You are assembled in your Legislative capacity in conformity to my Proclamation of 19th October last, and it now becomes my duty to lay before you briefly the principal reasons for which you have been convened.

Our system of Internal Improvements presents a subject of deep and absorbing interest in which the destiny of the State is involved, and when compared with its prospects and resources, is truly alarming. The public credit has been, and continues to be, extended to exhaustion, with a view of increasing the enormous debt which has been incurred. The vast amount which has been and is daily expending upon costly, and at present, unnecessary work, calls loudly for immediate Legislative interposition.

The general disapprobation of the people to the extent of the system, and to the further continuance of the extravagant expenditures under the plan of operations which has been pursued, furnishes ample cause for convening you.

The following is a brief statement of the present financial condition of the State.

The amount of canal lands remaining unsold, which, as will be perceived, I have placed under the head of unavailable resources, is estimated to be equal to the remaining cost of the canal on its completion.

From this cursory view of the present condition of our State, the propriety of my recent proclamation, and the weighty considerations which induced it, cannot but be apparent. Perhaps no former period of our political history presents questions of more absorbing interest, or so likely to have such an important bearing on our future destiny.

Within the last few years, the spirit of speculation—the natural offspring of an inflated paper circulating medium, has swept over the country. Millions, unaware of its fatal tendency, partook largely of its morbid influence, and wildly rushed into folly and extravagance. Forgetting the real source of wealth—the actual products of the country, they embarked in the most visionary schemes, and became a consuming instead of a producing people. If loans could be obtained for the prosecution of a favorite enterprise, they were willing to leave time to provide for the liquidation

---

of debts incurred, without any regard to existing, and I may add, prospective resources. Not only individuals, but representative bodies, were allured from the paths of prudence and economy by the overweening seduction of this popular, but fatal delusion. At this critical and most important crisis, a bill was introduced into the Legislature, providing for a general system of Internal Improvements by the construction of nearly thirteen hundred miles of railroads and the improvement of various rivers, and such was the zeal with which it was urged, and so numerous and powerful were its friends, that it passed through both Houses by large majorities. No fear seemed to be entertained by its advocates but that the ability and resources of the State would prove equal to the accomplishment of such a herculean task, and they pointed with pride and exultation to that high rank in the scale of wealth to which, as they alledged, the measure would finally elevate us.

As for myself, at the time I entered upon the station I now occupy, I had no doubts that the system was larger than our means could sustain, but being in favor of a system owned exclusively by the State, I only expressed my disapprobation of its extent, and my preference for the construction of the most important work first; for at that period, as at present, the amount expended under the existing plan of operations, deeply involved our character and credit, and seemed to forbid its abandonment. The vast debt, however, already incurred, the interest on which must be promptly paid, and the deranged state of the monetary affairs of this and other countries, making the negotiations of loans on acceptable terms exceedingly difficult, if not impracticable, interpose insurmountable obstacles to the successful prosecution of the system as now authorized by law. If additional testimony is wanting of the absolute necessity of its speedy reduction, and a more judicious application of our expenditures, it is to be found in the almost universal opposition of the people to the extent of the works and the manner in which they are prosecuted, partially expressed through the medium of public meetings held in various counties, the proceedings of which have been addressed to me in my official capacity.

I am aware that the System is the result of mutual concession and compromise, and that its advantages were to be dispensed as equally as possible throughout the State, by the construction of improvements in almost every county, and appropriating to those in which no improvements were to made, $200,000 in lieu thereof.

Not adhering, however, to these principles of compromise, extravagant as they appear, it seems to have been the settled determination of subsequent legislation, not only to carry out the original System, but actually to enlarge it nearly $1,000,000. The fatal tendency of this course, and the ruinous policy of simultaneously commencing all the works, and constructing them in detached parcels, thus making the completion of the most important depend upon the completion of the whole, is alike at variance with the principles of sound economy, destructive to the interests of the State, and to the System in all its parts. Absolute necessity, as well as the dictates of wisdom and prudence, demand at your hands such enactments as will remedy these evils, and ensure a judicious application of all future expenditures. I would, therefore, most earnestly recommend the concentration of all future labor and expenditures upon the most useful and

---

promising road and to the improvement of such of the larger class of rivers, as may be susceptible of steamboat navigation, and to suspend operations and expenditures upon all others, at least until those are completed. All experience teaches that it requires a large amount of transportation to render railroads and canals productive, and this can only be expected in populous countries, and between large commercial depots.

In a country like our own, unsurpassed for fertility—abounding with natural advantages, and inexhaustible resources—intersected and almost surrounded with natural navigation—with a surface admirably adapted to the construction of Internal Improvements, a judicious System, excluding all works which would not probably yield a revenue equal to the interest accruing on the cost of their construction, and the expenses necessary to keep them in repair, would aid in the development of those resources, furnish facilities to the industry and enterprise of the people, promote the interests, and advance the rapidly increasing population of the country, and ultimately ensure the construction of such additional works as the practical wants of the community and the available means of the State might justify. By the adoption of such a system of operation, I may repeat, the completion of one road, would facilitate the construction of others, and thus all, so far as necessity may call for, be finally accomplished without exhausting or crippling the resources of the State; the interest of the money expended would thus cease to be buthensome to the people, after the completion of the works to which it had been applied.

I am aware that objections may be urged against the adoption of the proposed modification, as some may be found unwilling to suspend their favorite work. Whatever may have been the notions which influenced previous legislation upon this important subject, I cannot conceive it possible that so selfish a policy, at juncture so critical as the present, will be brought into collision with the paramount interest of the State. Adherence to such suicidal measures, would only tend to endanger and destroy those improvements, which, if completed, would be the most useful and profitable, while it could not possibly coerce the completion of expensive and unnecessary works. The great magnitude of the subject, and the vastness of the interests involved, in which all the citizens of the State so deeply participate, induces me to invoke, and with implicit confidence, rely, upon your united wisdom in maturing and adopting such measures of reform as may best promote and subserve the public welfare.

Not having been furnished with the reports of the Board of Public Works, I am unable to lay before you the progress made in the manner of proceeding with, and the amount of disbursements upon our System of Internal Improvements, further than a statement furnished me by the Secretary of the Board of Fund Commissioners, which is herewith transmitted, marked A.

On the 4th of November last, Messrs. Rawlings and Oakley, two of the Fund Commissioners, apprised me by letter of that date, that they had contracted with Messrs. Wright & Co. of London, for the delivery of State bonds to the amount of $4,000,000, $500,000 of which has to be paid in railroad iron, and $250,000 more to be drawn for on the delivery of the bonds. They also informed me that they had constituted the said company agents for the State for the sale of the residue of the bonds, and that the whole transaction comprised an indivisible contract, and requested me

---

to execute the bonds in accordance with the same. Having some doubts as to the character of the negotiation, and being apprehensive that the interest of the State would be likely to suffer by throwing such an amount of our stock into the London market, in the present deranged state of financial affairs, I hesitated to sign bonds to the amount of $4,000,000, although I was imperatively required to do so, by law. I executed, however, bonds to the amount of $750,000, absolutely disposed of, and informed the Commissioners they were ready for delivery, urging, at the same time the propriety of withholding the residue of $3,250,000, subject to legislative action. But being informed by the Commissioners that less than $1,500,000 would not secure the contract, I finally, on their urgent solicitation, executed bonds to that amount, the Commissioners consenting that the residue might remain subject to your action.

You are not unaware, gentlemen, that great distress, disappointment, and loss have been incurred by contractors on various works, for the want of prompt payment of estimates on the part of the Commissioners. Why these estimates have not been discharged, I am unable, from any means of information in my possession, to determine. In view, however, of the fact that in some instances they have not been paid as they became due, and that in all probability, some of them still remain unsatisfied, I would respectfully and earnestly recommend an investigation of the accounts and proceedings of the Board of Public Works, and the conduct of all officers and agents connected with the System.

According to a statement of the Acting Commissioner of the Canal Board, the expenditures upon that work, inclusive of contracts and contingent expenses, up to the first of October, 1839, amount to the sum of $2,468,616 38. In addition to this, the amount payable to contractors, exclusive of contingent expenses on the first day of December, will not probably, vary much from $150,000. The probably additional cost of the Canal will be $5,500,000, making the aggregate cost of that work, when completed, $8,118,616 38. The amount realized from the sale of town lots, inclusive of sales made in 1836, and up to the present time, is $486,448 75. The amount of sales of town lots and miscellaneous sales of wood and timber to contractors, inclusive of those made in 1836, and up to the present time, is $1,419,727 50, and the amount of bills receivable up to the present date, is $1,047,654. Of this sum, $847,470 75 was forfeited. The purchasers, however, of the Canal property have the right, under an act passed by the Legislature at its last session, to cancel their notes by the execution of new obligations payable with twenty years, with six per cent. interest, per annum, on the amount due. The amount of unsold Canal Lands, as I before remarked, is 270,182 acres, making the estimated amount of Canal property (assuming said land to be worth $5,500,000,) $7,034,102 35, leaving a balance against the Canal of only $1,084,513 63, the greater part of which, I am persuaded, can be realized from contingent resources.

The failure to negotiate loans for the prosecution of this work, aside from the derangement of the financial affairs of this country and Europe, is in a great manner attributable to that provision in the law rendering the payments of interest annually. The interest accruing on all other bonds issued by the State, and as far as I am advised, by all our sister States, is stipulated to be paid semi-annually or quarterly, which of course gives

---

them the precedence in the market. It would, therefore, seem indispensable that the Canal Stock should be placed, in this respect, upon an equality with other stocks issued for similar purposes.

A loan of $1,000,000 effected by Gov.[Governor] Reynolds and Gen.[General] Rawlings in April last, from the U. States Bank, payable in instalments of $100,000 per month, for ten successive months, was obtained upon very unfavorable terms.

By the stipulations of this contract, I was compelled to incur great expense and hazard to the State in the transportation of the instalments from Philadelphia to Chicago as they became due. For more full information, however, upon this subject, a copy of the contract, together with the copy of one entered into with Mr. John Delafield of the City of New York, for the sale of $300,000 of State Bonds, (being the amount loaned to the Canal Fund out of the Internal Improvement Fund under an act approved January 21st, A.D. 1839) are herewith transmitted, marked “B.”

On the first day of June last, a deficit of $208,000 had accrued against the Canal Fund. The expenses upon that work from the 1st. day of May, until the first day of August inclusive, not varying much from $150,000 per month, exceeded the monthly instalments due from the United States Bank, about $50,000. To supply this deficit, I placed in the hands of Gen. Thornton, $500,000 of State Bonds, to be sold by him at Chicago; $100,000 of which he has sold at a premium of one per cent., but not finding a market for the residue, an arrangement was entered into by him, with the State Bank of Illinois, in the month of July last, to transfer to that Bank the remaining seven instalments of $100,000 each as they become due from the United States Bank to the Canal Fund, to which I assented. By this negotiation, the State Bank agreed to increase the instalments so as to avoid a suspension of operations upon a portion, if not all the work on the Canal, thus saving an immense sacrifice to the contractors, and loss to the State, as well as the consequent risk and expense attending the transportation of the instalments from Philadelphia to Chicago. The terms of this arrangement, also are transmitted, marked “C.”

On the 18th day of September last, Gov.[Governor] Reynolds entered into an arrangement with the State Bank of Illinois for the additional sale of $1,000,000 of Canal Stock, by which he agreed to pay the accruing interest semi-annually, at the rate of six per cent., per annum; and on the 19th of the same month, he contracted with Anson H. Bangs, agent on behalf of the Farmers’ and Mechanics’ Bank of Onondaga, located at Fayetteville, in the State of New York, for the sale of $500,000 more, and agreed that the accruing interest thereon should be paid quarterly. Both of these contracts remain open for your inspection and ultimate decision, (having been declined by me on the ground of legal objections) and are herewith transmitted marked “D.”

All negociations for the sale of Illinois stocks, and the stocks of other States so far as I have learned, during the past year, have been attend with great expence and disadvantage; and similar difficulties must be encountered in our future operations while the money markets remain depressed. The policy of placing our stocks in the European markets, I have always doubted, but of its inexpediency, at the present time, there can be no

---

question; to say nothing of a premium on their sale, it is impossible to realize par value in European currency; and to receive it in United States currency in our Eastern cities, would result in immense sacrifice. The sale of our Bonds in the United States, payable in pounds sterling, the interest and principal being made payable in Europe, (although the contract may fix the value of a dollar at four shillings, six pence) is calculated to produce difficulty and probably great loss. Should the debt, be liquidated in silver, other than the coinage of Great Britain, the dollar would only be worth about four shillings, two pence, which would be equal to eight per cent. discount; and if in gold, it would be still greater, the standard value of a British Sovereign in this country, being $4,87, and in Europe only equal to $4,44, which would exceed 9½ per cent. discount. If paid in Bills of Exchange, it would in that event, depend upon the difference of exchange at the time of payment. This subject merits your attention, whether viewed in reference to sales already made, or those which may hereafter be effected. All future negotiations should be dictated by sound policy, wisdom and prudence, and all expenditures judiciously and economically applied.

Having thus placed this important part of our stupendous system of public works, with the prospects and difficulties belonging to the same before you; it only remains for me to suggest a measure of relief. As a means of conducting the operations on the canal to a successful termination, bringing the residue of its lands into market, to be disposed of on such terms as may enable the State to meet with promptitude, the interest accruing upon her bonds, seems to me, a plan as plausible as any that can be recommended.

In the present exigency of affairs, it seems to my mind that the resources of the canal should be called into requisition by the sale of such portions of the lands donated by the General Government as would equal the liabilities which the State may have contracted from time to time for the prosecution of that work, extending to the purchasers a credit commensurate with the time of the final redemption of the bonds sold the purchasers, paying interest on the amount at the rate of six per cent. per annum. By this means the interest on the sales would meet the interest on the money borrowed, and the principal the final redemption of the bonds.

An arrangement was entered into with the Bank of Illinois, for advances in anticipation of the instalments which would become due from the Poughkeepsie Locomotive Engine Company, at the Atlantic Bank, New York, upon a loan of $128,000, negotiated under an act to authorize a loan for revenue purposes, approved March 1st, 1839. This arrangement was made with the Bank of Illinois, in consequence of the State Bank having refused to pay the warrants of the Auditor drawn in favor of the State House Commissioners, and declining to advance a sum exceeding $40,000 during the year.

Adhering in good faith to the terms of the agreement, the Bank of Illinois has already advanced $80,097. The company, however, from whom the loan was obtained, seem disposed to avoid the payment of the money. A draft of $16,000, (less $200 expenses) payable November 1st, 1839, drawn by me upon them, being the first instalment due upon the loan has been presented for payment at the Atlantic Bank, and protested. This subject has been laid before the Attorney General, and is

---

now presented for your consideration. The liberal and honorable course pursued by the Bank of Illinois, in furnishing means for the advancement of the State House, prompts me to recommend to you the propriety of your immediately indemnifying her against loss.

The revenue law passed at the last session has been a subject of much animadversion and dissatisfaction, and some of the counties, I regret to say, have resisted it by a refusal to assess their taxable property. Such proceedings should never be resorted to, and cannot be tolerated in a government like ours, where the people elect their own legislators, through whom they can only legitimately redress their grievances. There can be but little doubt of the equity and justice of the principle upon which the law is founded, that each individual should pay a tax in proportion to the value of his property, but its details are justly considered exceptionable, and call for a speedy revision. I would, therefore, recommend this matter to your consideration, and hope some mode will be provided by which its enforcement shall, in all cases, hereafter be insured.

It would have afforded me pleasure to have complied with the wish of a large respectable portion of my fellow-citizens in recommending a reduction in taxes, but the present revenue not being sufficient to defray the ordinary expenses of the State Government, precludes such a recommendation.

The present attitude assumed by the State Bank, since the date of my Proclamation, and the relations which subsist between that institution and the people, individually and collectively present to your consideration the questions of the gravest import. The isolated fact of the suspension of specie payments by the Bank and its branches on a former occasion was deemed of sufficient moment by my esteemed predecessor to justify a special convocation of the General Assembly. At that session an act was passed for the benefit of the Bank, which I have ever regarded as striking a fatal blow at the fundamental law of contracts. It cannot, indeed, be for a moment doubted by the most chimerical, that, if any holder of her bills, had instituted suit for the recovery of their value, the Act itself would have fallen powerless. Its only efficacy, therefore, was found in the relief it extended to the Bank by the preservation of her charter which otherwise would have terminated by the violation of her obligations.

A similar exigency having again presented itself in the affairs of this institution, I deem it my duty to submit to you my views upon this subject more fully than I have heretofore done. It is hardly necessary for me to say, however, that I regard the incorporation of companies for the regulation of the financial operations of the country, at war with the genius of a free government. Where there is no individual responsibility attached to the members of the incorporation, the danger is doubly enhanced for all past experience proves that in such instances personal interest is almost universally paramount to the public weal.

Laying aside all constitutional questions growing out of this subject, it is manifest to my mind that the channels of business should not be filled up and controlled by a circulating medium which is susceptible of contraction and expansion at pleasure. Permanent and fixed laws which dispense their blessings with equal justice will only ensure stability to our free institutions, and guaranty the perpetuation of American Liberty, and how can we expect to reap the advantages of such enactments for the regula-

---

tion of the currency, if this power, important and vast in itself, is entrusted to the care of an irresponsible corporation, who may have millions in circulation to-day and to-morrow contract their issues, force the payment of debts, and spread gloom and desolation where there was, at least, the semblance of prosperity and happiness. But it may be interposed that as banks have been so extensively established in our country, and are so intimately connected with every department of trade and consequently interwoven with the various relations of social and political life, it would be a suicidal policy to destroy them. Whatever force there may be in this argument to justify their longer continuance, it cannot in any event guaranty permanency to our monetary affairs or plead, in justification of a suspension of specie payments: it can only be urged, in extenuation of what is claimed to be a necessary evil, so deeply and firmly rooted, that we are told, it cannot be eradicated without destroying the country. Is this possible? Can it be true that we are already under the dominion of monied oligarchies? and that an inflated paper circulating medium is as essential to the support of the government as the heart to the organic system? If so, we stand on a fearful and alarming precipice, erected by error and sanctioned by time, from which it is our duty to extricate ourselves as speedily as possible.

The truth is, and it no longer admits of doubt, that the banking system, generally, is radically defective and unsanctioned by any principle of republican virtue. How can the fluctuations, to which the representative wealth of our country is continually subject, be otherwise satisfactorily accounted for. But the evil is not confined to the fundamental errors of the system. Its tendency and practical results leave their impress on the community, individually and collectively. A sudden and unnatural increase of paper currency imparts a fictitious value to property, and engenders a wild and extravagant spirit of speculation. Many are allured by its fascinations from the paths of honest industry in the hope of accumulating wealth by some fortunate enterprise. Facilities being easily obtained, they contract debts which finally overwhelm them in ruin. But at the moment when times become oppressive and they require aid, the banks refuse to extend further accommodations—force the payment of obligations due them, and not unfrequently refuse, at the same time, to redeem their own bills. The State Bank of Illinois, stands in this humiliating relation to the people at the present period, and it remains for you to determine, gentlemen, whether relief shall be extended to her, if any shall be solicited. If she is suffered, biennially, to set at defiance the will of the community—the law of her existence, and every principle of justice and moral honesty, by the suspension of specie payments, what special favors does she merit at your hands, and by what arguments are patriotic sympathies to be awakened in her behalf, or liberal and enlarged provisions enacted which would only tend to diminish accountability and promptitude in the proper discharge of her lawful duties. Had the proposition been submitted to the Legislature which passed its charter, to give the bank the privilege of refusing to redeem her bills on presentation, when the banks of New York, Philadelphia and Baltimore should refuse to redeem theirs, and to resume only on the condition of their resumption, it would have been regarded as too absurd and monstrous to receive a moments consideration. Yet experience proves that such is the tendency and effect of

---

power, that corporations frequently obtain from subsequent Legislatures, that, which at first would have been denied them. To my mind no exigency can possibly happen to justify the refusal of the bank to pay her obligations at maturity. And a State institution like our own, which, since its establishment, has continually urged her claims upon the Legislature—an institution, the measure of whose endowments and privileges has been alone limited by her own demands—an institution so powerful in itself and yet so inefficient in extending aid, has a few motives to present for the further exercise of legislative relief. Rigid accountability should supercede the indulgence she has heretofore received.

Three years ago the amount of the capital stock of the Bank was augmented by subscription, on the part of the State, to $2,000,000, with the view of affording increased facilities to mercantile operations, and extending aid to the agricultural, and other important interests of the State. How far the ends proposed by that augmentation of its capital, may have been realized on the interests upon which the measure was designed to operate, cannot, with certainty, be ascertained. The important enquiry, however, naturally arises, whether the Bank, with such vast accession to her capital, has extended relief commensurate with her increased means and ability. It has been asserted, (with what truth I leave you to determine,) that instead of confining her operations within the provisions of her charter, and the ordinary functions which properly pertain to a just exercise of her privileges, and furnishing that assistance and aid to the State in the prosecution of her public works, which she in honor and good faith was bound to do, she has engaged in speculating in the staple products of the country, or furnishing the greater part of her capital to a few favourite individuals for this purpose to the exclusion and detriment of the community generally. The deep and abiding solicitude with which this subject is entertained by the people, and the vast interest the State has at stake in the proper management of the Bank, render a rigid and impartial investigation into her condition highly important. If she is innocent, she should with pride and pleasure solicit this investigation. If she is innocent, she should with pride and pleasure solicit this investigation. If she is guilty of improper conduct, let her answer the consequences. It would be far better for the State that there should be, at once, a forfeiture of her charter, than that she should go on accumulating power, and yet disregarding her duty and that faith which she should maintain to the public. We indeed laboured in vain in overthrowing the Bank of the United States, if we should now draw to our embrace an institution above responsibility and capable of inflicting within its own sphere a still more deadly sting. I therefore, respectfully recommend that no law be passed to legalize the suspension of specie payment on the part of the Bank, and that you institute a rigid and thorough examination into its condition. As the Bank of Illinois has continued, through all the present financial embarrassments of the country, to redeem her notes, and as Banks in other States have not generally suspended, I cannot divine why the State Bank should close her doors and again plead inability, by the non-payment of her notes, to comply with her existing obligations.

Gentlemen it is unnecessary for me to remind you of the weighty and almost fearful responsibility which the exercise of your functions at this time impose upon you. The future destiny of the State, for weal or for woe, will depend upon your action. I hope and trust that no motives

---

but those of the purest and most devoted patriotism will mingle with your deliberations, and that all your measures will be dictated by wisdom and enlightened policy. May you act in such a manner as will meet the approbation of the people and your own consciences, and may the blessings of heaven crown your exertions with success and render the people prosperous and happy.