The Illinois and Michigan Canal, 1827–1911
A Selection of Documents from the Illinois State Archives
September 10, 1840; March 1, 1841; and April 1, 1843
Beginning in 1839, as the canal commissioners increasingly found themselves unable to pay their debts, they simply issued scrip (see document 13 explanation). Canal scrip were checks drawn on the credit of the Illinois and Michigan Canal and payable whenever funds became available. Their face values were accepted when purchasing canal lands. But on the open market they were traded at less than par value. By the fall of 1842, after the State Bank had closed due to insolvency and the last remnants of all construction along the line had ceased, canal paper was being traded at fifteen cents on the dollar.
As in any hard times those with capital could prosper. If persons had cash in the fall of 1842 they could have bought up canal scrip for fifteen cents on the dollar. And then they could have used that scrip to purchase canal lands at the scrip's face value, thereby realizing enormous profits (see document 19 explanation). Those persons without funds but holding scrip would have been forced to sell it at fifteen cents on the dollar because that was what the market offered and the fifteen cents provided was better than nothing.
The General Assembly at Governor Thomas Ford's urging enacted a law in early 1843 designed to revive the project. The governor was authorized to negotiate a $1,600,000 loan based on a pledge of canal property and future revenue from tolls. The canal itself was turned over to three trustees, one appointed by the governor and the other two selected by the subscribers to this loan. After all expenses for the canal's completion and maintenance had been met a hierarchical arrangement was made for paying off all remaining creditors. When the legislature approved a tax increase in May of 1845 to further investor confidence in this plan, the loan was fully subscribed to quickly. With a resumption of construction later in 1845 contracts had to be renegotiated and let, damages caused by several years of neglect repaired, and floods and sickness (which the season brought) overcome.
Points to Consider
Whose credit was being pledged by these notes?
Why did the canal commissioners issue these notes?
What did the State Bank of Illinois have to do with the documents displayed? Why was its name so boldly printed on two of these notes?
Describe some of the symbols depicted on these notes. What do they mean? Why were they used?