Repudiation in Antebellum Mississippi

摘要

In 1840, the state of Mississippi defaulted on interest payments on $2 million of Planters Bank bonds and $5 million of Mississippi Union Bank bonds. At about the same time, seven other states and one territory subsequently granted statehood defaulted on their debts (McGrane 1935; Ratchford 1941; English 1996; Wallis, Sylla, and Grinath 2004), as did the Republic of Texas, later annexed as a state (Pecquet and Thies 2006, 2007, 2009). Most of the states subsequently reconciled with their creditors-for instance, by resuming interest payments and funding interest arrears-and furthermore adopted constitutional restrictions on indebtedness (Thies 2002, 248-50; Dove 2012). Mississippi, however, proceeded to repudiate both issues of bonds and to undermine the private debts due to its banks. With respect to state bonds, why did Mississippi not reconcile with its creditors? With respect to private debts, Mississippi was apparently prohibited by the U.S. Constitution from interfering with these contracts, so how was it able to nullify them? Examining this episode of repudiation exemplifies the importance of institutional arrangements for the protection of debt.