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jgoodguy

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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.
 

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"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/

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jgoodguy

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"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/

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Banks increased the money supply by issuing their own notes.
 

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Charles Francis Adams, Great Britain, and the American Question in 1861
by Ian Delahanty

The world's greatest power of the mid-19th century, Great Britain, watched America with an anxious eye in 1861. Americans at home and abroad were well aware that should the British government side with the Confederacy, there was a very real possibility that the Union could do nothing to prevent the separation of the United States. With this in mind, the State Department serving under the Lincoln administration immediately set out to ensure that Great Britain, should it not see fit to side directly with the Union, remain a non-factor in the conflict. Secretary of State William Seward firmly believed that if the British government could be kept form interfering in America's Civil War, the Union would crush the Confederacy in a mere matter of time.

Thrust into this diplomatic struggle was the newly appointed American minister to Great Britain, Charles Francis Adams. Adams's mission in Great Britain was one of the most vital roles played by any member of the Union government during the Civil War. The year 1861 was a particularly essential period with regard to Anglo-American relations and British non-intervention in the conflict. A series of trans-Atlantic feuds beset the Union and British governments. threatening to not only bring Great Britain closer towards recognizing the Confederacy but also nearly bringing about a third conflict between America and Great Britain. Fortunately for the Union, Adams proved an adept diplomat and did a great deal to preserve relations between the two countries as well as prevent the British government from intervening in America's domestic difficulties.

Full article can be read here - https://vc.bridgew.edu/cgi/viewcontent.cgi?article=1034&context=undergrad_rev
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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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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.
 

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University of Tennessee, Knoxville
Trace: Tennessee Research and Creative Exchange
Doctoral Dissertations Graduate School
5-2013

The Dixie Plantation State: Antebellum Fiction and Global Capitalism
by Katharine Aileen Burnett

This Dissertation is brought to you for free and open access by the Graduate School at Trace: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Doctoral Dissertations by an authorized administrator of Trace: Tennessee Research and Creative Exchange. For more information, please contact trace@utk.edu.

ABSTRACT
“The Dixie Plantation State: Antebellum Fiction and Global Capitalism” connects the development of literature of the U.S. South to the ideological tensions inherent in the southern plantation economy before the Civil War. Southern literary form during this time reflects an economy that was sustained by international capitalism but which imagined itself as a version of provincial feudalism. The antebellum southern economy was defined by slavery and individual plantations, which created a culture that was isolated, rural, and oppressive. However, with global trade through cotton plantations as the driving force behind regional profit, the southern economy was also shaped by a form of laissez-faire, liberal capitalism that emphasized individual opportunism and modernization. The texts I discuss create myths of plantation life and re-imagine southern society under the plantation economy in ways that simultaneously support and question the ideological foundations of the system. Literary representation then becomes a method of merging nineteenth-century models of capitalism and international trade with the ostensibly self-contained tendencies of the plantation and the racial oppression of the slave system.
Each chapter is organized around a different literary form or genre and incorporates a comparative study of British fiction and fiction of the U.S. South. I argue that the form of nineteenth-century southern literature developed in tandem with the expansion of transatlantic trade. Therefore, the antebellum authors I discuss in this study do not consistently separate literary value from practical business or financial concerns. In chapters that focus on the historical romance, the sketch form, social problem novels and African-American autobiographical narratives, I highlight the interconnected nature of literary representation and economic change. Authors such as William Gilmore Simms, Joseph Glover Baldwin, George Tucker, Maria J. McIntosh, and Martin Delany drew from British novels such as Sir Walter Scott’s Waverley, Charles Dickens’s Sketches by Boz, and Elizabeth Gaskell’s North and South to represent the South as both economically progressive and culturally traditional. In this sense, fiction allowed southern authors to engage with the quasi-feudal space of the plantation within the modern economic models of the nineteenth century, without fully rejecting or denying either.


https://trace.tennessee.edu/cgi/viewcontent.cgi?article=2878&context=utk_graddiss

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Lots of interesting subjects to look at. Saves the sleep meds tonight too.
 

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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.​
 

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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.
 

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Cornell University School of Hotel Administration
The Scholarly Commons
Working Papers School of Hotel Administration Collection
3-18-2018

Labor Scarcity, Finance, and Innovation: Evidence from Antebellum America
by Yifei Mao (Cornell University School of Hotel Administration, ym355@cornell.edu) and Jessie Jiaxu Wang (Arizona State University)

Part of the Economic History Commons, Labor Economics Commons, Labor History
Commons, and the United States History Commons
This Working Paper is brought to you for free and open access by the School of Hotel Administration Collection at The Scholarly Commons. It has been accepted for inclusion in Working Papers by an authorized administrator of The Scholarly Commons. For more information, please contact hlmdigital@cornell.edu.

Abstract
This paper establishes labor scarcity as an important economic channel through which access to finance shapes technological innovation. We exploit antebellum America, a unique setting with (1) staggered passage of free banking laws across states and (2) sharp differences in labor scarcity between slave and free states. We find that greater access to finance spurred technological innovation as measured by patenting activities, especially in free states where labor was relatively scarce. Interestingly, in slave states where slave labor was prevalent, access to finance encouraged technological innovation that substituted for free labor, but discouraged technological innovation that substituted for slave labor.

https://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1050&context=workingpapers
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jgoodguy

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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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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.​
 

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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.
 

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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)
 

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Fellow Posters,

I weary of reading about all the cultural conflict and differences between the North and the South during this period with virtually no mention, let alone emphasis, upon what the sections had in common. I wonder if some of you might think with me along these lines and share your thoughts with me. In thinking of a divorce in marriage that I know about, one spouse, having determined upon a course of action, could find absolutely no good or common ground with her mate because to do so might have halted her pre-determined course of action. In short, the spouse in question was far from objectivity and balance. Her course of action dictated what she had to pile up as negative excuses about her mate for justifying her pre-determined conduct. And so I am wondering just how many things the North and South had IN COMMON that the South, especially South Carolina, ignored in the ultimate crafting of Secession Declarations. E.g., in the Declarations I find NO MENTION of the $10 million subsidy given to the South by Congress in 1853. Simple question: What other good and common things did these Sections enjoy but that the Seceshers ignored? For the sake of discussion feel free to widen the time period from 1850-186 to 1845-1861.

James
Cotton! By 1860 the South was growing 75% of the world's demand....and it was the Northerns who were shipping it.
 

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Edited. Most of the significant differences between North and South that identified them as such, stem from the Compromise of 1820. That was the date that the country was sectionalized and identified as being Slave and South or North and Free, I.e., the Union had been sectionalized, North and South over the single issue of Slavery. All significant differences between the two sections were based on the single issue of Slavery.
 

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Edited. Most of the significant differences between North and South that identified them as such, stem from the Compromise of 1820. That was the date that the country was sectionalized and identified as being Slave and South or North and Free, I.e., the Union had been sectionalized, North and South over the single issue of Slavery. All significant differences between the two sections were based on the single issue of Slavery.
IMHO, the South had a national identity first based on a slave labor ideology which affects society in a lot of ways. Later under the threat of Southern secession and dominance, the North developed its national identity. 1820 is a good date for that to start. Industrialization and urbanization of the North accelerated the difference.
 

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Honors Theses Honors Program
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Regional Variations in Antebellum Southern Agriculture
by Joseph Liss

College of Saint Benedict/Saint John's University
Available by permission of the author. Reproduction or retransmission of this material in any form is prohibited without expressed written permission of the author.

Given the above 'permission', the full article may be viewed / downloaded here for free...

https://digitalcommons.csbsju.edu/cgi/viewcontent.cgi?article=1609&context=honors_theses
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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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