SPECIAL MESSAGE

OF

JOSEPH A. WRIGHT,

GOVERNOR OF INDIANA.

IN RELATION TO THE

CRAWFORDSVILLE AND WABASH RAILROAD.

TO THE

SENATE.

INDIANAPOLIS:

JOHN D. DEFREES, STATE PRINTER.

1849.

SPECIAL MESSAGE.

Gentlemen of the Senate:

Bill of the Senate No. 121, an act to amend an act entitled "an act to incorporate the Crawfordsville and Wabash Railroad Company,," approved January 19th, 1846, and an act amendatory thereto, approved February 15, 1848, having been presented for approval, I have determined to withhold my signature from the bill, leaving it to become a law, under the constitution, without the Executive approval.

It is the constitutional duty of the Executive, from time to time, to give to the General Assembly information of the affairs of the State, and recommend to their consideration such measures as he may deem expedient; and I have deemed the present a fitting opportunity to present for the consideration of your body, certain measures of modification, which in my judgment would be salutary, by way of limiting the powers which the bill above referred to, and others of a similar character, will confer.

I should have returned the bill to the Senate, with a statement of my objections, if it had been an original proposition, for a work not commenced; but the work having been entered upon, and large investments having been made in its stock by individual and corporate subscription, I feel disinclined to do any thing which might have the effect to imperil the important interests already embarked in the enterprise. This disinclination is enhanced by a diffidence naturally growing out of my very recent investments with the executive functions, and the proper period not having arrived for me to present to the legislature the usual annual communication, embodying views of State policy in general, which require time for maturing.

I desire to call your attention strongly to the general fact connected with the prosecution of Internal Improvement in our State, and to invoke your deliberate and mature consideration of the whole subject as connected with the general principles of this bill. The impression is strong upon my own mind that we may find in such

a view of facts matter for caution, and hints for our guidance, which a proper zeal for the public welfare will not permit us to disregard. Irrespective of the question as to the propriety of counties and cities in their corporate capacity subscribing to the stock of such works, it is clear that when such subscriptions are made, the interest which the counties and cities hold, should be surrounded by safeguards of the most unquestionable security. From this consideration alone, it is submitted that it would be improper to invest the directory of any company with unlimited power, to sell bonds at any rate of discount they may please to make, and to cause them to bear any rate of interest, however exhorbitant. Is it not the duty of the law-making power to protect the tax payers of the subscribing counties from encroachment, especially when the irrevocable character of such bonds is considered?

But this objection to the unlimited rate of interest and discount, is greatly strengthened by a consideration of the vast number of enterprises of this character in this and the adjoining States, and the probable effect of their prosecution upon our financial condition. Facts of recent occurrence are full of instruction on this subject. The lesson that a similar state of things taught the people of the old world, I trust are not forgotten. There, these enterprises have already received a severe check, and it would seem that the spirit of speculation has been transferred from that field of operation, in a great measure, to this country.

Here, similar scenes are now being enacted, not to the same extent, it may be; but unless a prudent foresight interposes its salutory checks, there is ground for the apprehension that results equally disastrous will here ensue.

We are advised that one of the first moneyed houses of the old world has lately established a branch in our great commercial metropolis-thus preparing for action, regarding this as the peculiar field for such operation; and, from the very fact that it becomes necessary, now in view of the interest of certain companies in the prosecution of these works, to ask leave to pay a higher rate of interest than usual, and to sell their bonds at whatever amount they may agree to receive, is evidence of a strong pressure, or otherwise, of an overaction in this branch of enterprise.

Indiana has had such a lesson on the subject of the prosecution of works of a similar character, that we shall be justly chargeable with a want of prudence if we fall again into a like difficulty, without having made some exertion to avoid the disaster.

If the moneyed operations of these companies are confined to the ordinary and safe methods of conducting business-if large debts are not contracted at heavy rates of interest, or at a ruinous discount-then, in case of a general pressure, the worst that could happen would be a suspension of the work.

But consider what would be the effect if, by a general monetary revulsion, such a work should be arrested, while in the midst of its active operations, if burthened with the obligation to pay heavy

1

rates of interest, and at the same time, with no part of the work so far finished as to be susceptible of producing revenue.

!

Extend this example over the whole State, and what would we see but the materials of these works brought under the haminer,. the lands pledged to them disposed of at forced sales, to the consternation of the too confiding occupants, and the tax payers of a subscribing county groaning under a burdensome imposition for the purpose of paying the interest on a stock which pays no dividends.. When a rate of interest is established by law, and when, as with us, the rate is high, as compared with commercial rates, it is good policy not to permit exceptions to the rule, except in extreme cases, and then there should be a limit.

In the case under consideration, it seems to me that public policy points plainly to the enforcement of the rule within a given limit. It might be safe, and even desirable, to permit the sale of bonds at somewhat less than the par of State bonds, of the same rate of interest, but the experience of the State admonishes us that the discretion in such cases should have its limits defined.

It is a remarkable fact, that in every instance that has come under my observation, where this power is sought to be given to the directors of companies to borrow money or make sales of bonds, without limit or restriction, that in the first instance, acts of incorporation have been passed by the legislature, in which no such power is given, and that counties in good faith have taken stock in said companies; that subsequently amendments have been made. from time to time, until now this unlimited power is asked.

It is suggested with great deference, whether the adding of this power would not be a violation of the faith upon which the people of the several counties, in their corporate name, have heretofore taken stock in the various companies of the State.

It is said that the bill referred to, does not authorize the selling of the bonds of the counties, or the hypothecating of them at any rate of interest that may be agreed upon. While this is, perhaps, true, it is difficult for me to perceive the difference between giving the power expressly in relation to the bonds of the counties, or making the same unlimited power applicable alone to the stock of the company, or the borrowing of money. If you affect the stock by exorbitant interest, or sell the bonds of the company at a ruinous sacrifice, it must affect the county stock as well as that of the citizen. All are connected together for the wellfare of the work, and the adoption of a principle that is calculated to injure the one, will the other. The objection to this want of limit in the rate of interest to be paid for money borrowed, and in the sale of stocks, is, that it gives a power which is liable to great abuse, and may involve the most ruinous consequences; and I cannot but think that the legislature in conferring such a power, have failed to consider, with the requisite maturity, all the abuses to which it is liable. We know not who are to hold the places of directors of these corporations, with the right thus to offer in market the stock of companies and to