"legally and equitably bound to provide for the payment of the principal and interest of these bonds," covenanted with the holders to fund the interest till July, 1845, pledged the revenue from the public works to the payment of the interest which should accrue after that time, and voted a direct tax to be assessed and levied in the same manner as the other State taxes, in order to pay any deficiency of the interest which that revenue might fail to meet. Thus far the conduct of the State has been such as the country had a right to expect.

We wish it were in our power to approve of its conduct in respect to the residue of this loan, the history of which is briefly as follows. The Morris Canal and Banking Company met with great difficulties in the sale of the residue of these bonds; and being called on by the Governor, in November, 1838, to state the account of their sales, and to make such suggestions as they should think important concerning future proceedings, replied by a proposal to pass the whole amount of the bonds, at par, after deducting their commission as agents, to the credit of the State of Michigan; provided the Governor would deliver to the Banking Company the whole of the bonds at once, and take the obligation of the United States Bank of Pennsylvania to pay three fourths, and of the Morris Canal and Banking Company to pay one fourth, of the amount, at certain periods which had been fixed in the contract of agency before mentioned. To this proposal the Governor replied, that he had no objection to the details; that their contract of agency gave them full powers to act as the interest of the State required, and that they must take the responsibility of deciding whether this was the best thing that could be done for the interest of the State. The Banking Company say, in answer, that they think it is best for the State to accept the offer, which had been made, and that they have closed the bargain. The Governor afterwards delivered the bonds, took the obligations of the United States Bank of Pennsylvania and the Morris Canal and Banking Company for the price, and in his next message announced the sale to the legislature, and communicated to them the documents respecting it. The legislature interposed no objection. Subsequently, the State received from the purchasers about $1,000,000, in part payment of their obligations, and then the United States

Bank of Pennsylvania and the Morris Canal and Banking Company having both become insolvent, and having failed to pay the balance of the purchase money, the State declared, that it owed upon these bonds so much as the purchasers had paid, and that it was ready to issue new bonds for that amount upon the surrender of all the bonds so sold; and that as to the residue, "it was a transaction between the State and the purchasers, and their agreements are to be judged of by the circumstances attending them."

It only remains to add, that these bonds, all of which went to the United States Bank of Pennsylvania, were pledged by that bank to various banking houses in Europe to secure money previously borrowed, money advanced at the time of making the pledges, and subsequently paid on the faith of the pledges; that the bonds are, in form and by law, negotiable; and that no evidence has ever appeared, so far as we know, that either of those banking houses had knowledge, at the time they took the bonds, or when they afterwards advanced money upon them, of any defect in the title of the United States Bank of Pennsylvania.

Now we should agree, at once, that, if the United States Bank of Pennsylvania and the Morris Canal and Banking Company held these bonds, the State might justly refuse to consider any greater amount of them as due than had been paid for. The law of all civilized countries would, in some way, come to this result. But every system of law with which we have any acquaintance, and certainly the law of Michigan, makes a distinction between the case of these banks and that of bonâ fide purchasers. We believe the principle to be universally admitted, that, whenever a purchaser of property acquires a title from the seller, which he can transmit, although that title be tainted with fraud, if he sells to a bonâ fide purchaser, who parts with his money, or any other thing of value, on the faith of the property, such purchaser obtains a valid title, purged of the fraud. This principle is not only well established, but society could hardly get along without it; and it is most often and most liberally applied to the sales and transfers of negotiable securities. That the United States Bank of Pennsylvania had a title, which it could transmit, does not admit of a doubt. The sale negotiated by the Morris Canal and Banking Company might have been open to some objection, as they were

themselves the agents to sell, and seem to have been in some way interested in the purchase; but, surely, it is too late to object, after the Governor, who was the immediately authorized agent of the State, had, with a knowledge of all the facts, ratified the contract and delivered the bonds, and after the legislature, with all the facts before them, had interposed no objection, and had taken one third of the purchase money. The only possible question, therefore, is, whether the European bankers parted with their money in good faith; and we are not aware of any evidence to the contrary. The legislature do not assert, that these bankers had notice, either actual or constructive, of any fact which would deprive them of the protection due to all bonâ fide purchasers of negotiable securities. The mere fact, that the bonds had not been paid for, even if known to the persons to whom they were pledged, would not have this effect. It would be monstrous to say, that, because property bought on credit has not been paid for, the holder cannot give a good title to it. Such a doctrine would overset half the sales made in the country. But we repeat, we have never seen any evidence, or any reason to believe, that even this fact was known to the foreign bankers. To do the legislature justice, both by their committee and by the act relating to this subject, they preserve a silence which is dignified and proper, if they have no satisfactory evidence of such notice, but believe that inquiries made afterwards may possibly elicit it. And this we understand to be their position. But even without such evidence, we cannot doubt the equitable and legal claim of the holders of these bonds to be paid what is due on them, to the extent of the amount for which they were pledged. And we add, that we entertain as little doubt, that the State of Michigan will hereafter act according to this view of the subject, and adopt in reference to these bonds the same just and honorable measures which it has already taken concerning the others.

The State of Louisiana has loaned its credit to several banking corporations, the capital stock of which was secured by mortgages on real estate. The bonds issued by this State amount to about $22,000,000, of which about $17,000,000 have been sold. They are all payable in England. The immense trade of New Orleans, the port of entry and export for the great valley of the Mississippi, and

all its tributary waters, has, for a long time, caused capital to be in great demand there; and this method of obtaining it, by means of loans to banks whose stock is secured by mortgages of real estate, was devised about twenty years ago. These banks were well managed, and from their profits a fund was accumulating, which, before the maturity of the bonds, would have been sufficient to redeem them.

But unfortunately, New Orleans partook quite as much as any other city, and probably more than any other, of the unnatural excitement of the times, and felt, more than any other, the corresponding depression which followed. During the period of prosperity, cotton, the great staple, bore very high prices; property of all kinds was held at values merely factitious, and, confidence being great, and credit being easily obtained, the banks discounted an immense amount of paper, which was found to be bad when the day of trial came. The consequence has been, that the resources of the banks have been very much diminished, and the assets of one or more of them may not be sufficient to pay the bonds loaned to them by the State. We do not think the deficit will be large. Our limits do not allow us to state their condition particularly; suffice it to say, that, if they are judiciously managed, we believe they can pay so large an amount of the bonds loaned to them, as to leave only a small sum to be paid by the State.

In no part of the United States are there men of higher honor, and greater intelligence respecting financial affairs, than in Louisiana. Nowhere is the necessity of preserving the public faith inviolate better known or more strongly felt. The State is gradually, but securely, rising from her great pecuniary difficulties; property is attaining its just and safe value; capital is again increasing rapidly, and, almost before they people are aware of it, they will again be in a prosperous condition. It is a high and clear duty of the people of this State to watch vigilantly over their crippled banks; to see that their assets are honestly applied to the payment of the bonds; and to adopt such legislative measures as shall secure and preserve the faith of the State towards its creditors, and procure for themselves again the use of the foreign capital which they so much need.

We regret, that there should be any thing in the legislation of Louisiana upon this subject to require comment; but we

feel bound to say, that an act passed at the last session of the legislature, in reference to the liquidation of the affairs of some of the banks, is open to very serious objection. The act we refer to was passed on the 5th of April, 1843, and provides, that all debts due to the banks in question may be paid in State bonds issued by the banks, which bonds are to be received in payment at par. It must be borne in mind, that the capital stock of these banks consisted of the obligations of those who subscribed for the stock to pay the sums for which they subscribed, secured by mortgages on real estate; and before these bonds were issued, it was provided by law, that these obligations of the stockholders, together with the mortgages by which they were secured, should be deposited in the offices of the banks for safe keeping, and as a guaranty for the reimbursement of the principal and interest of the bonds to be issued by the State; and that all the hypothecary obligations, of whatever nature, subscribed by individuals in favor of the banks, should stand as collateral security for the payment of the money loaned on the bonds of the State, and the interest which should accrue thereon. Now there is not the smallest doubt, that this law amounted to a contract made by the State and the banks with every bond-holder, that these mortgages should be held by the banks in trust, to secure the payment of the money loaned on the bonds. There is not a court in the country, which would hesitate so to declare upon these facts. And when the State placed these banks in liquidation, and thus took the control of their affairs, it was bound to guard this trust strictly and faithfully. It had no right to receive depreciated bonds at par, in payment for well secured debts which it held in trust for third persons. What would the law of Louisiana, or the courts of Louisiana, say to a tutor or guardian, who should receive depreciated paper in payment of a debt due to his ward, secured by mortgage? doubtedly, they would say it was unfaithful administration, and would order him to make good the difference. And may the legislature itself justly do what its own laws condemn as unfaithful and unjust? As a question of right, this matter admits of no doubt. As a question of the constitutional power of the legislature, it is equally clear. This law impairs the obligation of a plain contract between the State and the banks on the one part, and the bond-holders on

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