Incorporating Business in antebellum Georgia

1. Michael Gagnon
Associate Professor of History
Georgia Gwinnett College
Incorporating
Business
Ventures in
Antebellum
Athens
Money Smart Week
Athens/Clarke County Library
April 7, 2014
11:00 AM

2. Why Incorporate a Business?
• Limited Liability
• Ability to raise large amounts of
capital
• Monopoly rights and taxes

3. 3 Shares of Stock issued in 1854

4. Creators of GA RR Bank
Augustin Clayton William Dearing James Camak J. Edgar Thomson

5. 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

6. 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

9. Locomotive shipped to Atlanta by wagon
before Georgia Railroad completed from
Madison

10. Georgia’s
Antebellum
Industrial Zone
Athens

11. $10 Georgia Railroad Bank
Note from Athens Branch

12. 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

13. 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

14. Bank Panics - Depressions

15. Bank Panics - Depressions
Banking Cycle: Economy Collapses EVERY 20
years under unregulated capitalism
Basic Causes:
1. Unstable Banking System
2. Collapse of Major Agricultural Commodity

16. 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

17. Charting the 1837 Bank Panic

18. Later
Depressions
• 1873
• 1893
• 1907
• 1919
• 1929
Later
Recessions
• 1946
• 1959
• 1974
• 1981
• 1992
• 2000
• 2008

19. Effects of Panic
1. 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.

20. 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

21. 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

22. Questions?