TENNESSEE. 



time, was that of the settlement of the State 

 debt. The interest on the bonds of the State 

 has been in default since 1870, when tin- tax 

 t:iritl' \va* reduced from 60 to 20 mills on a dol- 

 liir. In 1877 the creditors of the State agreed 

 to compromise the debt at the rate of 60 cents 

 on a dollar, at 6 per cent, interest. This was 

 not accepted. The question of the adjustment 

 of the debt finally became a political issue. 

 Party lines were not strictly drawn, though 

 the Republicans generally favored payment in 

 full, or acceptance of the bondholders' proposed 

 compromise at first, and afterward the settle- 

 ment proposed by the Legislature at 50 cents 

 and 4 per cent, interest. When the Legislature 

 met, it was expected that the matter would be 

 adjusted in some way. One party favored the 

 acceptance of the bondholders' proposition ; 

 another, a settlement on the basis of 50 cents 

 on the dollar at 6 per cent, interest ; another 

 advocated the basis of 33 J cents; and a fourth 

 party declared itself in favor of total repudia- 

 tion. This was made the leading issue of the 

 popular elections, and many members of the 

 Assembly had been elected upon it. Soon 

 after the Legislature met, the question was 

 taken up. It was referred to the Committee 

 on Finance, Ways, and Means. Mr. Savage, 

 chairman of the committee, submitted the ma- 

 jority report on the proposition regarding the 

 settlement of the State debt on the llth of 

 March. The report was in the form of a bill 

 embodying the following provisions : 



1. That the Capitol bonds, amounting to $493,000, 

 the Hermitage bonds, amounting to $35,000. the Ag- 

 ricultural bonds, amounting to $18,000, the bonds 

 held by Mrs. Polk, amounting to $29,000, and the 

 bonds held by the educational institutions of the State, 

 upon which interest has been paid under a resolution 

 of the last General Assembly, bo settled and funded, 

 with the accrued interest, at the rate of CO cents to 

 the dollar, at 4 per cent, per annum interest. 



2. That the Union Bank bonds, amounting to $125,- 

 000, the Bank of Tennessee bonis^ amounting to $214,- 

 000, the turnpike bonds, amounting to $728,000, the 

 Iliawassee Railroad bonds, amounting to $280,000, the 

 East Tennessee and Georgia Railroad bonds, amount- 

 ing to $144,000 t the La Grange and Memphis Railroad 

 bonds, amounting to $68,000 all the above bonds, 

 except bonds belonging to educational institutions, 

 being bonds of the State debt proper and the bonds 

 issued under the internal improvement act of 1852 and 

 amendments thereto, known as the ante-war railroad 

 bonds, amounting to $8,583,000, be settled and fund- 

 ed, with accrued interest, at 50 cents to the dollar, at 4 

 per cent, per annum interest. 



8. That the bonds funded under the act of 1868, 

 amounting to $569,000, and the bonds funded under 

 the act of 1873, amounting to $4,867,000, bo settled 

 and funded with accrued interest at S3t cents to the 

 dollar, at 4 per cent, per annum interest. 



4. That the Mineral Homo bonds, amounting to $63,- 

 000, and the bonds funded under the act of 1866, sup- 

 posed to cover the war interest, amounting to $ii,'Jl''>,- 

 000, be rejected and not paid. 



5. That the railroad bonds issued since the war, 

 amounting to $2,268,000 now outstanding with ao- 

 crucd interest, be settled at the rate of S3t cents to the 

 dollar, and paid in the non-interest-bearing Treasury 

 warrants of the State, in the denominations $5, $10, 

 $20, and $50, neatly printed on good paper, which 

 shall be receivable for taxes and all other dues to and 

 from the State. 



The new issue of bonds was to run nineteen 

 years and be redeemable at the end of five 

 vears, the interest to be payable once a year at 

 Nashville. The act was to be submitted to the 

 people, who should vote upon it in a special 

 election the first Thursday in August, and then 

 passed upon finally by the Legislature after 

 having received the popular approval. The 

 committee gave the amount and character of 

 the debt and the acts under which the several 

 classes of bonds were issued, making a distinc- 

 tion between what they called the State debt 

 proper, amounting to $2,105,000, and the bonds 

 issued under and subsequent to the act of 1852 

 and posterior acts, including the funding acts. 

 As to the nature and extent of the State's ob- 

 ligation for the rest of the debt incurred by the 

 State, they declared, if there was any obliga- 

 tion, it was secondary, as endorsers, as to $11,- 

 221,000. Of these the law required certain 

 conditions precedent and subsequent, which, in 

 nearly every instance, were not observed. The 

 greater part of the present debt they declared 

 to be the result of a vicious policy and corrupt 

 legislation. They denounced the acts for the 

 sale of the railways and the payment of the 

 purchase-money in bonds of any series, as hav- 

 ing been procured by interested combinations. 

 Setting out the requirements of the act of 1852, 

 they concluded that seven of these were condi- 

 tions precedent, and legal notice to purchasers 

 of the bonds, and, having been violated, that 

 $11,221,000 of bonds issued in aid of railways 

 under the act of 1852 were void, and any set- 

 tlement thereof by the State rests not in a 

 valid contract, but upon consideration of State 

 policy. 



Senator Clapp prepared a minority report, 

 in which he contested the grounds advanced in 

 favor of the rejection of any part of the bond- 

 ed debt. The arguments put forward in favor 

 of scaling down the debt included, besides, that 

 of the inability of the State to raise the taxes 

 necessary to discharge the obligations in full. 

 The report assumes that the liability of the 

 State upon bonds issued in her name rests for 

 its decision on the law and facts of the case, as 

 in a controversy between private persons. If 

 the Legislature has not inherent power to 

 make contracts, it can not communicate such 

 power to its creatures, private and public cor- 

 porations. The State is the primary and only 

 party liable for its bonds. As a legal proposi- 

 tion, the report can not understand upon what 

 ground the State expects to escape liability as 

 surety or guarantor on its railroad bonds as 

 the maker of a negotiable instrument. As to 

 funding the war interest, the minority knows 

 of no principle of international law that sus- 

 pends interest on interest- bearing debt due by 

 one of the belligerents to the other. As to 

 the charge of voidness of post-war bonds be- 

 cause of corrupt legislation and illegality of the 

 government, he showed that the vested rights 

 acquired would not be invalidated were the 

 charge proved ; but he insisted that the proof 



