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River Rights and Banking Problems

In 1795, Pinckney’s Treaty between the United States and Spain granted Americans the right to navigate the Mississippi, a right soon completely assured by the Louisiana Purchase of 1803. Enactment by the federal government of the Alien and Sedition Acts (1798) promptly provoked a sharp protest in Kentucky. The state grew fast as trade and shipping centers developed and river traffic down the Ohio and Mississippi increased.

The War of 1812 spurred economic prosperity in Kentucky, but financial difficulties after the war threatened many with ruin. The state responded to the situation by chartering in 1818 a number of new banks that were allowed to issue their own currency. These banks soon collapsed, and the state legislature passed measures for the relief of the banks’ creditors. However, the relief measures were subsequently declared unconstitutional by a state court. The legislature then repealed legislation that had established the offending court and set up a new one. The state became divided between prorelief and antirelief factions, and the issue also figured in the division of the state politically between followers of the Tennessean Andrew Jackson, then rising to national political prominence, and supporters of the Whig Party of Henry Clay, who was a leader in Kentucky politics for almost half a century.

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