will annually increase as joint-stock companies multiply.
A monthly distribution of dividends and interest will
altogether avert this loss and inconvenience. There will be
a regular and incessant flow of money from the moneymarket to the proprietors of shares and the holders of
bonds, and from them back to the money-market. There




ESTABLISHMENTS OF CREDIT.            63
will be continual compensation. The money will pour
back as fast as it is poured forth.
In the third place, this monthly payment of dividends and
interest will enlarge the market for bonds. The capital
which lies idle in the stagnant period between the active
seasons will readily take these bonds, in order to gain the
month's interest. The man in trade will not fear ally fluctuation in price in ordinary times. The rise now witnessed
in all securities upon the approach of dividend-day, and the
fall afterwards, will cease to take place. The quotations
will be more steady.
In the fourth place, this monthly payment will promote
economy and cash tranlsactions in every household.: This
will sensibly strengthen the trade of the country. The
risk of bad debts will be diminished. The loss of interest
will be avoided. I appeal to every man who receives his
income only once or twice a year, if he does not find it impossible to keep out of debt-and debt is invariably synolymous with waste —it "cdulls the edge of husbandry."
Last year's or the last six months' debts are to be paid-if
they leave any balance of money in his hands, he finds it a
very hard matter to lay it by. What is it compared with
the demands to be made upon it?  It is rare that any balance remains, for the petty debts scattered all over town
amount to an unexpected sum of money when addition reveals their total. If he receives his revenues monthly, he
will be able to extricate himself from this unfortunate debt
system. Economy and patience will soon make him a free
man.  He will thereafter pay in cash for every thing.
When once this method of monthly distribution of dividends and interest shall have been adopted, tradesmen will
be able to exact cash, or at least monthly payments, froml
all their customers. The retail trade of the country-so
insignificant in particulars and so imposing in its aggregate-will be placed on a sound basis. Tradesmen will in



64            ESTABLISHMENTS OF CREDIT.
crease their profits and diminish their prices, to the common benefit of us all.
I need scarcely say that borrowers from these establishments of credit will, while paying interest monthly, pursue
another method. They will begin to pay interest at thirty
days from the date of the loan. This rule may compel
some of them to borrow the first year's interest with the
amount of money they require.
The manner of paying the servants of these Companies
I shall treat in the next chapter. I shall there venture to
offer some suggestions upon the organization of these establishments of credit in the lesser agricultural States: for
instance, North Carolina, Florida, Mississippi and Tennessee.
I descend now. into some particulars of the organization
of each of these Companies.
I have suggested the establishment in each State of two
Companies: an Agricultural Real Estate Loans Company
and an Urban Real Estate Loans Company, respectively,
restricted to lending money on rural and on urban real property. Experience' has shown that the facility of ascertaining the value and title of town property is so great, that
seven-tenths of all the capital of IReal Estate Loans Companies are lent on town mortgages, when they are at liberty
to lend money on oppidan or rustic property. This is an
evil which should be avoided. I understand by urban real
estate all such species of property situated in cities, or
boroughs, or towns, possessing a charter.
The Virginian Agricultural Real Estate Loans Company
should at first be established with a capital of $25,000,000,
divided into 1,000,000 shares of $25 each. THIE COMMONWEALTH should subscribe 250,000 shares, paying $1,250,000
cash, and depositing her bonds for $5,000,000, to guarantee
the remainder of her subscribed shares. These bonds
should not carry interest. I need scarcely pause to explain
the reasons for this exception to the general rule requiring




ESTABLISHMENTS OF CREDIT.            65
the proprietors of shares to deposit one-fifth of their subscription in money and four-fifths in bonds of four of the
above-mentioned establishments of credit.
Books of subscription should be opened in the office of
the clerks of all the superior courts of law and chancery of
THE COMMONWEALTH. They should be kept open for ninety
days, and at the expiration of this period of time they
should be closed. All shares so subscribed to be taken at
their par value. The price of the share to be paid upon
subscription. During the first twelve months after the
opening of these books of subscription, Virginian, or bank,
or railway stock may be deposited instead of the bonds
above-mentioned, as none of them would be at once issued.
This stock must, however, be withdrawn and be re-placed
by the aforesaid bonds within the first twelvemonth after
subscription. iNo certificate of shares should be issued until those bonds should have been pledged. In the meantime a memorandum of subscription should be given to
each proprietor of shares.
As soon. as the amount of paid capital subscribed while
the books have lain open shall have been lent out on land,
then the Company should issue bonds for sums of not less
than five dollars each. These bonds should not be issued
below their par value, neither should they exceed in amount
ten times the value of the capital subscribed. These bonds
should bear interest at the rate of six per cent., payable
monthly in the manner above set forth. They should be
redeemed by weekly drawings in not less than five-andtwenty nor more than five-and-thirty years from the date
of their emission,
This amount of money being also lent out on land, public biddings for shares should be opened in the Company's
office. These biddings should be opened daily in the months
of January, February, March, April, May, June, November
and December-the business months of the year-and be
kept open until all the shares shall have been taken, or so
9




66            ESTABLISHMENTS OF CREDIT.
long as the Court of Directors may in their discretion think
proper. They will take care to maintain a proper proportion between the issue of bonds and shares. One share out
of every four shares sold shall be kept for THE COMMONWEALTH, after the whole of the 1,000,000 shares above-mentioned shall have been subscribed. The government may,
however, decline to avail itself of this prerogative. No
share should be issued for less than par. The highest premiulms offered should, of course, have the preference. The
premiums so obtained should be carried to the Reserve
Fund. THE COMMONWEALTH should receive all her shares
at par, whatever may be the premium shares may command
in the market.
Bonds should be kept constantly on sale in the Company's
office, until ten times the value of the subscribed capital and
Reserve Fund of the Company shall have been issued, or
until the Court of Directors shall in their discretion otherwise order.
It would be of public policy, if in those Southern States
where the local subscription proved inadequate to form the
fund necessary to enable the negroes to purchase messuages,
it would be of public policy for the Federal Treasury to
purchase bonds in sufficient number to provide this required
amount of money. This arrangement would cost the Federal Treasury nothing. It would procure the money on its
bonds at six per cent., which the Real Estate Loans Companies' bonds would pay, and in the course of a very short
period of time, some three or four years, would be able to
sell the latter bonds-and redeem its own. The arrangement
would be temporary, and would really amount rather to a
loan of Federal credit than of Federal money.
This would enable our people to aliment with money the
other companies. In this way, and in the activity given
trade, the Federal TreasurT would be amply rewarded.
It is of the utmost importance to the stability of all of
these establishments of credit that a Reserve Fund be




ESTABLISHMENTS OF CREDIT.            67
founded inl each one of them, and so constituted as to increase constantly in importance. It is the ballast of the
ship to which such important interests are confided.
This Reserve Fund should be established in the Virginlian
Agricultural Real Estate Company by devoting to it threequarters of the one per cent. annually charged on all loans
to defray the Company's expenses. These charges, however, shall first be paid out of it. The fractional balance of
profits which may remain after their division among the
proprietors of shares (and which is commonly carried over
to the dividend account of the following year) should likewise be devoted to the Reserve Fund. The interest on the
Reserve Fund (which, of course, will be actively employed
in the usual transactions of the Company) should be distributed among the proprietors of shares. All losses which
the Company may sustain must be paid out of its revenues,
other than those last mentioned. When these shall have
been exhausted, then, but not otherwise, the Reserve Fund
may be called upon for contribution.
When one considers the enormous draughts which the
Federal Government must make upon the people in order
to carry on the administration of public affairs, and honor
its pecuniary engagements, it will appear of judicious policy
to diminish local burdens so much as may be. After every
palliative shall have been used, the load of taxation will
still be heavy. It will therefore be wise in the States to
divert into their particular Treasury a portion of those
profits which otherwise would flow into private pockets. It
would so far relieve the citizens. These establishments of
credit enable the States to give their people this relief.
I haVe suggested the propriety of THE COMMONWEALTH S
subscription to one-quarter of all the shares issued by the
Virginian Agricultural Real Estate Company. She should
receive additional benefit from it. The remaining quarter
of the one per cent. annually charged on all loans to defray
the Company's expenses should go as royalty to THE COM



68            ESTABLISHMENTS OF CREDIT.
MONWEALTH, and should be paid monthly in the manner
above-mentioned. This is an indirecttax paid to THE COM1VOWWEALTH for the privileges granted and rights secured by
her charter.
The Virginian Urban Real Estate Loans Company should
at first be established with a capital of $1,000,000, divided
into 40,000 shares of $25 each. THE COMMONWEALTH should
subscribe 10,000 shares, paying $50,000 in cash, and depositing her bonds for $200,000, to guarantee the remainder of
her subscribed shares. These bonds should not carry interest. The Company should be organized in the manner
above described. The one per cent. charged to defray expenses should, as is above-mentioned, be divided into two
parts, three-fourths of the one per cent. should go to the Reserve Fund, and one-fourth should go to THE COMMONWEALTH as royalty. The fractional balance of profits, which
may remain after their annual division among the proprietors of shares, should be carried to the Reserve Fund.
The Virginian Public Loans Company should at first be
established with a capital of $25,000,000, divided into
1,000,000 shares of $25 each. THE COMMONWEALTH should
subscribe 250,000 shares, paying $1,250,000 cash, and depositing her bonds for $5,000,000, to guarantee the remainder
of her subscribed shares. These bonds should rnot carry
interest. The Company should be organized in the manner above described. The one per cent. charged for expenses, should, as is above-mentioned, be divided into two
parts: three-fourths of the one per cent. should go to the
Reserve Fund, and one-fourth of it should go to THE COMMONWEALTH as royalty. The fractional balance of profits
which may remain after their annual division among the
proprietors of shares should be carried to the Reserve Fund.
To avoid everything like ground of complaint or suspicion of partiality, the Secretary of the Federal Treasury
should in making or in consolidating or in transforming
loans issue a circular letter to the Public Loans Companies




ESTABLISIIMENTS OF CRIEDIT.          69
in all the States to inquire what amnount of the loan each of
them would take.  After distributing among them  the
amounts they respectively ask, (giving to none of them
more than so much as would be their share upon an equal
division of the whole loan among them), he should divide
the balance of the loan which may remain equally among
the companies, which asked more than their share. If
among these companies some ask less than the amount,
which would be their share upon this new distribution, they
should receive what they solicit, provided the sum they
require be not more than the share which may remain to
the more powerful companies upon the distribution of the
valance.
An example may place'this suggestion in a better light.
The Federal government wishes to contract a loan of
$330,000,000. The Secretary of the Federal Treasury issues a circular letter to all the Public Loans Companies to
inform them of the requirements of the Treasury. The
share of each of the thirty-three Companies (one being in
each State) would be $10,000,000, were the loan divided
equally among them. All of the States' Companies are
not able to take so much as their share. Some of them
ask for more than their share. Fifteen States ask for
$2,000,000. He gives this amount to them. Ten States
ask for $10,000,000. He gives this sum to them. Three
States ask for $30,000,000; five States ask for $50,000,000.
There are $200,000,000 of the loan still unsubscribed. He
divides this amount equally among the eight States which
ask for more than their share of the loan, giving to each of
them $25,000,000.
It is obvious that as a portion of each State's revenue
flows from these Companies, it is the duty of the Secretary
of the Federal Treasury to avoid every thing like an unequal distribution of these loans. There may be-there
will be-inequality, but it must proceed from the different
resources of the Companies themselves, and not from the




70            ESTABLISHMENTS OF CREDIT.
favor or aversion of the Secretary of the Federal Treasury.
The Virginian Maritime Loans Company should at first
be established with a capital of $1,000,000, divided into
40,000 shares of $25 each. THE COMIIMONWEALTH should
subscribe $10,000 shares, paying $50,000 in cash, and depositing her bonds for $200,000 to guarantee the remainder
of her subscribed shares. These bonds should not carry
interest.  The Company should be organized in the manner above described. The one per cent. charged for expenses should, as is above mentioned, be divided into two
parts: three-fourths of the one per cent. should go to the
Reserve Fund, and one-foburth of it should go to THE COMMONWEALTH as royalty. The fractional balance of profits
which may remain after their annual division among the
proprietors of shares, should be carried to the Reserve
Fund.
The Virginian Warrants Loans Company should at first
be established with a capital of $1,000,000, divided into
40,000 shares of $25 each. THE COMMONWEALTH should
subscribe 10,000 shares, paying $50,000 in cash, and depositing her bonds for $200,000 to guarantee the renmainder
of her subscribed shares. These bonds should not carry
interest. The Company should be organized in the manner above described.  The one-half of one per cent. charged
for expenses should be divided into four equal parts. Three
of them should go to the Reserve Fund and the remaining
fourth part should go to THE COMMONWEALTH as royalty.
The fractional balance of profits which may remain after
their annual division among the proprietors of shares,
should be carried to the Reserve Fund.
The Virginian Public Securities Loans Company should
at first be established with a capital of $1,000,000, divided
into 40,000 shares of $25 each. THE COMMONWEALTH should
subscribe for 10,000 shares, paying $50,000 in cash, and
depositing her bonds for $200,000 to guarantee the remain



ESTABLISHMENTS OF CREDIT.            71
der of her subscribed shares. These bonds should not
carry interest. The Company should be organized in the
manner above described. The one-half of one per cent.
charged for expenses should be divided into four equal
parts. Three of them should go to the Reserve Fund and
the remaining fourth should go to THE COMMONAWEALTH as
royalty. The fractional balance of profits which umay remain after their anuual division among the prproprietors to
be carried to the Reserve Fund.
The necessary, tb.e indispensable companioil to all of the
foregoing establishments of credit is a Stock Exchange, say
at Norfolk. We mlust malke this city our great commercial
capital-the chief seat of all these Loans Compailies. If
we are desirous to assure to ourselves a market where THE
COMMONWEALTH'S bonds and the shares and bonds of our
joint-stock companies may be certain of finding purchasers,
and where in times of public emergency TIE COMMONWEALTH may obtain adequate financial assistance, we must
establish a Stock Exchange upon a broad and solid basis.
We can find no better model than the Royal Exchange of
London. We must make ourselves financially independent. We cannot have a market for our securities unless
we foster speculation on them. Observe, even before the
war, the great difference between the quotations of Virginian stock and those of New York State stock, or of the
former and those of Louisianian stock. Multiply this per
centum of difference by our whole debt, and the loss to
THE COMMONWEALTH may be ascertained. It is deplorable.
Let me, before I end this chapter, venture upon the expression of a wish that our ancient landed families may no
longer neglect trade as too many of them heretofore have
done. Their younger sons should-unless happily gifted
for the law, or for some other profession-be placed in
trade. There is not a compting-room  or a shop which
would not be glad to receive a young man of gentle blood,
who comes with several thousand dollars in his hands.




72            ESTABLISI-HMENTS OF CREDIT.
There are at this moment many acute, energetic, ambitious
young men in Richmond who would willingly join their
brains and business knowledge with the capital of a young
man of means. This is the method by which solne of our
oldest families have retained their social position. It was
by neglecting this method that so many of our ancient fanmilies have decayed.  We see all around us their* children
hanging on the skirts of the legal and medical professions,
scarcely able to earn the salt in their bread. Others of our
old families embraced trade wrongly, and have not been
much better by the union. They espoused a branch of
trade, which was from the necessity of things limited in
its transactions (and therefore in its profits) in this branch,
to the immediate neighblorhood, in that branch, to a particular and not large district.
We should reform  these things. We should, instead
of giving the younger sons a parcel of the patrimonial
estate, borrow money on this land from the Agricultural
Real Estate Loans Company, and embark the younger sons
upon the great ocean of trade. We should so modiIfy our
legislation, by introducing that principle of limited liabilitythe very essence of life of our joint-stock companies, which
have wrought such wonders in our midst-as to enable the
father to become the son's limited partner. The father
would stake his $10 or $20,000 in the firm, and know the
remainder of his estate was safe. So shall both be benefitted. The wealth of the old family will be retained and
augmented in their hands. The younger soins, instead of
struggling to rear a large family in paternal luxury on a
tithe-part of the paternal estate, and ending their career,
the despairing and embittered fathers of decayed gentlemen
and decayed gentlewomen, who cannot dig, and are ashamed
to beg, will be in turn the founders of flourishing families.
They will rear noble mansions on our rivers' banks and on
our lines of railways.
This is the only magic by which the great county families




ESTABLISHtMENTS OF CREDIT.             73
of England have retained their wealth and ancestral halls.
Look over the lists of directors of the great enterprises of
England, you shali find the Norfolks, the Buckinghamls, the
Marlboroughs, the Northumberllands, aiding then'by their
name, capital and influence.
Since convents have ceased to occupy the places theyV
once held in French society, and a superfluity of daughters
can no longer be immured in those living tombs, all of the
higher classes of France are improving their fortunes by
trade.  They had great repugnatnce to conquer, because it
was of tradition in that country that a gentleman sensibly
derogated from  the dignity of his birth by engaging  in
trade.  These ancient prejudices have been so trampled
under foot as to warrant a wit to say with as mluch sprightliness as truth, that were the Chevalier Bayard in existence
he would be a director in some Ocean Steaml-ship Company,
and were the Cardinal de Rihelieu alive he would be a
railway director. It is by thus descending to trade's marts
that the de Luynes', de Lorges', de Larochefoucaulds, de
Birons, de Noailles', and the other handful of ancient French
families have retained patrimonial estates in their hands,
despite the provisions of the Code Napoleon and the vicissitudes of various sorts of revolutions.
Am  I accused of possessing aristocratic prejudices because I offer these suggestions?  I refer cavillers to the next
chapter.
Leave these ancient families aside! Direct our attention
to heads of firms and their young men. I would venture
to engage them to lift up with more alacrity the latter to
their level.'We all of us know how sorely pressed active,
energetic, ambitious young men are to obtain capital when
they would establish themselves in trade.  They scour the
country around to pick up a few thousand dollars here, a
little more there, a little less yonder. They borrow this
money at fixed —and always high-rates of interest. It
must be returned at short notice, often at the very moment
10




74                 ESTABLISHMENTS  OF CREDIT.
when it is most wanted.  And how  many young men are
there who leave  THE COMMONWEALTH in utter despair of
procuring this capital here?  Heads of firms ought to be less
supine than they are about admitting their clerks to a place
in the concern.  They ought to use this accession of capital
and energy to extend their business.
I think  a  reform   should  be made  in  our legislation,
(which I may be pardoned for saying is stupidly narrow  in
some of its commercial provisions,) to enable the old style
of firms to  remain  even  after the old partners are dead.
The Germans wisely foster this immortality of merchants,
(if I may use the expression,) and find various benefits from
it.  It would encourage retired  merchants and tradesmen
to leave a portion of their capital in the old firm, and continue  to  reap  a share of the  old profits.  Their children
after them  would do the same.
I would see the principle of joint-stock conlpanies extended to trade.  Why should not our dry goods men, and
hardware men, and  apothecaries, and grocers, and others,
resort to this prolific principle of trade?  Why should not
our tobacco merchant have proprietors of shares behind
him who contribute capital to his business, and enable him
to enlarge it?* I confess it is not without great impatience
X The above paragraph was in press when my attention was directed to the
following announcement in the "city article" of the most important newspaper
in the world: "A new form of combination,' under the Limited Liability Act,
has been introduced to-day. It is a fusion of three city firms of excellent
standing, who propose henceforth to carry on their business under the title of
the London Merchants' Company. The nominal capital is to be ~1,500,000,
in shares of ~100, and the amount to be taken by the three firms for good-will
is ~375,000, which represents their actual profits for the past three years. The
respective houses are those of Messrs. Robinson & Fleming, Messrs. Redfern,
Alexander & Co., and Messrs. Lane, Hankey & Co., and the leading members
of each will constitute the board of direction. The payment for the good-will
is to be one-third in shares and the remainder in debentures, maturing by instalments over ten years.  The experiment is perfectly legitimate, and may be
regarded as an important step in the commencement of a method by which we
may occasionally economize and consolidate our commercial power. Probably
some additions will soon be made to the present coalition, and, as the parties
will of course be of similar standing each, such addition will be an increase of
general strength."- The Times (London) 19th June; 1865.
It is with sensible satisfaction I find the views I express confirmed by such a
weighty authority.
I would seize this opportunity to add, that the joint-stock Companies to carry
on trade should be founded on the principle of a division of their capital into
paid and subscribed capital, the latter being guaranteed by bonds of some four
of the above-mentioned establishments of credit.




ESTABLISHMENTS OF CREDIT.                      75
I periodically read in the public prints that Messrs. Hottinguer & Co. have taken the contract to supply the French
government with the Virginian tobacco it requires, and that
Messrs. de Rothschild Brothers have purchased the right to
furnish the Austrian, Spanish and Portuguese governments
with all the Virginian tobacco they may use.  I speak without exaggeration when I say our merchants lose several
hundred thousand dollars annually by neglecting to take
these contracts themselves.  If no one among them  has
capital enough to enter upon this field, why does he not
establish a joint-stock company for this Very purpose?  Or,
why does not the whole body of tobacco merchants form
itself into a committee and provide a common capital to
secure these contracts?
Our statesmen must make the first moves. They must
provide trade and industry with the facilities they need.
The freshet of paper-money which submerges our country
must be abated.*  Establishments of credit must be founded. Our commercial legislation must be reformed. In
fine, the time has now come when our public men, both in
the General Assembly and in the Federal Congress, must
turn their attention to the great interests of the nation.
They must adopt a large and provident policy. They must
discard the miserable quarrels of faction, which occupy so
considerable a place in our history during the last five-andtwenty years, and which have led to such deplorable consequences.  That policy which drew  from  the ablest living
statesman words of contempt and scorn,t must be abandoned, and we trust from indications held forth, as well as
from  the acts of President Johnson, will not be the policy
*I know there are men who pretend that it is the true policy of the country
to keep afloat in the market $250,000,000 of Federal paper-money, in order to
save the interest on this amount of money. I persuade myself that in the
sixth chapter of this work, which is devoted, to a consideration of "Our Financial Policy," I may be so successful as to refute this error.
t"Soldiers of the Army of Africa! Africa has been a great school for the
soldier's education. He has there acquired those manly virtues, which are the
glory of armies, and the firmest supports of an Empire. By learning to affront
danger, to bear privations, to place honor and duty above all material pleasures, he has felt his soul open to every noble sentiment: Therefore is it that in
your ranks passion has never survived the contest.  Ye know no hatred of the
vanquished foe.  Ye are the very first to hold out to the mistaken Arabs a friendly
hand, and to insist that they should be treated with generosity and justice, as
henceforward forming part of the great French family."  Proclamation of Napoleon III to the army of Africa. Dated Bougie, 7th June, 1865.




76            ESTABLISHMENTS OF CREDIT.
of his administration. The security of person must not be
violated by arbitrary imprisonment; neither must search
or seizure be made but upon probable cause supported by
oath; or affirmation. The privileges of freemen must not
be violated by secret trials, without a jury of the State and
district wherein the crime shall have been committed. No
person mrust be attainted of treason until after public trial,
with all those securities for impartiality, or failing impartiality, for mercy, guaranteed by that constitution which
every officer of the United States must support under pain
of perjury.. Every person's estate must be secured to him
until he has been convicted of crime, which rmay work its
forfeiture in the manner prescribed by the constitution and
the statutes. Every prisoner, let the crime alleged against
him be heinous as it may, must have the benefit of the
merciful axiom of our law: Every man sball be presumed
innocent until he be proved guilty. The wounds of civil
war (God knows only too deep, and too wide, and too numerous!) must be staunched and not blistered.
Commerce and industry are halcyons that build their prolific nests only by calm seas and under cloudless skies.
I exhort all men, jealous of their country's honor, to
hearken in this tempest of the passions to the voice of
foreign spectators. They tell you by anticipation the verdiet which history will render upon your conduct, for they
are contemporary posterity. I exhort all patriots who
xWould guide their country to a happy issue out of her
present troubles, to study the lessons of policy to be learned
from the annals of Switzerland, which, after the Sunderbund
war, hurt no hair of any man's head, pilfered no man's
property; and from the annals of France, which, after La
Vendee was pacified, disturbed no man in it, either in
libertyor estate: nay, more, wisely forbore to execute there
the Conscription Law, though the Empire stood in need of
every man, and though the master was Napoleon. Meditate these lessons, for the Sunderbund has left Switzerland
and La Vendee France more united than ever.