The Half Has Never Been Told

by Edward E. Baptist

  Yet even though Jackson believed he was acting to protect opportunity for all white men, his policies repeatedly gave the frontier’s entrepreneurial elite exactly what most of them wanted: more Indian lands, more territories to the west for slavery, free trade for cotton, and, finally, destruction of all limits on their ability to leverage enslaved people’s bodies as credit. The majoritarian philosophy of the new Democratic Party would be fatally alloyed by its commitment to both slavery’s expansion and the unregulated, unstable economy that one-eyed entrepreneurs desired. But in the short term, the 1832 election convinced Jackson that the people now expected him to cut off the Monster Bank’s power to divert the blessings of government to the well-connected. And Jackson’s most fervently populist followers had long been anticipating a moment of confrontation with the nefarious powers who they thought were scheming to steal the independence and equality promised to white men by American citizenship. The B.U.S. charter allowed it to serve as the central bank until 1836, so Jackson pushed his advisers to find a legal or quasi-legal way to move against the bank. Finally, the president ordered Secretary of the Treasury Louis McLane to remove government deposits from the B.U.S. Instead, McLane issued a report showing that Biddle’s staff had managed the deposits judiciously. So Jackson reshuffled his Cabinet. Roger Taney eventually became the secretary of the treasury, and in September 1833 he began to draw down the $10 million in federal money that was still sitting in the B.U.S. account.75

  Needing somewhere to put federal money, the executive branch decided to distribute it among individual state-chartered banks. “Those which are in hands politically friendly will be preferred,” wrote one of Jackson’s most trusted political operatives. The opposition press called the recipients of federal money the “pet” banks. The Union Bank of Nashville was the chosen “pet” for Tennessee, for instance. It just happened to have been founded by the brother-in-law of James K. Polk, Jackson’s main political lieutenant in the state. The ranks of the “pets” soon expanded to over thirty. While the eastern institutions that received federal deposits were conservative with the new influx of money, banks at the leading edge of southwestern expansion used government funds as an excuse to expand lending dramatically. The Mississippi pets’ directors knew that after land sales in the Chickasaw and Choctaw cessions, government land offices would deposit hundreds of thousands of dollars. Anticipating these new reserves—which were also, they might have remembered, liabilities that could be withdrawn—the banks began to print and lend their own paper money. By late 1833, Mississippi banks had twenty times as much paper floating around the economy as they had gold in their vaults to back it up. From Columbus, Mississippi, a boom town in the state’s northeastern corner, D. W. Jordan chortled, “Here I can make money money” to his North Carolina relatives. John Knight reported that Natchez cotton was 18 cents per pound. He wanted to buy a woman for his wife, and Isaac Franklin was now charging $1,000 for a well-schooled house servant. “We shall do well this season,” Franklin wrote.76

  Back in Philadelphia, however, the Monster Bank still had claws. After Jackson’s withdrawal of the deposits, Biddle fought back. In November 1833, the B.U.S. began to call in all its loans. As he deliberately induced a massive recession, Biddle announced that “the other banks and the merchants may break, but the Bank of the United States shall not.” Businesses closed down. Factories and workshops stood idle. Retail districts had no buyers. The slowdown threatened devastation to heavily leveraged planters and cotton merchants. Interest rates offered to the brokers who flocked to New Orleans every fall to buy the cotton harvest rose to 25 percent. Cotton purchases dropped, pushing the recession up the rivers into the Crescent City’s vast watershed. In Mississippi, wrote one Natchez lawyer, “times are very hard, the mad course of the president has caused more ruin in the country than was ever known before.” Now John Knight watched cotton prices plummet to 9 cents per pound. The price of slaves followed. “I tried every Bank in this City for a check on the North,” wrote a panicked Isaac Franklin from New Orleans, “[but] none will.” “The Bank [here] will not discount a dollar,” confirmed his Natchez allies.77

  Many blamed Jackson. Elite southwestern Jacksonians turned apostate. Robert Walker, previously one of Jackson’s Mississippi political lieutenants, switched sides. Franklin Plummer was the only holdout, and he was reportedly wavering. Loyalist J. F. H. Claiborne expressed anti-bank views at a public meeting in Natchez, and was physically assaulted and beaten by the mostly wealthy crowd. A torrent of complaints poured into the offices of congressmen. Philadelphia businessman John Wurts wrote a letter imploring James K. Polk to use his “personal and political influence . . . to provide some remedy to check the impending evil.” From Tennessee, John Welsh warned that “even the enemies of the Bank here freely admit that all this distress may be corrected by a return of the deposits to the U.S. Bank.” Henry Clay, meanwhile, organized the Senate to censure Jackson for removing the deposits. But the president refused to quail. When a delegation of businessmen visited Jackson, he said: “What do you come to me for, then? Go to Nicholas Biddle. We have no money here, gentlemen. Biddle has all the money.” The bank, Jackson believed, was confirming the warnings of his Veto Message. His loyal followers agreed: Jackson loyalist Terry Cahal told James K. Polk that Tennessee Bank allies were squealing that the “mob” was plotting a revolution in which “the rich [will be] plundered by the rabble.” But this kind of talk reinforced the Jacksonian claim that B.U.S. supporters hated white men’s democracy, while Jackson partisans cheered his attack on the bank: “Crush it forever!! It is a Monopoly which ought not to exist among us.”78

  The recession winter of 1833–1834 was difficult, but by spring the economy began to cooperate with Jackson. Good harvests in Europe and new supplies of precious metal for circulation in the Western economies raised consumer demand and lowered interest rates. But one of the most significant factors that turned the southwestern economic climate from bank war to boom was the replication of the C.A.P.L.’s slave bonds on a far vaster scale. The new banks began to appear right as the bank war began, starting with the Union Bank of Louisiana in 1832. Structured on the C.A.P.L. model but significantly larger, the bank sold $7 million in “faith bonds” through the agency of the Barings. The proceeds of the faith bonds were to fund the capital-intensive projects of shareholders—in other words, to help them buy slaves—and back a massive commercial credit operation that would help move the annual pile of cotton from steamboat landings to Liverpool docks. By 1834, the Union Bank was taking up a lot of the slack left in New Orleans by the retreat of the B.U.S. In November 1834, it became a pet bank, opening access to another pool of money.

  Next, the state legislature established the Citizens’ Bank of Louisiana with $12 million in faith bonds, and then authorized several other smaller institutions (for instance, the Atchafalaya Railroad and Banking Company, capital $2 million). Louisiana’s orgy of bank-creation increased the number of the state’s banks from four to sixteen and expanded the total amount of authorized capital from $9 million to $46 million. By 1836, New Orleans had the densest concentration of banking capital in the country, outpacing Philadelphia and New York and suggesting that Louisiana might become the nation’s financial power center in the near future. The Florida territory, with fewer than 100,000 residents, launched multiple banks, including its own Union Bank, for which it issued faith bonds. Alabama also funded its banking system with bonds, selling most to the Rothschilds of Paris, Europe’s most powerful bankers. In 1832, the total amount of the bank loans available to southwestern borrowers had been under $40 million, including $30 million lent by the B.U.S. By 1837, despite the retreat of the B.U.S, southwestern bank loans soared to more than $80 million—one-third of the national total and more than that of any other region. Southwestern legislatures had authorized significantly more banking capital in the 1830s than what the B.U.S. had earlier applied to the economy of the entire United States.79

  Image 7.4. An elderly but
still pugnacious Andrew Jackson as President, slaying the many-headed Hydra of the nefarious Second Bank of the United States. The head with the top hat is Nicholas Biddle. “General Jackson slaying the many headed monster,” Henry B. Robinson, 1836. Library of Congress.

  Although some of the banks were ostensibly chartered to create investment in the state’s infrastructure—including railroads, or, in the case of the New Orleans Gas Light and Banking Company, modern municipal utilities—the major purpose of the splurge was to rush seeds of growth into the fields of southwestern entrepreneurs’ dreams. In the course of a mere four years, from 1833 through 1836, 150,000 enslaved people were moved from the old states to the new. They cleared and planted and harvested millions of new acres, and the US cotton crop doubled in size. Meanwhile, the bonds created by southwestern states—each one a guarantee of an income stream from the labor of mortgaged hands—found buyers in all of the major financial centers of the Western world—London, New York, Philadelphia, Amsterdam, Hamburg, Bremen, and Paris. Investors around the world voted their confidence in slavery’s expansion. And rising London prices for southwestern securities, statistics demonstrate, pushed up slave prices in New Orleans.80

  The irony is obvious, in hindsight. Andrew Jackson had mobilized common white male anger at arrogant, antidemocratic supporters of the B.U.S. and its allies. He and his followers, from the lowliest voter to loyal congressmen, metaphorically Potterized Biddle and George Poindexter and all the members of the old southwestern bank-vault factions that had monopolized frontier opportunity and tried to tell ordinary citizens to keep quiet. In fact, cartoons of the day even depicted Jackson chopping off the penile snakeheads of a hydra-headed Monster Bank.

  Yet the destruction of the B.U.S. and the ensuing deployment of banking innovations didn’t make the southern financial environment more democratic. For instance, when Franklin Plummer, the champion of the people of southeastern Mississippi, visited Natchez before the 1835 state elections, men who ran the new banks bought him a fancy carriage. Plummer then reversed his rhetoric against the use of state power to deliver bank goodies to insiders and campaigned for a slate of pro-bank candidates. When elected, these pro-bank state legislators sent Robert Walker to Washington as senator, deposing George Poindexter from office. Walker had depicted Poindexter as the servant of the Monster Bank, an arrogant opponent of white male equality. Now he and Plummer encouraged the Mississippi legislature as it chartered so many banks that by 1839 the state’s total on-paper bank capitalization was $63 million—more than the national B.U.S. at its largest. And old insiders managed to remain insiders. Stephen Duncan, leader of the old Natchez-based Planters’ Bank, launched a new bank, which the state legislature chartered. Henry Clay wrote his Mississippi allies in 1834, asking a Duncan ally to give his son a loan so that he could buy a Mississippi cotton plantation: “I have a number of surplus slaves here, principally young and well adapted to a cotton plantation.” Banker and planter were often the same: ten of the top eleven borrowers from the Union Bank of Florida were members of its board of directors, or immediate relatives thereof. While some charters required new institutions to distribute loans in a more geographically equal fashion than had predecessor banks, the new banks did nothing different from the B.U.S. when it came to distributing credit to lower-class men. Thus, those who had derived political benefit from common white men’s insistence on equal manhood replaced the B.U.S. with an insider-favoring banking system.81

  “The people” thought they had slain the monster, but the stumps sprouted new heads that feasted on the huge sums of capital being imported via European sales of state bonds that securitized slave mortgages. All of these innovations planted a crop of dramatic consequences. Securitization’s ability to export risk away from the immediate lender enabled unregulated borrowers to expand leverage without end. Here’s how the equation worked. In 1835, a cousin told Anna Whitteker that “each of his hands made $500 last year, raising cotton” in Mississippi. If remotely true, that kind of revenue would mean a return of over 30 percent per year. Enslavers with access to bank credit could now borrow money on slaves at 8 percent. The margin between anticipated returns on borrowed capital and its cost to borrow was thus huge. And the direct risk appeared to be negligible. State-guaranteed slave-mortgage bonds dispersed much of the immediate risk of borrowing to others—to bondholders, to taxpayers, and, above all, to the enslaved. In addition, entrepreneurs themselves—including judges, politicians, and state officials—controlled debt collection in their states, making it less likely that elite borrowers would be foreclosed, even if they fell behind on payments. Banking elites had the recourse of socializing the losses—making the whole population pay off the debts of failed enterprises—just as the old Plummer (pre-carriage) and the old Walker (pre–bank war) had once warned. So as enslavers multiplied their leverage, they multiplied their revenue without increasing their individual risk. In response to these clear incentives, enslavers created still more ways to leverage slaves into still more leverage. They mortgaged the same collateral from multiple lenders. They used slaves bought with long-term mortgages to bluff lenders into granting unsecured commercial loans. Above all, they kept buying more slaves on credit. Even if they ran into problems, they figured they would still win, because they could sell their assets. For the slave prices were still rising.82

  Yet the consequences of seemingly infinite and risk-free leverage were perverse, and not just because sexual predation helped stoke the risk-taking atmosphere. Securitization enabled both the immediate borrower and the immediate lender to escape the direct consequences of risk—economists call this “moral hazard”—even as they dramatically increased the total risk accumulated in the financial system. The multiplication of total leverage dramatically amplified the general consequences of a potential setback, such as a sudden decline in the cotton prices by which enslavers multiplied pounds picked per hand to calculate anticipated revenue. Yet by late 1834, few were thinking about such possibilities. The biggest boom yet seen in the history of slavery’s expansion began to swell as money from the new southwestern banks seeded the region with enslaved hands ready to meet a sudden increase in European demand. In 1832, cotton brought 9 cents per pound. By 1834, a woman reported from the Huntsville slave market, “cotton [at] 13 cents . . . has turned their heads.” In 1835 cotton hit an ecstasy-inducing 18 cents per pound. And demand for slaves kept soaring. “I have just returned from Charlottesville court, great many buyers[,] and negroes was scarce and high,” reported Rice Ballard’s employee from a buying trip along the Blue Ridge Mountains.83

  “People here are run mad with speculation,” wrote one visitor to the former Chickasaw land in northeastern Mississippi. “They do business in . . . a kind of phrenzy [sic]. [Gold] is scarce, but credit is plenty.” In 1835, government land offices in Mississippi sold 2.9 million acres, more than had been sold in the entire nation in 1832. A few found frenzy worrisome. “We have not yet reached the neighborhood of a sufficiency of Banking Capital—but taking this as true I would prefer to approach the point gradually, and not with such rapid strides,” wrote a Louisiana man in 1835, after the legislature chartered four banks in two days. Cheap land was vanishing, wrote a migrant to newly organized Noxubee County, Mississippi. “Speculators and cappitalist [sic] all have an idea to it. I have never in my life seen such a rush for land.” Next, he predicted, came the forced migrants—“this country will be a perfect negro quarter”—who, underfed by gambler planters, “will kill your pigs hogs and cows, I feal the effects of it already.”84

  But the tunnel vision of one-eyed men seemed to be working. Banks were lending, and land bought by speculators at the government minimum of $1.25 sold at $20 per acre. The clanking of chains rose from the roadways leading into the courthouse towns; entrepreneurs looked at their ledgers, at bales stacked by the landing, and at the men and women trudging out to the springtime field; light-skinned women stood in front of tables where traders poured their drinks and negotiated a pric
e. Prosperity trickled credit further down the chutes and slides of the southwestern economy into the pockets of slaveholders, overseers, and random white men with smooth tongues. Like Anne Royall cresting the hill and rounding the Alabama bend back in 1819, most white southwesterners thought they could see, spread out before them, a glorious future shining in a bubble. It looked like that first day when ten thousand little seedlings in the cotton field had obviously become a host of young plants. The green muscled its way upward, into the sight of the slave owner’s focused eye. Who knew how miraculous the crop of his seed might become?

  8

  BLOOD

  1836–1844

  HERE WAS WILLIAM COLBERT’S awakening. In the middle of the night, a gruff white man’s shouts splintered his child’s deep sleep, and then, on a lower register still came his older brother January’s voice in response. Some other antenna began to rattle. William was sensing that his parents were in distress. Whenever that happened, William always looked for big brother Jan, tall and unbroken. And now, William was out of bed and accelerating out the door of his parents’ cabin toward the sound of January’s voice.

  He stopped like a braked wheel. The full moon shone on January tied to the pine tree that stood across the yard from the long row of shacks. The white man stood behind January with a bullwhip. A silent chorus of enslaved people watched from their porches. And the young man—caught on the way back from visiting a girl at the next labor camp—refused to cry.