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COMMUNICATION

CONCERNING THE

SALE OF BONDS FOR CANAL PURPOSES.

To his Excellency, THOMAS CARLIN,

Governor of Illinois.

SPRINGFIELD, Dec. 15, 1840.

SIR: I have the honor to acknowledge the receipt of your note of the 7th instant, together with a resolution of the Senate, requesting from your Excellency, information relative to my agency in the sale of State Bonds, on account of the contractors on the Hlinois and Michigan Canal; and I have subsequently received, directly from the Secretary of that, body, the following resolution, having the same object, but making additional inquiries:

"Resolved, That General Thornton, one of the Canal Commissioners, be requested to inform the Senate whether or not, in the late sale of bonds to him, as agent of the Canal contractors by the Governor, provision was made to pay the State the difference of exchange between the United States and the place said bonds are payable; and also, whether any bonds have been hypothecated by him for the purpose of raising money to pay the interest on bonds; and also, whether or not the instal ment by Messrs. Wright & Co. under the contract made by them with the Hon. R. M. Young, for the Illinois and Michigan Canal Fund, has been paid to the said Young; and if so, at what time and by whom; and where said money has been deposited; if said money has been paid over to the Canal commissioners, and if not, the reasons why said payment has not been made; and if the agents of the State have ever refused to pay the same to the Canal commissioners, the reason assigned for such refusal, and all information in his possession relative thereto."

In order to give a clear and connected view of the subject, I beg leave to submit a detailed history of the whole transaction, embracing the application of the contractors for the purchase of bonds-the appointment

of an agent for the sale of them-the necessary payment of interest in New York and in London, preparatory to attempting sales-the negotiation in London of a thousand bonds of £225 sterling each-the disposition of the exchange between London and the United States-and the final disbursements in part, and condition of the remainder of the funds. Soon after the adjournment of the last session of the Legislature, a general meeting of the contractors was held in Lockport, to take into consideration the critical condition in which the laws just enacted had left them; and to devise some plan, if practicable, of averting the ruinous consequences that must result from a stoppage of the work. The only provision made by the Legislature, other than to leave, undisturbed, the previously existing authority to sell State bonds at par, was to pay the contractors whatever might be due them on the first day of March, and not thereafter, in checks on the State Bank of Illinois, bearing an interest of six per centum per annum, and payable whenever funds could be derived from the legal sales of bonds. Checks or scrip, of the character just described, amounting to about four hundred thousand dollars, were accordingly issued for work and other liabilities which had accrued during the winter. But the great scarcity of money at the time, and the uncertainty of the early redemption of the scrip, produced serious losses to contractors, and all parts of the community necessarily connected with them in business. Entertaining no reasonable hope of relief through any regular channel, the convention of contractors, already mentioned, appointed a committee to wait on your Excellency, with a proposition for the purchase of a sufficient number of bonds to sustain the work until the meeting of the General Assembly; and the President of the Canal Board was urged to accompany the committee, in order that no delay might ensue from the want of such information as your Excellency might require from the commissioners. The result of the negotiation has been communicated to the Legislature in your late message.

On the return of the committec to Lockport, the contractors were again convened, and the following resolutions, among others, were unanimously adopted, to wit:

"Resolved, That confidently relying on the ability of the Board of Canal commissioners, and their friendly aid in our behalf, this meeting accept, and will carry into effect, the proposition made by his Excellency, Governor Carlin, to the committee appointed by a meeting held by the contractors on the 24th day of February last, for the purpose of waiting on him in their behalf, as follows: Governor Carlin proposes to place in the hands of the Canal commissioners an amount of State bonds, equal to the amount of work that will be done on the Illinois and Michigan Canal, between this time and the meeting of the next Legislature, including the amount of work now done, the estimates of which are unpaid, supposed to amount altogether to about twelve hundred thousand dollars; and the Governor instructs said commissioners to sell the same, in their discretion, on such terms only as shall secure the legal par value of the same to the State, and the proceeds of such sale or sales to apply in payment of the current expenses of the Canal.'

"Resolved, That the commissioners are hereby instructed to dispose of bonds furnished in accordance with the foregoing resolution, to the best

possible advantage, at any price they may think proper, not less than seventy-five cents on the dollar in par funds in New York; and when requested by any party interested, to hold his bonds, or any part thereof, at a higher rate than seventy-five cents, then they will observe such requests, and carry them into effect for the benefit of the contractor so directing.

"Resolved, That in case the commissioners shall be unable to sell bonds within the rates limited by the foregoing resolution, or may deem it more to the interest of contractors to hypothecate, they are hereby requested to hypothecate a sum not exceeding half the bonds, as in their discretion they may deem advisable.

"Resolved, That in selecting an agent to negotiate the bonds on the part of the contractors, it becomes necessary to combine financial talent, firmness, and integrity, in one who knows our wants, and at the same time knows the deep distress that would be the consequence of a failure to progress with our work; and from the ability and well known qualifications of W. F. Thornton, Esq. President of the Board of Canal Commissioners, we most confidently place our bonds at his disposal, feeling well assured of his success.

Resolved, That General Thornton's expenses in negotiating bonds, including any commissions that he may think proper to pay to a banking house, or other assistance, be charged to contractors purchasing bonds of the State, in proportion to the amount of their several subscriptions; and the Secretary of the Board, Joel Manning, Esq. is hereby authorised to retain such sum from the estimates of contractors in proportion to their respective amounts."

Previous to either of their meetings, the principal part of the contractors had solicited me, in the event oftheir obtaining bonds, to act as their negotiator, which from many considerations, involving my own comfort and safety, I repeatedly declined; but when my services were unanimously required, with a very general assurance, that if I continued to refuse, I might be the cause of defeating their last prospect; and especially since your Excellency had expressed a wish that I should undertake the negotiation, I could no longer hesitate, and in co-operation with the Board of Commissioners, proceeded to make the proper preparations for the security of the State, and the introduction of the bonds legally into market. Paper No. 1, is the power of Attorney of your Excellency, authorising the Board of Commissioners to sell bonds to the contractors.

Paper No. 2, is the form of an obligation taken from each contractor, to make good to the State the difference between the par value of the bonds and the price at which his agent was limited to sell them.

Paper No. 3, is the form of a power of attorney, duly executed by each contractor to the agent.

Paper No. 4, is a letter of attorney from the Board of Commissioners of the Illinois and Michigan Canal to the agent of the contractors, empow ering said agent to sell bonds on account of said contractors, in conformity with the Governor's authority as exhibited in Paper No. 1.

Paper No. 5, is your Excellency's power of attorney to sell bonds on account of the Canal Fund; and Papers No. 6 and 7, are your letters of instruction relative to the sale of these bonds, as well as those of the contractors.

This series of papers, supported by sufficient evidences of the progress, condition, and national importance of the Canal, and the value of its resources, independent of the credit of the State, completed the preparations deemed necessary for offering the bonds in market. It remained, however, to make timely provision for the payment of the interest falling due on the first Monday of July following, which, in this country, amounted to about $45,000, and in Europe, including a payment previously made by the Bank of the United States, and still due her, to about $90,000.

Unless the interest could be punctually paid, it was manifest to every one, that any further attempt at negotiations would be in vain; hence my first efforts were directed to that object.

There was no money in the Treasury as had been shown in the last Annual Report of the Board of Commissioners; and the oppressed state of the country rendered it entirely certain that neither sales of lands, nor collections on account of those already sold, could be relied on as early as July. But up to May, it had been confidently believed that ample resources would be derived from Messrs. John Wright & Co. of London, who had contracted with Judge Young and Gov. Reynolds to advance £10,000 in January last, and £20,000 six months thereafter, both of which sums had been relied upon for the payment of the July interest-the one in this country, and the other in Europe. And here it may be proper to revert to the Senate resolution, quoted in the commencement of this communication.

Enqiury is made whether the £10,000 due from Messrs. Wright & Co. has been paid, and if paid, where deposited, &c. I can only say, that I learned from your Excellency, during last winter, and while the Legislature was in session, that Judge Young had sold a draft on Messrs. Wright & Co. for the amount in question, to the Bank of the United States, and had deposited the proceeds, amounting to about $56,000, to his own credit, in that institution; and I soon afterwards learned, but from what source I do not now recollect, that Judge Young had withdrawn the deposite from the Bank, and was converting it into western funds, to remit for the use of the Canal.

I think it was about the close of the session that I informed your Excellency of what I had heard, and took the liberty to recommend that the money remain in eastern funds, for the payment of the July interest, being the only sure dependence for that purpose.

While in Quincy, in company with the committee of contractors, your Excellency informed us of your determination to annul Messrs. Wright & Co.'s contract, and of your having instructed Messrs. Young and Reynolds to that effect; but at the earnest request of the committee, in which I joined, you consented to countermand the instructions, and allow the contract to be turned over to the contractors on the Canal, who were willing to make it a par negotiation to the State, if funds could be realized from it in time to meet their engagements. In the course of a few weeks, however, Judge Young expressed his opinion in a letter to the contractors, that the proposed change could not be effected. But in the latter part of April, your Excellency, urged by the contractors and myself, sanctioned the contract of Wright & Co. on condition, that it could be made available for the existing year's operations upon the Canal,

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