The Big Interest Cases J. Mills Thornton III (bio) When alabama’s constitutional convention of 1819 met in Huntsville at the beginning of July, the infant state’s economy was in the process of disintegrating. The return of peace to Europe in 1815, after a quarter century of war, released enormous pent-up demand for textiles and other consumer goods. But by late 1818 that unusual demand had begun to be satisfied, and textile mills had started to moderate their output. In January 1819, as a result, the inflated price of cotton on the Liverpool exchange suddenly collapsed, falling by twenty-five percent in a single trading day. The result was the Panic of 1819. Before the Panic, cotton had been selling for twenty-five cents per pound. By the time the constitutional convention met, it was down to twelve cents and still falling.1 These events were far beyond the control of Alabamians, of course, but the territory’s settlers and their political leaders had taken actions that vastly exacerbated the situation. The demand for cotton had been so strong that people bidding on the lands that the federal government began offering for sale in the newly opened territory in 1817 and 1818 pushed prices up to inordinate levels. The result was an acute demand for credit. The first session of the new territorial assembly, meeting in St. Stephens in February 1818, sought [End Page 201] to meet this demand by repealing the Mississippi territorial act of 1805 that had limited interest rates on loans to six percent. Henceforth, though bank loans continued to be capped at six percent, all other loans could bear any rate that the contracting parties agreed to.2 Creditors very quickly began demanding extraordinary interest, at first three or five percent per month, then ten percent, and, finally twenty percent per month. The author of this act repealing most usury limits was Representative John W. Walker of Huntsville, the son-in-law of the president of the Huntsville Bank, Leroy Pope. Doubtless fearing that his motives might be impugned because of his familial relationship, however, Walker induced a close friend in the assembly, Abner S. Lipscomb of St. Stephens, to introduce the act. It was referred to a select committee consisting of Lipscomb, the bill’s sponsor; Walker, its author; and Clement C. Clay, the Huntsville Bank’s principal attorney. Reported favorably, it was passed by voice vote.3 These events would provide rich fodder for the enemies of the new state’s financiers once the act’s effects became obvious. By the time the constitutional convention met in the summer of 1819, it was clear to all the delegates that as soon as Alabama could create state courts, they would at once be flooded with suits for collection of the many enormous outstanding debts. The debtors had counted on high cotton prices to service their loans, and now they could not do so. Creditors who had influence with the state’s two small banks—in particular the members of their boards of directors— had borrowed large sums from them at six percent in order to lend the money out at vastly greater rates, and now the hard-pressed banks were demanding payment. The suspension of specie payment [End Page 202] by Tennessee’s banks had rendered a large part of Alabama’s currency nearly valueless, even though the Huntsville Bank itself was able to hold out until 1820, when the draining of its specie supply by the Tennessee banks forced it to join them in suspension.4 The land purchasers had bid far more than their land was now worth, and the United States was expecting to get its money, threatening a great many of the state’s new settlers with a loss of both their down payments and their farms. As Alabama’s economy imploded, one of the most controversial questions before the constitutional convention was therefore the method of choosing state court judges. John W. Walker was now the convention’s president, and Clement C. Clay chaired the Committee of Fifteen appointed to draft a document for the convention to debate. They were both intent on insulating the state court...