Banking on Slavery in the Antebellum South.

jgoodguy

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#1
Banking on Slavery in the Antebellum South
Emphasis mine
Inspired by the thread on NY loans to Southern plantations owners.

Someone had to finance a legal economic enterprise in the Antebellum South.

Despite the rich literature on the history of slavery, the scholarship on bank financing of slavery is quite slim. My research demonstrates that commercial banks were willing to accept slaves as collateral for loans and as a part of loans assigned over to them from a third party. Many helped underwrite the sale of slaves, using them as collateral. They were willing to sell slaves as part of foreclosure proceedings on anyone who failed to fulfill a debt contract. Commercial bank involvement with slave property occurred throughout the antebellum period and across the South. Some of the most prominent southern banks, as well as the Second Bank of the United States, directly issued loans using slaves as collateral. This places southern banking institutions at the heart of the buying and selling of slave property, one of the most reviled aspects of the slave system. This project will result in the first major monograph on the relationship between banking and slavery in the antebellum South.​
A look under the hood of slavery on how money moved it to the determent of African Americans. Bear in mind that morality plays second fiddle to money and all we see is legal and moral in the world where these activities were transacted. It is another look at one of the mechanisms that supported slavery such as legal, social and political.
Chapter 1 will set the scene, describing southern banking, explaining how various mortgage and loan contracts worked, and examining the legal issues regarding contracting, foreclosure, and the breakup of slave families. Chapter 2 will examine slave mortgages by southern commercial banks through the 1830s, looking particularly at the role these mortgages played in the speculation leading up to the Panics of 1819 and 1837. Chapter 3 will focus on the involvement of the First and Second Banks of the United States in slave mortgaging, and the role these mortgages played in the failure of the Second Bank in the 1840s. Chapter 4 will examine the plantation banks, with a particular emphasis on the Citizens’ Bank of Louisiana. Although the Citizens’ Bank of Louisiana stopped payment on its bond obligations in 1842, it continued in operation until the early twentieth century. During the 1840s, it actively provided mortgages on plantations and slaves without the direct sanction of the state, and by 1852, the bank was able to convince the state to revive its charter. It actively underwrote slave mortgages through the Civil War. Chapter 5 will return to the experiences of commercial banks with slave mortgaging during the 1840s and 1850s. In particular, this chapter will examine the relationships of banks with slave traders, and the effects of sales on slave families. The final chapter will look at the legal and economic implications of emancipation for these mortgage contracts.​
 
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#2
Second paragraph, "....how money moved it to the detriment of African Americans." I admit I know very little to this specialized subject matter, and very much desire to review it, not for the purpose of fault, but rather to learn from your experience. Block sale advocates, as slave traders and participants in defaulted loans such as found in auctions to a highest bidder; and for those that possibly are not yet in default but in late payment; the influence these 'bill-collectors' used against existing delinquency, for breaking up a full block sale, and causing piecemeal dispersion.
I wish not to guide nor direct your monograph in any manner, but rather desire for you to understand this reader's interest, and particular items that surfaced to my thoughts, believing I could touch a chord of harmony to know if I understood you correctly. My personal thought immediately saw opportunity for someone to map out the spread of slavery, similar to patterns of immigration, and had wondered too, if you had that goal in mind.
Allow me to repeat my own agenda; I wish not to meddle with your outlined thesis; but you sparked enough interest for me to remain vigilant.
Thanks, Lubliner.
 

jgoodguy

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#3
Second paragraph, "....how money moved it to the detriment of African Americans." I admit I know very little to this specialized subject matter, and very much desire to review it, not for the purpose of fault, but rather to learn from your experience. Block sale advocates, as slave traders and participants in defaulted loans such as found in auctions to a highest bidder; and for those that possibly are not yet in default but in late payment; the influence these 'bill-collectors' used against existing delinquency, for breaking up a full block sale, and causing piecemeal dispersion.
I wish not to guide nor direct your monograph in any manner, but rather desire for you to understand this reader's interest, and particular items that surfaced to my thoughts, believing I could touch a chord of harmony to know if I understood you correctly. My personal thought immediately saw opportunity for someone to map out the spread of slavery, similar to patterns of immigration, and had wondered too, if you had that goal in mind.
Allow me to repeat my own agenda; I wish not to meddle with your outlined thesis; but you sparked enough interest for me to remain vigilant.
Thanks, Lubliner.
I am just following where the author goes.
 

O' Be Joyful

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#4
Chapter 3 will focus on the involvement of the First and Second Banks of the United States in slave mortgaging, and the role these mortgages played in the failure of the Second Bank in the 1840s.
I've always suspected that Andy Jackson had to have had some...good reason to oppose the Bank. And there it is, plain as day, Andy was a secret abolitionist! :rolleyes:

Another great find jgg. :thumbsup: :thumbsup:
 
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#6
Chapter 1 will set the scene, describing southern banking, explaining how various mortgage and loan contracts worked, and examining the legal issues regarding contracting, foreclosure, and the breakup of slave families. Chapter 2 will examine slave mortgages by southern commercial banks through the 1830s, looking particularly at the role these mortgages played in the speculation leading up to the Panics of 1819 and 1837.
Southern banks? Really?

This may work out to be a very entertaining thread.
 

jgoodguy

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#8
Southern banks? Really?

This may work out to be a very entertaining thread.
It is rather dry to be entertaining, but there were Southern Banks and Northern Banks lending in the South. Not too long ago we had a thread on Northern insurance companies selling life insurance policies on slaves. It was a completely unremarkable mundane economic activity.
 

USS ALASKA

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#9

USS ALASKA

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#10
"Despite notable differences in the specific form and structure of each region’s banking system, they were all aimed squarely at a common goal; namely, realizing that region’s economic potential. Banks helped achieve the goal in two ways. First, banks monetized economies, which reduced the costs of transacting and helped smooth consumption and production across time. It was no longer necessary for every farm family to inventory their entire harvest. They could sell most of it, and expend the proceeds on consumption goods as the need arose until the next harvest brought a new cash infusion. Crop and livestock inventories are prone to substantial losses and an increased use of money reduced them significantly. Second, banks provided credit, which unleashed entrepreneurial spirits and talents. A complete appreciation of early American banking recognizes the banks’ contribution to antebellum America’s economic growth."

'Antebellum Banking in the United States' by Howard Bodenhorn, Lafayette College
http://eh.net/encyclopedia/antebellum-banking-in-the-united-states/

Cheers,
USS ALASKA
 

jgoodguy

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#11
"Despite notable differences in the specific form and structure of each region’s banking system, they were all aimed squarely at a common goal; namely, realizing that region’s economic potential. Banks helped achieve the goal in two ways. First, banks monetized economies, which reduced the costs of transacting and helped smooth consumption and production across time. It was no longer necessary for every farm family to inventory their entire harvest. They could sell most of it, and expend the proceeds on consumption goods as the need arose until the next harvest brought a new cash infusion. Crop and livestock inventories are prone to substantial losses and an increased use of money reduced them significantly. Second, banks provided credit, which unleashed entrepreneurial spirits and talents. A complete appreciation of early American banking recognizes the banks’ contribution to antebellum America’s economic growth."

'Antebellum Banking in the United States' by Howard Bodenhorn, Lafayette College
http://eh.net/encyclopedia/antebellum-banking-in-the-united-states/

Cheers,
USS ALASKA
Banks increased the money supply by issuing their own notes.
 
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#12
It is rather dry to be entertaining, but there were Southern Banks and Northern Banks lending in the South. Not too long ago we had a thread on Northern insurance companies selling life insurance policies on slaves. It was a completely unremarkable mundane economic activity.
I'm pretty sure most of the credit issued in the South came from "factors," agents of cotton planters who were mostly based in Southern port cities. "Factors" extended credit for supplies with cotton and other crops pledged as collateral.

"Factors" of course got credit from their clients in (ahem), the North.
 

jgoodguy

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#13
I'm pretty sure most of the credit issued in the South came from "factors," agents of cotton planters who were mostly based in Southern port cities. "Factors" extended credit for supplies with cotton and other crops pledged as collateral.

"Factors" of course got credit from their clients in (ahem), the North.
Also lending by merchants for machinery, furniture, seeds, implements and so on, financed by northern banks as loans to those merchants to buy the merchandise.
 

jgoodguy

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#14
Banking on Slavery in the Antebellum South
Emphasis mine

Introduction

These men likely sold items to farmers, businesses, and plantations and took notes payable at harvest or sometime in the future. To generate cash to buy the items to sell, they had to discount the notes that is take the note to the bank who would collect on it in the future and take a discount from the face value, for example, a $100 note might net $80 in cash. They also mortgaged the same slaves to different parties as surety on a different note.

During the economic boom following the War of 1812, Kentucky business partners A. Morehead and Robert Latham increasingly found themselves in debt to the Bank of Kentucky.1 The pair had been discounting notes at the bank for several years, and by 1817 owed the bank almost $16,000. With so many notes outstanding, the bank required the men to provide some form of collateral to protect it against the risk of continuing to renew these notes. In October of 1817, they mortgaged 20 slaves and several tracts of land to the bank, as collateral for these debts. The mortgage deeds permitted the bank “to sell the mortgaged property, in case of default in payment.” Two years later, another man by the name of Vance endorsed a bill of exchange drawn by Morehead and Latham for $4500, which they would be required to pay back in 90 days. Vance, who was also worried about the risk of repayment, accepted a mortgage of 19 slaves as collateral – the same slaves which had been previously mortgaged to the Bank of Kentucky. This mortgage also permitted him to sell the slaves, if the businessmen failed to pay back the debt in time.​
Bad things happened and the owners could not pay the debts and the creditors scrambled to seize the pledged a
By the fall of 1819, during the height of the economic panic, Morehead and Latham had fallen behind in all of their debt payments. Both the Bank of Kentucky and Vance decided to begin selling the mortgaged slaves in payment. Vance acted first, seizing the slaves and quickly selling one of them. The bank then obtained a court order to take possession of the slaves, immediately selling eleven more of them. Both sides sued the other for possession of the remaining slaves and for the proceeds from the already-completed sales.​
Banks provided financing for businesses of all sorts in the South. Ignoring slave related financing would have been disastrous to Southern banks and a forgoing of profits for the Northern banks.
This case highlights many of the risks faced by antebellum Americans when dealing with financial transactions: the risks to the creditor, the risks to the debtor, and (in this case) the risks to the slaves who were being used as collateral in these transactions. My main area of research is financial institutions and their complex relationships with their clientele. I focus on understanding why financial institutions emerged, how they were marketed to and received by the public, and what were the reciprocal relations between the institutions and the community at large. In the South, these questions inevitably interacted with slavery. Few, if any, institutions were uninfluenced by the economic and social system that dominated southern life, and financial institutions were no exception. Life insurers had to consider whether or not they would underwrite slave lives. Banks had to consider whether or not they would provide loans for the purchase of slaves or accept slaves as loan collateral. Of course, any institution or even a whole industry could choose to decline direct participation in the slave economy, but this would have to be a conscious, deliberate decision. And as the work of many recent scholars has shown, both northern and southern institutions that avoided any explicit involvement in slavery were often implicated indirectly in the slave system. I am mainly interested in how formal institutions such as insurance companies and banks viewed and dealt with these risks. Thus I am not examining the credit system writ large, but much more specifically banking institutions and those bank loans which involved slaves.​
 

JPK Huson 1863

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#15
Good to read how vested this place was in keeping an entire race enslaved. Plenty of blame to round. I have a question- did some of the anti-war sentiment in the North have its base in plain, old, oily money? I mean base as in you can't always see it- bigotry in the North at the time was sure rampant. Was this aspect used and encouraged to manipulate public opinion? I'm not explaining very well, sorry. Racism was sure a handy tool.

You know how we're frequently encouraged to go for each other's throats? It tends to keep us divided, like smoke and mirror distractions. It has historically worked and still does because a divided population is weak, there's no cohesion. I can't imagine many people going to bat so Northern bankers could keep raking it in, but they'd go to bat for themselves. Convince enough all about how they're threatened by a certain population, race or ethnicity, poor people do all the work for you.
 

jgoodguy

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#16
Good to read how vested this place was in keeping an entire race enslaved. Plenty of blame to round. I have a question- did some of the anti-war sentiment in the North have its base in plain, old, oily money? I mean base as in you can't always see it- bigotry in the North at the time was sure rampant. Was this aspect used and encouraged to manipulate public opinion? I'm not explaining very well, sorry. Racism was sure a handy tool.

You know how we're frequently encouraged to go for each other's throats? It tends to keep us divided, like smoke and mirror distractions. It has historically worked and still does because a divided population is weak, there's no cohesion. I can't imagine many people going to bat so Northern bankers could keep raking it in, but they'd go to bat for themselves. Convince enough all about how they're threatened by a certain population, race or ethnicity, poor people do all the work for you.
Money motivates for sure. Slavery was very integrated into the fabric of the South. Without a war and devastation, it is hard to see how the South would have engaged in emancipation or what the motivation would have been.
 

jgoodguy

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#17
Banking on Slavery in the Antebellum South
Emphasis mine

More on how this author is different from the rest.

Calvin Schermerhorn examines the short but interesting life of plantation banks in the 1820s and 30s.5 My own work has examined the underwriting of slaves by life insurers.6 While this brief historiographical sketch is in no way complete, the scholarship on southern finance – and particularly on the relationship between finance and slavery – is still quite slim, especially when compared with the much richer literature on all other aspects of slavery. Part of the problem is that financial history itself is a niche field – particularly outside the confines of economics departments and twentieth-century topics. And those that do study 18th and 19th century finance (myself included) tend to focus on northern institutions. On the other hand, Larry Schweikart’s volume on southern banking and Howard Boderhorn’s work on antebellum banking throughout the United States both still have remarkably little about slavery.7 This project is an attempt to look more directly at those connections between banking and slavery.​
 

jgoodguy

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#18
Banking on Slavery in the Antebellum South
Emphasis mine

The Risks of Slave Collateral

Dry legal and financial proceeding showing that slaves were just like any other collateral.

The court case involving Morehead and Latham is a good example of the central issues involved in slave mortgages. The main risk to the creditors, who in this case were the Bank of Kentucky and Vance, was that the debtor would fail to pay his obligation in a timely fashion. Creditors required debts to be secured with collateral to help mitigate this particular risk. But the quality of the collateral was also an issue. How easily could it be liquidated? Was it actually worth the amount for which it was mortgaged? Could it decline in value over time? Were there any other claims on this collateral? Most states dealt with this latter issue by requiring all mortgages to be registered with the city or county government.8 This should have enabled Vance to check and see if the slaves offered to him as collateral had a prior claim on them. The Bank of Kentucky had indeed registered the initial mortgage with the proper authorities. However, as Morehead and Latham continued to discount notes with the bank, these additional debts were just added onto the original mortgage using the same collateral. The bank was not required to update the mortgage debt in the official register. Thus Vance knew that the slaves had a prior lien on them from the bank, but didn’t know the full value of that lien. As part of his lawsuit​
against the bank, Vance argued that his claims should have priority over the debts that had been added to the original mortgage but not registered. The court, however, disagreed, siding with the bank that debts could be added onto a mortgage without updating the mortgage registry. As long as the bank could prove that these particular debts predated the mortgage to Vance, then their claims took priority.​
Slaves seem to be a superior sort of collateral, better than land because they were easier to sell.
The quality and liquidity of the collateral was also an issue. In theory, anything with a market value could be used as collateral. Land, crops, merchandise, stock certificates, livestock, even life insurance policies were commonly offered and accepted as debt collateral. Since slaves constituted such a large proportion of southern wealth, it is hardly surprising that debtors offered their slaves as collateral for loans. Slaves had many advantages over land as collateral for the creditor. They were often easier to sell than land. And it was also easier to break up a group of slaves, selling only the portion necessary to meet the claims of the creditor. Thus while the Bank of Kentucky had accepted a mix of land and slaves as collateral, they preferred to settle their claim by selling slaves. In fact, the bank had permitted Latham and Morehead to sell off some of the mortgaged land, leaving the slaves as the main portion of the collateral.​
Vance’s lawsuit also addressed this issue. While the bank possessed collateral in both land and slaves, Vance’s entire collateral was the slaves. Thus, he argued, the bank should be required to first liquidate the land to satisfy their claims, leaving the slaves for Vance. The bank, however, argued that they should be able to liquidate the collateral in any order it chose. The remaining lands, in their opinion, were “in remote places and are of little value.” In the bank’s view, the slaves were not only more than adequate as collateral, they were the preferred type of collateral.​

The court again ruled in the bank’s favor. It did not matter whether or not the bank had access to another source of collateral. Since they possessed the first lien on the slaves, they were perfectly within their rights to sell the slaves first. If, upon selling the slaves, the proceeds exceeded the amount owed to the bank, the bank was to pass on the excess in payment of the debt due to Vance. Additionally, once the bank’s debt was settled, they were to assign over any remaining real estate from their original mortgage for Vance to use to satisfy the remainder of his claim. This placed Vance in the position of having to deal with the hassle of selling off the less-desirable lands.​

At lease Vance got something.
7 Howard Bodenhorn, State Banking in Early America: A New Economic History (Oxford, 2003); and Larry
Schweikart, Banking in the American South from the Age of Jackson to Reconstruction (LSU 1987).
8 Indeed, extant notarial records in places like New Orleans and Georgia will be a critical source for this project. I
have only just begun examining these, but they are already proving to be a goldmine of information on these
mortgage contracts.
 

jgoodguy

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#19
Banking on Slavery in the Antebellum South
Emphasis mine
Living collateral has the problem n age, healt or death.
Although slaves were desirable as collateral, there was also a downside for creditors to relying on slaves. The market value of both land and slaves could fluctuate – particularly in economic downturns such as the Panic of 1819. Yet slaves could also lose value as individuals due to age, health, or death. Slaves were thus often offered in large groups, as was the case with the Bank of Kentucky, to reduce the risk of any individual slave losing value.​
A slave unlike land could be taken out of state and sold with little chance of recovery.
The ease of liquidity and mobility of slaves could also be a problem. While a debtor could certainly sell a piece of land upon which there was a mortgage, the new owner could not remove the land from the state. The creditor could always press a legal claim against the new owner (although these legal suits against innocent third parties were not always successful.) A slave, on the other hand, could be sold out of reach of the creditors.​
Another case involving the Second Bank of the United States demonstrates this problem.9 Again in 1819, the Kentucky branch of the Bank of the United States had discounted a $4700 note, payable in 60 days. When the note went unpaid, the bank sued all the endorsers of the note for payment, including a man named Venable who owned a 200 acre tract of land, another of 113 acres, and several slaves. The bank was unable to liquidate the land “for want of proper bidders,” while the slaves and a portion of the land had been recently deeded to his brother-in-law, George M’Donald. The Bank alleged that the deeds had been made fraudulently, with the sole intent of placing these assets out of the hands of his creditors. “Here then is the case of a person upon the eve of a decree being rendered against him for a large sum of money, which it is admitted would go far to his ruin, making conveyances of his whole property real and personal to his brother-in-law, for an asserted consideration equal to its full value.” Part of the evidence against Venable was the fact that M’Donald could not actually afford to purchase this property for cash. Instead, the land and slaves were deeded to M’Donald partially in exchange for administering the estate as guardian on behalf of Venable’s step-children. The land and slaves, however, were “to remain in possession of the former tenant,” i.e., Venable. The remainder of the purchase price M’Donald borrowed from a man named Hendley and paid to Venable. The next morning, Mrs. Venable took the money paid by M’Donald and loaned it back to the same M’Donald, who used it to repay his loan from Hendley. Hendley even testified that he had required no collateral of M’Donald, since he expected to (and did) receive the loaned money back almost immediately. As the court concluded, “the borrowing of the money was merely to exhibit before witnesses a formal payment, and that there was no real bona fides in this part of the transaction.” As in the former case, the creditor deemed the slaves to be the more liquid collateral security. Yet the ease with which they could be conveyed to another owner, outside the reach of creditors, also made them a potentially problematic form of collateral.​

9 Venable v. Bank of U.S., 27 U.S. 107 (1829)
 

jgoodguy

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#20
The mainstay, though, was cotton. Northern banks would lend against slaves, because of what they could produce and their value in the marketplace. As painful as this may be to many, it was the reality of the time and place.
Southern Banks did the bulk of lending using slave collateral as they were the local subject matter experts and in case of foreclosure better situated to sell the foreclosed collateral. Northern Banks facilitated the growing, factoring and shipping of cotton.
 



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