JULY 2017

JULY  2017
Greed and Monopolies Take Over the Ship

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Saturday, February 04, 2017

GEORGIA PEACHES Chapter Four

I hope that on election day, Tuesday, 10 November, 1794, the members of the Georgia legislature did not realize the evil they were unleashing when they voted to return James Gunn to a second six year term in the U.S. Senate. The distinguished members of the Georgia legislature were supposed to be the best of the best, brightest of the brightest, far more qualified to pick a Senator than the "hoi polli" – a word from the ancient Greek democracies, defining the general populace. So the majority of the Georgia legislature must have been naive idiots, otherwise their willingness to return this amoral selfish bully to power was a conscious decision to sell their reputations to him - which they promptly did.
In the flunkies defense, it must be pointed out that Senator Gunn and his co-conspirators had been preparing for this immoral yard sale for at least three years. Having bought up the Virginia Yazoo Company in late 1791, Gunn and his “Yankee” partners - Pennsylvanians Robert Morris, John Nicholson and James Greenleaf - had renamed it the "Upper Mississippi Company", to avoid the impression they were “foreign invaders”. Wade Hampton and his South Carolina Yazoo Company had gone even further, renaming their land grab "The Georgia-Mississippi Company". The Tennessee Company felt no such compunction to verbally pander for approval. But members of all three companies agreed to act as one, and cross traded in each others stocks. And as a joint committee of the Georgia legislature began to consider their bids, it was seen as politically expedient to form a fourth company, to be called "The Georgia Yazoo Company", from which land bribes might be more palatable to the locals. But the bylaws for this new bidder were written by Georgia judge Nathaniel Pendleton, who was a shareholder in the new "Upper Mississippi Company" with Senator Gunn.
The partners even put it down on paper, agreeing in writing that it was “expedient to dispose of a considerable quantity” of the land they were offering to buy “to diverse persons...to effect the purchase”. In other words, the men behind all four Yazoo companies were willing bribe the Georgia legislature, and said so in writing.  And at the very center of this web of graft loomed the hulking frame of James Gunn.
After he was safely re-elected, Gunn warned Supreme Court Justice James Wilson, who owned 25,000 shares of the Upper Mississippi Company, “We have taken measures which will ensure Success. But...they are to be executed by men whose want of talents may ruin every thing.” And by talents he meant a willingness to be bought, and by a want of talent he meant a shred of integrity. Senator Gunn had already been handing out options worth 1,000 British pounds - called 'money shares' -  to merchants in Savannah, including Mayor Thomas Gibbons, who was supposed to be the richest man in Georgia. The printer of the Augusta Southern Centinial newspaper, Alexander McMillan, was given 28,000 acres of land in the Georgia Company grant, to ensure at least one favorable newspaper. The Treasurer for the state of Georgia, Philip Clayton, was given 112,000 acres, and two of Governor George Mathews' personal secretaries got options on even more land. Even Governor Mathew's son-in-law received a land donation, although he kept suffering integrity relapses. In fact, Gunn warned every politician in Georgia they would not share in the bounty if they “did not vote for the bill.”
Gunn offered the Columbia County representative, James Simm, 50,000 acres for every fellow legislator he could convince to vote for the sale. He offered state Representative Robert Flournoy and state Senator Henry Mitchell 75,000 acres each in the Georgia Company's grant. Once the joint committee recommended accepting the primary bids on Friday 28 November, 1794, and the matter went before the entire state Assembly and Senate, legislators were treated to the image of United States Supreme Court Justice James Wilson, standing in the lobby of the Georgia State Capital with “$25,000 in his hands as a ready cash payment.”
Richmond County Representative Robert Watkins received no shares for his support. But his younger brother Thomas got shares in the Upper Mississippi Company, and his other brother Anderson got shares in the Tennessee Company.  Representative Peter Van Allen opposed the sale, and Treasurer Clayton offered him 75 British pounds to just go home until the vote was over. That offer, Clayton told Van Allen, came from “General Gunn”.  A similar offer was made to Georgia state Senators John Sheppered and Henry Mitchell.  Another state Senator was offered $2,000 cash for his vote. And when he had the temerity to ask where the cash was coming from, Treasurer Clayton told him, “It is nothing to you.” Yet another state Senator was offered ten slaves for his vote. Representative Thomas Raburn was offered $600 for his - and he took it – and state Senator Robert Thomas received shares in the Georgia Company, which he later sold for $5,000 cash.
After a lot of behind the scenes pushing and shoving, the bill, nobly titled "An Act for appropriating a part of the un-allocated territory of this state for the payment of the late state troops, and...for the protection and support of the frontiers of this State, and for other purposes, " passed the Georgia Assembly by 19 to 9 on 2 January, 1795, and the Senate on 3 January by a vote of 18 to 10. Governor Mathews signed it into law on 7 January, 1795.   Senator James Gunn and his conspirators had just bought 35 million acres of land, an area far larger then the original Yazoo Land grants. And where the old grants had offered Georgia 24 cents an acre, these new grants promised to pay just 1 ½ cents an acre. It was a steal.  In every way you looked at it.
And there was more. Among other "goodies" hidden in the bill was the clause that “the lands....shall be free from taxation, until the inhabitants thereof are represented in the legislature...”  Translation; the speculators were not responsible for property taxes,  and thus they produced no income to the state until they were sold to the suckers,...er, farmers. That made the grants easier to resell, which had been the goal from day one. And who was going to farm a swamp? Three months after the bill was signed,  Wade Hampton sold the Upper Mississippi Company to three Boston speculators for $120,000 ($1.5 million today). However Senator Gunn was not so fortunate. The day after the sale became law, Senator Gunn was on his way back to Washington, D.C., Within two weeks Senator Gunn  resold his lands for a measly $25,000 profit ($300,000 today) .  The buyer was his own partner, James Greenleaf.
What drove Senator Gunn to hurry back to Washington was that he was already being hanged and burned in effigy in several parts of Georgia. It was the already humbled David Ross who had warned him of this. The open bribery used in the Georgia legislature, Ross counseled, “will not a little embarrass the members, and, I fear, increase your difficulties.”
Ah, how true that would prove to be. If this had been a monster movie, the villagers were about to show up with their pitchforks and flaming torches.
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Friday, February 03, 2017

GEORGIA PEACHES Chapter Three

I think it is unfair to judge Patrick Henry by 21st century standards. He was an 18th century man. He was a slave owner, who measured his wealth largely by how many other human beings he owned. But  the hypocrisy of speaking for freedom while holding humans in bondage, was not completely lost on him. But it was lost on the pugnacious and ambitious and very un-humble Senator James Gunn. Which may be why American history books rarely mention him.
Born in Virginia, the “arrogant (and) ambitious” Gunn had risen to the rank of Captain during the revolution, but his career had faltered after he stole a horse from a South Carolina widow, and used it to “fix” a race.  After the end of the war Captain Gunn moved to Savannah, Georgia, where people didn't know him so well. He became a lawyer.  In the spring of 1786 Captain Gunn lead a handful of local militia in putting down a slave “revolt”.  In fact they had just run away, and were hiding in the Black Creek Swamp.  Gunn's brave militia proceeded to butcher most of them. And from that day forward, Gunn was known derisively as “General Gunn”.
The next year James Gunn was appointed to the Constitutional Convention in Philadelphia. However he could not be bothered to actually show up.  And after being appointed a United States Senator in 1789, the now 36 year old bully's only legislative achievement was to be the first Senator to block a presidential appointment. It seems a certain naval officer, Bennamin Fishbourn, had refused to kick back Charleston tariff duties to Gunn.  That may have been the political highlight for the rapacious and arrogant James Gunn, had not the French revolution expanded his horizons.
When the mob stormed the Bastille in July of 1789, it set set off a seemingly endless series of wars, as the royal houses of Europe sought to suppress the revolutionaries, and failed. This chaos inspired all the spare cash in Europe to start looking for safer pockets. Senator Gunn figured American land speculation, like that old forgotten Yazoo swamp-land scheme, would look safe by comparison.
Remember the Bank of North America, the financial institution which had saved the revolution? It had been the invention of Robert Morris, the “Mozart of American finance”, a Philadelphia land and stock speculator, and a friend of Senator James Gunn.  Another like minded friend and business partner was the trusted Comptroller for the state of Pennsylvania, John Nicholson. He was responsible for collecting that state's taxes, and liquidating the estates of absentee loyalists. He and Morris quietly got rich doing that, and they shared many of these opportunities with Senator Gunn. These three vultures now combined to resurrect the Yazoo land fraud. Their first hire was the young James Greenleaf, the U.S. Counsel to the Netherlands, who boasted he could snap his fingers and produce a million dollars of gold and silver from his dutch banker friends.
To discourage any legal challenges Gunn hired James Wilson, a Supreme Court Justice who oversaw the Federal courts in Georgia. And as a silent partner they chose Nathaniel Pendleton,  another Federal judge.  Now all Senator Gunn needed was to get his hands on the old Virginia Yazoo company.
Remember Patrick Henry's partner, David Ross? Back in 1787, Ross had been one of the wealthiest men in Virginia. But when Georgia rejected his payment on the Virginia Yazoo lands, his empire fell apart like a row of dominoes. Creditors were now nipping at his heels. In 1791, Ross sold most of his shares in the Virginia Company to the rapacious Senator from Georgia, James Gunn.
Now, remember, the Federal Government had been trying to take the Yazoo lands off Georgia's hands for a decade and more. But the Peach State's politicians had refused every offer. They were convinced there was money in 'them-there' swamps – somehow. The problem was, if they were going to find a profit in the place, they were going to have to defend it.  In 1793 the arrogant red faced fire-plug, Governor George Mathews had been elected to his second non-consecutive term, partly on a platform of defending Georgia's western border against all challengers.  But Georgia didn't have the money for soldiers or forts. The only choice was for the legislature to resurrect the Yazoo land deal. Suddenly everything was coming together rather nicely. 
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Thursday, February 02, 2017

GEORGIA PEACHES Chapter Two

I don't think we should judge Patrick Henry too harshly. Shortly after the birth of her sixth child Patrick's  beloved Sarah went mad and in 1771 the doctors diagnosed her as being possessed by demons. Two centuries later it seems likely she suffered from post patrum psychosis. Over the next 4 years Sarah was kept locked in a cellar “apartment” beneath her own home and cared for by her eldest daughter Martha, and her slaves. The standard treatment – exorcisms, restraints, regular enemas and laxatives, bleedings and beatings – all probably hastened her death in 1775. 
On 15 July, 1788, Federal Secretary of the Treasury Alexander Hamilton suggested that Georgia cede her “vacant territories” west of the Apalachicola River to the Federal government.  In exchange the Federal government would assume Georgia's entire war debt. But Georgia politicians said “no thanks”. Instead, on 21 December, 1789, Georgia governor Edward Telfair, signed grants of five million acres between the Apalachicola River and the Mississippi River, to the Virginia, Tennessee and Carolina Yazoo companies.  In exchange, within two years, the Yazoo companies were to pay Georgia $207,000 – or about 24 cents per acre. The first payment was to be made in six months. A disinterested observer might ask, when land claims in the region were certain to be disputed by local Indians and the Spanish,   and since undisputed claims elsewhere were selling for two pennies an acre, how could the investors in the Yazoo swamp – er, Yazoo lands – hope to make a profit?  Well, there was the golden rule of business - Caveat Emptor
The concept has officially been a part of English law since 1603, when a goldsmith named Lopus sold what turned out not to have been the magical gallstone of a wild goat to a Mr Chandler, for 100 pounds. When Chandler realized he had bought a useless rock, he sued, and a court ordered Lopus to give Chandler his money back. But on appeal the case was thrown out, because the higher court said it didn't matter what the seller's sales pitch had been - “for everyone in selling his wares will affirm that his wares are good...(yet) the warranty ought to be made at the same time of the sale.” In other words, without a written guaranty, there was no legal promise. That was quite a barrier to justice when the vast majority of the population could neither read or write. And in Georgia in 1790, buyer beware was the business model for all three of the Yazoo companies, never mind that the buyers were Georgia taxpayers.
But again, how do you make a profit buying swamp land for 24 cents an acre, when adjacent dry land was selling for 2 cents an acre? The answer is simple - you pay in play money. And in 1789 there was a lot of it around.
At America's lowest point in the revolution, a desperate Continental Congress had created the Bank of North America, and it had furnished the financial framework to support Washington's army. The BNA was the great unsung hero of the revolution. But in 1785 the new Confederation Congress withdrew the bank's charter, leaving the Federal government $11 million in debt to France and Spain, and the states about $48 million in debt to their own citizens. In exchange the moneyed class got “free market” banking.  And it was utopia. Right?
Within 2 years bonds issued by the American government were selling for ten to fifteen cents on the dollar, and most state bonds were selling for less than that. State legislatures were reduced to borrowing money just to pay the interest on earlier loans. There were more than fifty currencies in circulation, including English pounds and Spanish “pieces of eights”.  Individual cities were chartering banks, which then issued their own money. And in the woods of western Pennsylvania, where their were no banks, the standard medium of exchange was home brewed whiskey. The collapse of the American economic system was the major reason the Articles of Confederation were scrapped in 1787.
Under the new Constitution, establishing a stable economy was the job of President Washington's bright-eyed boy, Alexander Hamilton. Having been orphaned twice while growing up (even his adoptive parent had died), the new Secretary of the Treasury had an aversion to chaos. Hamilton's imposition of economic order was simple, brilliant and realistic. And he had a little help when reality kicked the Virginia money class right in their pocket books.
That summer, when agents for the Virginia Yazoo Company showed up in Georgia to make their first payment for the Yazoo land grants, they were carrying a huge pile of paper money.  Some of it was Federal bonds, and the rest was cash issued by various state banks, all bought at a discount. None of it was gold or silver and Patrick Henry and friends expected their payment to be accepted at "face value".  But the state of Georgia refused to fall for that.  They deemed the offer insufficent and canceled grants to all three Yazoo companies – No sale.
That left Patrick Henry David Ross and Thomas Jefferson, et al, holding huge piles of paper which had just been officially declared worthless. Which is when Alexander Hamilton offered to exchange their “worthless” paper “at par”, meaning at the best rate offered in the open market - for new U.S. government bonds. In other words, he was offering something of nothing. And all they had to do was convince the state of Virginia to allow the Federal government to take over their entire debt, and give up claims to any western lands.  Oh, and Hamilton also wanted to set up a new Bank of North America - this time to be called The First Bank of the United States.
It was the deal which saved the Virginia speculators' collective behinds, but it was a bitter pill for the aristocracy to swallow. Thomas Jefferson, a life long land speculator, would later say bitterly that Hamilton had fooled him. But he still cashed the check.
So the Yazoo swamp land deals were dead and buried. Except they weren't. Like movie zombies the land speculators would rise again. It is the nature of capitalism that its keeps ripping open its scars.. Have I mentioned that greed makes you stupid?
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Wednesday, February 01, 2017

GEORGIA PEACHES Chapter One

I have always been confused by Patrick Henry. He is famous for saying, “Give me liberty or give me death”, a bold statement that should have gotten a lot of press. Yet nobody at the time recorded him saying it.  He also supposedly said “If this be treason, let us make the most of it”, another bold statement which, again, nobody wrote down at the time. What is fact is that he was always suspicious of the power of government. We largely have him to thank for the Bill of Rights, today a beacon of freedom for billions of people world wide. But he was also the CEO of the Virginia Yazoo Company, when he sold  swamp land to war veterans and unsuspecting tax payers.
My guess is the Yazoo Indians were only joking with French explorer Robert de La Salle.   In 1682, la Salle asked about the water at the edge of their town and the Yazoos told him it was a river....a 180 mile long by 100 mile wide “river” which did not so much as flow into the Mississippi River, as seep. It was a swamp.  But the last laugh was on the Yazoo Indians because La Salle named the “river” after them.
And since even in 1789 nobody was interested in buying a swamp, American crooks decided to call it the Yazoo Lands, instead.  Besides patriot and ex-governor Patrick Henry's Virginia Yazoo Company, there was the Tennessee Yazoo Company and the Carolina Yazoo Company. And together they formed the first American lobby firm, what they called "The Combined Society".  It's stated purpose was  “By means of certain influences...to obtain from the State (of Georgia) large grants of land...for the end of making a large sum of money...” They were certain they could obtain a deed from Georgia, because Georgia was flat broke.
Georgia had paid for its war of revolution by claiming lands westward to the Mississippi and beyond, and using them as collateral to borrow gold and silver. The problem was that land, including that swamp,  was occupied by native American tribes and claimed by the King of France.
The solution was first suggested by an ex-militia Colonel named Thomas Marston Green.  He'd been farming out in the Pine forests when a bunch of Spanish soldiers and surveyors showed up looking to inventory the lands they had just bought from the French. Colonel Green realized that after the inventory would come the taxes. And he hated paying taxes.  Luckily Green had no objection to collecting taxes. In the fall of 1784 Green showed up in the state capital of Louisville, Georgia, suggesting the state take over his plantation as "Bourbon County".  It would be the largest county in the United States, and Marston Green would, of course, run it, selling the land he did not want and splitting the take with the state. And on 7 February, 1785, the rich white men running Georgia passed the Bourbon County Act, and waited for the money to roll in. 
Unfortunately, Green went home and told the Spanish to get out because Georgia was now running things. They threw him in jail. And as long as Georgia was taking that attitude, the Spanish decided Americans could no longer use the port of New Orleans to ship their produce to market. That made the settlers in western Georgia, very unhappy.  In 1788 the state of Georgia backed down and repealed the Bourbon County Act.  But that still left Georgia flat broke.
The next answer they tried in the fall of 1788 was the infamous Pine Barren Land Speculation, in which a dozen rich white men surveyed (badly) about thirty million acres of Georgia and sold it off (quickly), mostly to smaller speculators, Everybody thought they were going to get rich. The problem this time was that Georgia contained only about nine million acres. There were a lot of duplicate titles, and five or six owners for every section of land. Over night land prices went from sky high to bargain basement,  inspiring a fake advertisement, offering, “ Ten millions of acres of valuable pine barren land in the province of Utopia, on which there are several very sumptuous air castles, ready furnished”.
This business model would later be called a Ponzi scheme, and the only people who got rich were the ones at the top, and none of that money trickled down to the state of Georgia. So in 1789, this time under the Governorship of an arrogant fire plug named George Mathews, they tried it again, only bigger. And this was where Patrick Henry got into the game.
It was enough to make you wonder why the American people continue to have such childlike faith in capitalism, considering how often they keep getting screwed by it. It's a morality play, of sorts, if the moral is "There's a sucker born every minute".
Patrick Henry had never been much of a business man. When he was 18, the “indolent, dreamy (and) procrastinating...ill-dressed young man” impulsively married the equally impulsive, plump and buxom Sarah "Sallie" Shelton. He went to work for Sarah's father in his Hanover Tavern, but after a few months as a barkeep, Patrick decided on a career which would not require so much physical labor. With only six weeks of study he passed the Virginia bar. The parents of the bride were so thrilled, they set the fecund couple up with some land and slaves – an instant entrance into Virginia's upper class. It was the perfect foundation for a politician. But, alas, Patrick would be short of money his whole life. Which is why he formed the Virginia Yazoo company.
The 53 year old Patrick Henry assembled a slightly odd group of investors. At 53, droll and humorless, Paul Carrington was a long time member of the Virginia House of Burgesses, and a judge of the Court of Appeals. At barely 30 years old, Abraham Venerable was an up-and-comer in Virginia society, while 50 year old Francis Watkins was the clerk for the local courts.
But the key investor, the actual brains behind the original Virginia Yazoo Company was David Ross, who had already assembled 100,000 acres in Virginia, buying up plantations and farms abandoned by loyalists during and after the revolution.  Ross also owned 200,000 acres of Kentucky, and several thousand more in what would become Tennessee (claimed by North Carolina). He was a very land rich young man. And, oddly, he was Scottish
See, after the 1746 battle of Culloden, Scotland was under the royal lash, and David Ross stood to inherit nothing from his father's now looted Scottish estates. So in the middle of the 1750's he joined the horde of Scots emigrating to the American colonies. But where most Scotsmen chose the less settled Carolinas, and arrived with little but the clothes on their back, David Ross chose Virginia and arrived with contacts in the colonial government, and with cash,  Almost immediately he invested in the Oxford Iron Works along the Potomac River and the Antietam Iron Works in Maryland. He then began buying land and planting tobacco. It is hard to escape the suspicion that David Ross's family had sold out their fellow Stuart supporters, perhaps his own cousins. It is what the losing side of a rebellion often has to do to save the family fortunes.
Most years the iron works struggled to get by, and the tobacco barely covered operating expenses.  To really build a fortune, Colonial Virginia planters - such as the gout ridden George Mason - used their large plantations as collateral to buy Indian land north of the Ohio River, cheap. The new owners then surveyed it quickly, subdivided it in haste and sold it off in 100 to 600 acre sections to land hungry farmers at inflated prices.  To quote from Wood Holton's 1994 paper in 'The Journal of Southern History:  “Land speculation was a principal source of income for the Virginia gentry, the 2-to-5 % of families who stood atop the colony's pyramid of wealth and power...During the frontier years, absentee landholders owned three-quarters of the region's total acreage...little acreage was left for residents. ”
The only draw back was that the invasion of English farmers set off the French and Indian War, which brought the sale of western lands to a halt for nine long years.  Then  in 1763, after the peace was signed, King George III issued a Royal Proclamation that henceforth no colony could lay claim to any land west of the crest of the Appalachian Mountains. Individual farmers were still free to negotiate with tribes for acreage on Indian lands, but their property rights would not be recognized by the English crown, meaning the land could not be resold, ending speculating in Indian lands.  Wood Holton argues it was this loss of income which spurred Virginians, like the “great land-monger” George Washington, and speculators Thomas Jefferson, George Mason and Patrick Henry, to support the American Revolution
Even before the American victory at Yorktown, in June of 1779, Virginia and her governor Patrick Henry, joined the other southern colonies in reviving virtually all of the land claims rejected by George III's government. George Mason rehired his old employee Daniel Boone to began “exploring” new lands to the west of Boonesborough, paying him in land -  from which Boone earned $20,000, a hefty fortune during the revolution. And on 20 November, 1789, the Virginia Yazoo Company, headed by Patrick Henry and David Ross,  along with the Tennessee Company and the Carolina Company, formally applied for land grants along the Yazoo River from the State of Georgia.  
To the wealthy speculators who were also the founding fathers, this is what they meant by the word “freedom”. And that is the morality play we shall now follow.
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