Sold – Henry Clay Urges His Client, the 2nd Bank of the United States, to Make an Exception and Allow His Friend and Political Ally (and Future Vice President) Richard Mentor Johnson to Cancel an Indebtedness Under Special, Favorable Terms

Richard Mentor Johnson was a war hawk and hero in the War of 1812, and an ally of Clay who succeeded Clay as Speaker of the House of Representatives. He enjoyed considerable leverage over the War Department as chairman from 1817 to 1819 of the House Committee on Expenditures in the Department of War. In 1818, Secretary of War John C. Calhoun authorized an expedition to plant a military outpost at the mouth of the Yellowstone River, near the current site of Bismarck, North Dakota, and awarded the transportation and supply contract to Johnson's brother (and partner) James Johnson. The Yellowstone expedition departed from St. Louis just as the panic of 1819 brought postwar economic expansion to a halt. The venture grossly exceeded anticipated costs and provided Calhoun's enemies in Congress with potent ammunition for an attack that ultimately led to drastic reductions in the War Department budget. After Johnson requested yet another contract for James in the summer of 1820, Calhoun advised the President against it, writing "to avoid all censure, the contracts ought to be made on public proposals." On December 10, 1819, the Kentucky legislature elected Johnson to the U.S. Senate. He, however, began his Senate career heavily in debt, so he mortgaged several properties in Kentucky and Ohio to the Bank of the United States to settle accounts outstanding from the Yellowstone expedition and other speculative ventures. The amount that he owed the Bank was $130,000.

In 1820 Clay became counsel to the 2nd Bank, a position so lucrative that he refused reelection to Congress, and instead become its general counsel from 1821-23. The Johnson matter fell into his lap, as the Johnson brothers wanted to turn over the land to cancel the indebtedness. As stated in the book "Henry Clay the Lawyer" by Maurice Baxter, "Clay was reluctant to accept Johnson's offer to turn over the property, for he was then advising the bank to avoid acquiring real estate." However, he was uneasy to move against a friend and such a prominent figure as Johnson…Eventually, he conceded the need to settle the debts by a complete transfer of the Johnson brothers' holdings.

This is the very letter in which he advised the Bank to accommodate Johnson. Autograph Letter Signed, two pages, Washington, January 18, 1821, to Langdon Cheeves, who from 1819-1822 was President of the 2nd Bank of the United States. "Col. Richard M Johnson informs me that he has made an application to the Bank of the United States, in behalf of himself and his connections, to be allowed to discharge the debt which they owe that institution in Kentucky, in real estate at valuation; and he has added that the real estate which they propose to give consists principally of first rate land in the Elkhorn region and Ohio bottoms. As a general rule, it must certainly be adverse to the interest of the Bank to invest any portion of its funds in such inactive and unmanageable property as real estate is; but there must be exceptions to it, arising out of the circumstances and conditions of debtors, and I am persuaded that the case of Col. Johnson presents one. From the calamitous change in the times, he candidly owns what I think Mr. Thomas Wilson must have become satisfied of, that they are unable to pay the debt alluded to, if payment to be demanded in specie. Persistence in such a demand would make their situation hopeless, and even deter their numerous friends from lending them that pecuniary assistance which they would otherwise be predisposed to afford. I am induced to believe that they have friends who would largely and liberally contribute toward extricating them from this load of debt, if the real estate were received; and I think it possible that if they convey such estate and as I have suggested, the bank will be ultimately remunerated or nearly so. I do not believe that instances of such enormous and fraudulent valuations as some of those which shocked Mr. Wilson and myself at Cincinnati, are likely to occur in Kentucky; at least I should hope not. If the board at Lexington were charged with the execution of the arrangement with Col. Johnson, I feel confident that it would be able so to regulate the subject of valuations as to do justice to both parties. There are considerations belonging to the case of Col. Johnson, arising out of his public services, his distinguished enterprise, and the esteem in which he is everywhere held, that I am quite sure the Bank will give all the weight to which they ought to receive, in deliberating upon his proposition." This letter is contained in the "Papers of Henry Clay."