increased by the Brownlow Administration, proved a most perplexing question. It became an apple of political discord, and retarded the industrial and commercial regeneration of the State. It disrupted the Democratic party into three factions. A few of the most prominent leaders desired to see the State's credit preserved by paying the bonds in full. A still larger number, while recognizing the validity of the bonds, conscientiously believed that the State, on account of the amount of the debt, and the demoralized business conditions resulting from the war, would be unable to meet its just obligations. They therefore favored some agreement with the bondholders, whereby the debt could be scaled without inflicting dishonor upon the State. A third faction was for open repudiation. They contended that the bonds were illegal on two grounds, first, they had been issued in direct violation of the conditions precedent laid down in the Internal Improvement Act of 1852, and its amendments; secondly, the Brownlow Administration, which had issued the bonds, did not represent the State, it was a mere interim of usurpation and revolutionary government. While for purposes of convenience its acts, which affected merely private rights, should not be disturbed, nevertheless it could not pledge the credit of the State.
In 1873 a Funding Act was passed by the Legislature. It provided that all past due coupons and bonds might be funded into new bonds bearing interest at six per cent., redeemable after July 1, 1884, and payable July 1, 1914. Coupons on the new bonds were payable on January and July of each year, beginning with July, 1874. The question as to the validity of the Brownlow bonds was avoided by inserting a provision that only "bonds legally issued should be funded." But the State officials ignored this provision by funding all the bonds that were presented.
This Funding Act of 1873 proved a failure. The State was unable to meet its interest on the new bonds. A series
