Slaves as collateral?

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#1
Does anyone have any information on how many slave owners leveraged their slaves as collateral to borrow money?

Kind of like an equity line on your house...

I had read and heard that this was prevalent...

After the war and they no longer held slaves - my assumption is the debt didn’t go away though?

Has anyone seen evidence that this specific thing had some impact on the southern economy... or even the entire national economy? Any numbers?


Thanks
 

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#3
Does anyone have any information on how many slave owners leveraged their slaves as collateral to borrow money?

Kind of like an equity line on your house...

I had read and heard that this was prevalent...

After the war and they no longer held slaves - my assumption is the debt didn’t go away though?

Has anyone seen evidence that this specific thing had some impact on the southern economy... or even the entire national economy? Any numbers?


Thanks
the question is whether that debth has be converted to csa dollars and inflated off
 

jgoodguy

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#5

jgoodguy

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#6
We have a thread on this
Banking on Slavery in the Antebellum South.

Often slaves were better collateral than land.
Leverage was used to buy slaves just like any capital investment.
Banks foreclosed on slaves, took and sold them.
This was a normal financial activity in the Antebellum South. Slaves were also insured.
And yes, Northern Banks participated in this financial activity, although being the subject matter experts and local, Southern bank predominated.
 
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#7
We have a thread on this
Banking on Slavery in the Antebellum South.

Often slaves were better collateral than land.
Leverage was used to buy slaves just like any capital investment.
Banks foreclosed on slaves, took and sold them.
This was a normal financial activity in the Antebellum South. Slaves were also insured.
And yes, Northern Banks participated in this financial activity, although being the subject matter experts and local, Southern bank predominated.
which suggests csa dollar inflation should play a role if and only if those loans where transferred fro us$ to cs$. i do believe 'patriotic' lenders would have done that.
 

jgoodguy

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#8
which suggests csa dollar inflation should play a role if and only if those loans where transferred fro us$ to cs$. i do believe 'patriotic' lenders would have done that.
If the debt was in CSA dollars, then it was to be repaid in CSA dollars. I doubt any such conversion happened on the contract, but I am sure the bank would patriotically take CSA currency in payment, but discounted to the current US$ value just like any foreign currency transaction.
 
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#10
What, may I ask, brings these questions to your mind? Mere curiosity, lack of resources, or something else? I am attempting to comprehend, but am not all together clear about the basis for your questions. Please clarify, if you don't mind.
Just curious. I like economics. And I’ve often wondered what the impact was.

Overnight you basically had an entire class of assets - a gigantic share of the economy- disappear.

There had to be some sort of economic impact- especially if banks loaned money to slave owners, who used slaves as collateral.

Who got left holding the bill? Did banks just take the hit? Did former slave owners declare bankruptcy - being that their debt likely surpassed the value of their Assets?
 

DaveBrt

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#11
Just curious. I like economics. And I’ve often wondered what the impact was.

Overnight you basically had an entire class of assets - a gigantic share of the economy- disappear.

There had to be some sort of economic impact- especially if banks loaned money to slave owners, who used slaves as collateral.

Who got left holding the bill? Did banks just take the hit? Did former slave owners declare bankruptcy - being that their debt likely surpassed the value of their Assets?
State and Confederate laws enacted during the rebellion were declared void -- don't know about private contracts. There are probably articles in the 1865 and 1866 newspapers at

Chronicling America « Library of Congress
 

diane

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#12
Most of the planters were only paper rich, in reality. Forrest, for example, said he was worth a million and a half and most of that was invested. He could scrape together some cash but not a lot! He used land for collateral on loans, not slaves - he never owned but one slave in his entire life. I've wondered if other planters were in that same odd bind - had slaves on their property working but didn't actually own them?
 

jgoodguy

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#13
Most of the planters were only paper rich, in reality. Forrest, for example, said he was worth a million and a half and most of that was invested. He could scrape together some cash but not a lot! He used land for collateral on loans, not slaves - he never owned but one slave in his entire life. I've wondered if other planters were in that same odd bind - had slaves on their property working but didn't actually own them?
It is not the capital invested, but the income from that capital that is important. An investor in 1860s RR stock is in the same fix for example. Say a $100,000 in RR bonds drawing 5% per year is $5,000 a year in a time when a skilled laborer made $300 a year. The investor might not be able to sell his stock quickly for 100,000 but he has the income.
Lets further say he bought the stock on margin and has only $10,000 invested borrrowing $90,000. After paying interest he gets $15,000 that is a return of 15% Is the paper rich, yes, but he is making money at a very good rate. Things go side ways he loses the stock.

Likewise with slaves, they were bought with borrowed money and the planter made income from their labor. IMHO in 1860, slaves could be liquated much more readily than RR Stock or land and recover more from the liquidation. Using the example above, the slaveowner makes a great return on a small amount of investment in slaves.

The slave owners owned the slaves in the same manner as a modern homeowner owns his home. It is their's free to use as they will until they cannot pay the mortgage payment. That may be what Forrest meant, he was leveraged to the hilt and if things went sideways he lost it all, but I don't see Forrest buying RR bonds with the same investment.
 
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#14
We have a thread on this
Banking on Slavery in the Antebellum South.

Often slaves were better collateral than land.
Leverage was used to buy slaves just like any capital investment.
Banks foreclosed on slaves, took and sold them.
This was a normal financial activity in the Antebellum South. Slaves were also insured.
And yes, Northern Banks participated in this financial activity, although being the subject matter experts and local, Southern bank predominated.
Well, with respect to the Butler liquidation in South Carolina, the creditors liquidated part of Butler's estate: which excused him from doing what had to be done.
In most of the south, there were no financing statements, or ways to keep track of a moveable item of security. Many banks found the slaves double secured, or were unable to locate the people used as collateral. Many frauds in the western part of the south.
 

WJC

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#15
Does anyone have any information on how many slave owners leveraged their slaves as collateral to borrow money?

Kind of like an equity line on your house...

I had read and heard that this was prevalent...

After the war and they no longer held slaves - my assumption is the debt didn’t go away though?

Has anyone seen evidence that this specific thing had some impact on the southern economy... or even the entire national economy? Any numbers?


Thanks
Slaves and land made up the portfolio of a slaveholder. So when it was time to acquire a loan, since slaves were property, they could be and were used as collateral in obtaining loans- just like using one's home or other property as collateral today.
That was why the threat of emancipation was so real to the Southern planters: it would wipe out most of their fortune overnight. It's no wonder that they reacted so passionately to Lincoln's election.
And yes, the planter who lost his slaves still had to deal with his/her debt. The image of the devastated Gerald O'Hara in Gone with the Wind, though fiction, was all too close to the reality facing planters who had lost their slaves, were left with devastated lands and faced foreclosures.
 

uaskme

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#17
It is not the capital invested, but the income from that capital that is important. An investor in 1860s RR stock is in the same fix for example. Say a $100,000 in RR bonds drawing 5% per year is $5,000 a year in a time when a skilled laborer made $300 a year. The investor might not be able to sell his stock quickly for 100,000 but he has the income.
Lets further say he bought the stock on margin and has only $10,000 invested borrrowing $90,000. After paying interest he gets $15,000 that is a return of 15% Is the paper rich, yes, but he is making money at a very good rate. Things go side ways he loses the stock.

Likewise with slaves, they were bought with borrowed money and the planter made income from their labor. IMHO in 1860, slaves could be liquated much more readily than RR Stock or land and recover more from the liquidation. Using the example above, the slaveowner makes a great return on a small amount of investment in slaves.

The slave owners owned the slaves in the same manner as a modern homeowner owns his home. It is their's free to use as they will until they cannot pay the mortgage payment. That may be what Forrest meant, he was leveraged to the hilt and if things went sideways he lost it all, but I don't see Forrest buying RR bonds with the same investment.
Fast Forward to 1865: Slave Investment is Worthless, Plantations are worth 10 cents on the Dollar.
 

uaskme

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#18
Just curious. I like economics. And I’ve often wondered what the impact was.

Overnight you basically had an entire class of assets - a gigantic share of the economy- disappear.

There had to be some sort of economic impact- especially if banks loaned money to slave owners, who used slaves as collateral.

Who got left holding the bill? Did banks just take the hit? Did former slave owners declare bankruptcy - being that their debt likely surpassed the value of their Assets?
All of the Above!
 
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#19
Just curious. I like economics. And I’ve often wondered what the impact was.

Overnight you basically had an entire class of assets - a gigantic share of the economy- disappear.

There had to be some sort of economic impact- especially if banks loaned money to slave owners, who used slaves as collateral.

Who got left holding the bill? Did banks just take the hit? Did former slave owners declare bankruptcy - being that their debt likely surpassed the value of their Assets?
For the most part these were so-called, "non-recourse" loans. That means when the collateral (slaves) walked off the farm, there was no collateral to seize. When loans were unpaid, the banks took the hit.

If you're really interested in learning, find yourself a copy of Richard Kilbourne's book, Debt, Investment, Slaves. He dug mid 19th century property records out of courthouses and explains what he found.
 
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#20
Does anyone have any information on how many slave owners leveraged their slaves as collateral to borrow money?

Kind of like an equity line on your house...

I had read and heard that this was prevalent...

After the war and they no longer held slaves - my assumption is the debt didn’t go away though?

Has anyone seen evidence that this specific thing had some impact on the southern economy... or even the entire national economy? Any numbers?


Thanks
It was certainly important in the Southern economy, but I don't know how much it mattered in terms of actual numbers. Perhaps you can contact Sharon Ann Murphy, Ph.D. or Bonnie Martin to discuss. Scholars can often be kind with their time, and provide you with some sources or references you can use. I would certainly see about getting the Martin article for any info it might have.

- Alan
 



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