Papers presented by David K. Thomson since 2019

2024 Providence, Rhode Island

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

Abstract:

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.

2022 Mexico City

"'Repudiation is Now Weighing Like a Mountain': U.S. State Debt and Foreign Bondholders in the 1830s-40s"

Abstract:

This paper centers on the transatlantic role of United States state debt in the era prior to the American Civil War (1861-1865.) In the 1830s, various state legislatures chartered banks to underwrite a drastic expansion in debt. In 1820, total American 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 and refusal to do things like raise sufficient revenue via taxation only served to complicate matters. What happened afterwards troubled investors within the United States and abroad. Eight US states and one future state (the territory of Florida) repudiated their debts while another five states barely avoided repudiation. 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, however, conflict increased between the repudiating and even defaulting states and European financiers. As states defaulted or repudiated in the 1840s, however, European agents proved integral to stabilizing United States markets. These acts served their own self-interests, but likewise succeeded despite the vast array of Americans that worked against their efforts. In the end the active role taken by European banks and their respective agents in the United States stabilized some, but not all monetary obligations of various states in the pivotal decade of the 1840s. These institutions expended financial and political capital to ensure American states honored financial commitments and corrected debt defaults—even with some financial pariahs remaining, most notably Mississippi. By looking at government and financial archives, this paper explores the power of lobbyists, publicists, shadow networks, and acts of dubious legality that defined a period of great economic uncertainty— in essence a period of state building centered around scandal.

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2021 Hopin Virtual Events Platform

"‘He [Chase] thinks there is a fourth person in the Trinity’: Salmon Chase and the Civil War Treasury"

Abstract:

As the guns of the Civil War fell silent across a scarred American landscape, one Confederate leader supposedly quipped, “The Yankees did not whip us on the field. We were whipped in the Treasury Department.” He was partly right. The American Civil War cost the federal government $3.2 billion and for the Confederacy, some $2 billion. The North raised nearly two thirds of the requisite funds from the sale of Union bonds, while the Confederacy relied more on churning out Confederate currency (to the tune of $1.5 billion, to say nothing of state currency issues) to cover expenses. The war itself however represented a new chapter in American finance and financial institutions. Financing the war required a degree of state-led financial innovation utterly at odds with American antebellum financial culture. The moral hazards of the anonymous marketplace from the antebellum era quickly became replaced by a statist response that called on all of the citizenry (North and South) to embrace an evolving financial world punctuated by wartime exigencies. But this only tells part of the story for successful execution of the financial war. The cause of Union and emancipation relied upon a triumvirate of financial instruments. Bond issues (more than $2 billion worth), the issuance of a new currency backed by the United States government referred to as greenbacks, and radical new taxation policy centered around the first income tax paved the way for Union success. And at the center of this all was Secretary of the Treasury Salmon Chase. Inexperienced in finance and monetary policy, Chase used his bravado to coordinate efforts between the government and Wall Street and between the executive and legislative branches in order to fiscally survive the Civil War. This paper explores Chase’s role in the conflict and the growing pains posed by wartime exigencies that the Treasury nevertheless overcome to facilitate northern financial success.

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