Abstract

"“Bonds Negotiated in the Grossest Fraud”: Fraud, Corruption, Trust, and Mississippi State Debt in the Antebellum United States"

David Thomson, Sacred Heart University (david.kelley.thomson@gmail.com)

In 1820, total United States state indebtedness numbered some $12.7 million. By 1840, U.S. state debt reached more than $170 million. But then it came crashing down. Overextended states could no longer make their interest payments to creditors. Eight US states and one future state (the territory of Florida) repudiated their debts (in part or in full) while another five states barely avoided repudiation. Mississippi acted as one of the chief repudiators, an action that has carried with it legal repercussions up to the present. Central to the repudiation argument put forth by the state of Mississippi was the claim that the bond sales undertaken by the Second Bank of the United States (BUS) under Nicholas Biddle on behalf of the state perpetuated a fraud because the bonds were sold at times below par, violating the terms of the bond issuance by the state legislature. Such sales largely involved European financial institutions. After all, the U.S. state bond market in the antebellum period proved a fruitful ground of investment for European capitalists. As the debt and defaults mounted for Mississippi, however, conflict increased between the repudiating state and European financiers. British and Dutch banks worked extensively to get Mississippi to “come right” by honoring their debts. These firms and their American agents placed a significant emphasis on notions of honor and Christian faith in the face of Mississippi’s claims of fraud and corruption on the part of the BUS and their European partners. By looking at government (legislative and judicial) and financial archives, this paper explores the power of language centered around fraud, corruption, trust, and honor in the antebellum United States. Such a case study reveals not just an interesting moment in transatlantic financial and political communities during the antebellum period, but the increasing importance of US state debt in finance capitalism by the 1840s.