Real Estate Bank of Arkansas
Two Whigs, Anthony H. Davies and John Ringgold, produced the charter for the bank, and the legislature that approved its creation was controlled by the Democratic Party.
[3] The enabling legislation required the bank to issue $2,000,000 of bonded indebtedness at five percent,[1] with a maturity in 25 years.
[4] The state government appointed a quarter of the bank's board of directors, but took no part in the active management of the organization.
[3] The bank was intended to promote the interest of planters,[1] an intention that was stated in the enabling legislation.
[6] The 284[3] or 325 stock subscribers of the bank, most of whom were prominent leaders in Arkansas, appointed the rest of the board of directors.
Many of the lands used as surety were fraudulently overappraised, including those of an author of the bank's charter and a United States senator.
[15] May 1839 saw a challenge to the constitutionality of the bank, with the Arkansas Supreme Court ruling in favor of its legality.
A court in Phillips County was forced to close in 1841 after its plan to auction lands of defaulted debtors led to an uprising.
[1] It was intended for the bank's assets to be liquidated, any paper money to be bought back, the bond interest to be paid, and any remaining loans to be collected within eight years.
[28] Effectively, the transfer resulted in the state remaining responsible for the bond debt, but not having control of the bank's assets.
The legislation had little practical effect on how the bank was run, and the trustees profited materially from their roles.
[30] The 1843 legislation also permitted the governor to establish prosecutors to sue the stockholders in order to recover their debts to the bank.
In response, the trustees forfeited the bank's charter, which meant that it could no longer issue paper money.
[31] The primarily Democratic trustees avoided scrutiny of the bank,[1] and information requested by the state was never provided.
As leaders of both the Democrats and Whigs were involved in the bank's management, neither party pushed for a full investigation.
[32] Over time, it became apparent that the bank could not recover, and it had to be determined how to pay back the remaining bonds that the state was liable for.
Direct taxation would have been a solution, except that such a tax would have largely affected the planters who controlled the bank and the state government.
[38] The trustees failed to provide information necessary, and the filing was delayed until 1854;[37] it was also found that the attorney general had not done anything to push for action.
Noland was removed in November, as it was felt that he was not moving quickly enough to complete instructions given him by the governor, and was replaced by Gordon N. Peay.
[44] The Holford bonds remained controversial, and were never fully paid off; the 1884 repudiation was accomplished via a congressional amendment.
[42] In the words of historian Ted R. Worley, "a system of special privilege had flourished by using the forms of democracy to further its own ends".
