RKITIUATIOX. 



thns circumstanced would have to be sold at ruinous 

 rmtes not only for the reasons common to all the States 

 of the I'liion, and for the special reasons already 

 stated, but for the additional reason that the perm i 

 Oncy of the then existing administration in those 

 States WM not anticipated, ami shoul 1 those govern- 

 ments come into the hands of those antagonizing 

 them, tin- new rulers would not be apt to regard tin- 

 honor of the Suite* as involved in the faithful discharge 

 of the obligations created during such transition 

 period. 



These causes operated more or less throughout all 

 the States last named, but culminated in the Slate of 

 South Carolina, where reckless legislation added to 

 the embarrassment. Repudiation in Virginia was 

 chiefly from the fact that West Virginia had been 

 -i> ir.iti' I as a State without provision being made for 

 h T contribution to the payment of the debt of Virginia 

 :ing at the time of such separation. Virginia 

 claimed that one-third of the debt should be paid by 

 West Virginia as her just proportion. Virginia in 

 1871 funded two-thirds of her debt in bonds and is- 

 sued certificates for the remaining one-third, redeem- 

 able when West Virginia should assume her part of 

 the debt It was provided in the funding act that 

 coupons on the bonds should be receivable in payment 

 of taxes. Subsequently it was enacted that only coin 

 and currency should be received in payment of taxes, 

 thus repudiating the obligation as to coupons forming 

 part of the Funding Act. Again in ISSOthe attempt 

 was made in the readjustment of the debt of the State 

 to repudiate a portion of the funded debt on the 

 ground that it represented the capitalization of interest, 

 which in the depressed condition of the State was 

 claimed to be unjust. 



The most general ground of repudiation throughout 

 the repudiating States was the consequence of aid 

 having been given to railroads with no proper return 

 to trio interests of the States. North Carolina repu- 

 diated upwards of $12,000,000 of debt alleged to have 

 been oi.il'isively obtained under the pretence of the 

 building of railroads. Georgia and Florida based 

 their actioc upon the decision of their courts against 

 the validity of the bonds. Louisiana placed her 

 action upon i:,<i ground of the unconstimtion ility of 

 certain i-viiei. Arka: '. upon the decision of 



her courts. A'abama and Mississippi repudiated 

 large portions o>' their debts created in aid of railroads. 



The case of South Carolina fully illustrates th 

 eral situation. The in.iuiruration of the new State 

 government in ISi'.H found an empty treasury and no 

 available means of raising money by taxation. Kind 

 ing that the bonds of the new State could not be sold 

 exueptat ruinous rates, temporary loans were made 

 upon bonds as collaterals in the expectation of funilinir 

 at an early day. That expectation was never realized. 

 The maturity of the loans finally resulted in the for- 

 feiture of the bonds and their sale at a small percent, 

 upon their face value. A scheme for ascertaining the 

 true indebtedness of the State and scaling it to 50 cents 

 on the dollar was matured and carried out and a con- 

 solidated bond issued to replace the outstanding debt. 

 In 1880 this scheme was revised and the original va- 

 lidity of the bonds that Centered into the new issue was 

 miumitted to judicial inquiry and resulted in the in- 

 validating of certain clauses of bonds that had pre- 

 viously been validated and funded 



The cases of repudiation show three modes of ac- 

 coniplishirig that end, namely, under the decisions of 

 the courts of tin- indebted States, under the action of the 

 legislature, and by studiously omitting to make pro- 

 vision for their payment where such a provision was 

 possible. That the decisions of the courts of a State 

 nhould be accredited with authority to dissolve the 

 obligations of such* State is against the principle that 

 no one can be regarded as a competent judge in his 

 own case. The legislative authority of a State of the 

 Union cannot impair its obligations, as that is dis- 



tinctly forbidden by the Constitution of the United 

 Stiles. The act of repudiation by a State of the 

 I moii is therefore one of arbitrary force and not of 

 law. tor such an act cannot take proper effect under 

 tin- Constitution of tin- I'nited States, but it is to bo 

 regarded as simply taking advantage of its exemption 

 from judici.il compulsion. If a State fails to meet its 

 <L'cnieiitx from absolute inability, its honoris un- 

 touched, and it mav IK- entitled to sympathy. If, en 

 the oilier | hand, it denies the obligation when able to 

 perform it and does not avail itself of the opportunity 

 it possesses of submitting the question of it.s indebted- 

 ness to the judiciary of the United States, its justice 

 must necessarily be brought under criticism. 



The repeal of remedies existing for the enforcement 

 of an obligation of a State at the time its debts are 

 contracted is an unconstitutional act that can produce 

 no proper legal effect, and those remedies still remain 

 in vigor, although existing under the laws of the State, 

 and this applies equally to the privileges attached to 

 cou|>ons. After a State has made a com position with its 

 creditors, and especially where that composition is in 

 the nature of a compromise, a question is presented to 

 which little attention has been given. It has been 

 assumed, as in the cases of Virginia and South Caro- 

 lina already mentioned, that after a compromise and 

 funding bused thereon, it was competent that a State 

 should reopen the question of the validity of the obli- 

 gation that was the subject of such compromise. This 

 cannot be done in the case of individual transactions, 

 and no reason has yet been pointed out why it should 

 be available to a State. 



T 'l'he preservation of the honor of the States of the 

 Union seems to require that where they have reason 

 to doubt the validity of their obligations and are 

 satisfied that justice will admit of the solution of 

 that doubt, they should take measures to have the 

 question submitted to the judiciary of the United 

 States, the only impartial tribunals in such cases, 

 and when their inability to meet their obligations is 

 confessed that they should readjust them upon consul- 

 tation with their creditors, which can be done without 

 loss of dignity and with the saving of their honor. 



What eflWt the early financial history of the coun- 

 try may have had upon the state of opinion that ren- 

 dered repudiation possible must remain the subject 

 of conjecture. BIK, the disposition made of the debt 

 contracted by the issues of paper-money for the main- 

 tenance of the Revolution that gave independence to 

 tin 1 States is el-arly distiiiL-uishable from the idea of 

 repudiation. The issues during that war constituted 

 the currency of the country, and thus became dis- 

 tributed among the people, and, as they lost their pur- 

 chiLsing value and finally ceased to perform any useful 

 function to trade, were subject to vicissitudes tending 

 to make their distribution still more general. When 

 in 1790 Congress provided for funding the domestic 

 debt at a great reduction upon its face value, the real 

 question presented was whether that domestic debt 

 should be at once absorbed bv taxation, or that some 

 portion of it should be left to future adjustment. The 

 power of taxation in the hands of Congress was un- 

 limited, and could have been extended to absorb the 

 iMit ire outstanding indebtedness, and that indebtedness 

 was distributed as broadly as it would be practicable 

 to distribute taxation for its absorption, and hence the 

 reduction of the nominal value of the debt was equiv- 

 alent to taxation for its absorption. The reason why 

 any portion of that debt was funded must be considered 

 to have been to postpone the adjustment of a certain 

 port ion of it to a future day, and to afford the holders 

 of that debt the credit of the government to a limited 

 extent to facilitate commercial operations. In view of 

 the fact that the holders of the debt and the persons 

 subject to taxation to pay it were practically the same, 

 there cannot IK; found in the transaction the elements 

 of repudiation. 



The Confederate currency and bonds that were left 



