University of Nevada, Reno
Financing the Republic of Texas
As the newly minted Republic of Texas faced financial collapse, President Mirabeau B. Lamar signed the Act of February 5, 1840 creating stocks to re-balance inflation caused by the Texian “redback” dollar devalued to pennies. The collapse of the overextended Texas economy ultimately led to its annexation to the United States, precipitating the Mexican-American War.
Header Image: 1844 Political cartoon of Texas making its way into the U.S.; authors James Baillie and H. Bucholzer; courtesy Library of Congress [1].
“Texas will again lift its head and stand among the nations. It ought to do so, for no country upon the globe can compare with it in natural advantages.”
Map showing Texas in 1841; author Hunt and Randel’s 1839 map of Texas courtesy University of Texas Libraries
In the late 1830s, the economy of the newly independent Republic of Texas was facing severe inflation and rapidly losing purchasing power. The Texas Revolution had been financed through schemes like the Texian Loan that largely remained unfulfilled, and the young Republic continued to issue bonds that it knew it may not be able to repay in order to offset previous obligations. The Republic was, in short, bankrupt, only held afloat on a series of paper promises in the form of loans, stocks, and bonds; numismatist James Bevill alludes to this in the title of his book The Paper Republic: The Struggle for Money, Credit and Independence in the Republic of Texas.
Stocks were produced in an attempt to offset the devaluation of the Republic’s over-issued currency, which was worth pennies on the dollar. Texas dollars were referred to as “redbacks” due to the burnt orange or reddish hue of the back of the bills. Instead of issuing more redbacks to repay its obligations, stocks were issued which could be purchased with redbacks and redeemed for gold or silver.
The Republic was able to pull a number of redbacks out of circulation to prevent further inflation. President Mirabeau B. Lamar signed the Act of February 5, 1840—referenced below the title of this certificate—which authorized the issuance of a new series of stocks. This stock certificate is one of several varieties that were produced as a result of this.
The vignette at the top center shows two men, one a sailor pointing at a distant ship, the other the Roman god Mercury, patron god of commerce, profit, and trade. The certificate also features a five-pointed “Lone Star” in the center and a classical image of a woman embracing an eagle which may symbolize the Republic of Texas embracing the United States.
At the bottom there are ten interest warrants—more commonly known as interest coupons today—which the stock’s bearer could exchange for semi-annual interest payments of $25. Note that all of the warrants are still attached, meaning that the owner never received any interest payments. This is likely because it soon became clear that the Republic of Texas could not in fact meet its obligations to pay, and those who attempted to collect interest only received another treasury warrant. The inevitable collapse of the troubled Texas economy ultimately led to the annexation of the region to the United States, a move that precipitated the Mexican-American War. As part of the negotiations for annexation, the U.S. government agreed to take on approximately $10 million of Texas’s debt.
This stock certificate is signed by one of the Republic of Texas’s purchasing agents, Edward Hall; comptroller James B. Shaw; and stock commissioner Charles DeMorse. DeMorse was not only involved in the politics and economy of the Republic; he is also remembered as “the Father of Texas Journalism” for his work as a reporter, editor, and founder of the Clarksville Standard. DeMorse’s role in the making of Texas history also made the Standard one of the foremost newspapers in Texas.
