Papers Relating to Foreign Affairs, Accompanying the Annual Message of the President to the First Session Thirty-ninth Congress, Part I
Mr. Adams to Mr. Seward
Sir: I transmit herewith copies of the Daily News of the 5th and 6th and the Morning Star of the 5th of September, containing reports of the proceedings of a special meeting of holders of the confederate cotton bonds in London on the 4th, together with comments on the same. I should very much apprehend, from the remarks made on this occasion, that the shrewd originators of the scheme have partially succeeded in escaping loss by entailing it upon very simpie and ignorant people.
I have the honor to be, sir, your obedient servant,
Hon. William H. Seward, Secretary of State, Washington, D. C.
The Confederate loan.
A meeting of the holders of the seven per cent, cotton loan bonds of the Confederate Stat was held yesterday, at the London Tavern, “to consider their altered position, now that t government of the United States has become the de facto government of the Confederai States, and, if deemed expedient, to appoint a committee to protect their rights and interests, and generally to take such steps as may be thought advisable.”
Admiral Sir P. Wallace was voted to the chair; and, having opened the business,
Mr. Chamberlain, of the firm of Terrell, Chamberlain & Blake, who, as solicitors to severa of the bondholders, had called the meeting, stated that he was not in a position at that moment to lay before the bondholders the result of any investigation which had been instituted as to the legal rights of the bondholders, that being a question which the committee, if appointed, would have to consider and determine. It was, however, a question for the meeting to say whether it was worth while considering or not. The real question for their consideration was whether the bonds they held were worth the paper they were written on, or the price they had given for them, or their nominal amount, or any other amount. [Hear, hear.] Any one who looked at the matter in a purely legal and international point of view would see that there were questions of the highest moment and the gravest character involved in this loan. First, they had to ascertain whether the contractors, Messrs. Emile, Erlanger & Co., of Paris, or their agents here, Messrs,. Schroeder, had money in hand to pay the coupons now due. [Heat, hear.] He had no official communication to make on the subject, but he had heard that there was a sum of money in hand, which, if the parties holding it could be properly indemnified, might be made applicable to the payment of the interest of the loan to some’ extent, but what the amount was he did not know. This, however, was one of the points to be inquired into if a committee was appointed. The conduct of the contractors by whom the loan was originally issued was another grave question, to which he would only further allude by saying that it might be found advisable for the bondholders to ascertain what were the arrangements made with the contractors by the parties for whose benefit the money was raised, for bringing out the loan at the price at which it was issued, and what arrangements were made to protect the interests of the subscribers. Another question to be inquired into was whether the Confederate States had any property whatever on which the bondholders might be considered to have a preferential lien as against the federal government which had taken possession of the whole of the property of the late confederate government and the Confederate States. This was a very important question, and one that would require careful investigation, for there might be property in England or on the continent upon which the bondholders might be legally held to have the first claim. Upon this point he, might just allude to the decision of Vice-Chancellor Wood in the case of the “United States against Prioli,” in which the court upheld the right of Messrs. Prioli to a loan of £20,000 upon certain cotton that had been consigned to this country from the Confederate States against the attempt of the federal government to defeat it, and this decision of Vice-Chancellor Wood was, he be lieved, universally admitted to be good law. Another question was as to the liability of each State forming the Confederate States to its fair proportion of the liability; and then as to the liability of the federal government, which had taken possession of the property of those Confederate States and the property of the confederate government, to discharge the debts which attached to the property. He had hopead to lay before the meeting the opinion of one of the most able of the Queen’s counsel upon this point, but although, owing to the absence of that learned gentleman from town, and other circumstances, he had not received his written opinion, he was authorized to state that, having given the matter the gravest consideration, the learned counsel to whom he alluded was prepared to advise that the several States which formed the late confederate government were all of them sovereign and individual States, and as such were each liable for its proportionate share of this loan. [Hear, hear.] And further, that looking at the federal Constitution of the United States, the confederates had not forfeited, nor could they forfeit, their individual and sovereign rights; that they could not be considered to have been in such a state of rebellion as to make the loan void, and that, the federal government as a de facto government, having taken possession of another de facto government, was morally and, according to all international law, legally bound to take this loan upon itself. He (Mr. Chamberlain) would not attempt to argue the question or to give his own impressions upon it one way or the other. He was not a bondholder, and therefore not personally interested. He was merely the agent of a number of gentlemen who were bondholders to a considerable extent, and who considered that these questions ought to be looked into, and they thought it might be well to appoint a committee to investigate and consider them. He ought to add that he had received several letters from bondholders to a large amount, who did not wish their names to be known in connexion with this loan, urging the appointment of such a committee, and with this explanation he begged to leave the matter in the hands of the meeting.
Mr. Wells inquired if any representative of Messrs. Erlanger or Messrs. Schroeder, their agents, who issued the bonds, was present?
[Page 531]Mr. Chamberlain was not aware. He had applied to Messrs. Schroeder to allow him to see the contract, but he had not yet succeeded. He had also applied to Messrs. Erlanger, the contractors at Paris, but as yet he had not had the facilities afforded him which he required. He had, however, no reason to suppose that if a committee were appointed Messrs. Erlanger or Messrs. Schroeder would withhold from them the fullest information.
Mr. Green thought good ground had been shown for the appointment of a committee, but suggested that a representation should be made to the President of the United States and to Mr. Seward of the position of the bondholders and of the justice and policy of the federal government taking the debt upon itself. [“Oh,” and a laugh.] If there was any money in the hands of the agents, it ought to be divided among the bondholders in payment, so far as it would go, of the interest.
Mr. S. Herapath observed that the only claim they could have upon the federal government was in respect of the property seized by them which was hypothecated to the payment of this loan. To that extent, no doubt, they had an equitable claim, but it was not reasonable to suppose that the federal government would hold itself liable for more. Their claim was against the States for whose use the money had been raised, and upon the property be. longing to those States which had fallen into the hands of the federal government.
Mr. Joseph thought they ought to have information as to the terms of the contract, the parties to the contract, and the parties by whom the money to meet be dividends had been paid. These things could be ascertained more readily by a committee than by a large body of shareholders, and therefore he likewise supported Mr. Chamberlain’s suggestion.
Mr. Chamberlain had prepared a resolution, which would test the feeling of the meeting upon the subject. It was to the effect that, considering the position in which the subscribers to the seven per cent, cotton loan of the late Confederate States were placed, it was advisa-ble that a committee should be formed to investigate the rights and claims of the bondholders, and take such steps to protect and enforce the same as might be deemed expedient. His own opinion was, that the federai government must be looked upon as an independent state conquering another independent state, and therefore internationally and morally bound to’ take upon itself the liabilities of the conquered state. According to the Constitution of the United States there were means of trying the question as to the lien of the bondholders upon the property hypothecated to the payment of the debt, and which had been since seized by the federal government; but whether a bondholder would have a chance of establishing his claim in a United States court of law he was not prepared to say. This, however, would be a question for the committee to consider.
A bondholder expressed regret that the contractors, or the agents, Messrs. Schroeder, who had profited largely by the transaction, had not volunteered information and assistance, but he trusted that they would aid the committee when it was formed as far as they could. He agreed with Mr. Herapath that they must look to the Confederate States rather than to the federal government. He objected to eating humble pie or buttering over the federal government. These southern States would want money at some future time, and they would find it to their interest to pay this debt, which, spread over them all, amounted to a mere nothing.
Other bondholders contended for the liability of the federal government to the debt on the ground that they had conquered a confederation of independent and sovereign States, not a number of dependent States fighting in rebellion. It was urged that the bondholders had at least an equitable lien upon all the cotton which had been seized by the federals, and, so far as that would go, the federal government were in law and in equity bound to satisfy the claims of the bondholders.
Mr. Sebag questioned the policy of naming the committee at that time, seeing that so many of the bondholders whom it might be desirable to appoint upon it were out of town, while others, from natural disinclination or timidity, were absent. He recommended in dealing with the subject, a policy of conciliation and good nature mixed with some little confidence. He proposed that they should adjourn the meeting for a fortnight, and then, the matter having been in the meanwhile ventilated, they might appoint the committee.
Mr. Herapath seconded this proposal.
Mr. Green, on the other hand, insisted upon the importance of appointing a committee at once, otherwise there would be no responsible or authorized body to see the contractors and agents, and to act on behalf of the bondholders. Delays were always dangerous in matters of this kind.
A conversational discussion of some length ensued, the result of which was that the resollution suggested by Mr. Chamberlain was carried, and the meeting was adjourned to the 18th of October, a temporary committee, consisting, of the chairman, Mr. Morgan, (who, it was stated, held bonds to a very large amount,) and Mr. Chamberlain, being appointed to “act in the mean time, and to suggest at the adjourned meeting, the names of those bondholders” who might be considered most desirable to form the permanent committee.
A vote of thanks to the chairman concluded the proceedings.
Now that the confederate bondholders have held their meeting, the world has been furnished with a measure of the ignorance and folly which concurred to impel a number of Englishmen, sensible enough in the ordinary business of life, to participate in an adventure that was certain some day to end in loss and ruin. We limit this observation to the persons who took an approving part in the proceedings at the London Tavern on Monday. The large bondholders were not present, having intimated that they did not wish their names to be known in connexion with their holdings—a feeling which was shared by some who felt that their position, as one of them expressed it, was sufficiently “stupid,” although their holdings were not, large. The meeting was called to consider the loan “as an investment, and not in reference to any political question in any way.” Such was the statement of the chairsman, which probably means that the bondholders are ready to accept any political theory which may favor the payment of their debt. How in any other sense the altered position of the bondholders which, the meeting met to consider can be ascertained apart from questions eminently political, we are at á loss to imagine. Mr. Chamberlain, who took the leading part at the meeting, carried the meeting with him when he observed that “questions of the very gravest character were involved in the business before them”—a reflection which one often hears when people who have lost their money meet together. The first question, according to Mr. Chamberlain, was whether the agents or contractors of the loan had money in hand to pay the coupons. He had heard that they had a little, but how much he did not know. Next was the conduct of the contractors in reference to the loan. He appeared to think that something might possibly come of an inquiry into the circumstances under which the loan was contracted, the price at which the contractors took it, and other details. It is not clear what the bondholders have to do with these questions. The business of the con tractors was to buy in the cheapest and to sell in the dearest market. The risk they ran cannot be exaggerated, and the profit, although understood to be sufficient to constitute a large private fortune, was only proportionate with the hazard. We trust that those who, three years ago, bought what they hoped might prove a great bargain, but which they knew to be an extremely speculative security, will show themselves better Englishmen than to quarrel at this time of day with the vendors. Another question was whether what were called the Confederate States of America had any property on which the bondholders might have a preferential lien. This seemed to be the suggestion which had most promise in it Vice-Chancellor Wood had pronounced a judgment in the case of The United States of America vs. Prioleau, upholding against that government a line which Messrs. Prioleau had upon some cotton which it claimed. The United, States government, it is understood, does not recognize that decision, either in its principles or its obligations. Nevertheless, if property can be found belonging to the late confederate government, and judgments favorable to the bondholders can be obtained in our courts, there may be something, though there cannot be much, to divide among the unfortunate creditors. Then came the question of the liability of each State which joined the confederate government for its debts, or a proportionate share of them.
It is here that the intense and invincible folly of the handful of bondholders represented by the speakers at the London Tavern becomes apparent. The least acquaintance with the history of these States, and of the loan, would have preserved them from making themselves, as they have done, the laughing-stock of Europe and America. The seven per cent, cotton loan formed no part of the State debt of any State, nor was it raised on the credit of the several States. It was a gambling loan, its principal. attraction consisting in the favorable terms on which its holders were allowed to get cotton from the southern States. At no time during the war had either the States or the confederacy credit upon which they could have procured the sums represented by the loan. More than this, when, in consequence of the doctrine of State rights becoming better understood, and its being perceived that, according to that doctrine the States might go out one by one, and so the confederacy expire, the Richmond government, to invigorate its credit, applied to the several States to guarantee the general debt; the States refused compliance, and the guarantee was not given. But suppose that, instead of refusing, they had complied, in disregard of the claims of their allegiance which the government of the Union never ceased to assert, what would be the legal or practical worth of such an obligation to the bondholders after the government of the Union had completely vindicated its authority ? It is more than absurd to revive the theory that the seceded States were never in rebellion, that their people were never liable to be treated as rebels, but that each State was and is sovereign. That theory came upon Europe in 1861 as a surprising novelty; it was a theory which there was only one way of making good; that way was tried and failed. If Generals Lee and Johnston could not malve good that theory, will a committee of creditors of the rebel States be able to do so ? The idea of the federal government being liable for the debts of the persons who combined to resist its authority is simply amusing—so amusing that we could wish that Mr. Chamberlain could be induced to go and urge that view at Washington. Anything more comical than a faithful report of his interview with Mr. Seward would certainly prove has not been produced on any stage. Imagine anybody deliberately giving out three years ago that he was going to lend money to the States of the Union which had thrown off their allogiance to [Page 533] the federal government, feeling confident that if they made good their independence they would pay the interest on the money; and that if they did not, the federal government would be bound to assume the debt. Such a person would have been thought to have qualified himself for a cell in Bedlam. The first man he met in the street would ask him whether he had ever heard or read of a government acknowledging as its creditors those who had supplied money to enable states or provinces to throw off its customary or constitutional authority.
But it is notorious that the money was lent with no such expectation. The federal government took measures as soon as the loan was announced to inform all whom it might concern that the money was being raised for an illegal purpose, and that under no circumstances would it incur any liability in respect of it. The whole conduct of Mr. Lincoln and Mr. Johnson towards the seceding States is based upon the assumption that they have never been out of the Union; that, consequently, they never ceased to owe allegiance to the Union government; and that thus all their acts done while in secession were without legal validity. But not only is this the theory of the federal government: it is the doctrine of the southern States themselves. The bondholders, we presume, read the telegrams. Let them attend to the reports from the State of Mississippi now in course of reconstruction. The convention of that State began its labors by annulling the ordinance of secession; then it cancelled all; laws and acts passed while the State was in rebellion, subsequently re-enacting such of them as were not repugnant to the federal Constitution. The theory of State sovereignty is thus blown to the winds with the government which it was invented to support. The bondholders may read in these facts the secret of their position. They lent their money to an adventure which has failed, to a pretended government which never had any recognized legal existence, and which was unable to maintain itself, which has perished without leaving any heir or any representative. In a word, they have lost their money. This is true of all of them, and, after Monday’s meeting, we must add that some of them have besides lost their good sense, their personal dignity, and the sentiment of what is becoming in Englishmen.
The Confederate cotton loan.
A meeting of the bondholders was held yesterday in the London Tavern to consider their altered position, the government of the United States having become the de facto government of the Confederate States, and, if deemed expedient, to appoint a committee to protect their rights and interests, and generally to take such steps as might be thought advisable.
Mr. Chamberlain, solicitor, announced that on thé part of certain bondholders he had called the meeting. He had made arrangements for a gentleman to take the chair, but at the last moment he was disappointed. The meeting had been called by him on behalf of several gentlemen who were large bondholders, but, unfortunately, those who were the largest holders did not wish to appear publicly in the matter, and therefore he suggested that if they wished any gentleman to take the chair they would propose his name. The meeting was called to consider the question as an investment, and not in reference to any political question in any way. If no other chairman was proposed, he would propose that Admiral Sir Provo Wallis should take the chair. [Hear, hear.]
The chair was accordingly taken by Admiral Sir P. Wallis
Mr. Chamberlain said he was not in a position to put before the meeting any result of investigations as to the rights of the bondholders. That was a question for a committee to consider and determine upon. All he proposed to them was that they should decide whether the question was worth considering. [Hear, hear.] No doubt the real question they had to consider was, whether the bonds were worth the paper they were written on, or worth the price they had given, or their nominal amount. He was convinced that questions of the very highest moment and of the gravest character were involved in this loan. The first question was, whether the agents or contractors of the loan had any money in hand to pay the coupons. [Hear.] He had no official communication to make, but he had heard there was a sum of money applicable (if the parties could be properly indemnified for making the application) to the payment of the interest on the loan to some extent. Another grave question for consideration was the conduct of the contractors in reference to the loan. [Hear.] It might be advisable for the shareholders to investigate the circumstances under which the loan was contracted, and the arrangements made by the gentlemen who brought out the loan; the price at which they did it, and the steps they took before they made the representations to the public they did. [Hear, hear.] Another very grave question was, whether what were called the Confederate States of America had any property on which the bondholders might be considered to have a preferential lien—[hear, hear]—as against the federal government, that had taken possession of the confederate property. That was a question requiring considerable investigation. There might be property in England or on the continent on which it was possible the bondholders might be considered to have a preferential claim. [Hear, hear.] He begged to call attention to the decision of Vice-Chancellor Wood in the case of the United States of America vs. Prioleau. In that case his honor upheld the lien against the federal government. The United States government tried to defeat the bona fide claim of Messrs. [Page 534] Prioleau for £20,000 advanced by them on cotton, and Vice-Chancellor Wood upheld their claim on the cotton. Then came the question as to the liability of each State forming the confederate government to pay this loan or their proportionate part of it. Next came the question as to the liability of the federal government, that government having taken possession of all the property of the confederate government He had hoped to be able to lay before the bondholders that day the written opinion of one of the most able of her Majesty’s-counsel on this grave question, but in consequence of that counsel’s absence from town he (Mr. Chamberlain) had not obtained his written opinion; but he was authorized to state that, after counsel had given the matter grave consideration, he was prepared to advise the bondholders that the States forming the confederate government, as individual and sovereign States, were each liable for its portion of this loan. [Hear, hear.] And counsel was of opinion, looking to the federal Constitution of the United States, that the Confederate States did not forfeit their sovereign rights, and could not have been considered to be in a state of rebellion so as to make the loan void, but that the federal government having defacto taken possession of the property of another de facto government, morally and internationally, the tederai government ought to take upon itself this loan. This question should be looked into, and was sufficient in itself to justify the appointment of a committee. He had received several letters from gentlemen who are large bondholders and are most anxious that a committee should be appointed, but who did not wish that their names as large bondholders should be known. [Hear, hear.]
In reply to a question,
Mr. Chamberlain said that he did not know whether any representative of the agents who contracted the loan was present. He had applied to the Messrs. Schroeder, the contractors in London, to see the contract, but had not been enabled to see it. He had also applied to Mr. Erlanger, of Paris, to let him see it, but he had not succeeded. He had no reason, however, to suppose that they would withhold information respecting the loan. But, considering the circumstances, the agents might say they were not going to give information to every bondholder, but if there was any person to represent the bondholders en masse they might give t.
Mr. Wills said he had asked for information at the office of Mr. Schroeder on Saturday, and the only answer he could get was: “No funds.” [Hear, hear.]
Mr. Green suggested that it would be a question for consideration whether it would not become them to bring their claims before the President and Mr. Seward.
Mr. Spencer Herapath thought it would be unreasonable to think that they should have a claim on the federal government beyond the amount of property belonging to the confederate government, of which the federal government had taken possession.
Mr. Joseph asked for an explanation respecting the nature of the contract. From whom had the money been received with which the dividends were paid? They were. entirely in ignorance of the nature of the contract, and with whom they had contracted.
Mr. Chamberlain said the question involved was, whether the Confederate States of America might be considered in a state of rebellion, so as to allow of their being treated as rebels. He was advised that the federal government must be looked upon as a state conquering another independent state. Each one of the Confederate States was and is a sovereign State; the federal States were also sovereign States, and the federal government must be looked upon as a sovereign state conquering another sovereign state. The government that displaced the other must internationally and morally take upon itself all the liabilities of the government displaced. Whether there was any chance in the courts of the United States of establishing these bonds against the federal government he was not prepared to say; but that was a question for a committee, and one which the men who had advanced their money should not lose sight of. In conclusion he read a resolution for the appointment of a committee.
A bondholder expressed his regret that they had not Messrs. Schroeder’s assistance there that day; but he hoped they would aid the committee by their co-operation. He quite agreed in the opinion that they must look to the Confederate States more than to the federal government. Every man in the Confederate States must feel that he was bound to pay this debt.
Another bondholder contended that the federal government having conquered the confederate government, had a right to pay this debt, and ought honestly to acknowledge it That would be the way to show the south that the people of the north had something like heart about them.
Another bondholder feared there was no chance of the federal government recognizing the late confederate government as a legitimate one. The bondholders had certainly a lien on all the cotton that had been seized, and that would be amply sufficient to meet all their claims.
Another bondholder asked if it would be desirable to appoint a committee on that day. The gentleman that was originally to take the chair was not present, and other bondholders were likewise absent.
Mr. Sebag explained that many bondholders did not like to come there, lest they should be considered to be in a stupid position as holders of confederate bonds. [Laughter.] It occurred to him that it would be worth their while to adjourn the meeting, so that the matter might be ventilated, and the agents might come there and see what could be done.
Mr. Green objected to the adjournment. By appointing a committee that day they would [Page 535] put a price upon their stock considerably above what it was at present. That would show that they were determined to make a beginning.
Mr. Chamberlain thought it was the universal opinion that a committee should be appointed. If they appointed the committee, no step could be taken by that committee without reporting to another meeting of bondholders. He pledged himself to make every inquiry, and they would be called together on a future day to consider who should be on the committee.
The Chairman promised to give all the assistance in his power to get back the money they had advanced. What, he asked, would be their debt when divided amongst the seven Confederate States ? [Hear, hear.]
At the close of the discussion the following resolution was passed:
“That, considering the position in which the subscribers to the seven per cent, cotton loan of the Confederate States of America are placed, it is expedient that a committee should be appointed to consider the rights and claims of the bondholders, with instructions to report to a subsequent meeting before taking any steps to protect the same.”
Some further discussion ensued, and the meeting came to the conclusion that the committee should be named at the next meeting. The following resolution was then passed:
“That the chairman, Mr. Morgan, and Mr. Chamberlain, be requested to act as a temporary committee on the part of the bondholders, and that the meeting be adjourned to the 18th of October.”
A vote of thanks was passed to the chairman, and the meeting accordingly adjourned to the 18th of October.