THE FISCAL PROBLEM IN MISSOURI

History oF Missouri STATE INDEBTEDNESS

“Missouri has had an eventful history in debt-making and
debt-paying, but has met its trials, although severe, with
credit.” Thus begins an interesting review of the history
of state indebtedness in Missouri, published in 1893. Although
 Missouri was admitted as a state in 1820, there 1s
no record of the issue of any state bonds prior to 1837, or
during the formative period. The beginning of state indebtedness
 in 1837 was especially eventful, for the first
issue of bonds did not find a responsive market, and only a
small portion of the total was actually sold. The proceeds
of the issue, $2.5 million, were to be used to provide the
state’s half of the capital of a state bank, provision for which
was made in the constitution of 1820.2 There was no particular
 reason to question the credit of the state, for at the
time Missouri had no bonded indebtedness, but the state
government made the mistake of trying to float an issue of
bonds at a time when banks throughout the country were
suspending operations at an unprecedented rate, and when,
as a consequence, credit facilities of an adequate nature were
practically non-existent. The country as a whole, moreover,
was oversupplied with state securities, many of which were
regarded skeptically by the investing public. As a result
of this situation, only about $263,000 of the issue of $2.5
million found a market.
Not only did Missouri's first effort to create indebtedness
fail, but the second attempt was an even more dismal failure.
In 1839 the legislature recalled the bonds of the previous
issue and authorized another issue of like amount for the
same purpose. The rate of interest, however, was increased
from 5259, to 6%. Although offered in Europe as well as
in the United States, only $139,000 of these bonds were
sold. The act authorizing this issue had stipulated that the
bank should accept the bonds in full payment of the state’s
stock. Since the bonds were practically unsalable. the bank

1 State and City Supplement to the Commercial and Financial Chronicle, April,
1893, p. 111.
2 This constitution provided for a single state bank with not more than five
branches to serve the entire state; $5,000,000 capitalization was fixed as a maxi.
mum,