2014 athens clarke county library money smart week presentation

Michael GagnonAssociate Professor of HistoryGeorgia Gwinnett College

Incorporating Business Ventures in Antebellum Athens

Money Smart WeekAthens/Clarke County LibraryApril 7, 201411:00 AM

Why Incorporate a Business?

• Limited Liability

• Ability to raise large amounts of capital

• Monopoly rights and taxes

3 Shares of Stock issued in 1854

Creators of GA RR Bank

Augustin Clayton William Dearing James Camak J. Edgar Thomson

Incorporating the Georgia Railroad• Athenians first met to discuss a RR in June

1833, when SC neared completing its railroad from Charleston to near Augusta

• Arranged coordinated approach with other towns in October 1833

• Legislature passed incorporation in December• Subscription books opened for 10 days in

February 1834 and sold 6015 shares.• Organized and elected officers in Athens on

March 10, 1834

How Stock Subscription Worked• Each Share costs $100

– Had to put down $5 at subscription– Sometimes accepted “notes” in lieu of $5– Later called for payment of portion of subscription 15-20% as

needed in following years• In 1836, added Banking to corporate charter

– Augusta Town Council bought 2,000 shares of 7,500 new shares offered

– Opened independent branches in Athens and Augusta• With national depression in 1837, bank in Athens

faltered, Augusta purchased controlling share of stock• Closed Athens branch in 1842

Locomotive shipped to Atlanta by wagonbefore Georgia Railroad completed from

Madison

Georgia’s Antebellum

Industrial Zone

Athens

$10 Georgia Railroad Bank Note from Athens Branch

Corporations regulated because feared• Most important corporations were banks

• Bank of the United States acted similar to today’s Fed

• People thought it too influential and too powerful to be safe

• Not elected but controlled by rich• Andrew Jackson waged war against the BUS, forcing

it out of business• Banks only as good for economy as people’s trust in

them

Corporations regulated because feared• Most important corporations were banks

• Bank of the United States acted similar to today’s Fed

• People thought it too influential and too powerful to be safe

• Not elected but controlled by rich• Andrew Jackson waged war against the BUS, forcing

it out of business• Banks only as good for economy as people’s trust in

them

Bank Panics - Depressions

Bank Panics - DepressionsBanking Cycle: Economy Collapses EVERY 20 years under unregulated capitalism

Basic Causes:

1. Unstable Banking System

2. Collapse of Major Agricultural Commodity

Bank Panics - Depressions• Panic of 1819

– 2 years– Bank Failure and Cotton Prices

• Panic of 1837 – Up to 8 years– Bank Failures and Cotton Prices

• Panic of 1857– 6 months to 2 years– Insurance/Bank and Wheat

Prices– Also Manufacturing

Charting the 1837 Bank Panic

Later Depressions

• 1873• 1893• 1907• 1919• 1929

Later Recessions

• 1946• 1959• 1974• 1981• 1992• 2000• 2008

Effects of Panic1. Banks fail to pay depositors – Bank Runs

- Think Michael’s Tuppence in the Movie “Mary Poppins”

2. Creditors sue everyone who owes them to pay their own debts, but most debtors can’t pay debts because no money available

3. If you lost lawsuit, Creditors sell all you own at Court House steps to highest bidders, who pay pennies on the dollar for your possessions.

Other Corporation in Athens

• Scull Shoals Factory 1834• Princeton Factory 1834• Georgia Factory 1839• Southern Mutual Insurance 1848• Athens Factory 1848• Pioneer Paper Mill 1852• Athens Foundry 1852• Bank of Athens 1856

General Incorporation Laws start in Georgia in 1848

• Primarily for factories• Everything else still done through individual

incorporation laws• Most general incorporation still awaited until

after Civil War

Questions?