Image 7.2. Auction of enslaved baby. African-American and white abolitionists identified family separations and the exposure of women to sexual abuse as two of the most devastating impacts of the domestic slave trade. Henry Bibb’s autobiography described his own misery at being separated—like the parents and spouses crying and pleading here—from his wife and children. Narrative of the Life and Adventures of Henry Bibb, an American Slave (New York, 1849), 201.
To most one-eyed men, the B.U.S. seemed like a maiden-aunt chaperone who frowned at any sign of a creeping hand. Enslavers benefited from bank-induced stability and steady credit expansion, but the B.U.S. limited credit expansion and favored only a few entrepreneurs. Of course, there were other important reasons—even “rational” ones—why enslavers wanted to borrow more money. The more slave purchases they could finance, the more cotton they’d make, and cotton was the world’s most widely traded product. It had an unending market. So the more cotton they made, the more they’d sell, and thus the more money they’d make. Owning more slaves enabled planters to repay debts, take profits, and gain property that could be collateral for even more borrowing.62
At the same time, it made sense that people with money wanted to lend it to entrepreneurs on slavery’s frontier. People who have money want to lend it if they can make still more money doing so, especially if they can feel certain of repayment. Lending to the South’s cotton economy was an investment not just in the world’s most widely traded commodity, but also in a set of producers who had shown a consistent ability to increase their productivity and revenue. In other words, enslavers had the cash flow to pay back their debts. And their debts were secure, since enslavers owned a lot of valuable collateral. In fact, they owned the biggest pool of collateral in the United States: 2 million slaves worth over $1 billion. Not only was that almost 20 percent of all the wealth owned by all US citizens, but it was the most liquid part of that wealth, thanks to the efficiency of markets manned by professional slave traders and supplied with credit by a B.U.S.-governed financial system (see Table 7.1).
Potential lenders—such as the banks of Western Europe and their investors, the old and new upper classes, whose savings Baring Brothers and the Bank of England pooled—wondered whether Biddle was perhaps not investing aggressively enough, or passing on sufficient profits to Europeans who bought B.U.S. bonds. Enslavers, meanwhile, wanted to transform their control over enslaved people’s bodies into authority over their own credit. In 1827, a Louisiana enslaver had created a tool that might answer both tasks at once. J. B. Moussier was facing a lawsuit by Rogers and Harrison, Virginia-based slave-trading partners to whom he owed $21,000 for seventy men, women, and children he had bought on a short-term, high-interest loan. What if, Moussier wondered, planters used slaves as collateral to raise capital overseas, from people who needed American cotton and sugar, and then used the capital to build a lending institution that enslavers themselves could control? Moussier took his idea to New Orleans politician-entrepreneurs Edmund Forstall and Hugues Lavergne, who engineered it into the charter of the Consolidated Association of the Planters of Louisiana (C.A.P.L.), chartered by the state legislature in 1827.63
TABLE 7.1. ENSLAVED PEOPLE AND TOTAL US WEALTH
* Author’s estimate.
Source: Historical Statistics of the United States: 1789–1945 (Washington, DC, 1949); Susan B. Carter, Scott Sigmund Gartner, Michael R. Haines, Alan L. Olmstead, Richard Sutch, and Gavin Wright, eds., Cambridge Historical Statistics of the U.S. (Cambridge, MA, 2006).
Here are the nuts and bolts of the C.A.P.L. First, potential borrowers would apply to buy stock in the “Association.” Their application accepted, they could mortgage slaves and land to the C.A.P.L. in order to pay for the stock. The stock would entitle them to borrow C.A.P.L. bank notes of up to half the value of the mortgaged property. To ensure that people would take these bank notes at face value, the founders needed a large reserve of hard cash. They planned to raise it by selling bonds on the financial markets of the Western world. Each bond would be $500 in face value—about the average price, in the 1820s, of a young enslaved man. A bond would reach maturity in ten to fifteen years, and it would pay investors 5 percent in annual interest.64
Lenders always want security, though, so how would the C.A.P.L. assure potential investors that the bonds would be worth their face value plus interest? Thomas Baring of Baring Brothers helped Lavergne and Forstall to convince the state legislature to back the C.A.P.L.’s bonds with the “faith and credit” of Louisiana. If loan repayments from planters failed and the bank could not pay off the bonds, the taxpayers of Louisiana were now obligated to do so. The state’s commitment convinced the European securities market. In 1828, the C.A.P.L. received from Baring Brothers, its European brokers, the first receipts from bond sales that would ultimately total $2.5 million in “sterling bills” redeemable for silver at the Bank of England. The bank started to lend out $3.5 million in new C.A.P.L. notes, printed by a London engraver, to planter-stockholders.65
Image 7.3. In the late 1820s, southwestern states began to issue bonds that turned slave mortgages into securities that could be marketed to investors around the Western world. This helped pump credit onto slavery’s frontier, where it was used to purchase large numbers of enslaved people from the southeast. Citizens’ Bank faith bond, marketed in Europe. When first issued, the price was approximately that of a first-rate female slave in New Orleans. Louisiana Banking collection, Louisiana Research Collection, Tulane University.
For the next dozen years, entrepreneurs working with legislators in Louisiana, Mississippi, Alabama, Tennessee, and the territories of Arkansas and Florida replicated C.A.P.L. innovations in a series of new banks. Many were bigger, generated more capital, and sold even more bonds than the C.A.P.L. The tens of thousands of enslaved people named in their documents were still used as collateral mortgaged to a lender—which was now a local bank like the C.A.P.L.—but the banks’ bonds securitized the slave mortgages. Securitization is the pooling of debt from many borrowers so that it can be sold off in uniform chunks, reducing the risks inherent in lending to one person at a time. Now, all bond-buyers would share in the profits of the C.A.P.L. while being shielded against the kind of catastrophic individual losses a single lender would suffer if, say, a borrower’s slaves died en masse at a malaria-infested labor camp, or if floods destroyed a cotton crop.66
The financial product that such banks as Baring Brothers were selling to investors in London, Hamburg, Amsterdam, Paris, Philadelphia, Boston, and New York was remarkably similar to the securitized bonds, backed by mortgages on US homes, that attracted investors from around the globe to US financial markets from the 1980s until the economic collapse of 2008. Like the C.A.P.L. bonds, mortgage-backed securities shifted risk away from the immediate originators of loans onto financial markets while promising to spread out and thus minimize the consequences of individual debtors’ failures. Investors who purchased latter-day mortgage-backed securities planned to share in streams of income generated by homebuyers’ mortgage payments. Likewise, the faith bonds of the 1830s generated revenue for investors from enslavers’ repayments of mortgages on enslaved people. This meant that investors around the world would share in revenues made by hands in the field. Thus, in effect, even as Britain was liberating the slaves of its empire, a British bank could now sell an investor a completely commodified slave: not a particular individual who could die or run away, but a bond that was the right to a one-slave-sized slice of a pie made from the income of thousands of slaves.
Typically, credit brings risk. For the borrower, there is the risk of not being able to pay, and for the lender, the risk that he will not be repaid. The C.A.P.L. model shifted risks away from both the immediate lender—a bank—and the borrower. In fact, the faith bonds shifted, or “socialized,” risk onto two groups of people. The first was the enslaved. Their own hands would have to repay the loans. And if their owners did not pay their debts, the enslaved people themselves would b
e foreclosed upon.
Second, if neither bank revenue nor foreclosure sales of human collateral could pay back the bondholders, the citizens of the state would have to redeem the bonds with their own taxes. The fact that popularly elected legislatures repeatedly supported such bond schemes is therefore remarkable. After all, many elements of the intensely democratic frontier electorate saw banks as machines designed to channel financial benefits and economy-governing power to unelected elites. But advocates of the new banks often posed as competitors to much-resented factions favored by the hated B.U.S. When Mississippi’s newly democratized legislature considered the possibility of chartering a new bank, its backers insisted that doing so would provide competition to Stephen Duncan’s Bank of Mississippi. That bank’s “aristocratic pack” of supporters “ridiculed the notion of anybody but Dr. Duncan and Gab. Tichenor knowing anything about Banking or even being able to put their feet in a Bank except as petitioners.” Or so claimed a board member for the new institution.
Enhancing the effect of the rhetorical device of posing new banks as democratic blows against established cliques was the sudden increase in opportunities for putting credit to use. After the passage of Indian removal, the US government imposed the Treaty of Dancing Rabbit Creek on the Choctaws, opening 11 million Mississippi acres to sale. Federal treaty-makers’ agreements with the Chickasaw, meanwhile, transferred another 7 million. Potential bank-borrowers imagined what they would do with the land. “A thousand avenues [are] wide open here for money making,” as one Mississippi enslaver wrote, “such as planting shaving paper [buying and selling other people’s debt for profit] or speculating by buying & selling all kinds of property.” Robert Walker, a supporter of the new bank, wrote that “Kentucky’s coming, Tennessee’s coming, Alabama’s coming, Georgia’s coming, Carolina’s coming, Virginia’s coming, and they’re all coming to join the joyous crowd of Mississippians.”67
The new banks were bound to find themselves in conflict with the B.U.S. monopoly on financial and monetary control, but the C.A.P.L. showed borrowers, bankers, slave traders, and other entrepreneurs an accessory pathway around Nicholas Biddle. And they traveled in that direction hand in hand with Andrew Jackson and his administration. Jackson supposedly hated all banks, but his policies would lead to explosive growth in both new banks and new lending. Even more ironically, Nicholas Biddle did at least as much as Jackson to create a new financial environment in which C.A.P.L.-style innovations could run as wild as one-eyed men demanded.
From 1828 onward, Biddle had tried to court both Jackson and other southwestern entrepreneurs. Yet neither Biddle’s visits to the Oval Office nor a dramatic surge of B.U.S. credit into southwestern channels changed the minds of the bank’s opponents. These included not only resentful planters, but also radicals like the members of the Philadelphia Workingmen’s Party, who attacked the disproportions of wealth that were emerging in eastern urban centers. The bank’s monopoly control over American credit, complained one “Workie’” spokesman, enabled “some men to live in splendor on the labor of operatives.” Then there were those who still resented the bank’s role in the troubles of 1819, such as Jackson’s close adviser Amos Kendall. Even Baring Brothers, long-term B.U.S. trading partners, were beginning to perceive Biddle’s regulatory power as an impediment to C.A.P.L.-style endeavors.68
Biddle’s administration contacts hinted to the bank that an extension of its charter, which expired in 1836, was a real possibility. But Jackson kept his cards close to the vest. By 1832, the uncertainty was driving Biddle crazy, and even though Jackson’s more pro-bank counselors told the bank president to avoid pushing, Biddle made an unwise decision. The suave Kentuckian Henry Clay, Jackson’s inevitable 1832 opponent for the presidency, persuaded the vulnerable Philadelphian to try to back Old Hickory into renewing the bank’s charter before the election. Clay believed he could trap Jackson on a dilemma. If Jackson vetoed the recharter, Old Hickory would lose the electoral votes of pro-bank Pennsylvania. If Jackson signed the bill, he would blur the lines between himself and Clay, blunting the enthusiasm of his most fervent foot soldiers. In June, the Clay-manipulated Senate passed a bill reestablishing the B.U.S. for another twenty years. Southwestern senators split on the issue. Louisiana’s delegation supported it. So did Mississippi’s George Poindexter; B.U.S. loans financed his extravagant lifestyle. But Mississippi’s other senator stood against it, with those of Tennessee and Georgia.69
On July 3, the House followed suit with its approval. The next day, Martin Van Buren, who was replacing Calhoun as the vice-presidential candidate on Jackson’s ballot, found the president sick in bed. The old general squeezed Van Buren’s hand and struggled to sit upright. “The bank, Mr. Van Buren, is trying to kill me, but I will kill it,” he said. Back in 1815 at New Orleans, Edward Pakenham had also thought he had Jackson trapped. Pakenham died on a sugarcane field. Over the next week, alternating between his sickbed and meetings with a hard core of anti-bank advisers—Martin Van Buren, Maryland’s Roger B. Taney, and Amos Kendall—Jackson worked up an essay that supported what he was about to do. On the 10th, he announced his veto of the bank recharter.70
This was an unprecedented act. No president, opponents would charge, had vetoed an act passed with overwhelming support by both houses, simply because he personally disagreed with the policy it enacted. Yet Jackson asserted an idea of power in a representative government that showed why less wealthy white men supported him with such ferocious loyalty. In the president’s “Veto Message,” he argued that all white male citizens were precisely equal in political rights and power. The government should not favor anyone, and in particular, it should not fulfill the self-interested wishes of the wealthy over the will of the majority. This was no mindless critique of government. He did not agree with, for instance, the “d—d tadpole eating crew,” as one Tennessee Jacksonian called South Carolina’s nullifiers. Instead, said Jackson, if government “would confine itself to equal protection, and, as Heaven does when it rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.” But in Jackson’s judgment, the bank did “not measure out equal justice.” Instead, it used the government’s favor to make “the rich richer and the potent more powerful.” The federal charter, government deposits in the bank, and monopoly power over the workings of the economy enabled the B.U.S. to make its stockholders “a privileged order, clothed both with great political power and enjoying immense pecuniary advantages from their connection with the Government.”71
Congress exploded. The reaction was so furious, in fact, that Biddle believed the electorate would punish Jackson at the polls. “One individual,” wrote Biddle, has “opposed his will to the deliberate reflections of the representatives of the people.” And indeed, the fall 1832 election was an epic moment that helped crystallize the coalitions of voting blocs and politicians into modern political parties. Henry Clay’s supporters, outraged at the veto, included the “National Republicans” who had supported John Quincy Adams. They linked up with former Jackson supporters who thought the national bank was necessary and believed that the general’s veto had broken all restraints on the executive branch. Also joining them were supporters of moral and economic improvement who believed that Jackson’s followers ignorantly opposed progress. Young Abraham Lincoln, for instance, was the only reader in his family, the one who left his father Thomas’s farm in the woods. He had walked all the way to the Illinois frontier town of Salem Creek to work in a store and read law. Abraham Lincoln was also the only one in his family who joined the brand new party of Jackson’s opponents: the Whigs.72
Clay’s opponents included most of Jackson’s core constituencies from the 1828 election. In the veto summer their representatives united at the first-ever national convention of the Democratic Party. They included many southeastern and southwestern enslavers who lacked personal connections to merchants and bankers. The Democrats also included small farmers, tenants, and the rural landless of t
he southern and northwestern frontiers, urban workers, and Robert Potter sitting in the Granville County jail: everyone energized by Jackson’s assertive refusal to accept anything less than white male equality.
The B.U.S. openly subsidized Clay’s presidential campaign. In so doing, it did much to prove Jackson’s points—which Biddle foolishly publicized by having tens of thousands of copies of the Veto Message distributed throughout the country. He thought that everyone who read it would agree that Jackson had produced a “a manifesto of anarchy,” addressed to a “mob.” But when all the votes were cast, Biddle’s “mob”—or, in Jackson’s terms, the “people”—had sustained the president’s veto of the pro-bank Congress, reelecting Jackson by a clear majority in both popular and electoral votes.73
Anyone who understood at the subrational level why Robert Potter’s support increased with each conflict he fought against the Granville County elite would also understand why Clay and Biddle and the B.U.S. went down to inglorious defeat in November 1832. The destruction of the B.U.S. definitively established popular but white-males-only democracy as a winning play in the US political competition. White men forced to the margins of the changing US economy usually chose the Democrats as their political home, and would do so for the next fourteen decades. Frontier enslavers, even if they were outside of the old bank cliques, didn’t want the same kind of democracy that Jackson’s hottest partisans among common white men wanted. But the two groups could cooperate, at least during good times.74
The Half Has Never Been Told Page 35