NATIONAL BANKRUPTCY
I have, since I have been in the Senate, taken great interest
in the passage of a bill for a system of National Bankruptcy.
The Constitution gives Congress power to establish a uniform
system of Bankruptcy. The people of Massachusetts, a commercial
and manufacturing State from the beginning, have always desired
a Bankrupt law. They were large dealers with other States
and with other countries. Insolvent debtors in Massachusetts
could not get discharge from their debts contracted in such
dealings. The Massachusetts creditors having debts against
insolvents in other States found that their debtors under
the laws of those States either got preferences or made fraudulent
assignments which they could not detect or prevent.
On the other hand, the bankruptcy laws have always been unpopular
in many parts of the country. The Democrat who strictly construed
the Constitution did not like to see this power of Congress
vigorously exercised. The National Courts, who must administer
such laws, were always the object of jealousy and suspicion
in the South and West. The people did not like to be summoned
to attend the settlement of an estate in bankruptcy, hundreds
and hundreds of miles, to the place where the United States
Court was sitting, in States like Texas or Missouri. The
sympathy of many communities is apt to be with the debtor,
and not with the creditors, who were represented as harpies
or vultures preying on the flesh of their unfortunate victims.
A good example of this prejudice will be found in an extract
from the speech of Senator Ingalls, of Kansas. He said in
defending what was known as the equity scheme:
"The opposition arose first, from the great wholesale merchants
in the chief distributing centres of the country. They have
their agents and attorneys in the vicinity of every debtor,
obtaining early information of approaching disaster, and ready
to avail themselves of the local machinery of State courts
by attachment or by preferences, through which they can secure
full payment of their claims, to the exclusion of less powerful
or less vigilant but equally meritorious creditors. Naturally
they want no Bankrupt law of any description.
"Second. From the disabled veterans of the old army registers;
from the professional assignees and wreckers of estates, who,
by exorbitant fees and collusive sales of assets to convenient
favorites, plundered debtor and creditor alike and made the
system an engine of larceny and confiscation.
"Third. From those who desire, instead of a system for the
discharge of honest but unfortunate debtors upon the surrender
of their estates, a criminal code and a thumb-screw machine
for the collection of doubtful and desperate debts. They
covet a return to the primitive practices which prevailed
in Rome, when the debtor was sold into slavery or had his
body cut into pieces and distributed pro rata among his creditors.
"Fourth. From those timid and cautious conservatives who
believe that nothing is valuable that is not venerable.
"Like the statesman described by Macaulay, they prefer to
perish by precedent rather than be saved by innovation. They
adhere to ancient failures rather than incur the risk of success
through venture and experiment.
"Fifth. From Boards of Trade, Chambers of Commerce and other
ornamental organizations who, being entirely uninformed on
the subject, permit themselves to become the conduits through
which the misrepresentation and animosity of avaricious creditors
and rapacious attorneys are discharged upon Congress and the
country."
I had moved in the Senate, in 1882, a bill favored by the
merchants and manufacturers of Massachusetts, which was largely
the work of Judge John Lowell, of the United States Circuit
Court, one of the most accomplished lawyers of his day, as
an amendment to a bill which Mr. Edmunds, Mr. Davis and Mr.
Ingalls had reported as a Subcommittee to the Senate Judiciary
Committee, and which had been reported from that Committee
to the Senate.
The Lowell Bill was on my motion substituted for the report
of the Judiciary Committee, by a majority of three. This
bill was extensively discussed in June and December. But
I was unable to secure its passage. It passed the Senate,
but it did not get through the House.
I have had the Parliamentary charge of all Bankruptcy measures
in the Senate from that time. After the failure of the Lowell
Bill, the Boards of Trade and Chambers of Commerce, and other
like associations throughout the country, took up the matter
very zealously by employing an able lawyer, the Hon. Jay
L. Torrey of Missouri, to present the matter in the two Houses
of Congress. He was thoroughly acquainted with the principles
and history of Bankruptcy laws in this country and England.
But he had no compromise in him. He insisted on the Bill
which he drew, which was a modification of the Lowell Bill,
without being willing to make any concession to objection
or difference of opinion in Congress, or out of it. He said
he would have a perfect law, or none at all. The measure
as he drew it was apparently very austere and harsh to the
debtor. It enumerated a large number of offences for which
the debtor was to be punished by fine and imprisonment, and
by a denial of his discharge. Mr. Torrey's provisions were
not very unreasonable. But they made it seem as if the Bill
were a penal code for the punishment of fraudulent debtors.
A simple provision that any debtor who wilfully should make
false answer to any question lawfully put to him by the Court,
or who wilfully concealed or attempted to conceal any property
from his assignee should lose his discharge and be punished
with a proper and moderate punishment, would have answered
the whole purpose. I take some blame to myself for not insisting
more strenuously upon modifying Mr. Torrey's measure. But
he constantly visited different Senators and Representatives
and came back to me with glowing accounts of the prospects
of the Bill, and of their promises to support the Bill. He
was also the agent of the business organizations of the country
who had passed resolutions in favor of the measure as he had
drawn it. It seemed to me therefore that if I should get
the Bill amended and then it got lost, I should incur the
great reproach of having obstinately set up my judgment against
that of this large number of the ablest men in the country,
who were so deeply interested in the matter. So the Bill,
though brought up and pressed Congress after Congress, failed
until Mr. Torrey enlisted in the Spanish War.
I then introduced a Bill in a softened and modified form.
It was attacked in that form by Senator Nelson of Minnesota,
a very excellent lawyer and gentleman of great influence,
in the Senate. He succeeded in having the Bill modified
and softened still more. The Bill then passed and went to
the House which, under the leadership of the Judiciary Committee,
substituted the original Bill.
Mr. Nelson and I, with Mr. Lindsay of Kentucky, were put on
the Conference Committee in the Senate, with Mr. Henderson,
afterward Speaker, Mr. Ray of New York, now Judge of the
U. S. District Court, and Mr. Terry of Missouri, on the part
of the House. We struggled nearly the whole winter. Mr.
Nelson and Mr. Ray took the burden of the contest upon their
shoulders. Their attempts at compromise reminded their brethren
of the old scientific problem--"What will happen when an irresistible
force encounters an immovable obstacle." But both gentlemen,
each exceedingly firm in his own opinion when he thought he
was in the right, were wise and reasonable and conscientious
men. So at last they agreed upon the present Bankruptcy
Bill, which became a law July 1, 1898. It was on the whole
satisfactory to the country, except for one clause in it, which
was interpreted by the United States Supreme Court in a manner
contrary to the understanding and expectation of the framers
of the Bill.
A law was passed February 7, 1903, correcting this and some
minor defects. It is hoped, though we cannot be sure in
such a matter, that a permanent system of Bankruptcy, so
essential to all commercial, indeed to all civilized nations, is
now established, and will be maintained in the United States.