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State Bank Lands (1836)

The Real Estate Bank of Arkansas became the initial act to pass the first State Legislature in 1836. The bank’s initial charter required the state to issue $2 million in five-percent bonds with the proceeds to serve as the bank’s capital. Its stated purpose was to promote lowland planters. It had four branches; the headquarters was in Little Rock and the other branches were in the cotton belt areas of Columbia (Chicot County), Helena (Phillips County), and Washington (Hempstead County).

 

Subscribers to the bank’s stock totaled 325 men, many of whom were leading citizens of the state. Most of the stockholders lived between the Mississippi and Red Rivers and more than twenty-five percent of the entire bank’s stock was owned by 28 men in Chicot County. Stock was typically bought by mortgaging land that was appraised far above its market value. In turn, they could borrow up to half of their valued stock with the cap being $30,000. From the beginning, the Real Estate Bank proved to be a source of political corruption, financial mismanagement, and intense sectional conflict among politicians. It was these circumstances that set the stage for one of the most famous/infamous incidents in Arkansas history.

 

Accusations, favoritism and spoilage with regard to the Real Estate Bank dominated the 1837 legislative session. A leading critic, Joseph Anthony, (Randolph County) wrote a resolution attacking the bank as a source of special privilege. House Speaker John Wilson, who happened to be president of the bank at the time, staunchly defended its operation and vouched for its financial security. On December 4, 1837, during a debate to encourage the taking of wolf pelts, Representative Anthony sarcastically alluded to Wilson’s connection to the bank. A heated argument ensued resulting in Wilson killing Anthony on the House floor with his Bowie knife.

 

By 1839, all of the banks were issuing far more credit than was held in reserve causing them to have to illegally borrow money from other banks to cover depreciating bank notes and bad lending policies. After a decade of corruption and accusations regarding who was responsible, the Arkansas General Assembly followed many other states in the late 1840s and imposed stiff constitutional regulations on the relationship between government officials and banking. The bank continued to operate until 1855 when the state finally had to step in and assume full control of its assets and ordered a complete reckoning of its accounts.

 

*Information courtesy of the Encyclopedia of Arkansas