e State could not pay
the interest on this sum, and the constitutional convention of 1879 made
drastic reductions in the interest rate. Both New York and New
Hampshire, acting ostensibly for themselves but really in behalf of their
citizens, brought suit, but the Supreme Court threw out the cases on the
ground that the actions were attempts to evade the constitutional
provision forbidding a citizen to bring an action against a State. The
bondholders still refused to accept the reduction, and the Supreme Court
in 1883 described the ordinance as a violation of the contract of 1874
but a violation without a remedy. Meanwhile the Legislature, after
consultation with the bondholders, had agreed to a slight increase in the
rate of interest; and in 1884, this compromise was ratified by an
amendment to the constitution.

The debt of Arkansas was not so difficult to settle. The issue of about
$7,500,000 for railroads and levees during Reconstruction was declared
unconstitutional in 1877-78, and the so-called Holford bonds, issued in
aid of banks, were repudiated by the constitutional convention of 1884.
The total amount repudiated and declared void by the courts was nearly
$13,000,000. Tennessee also struggled with a debt which it was unwilling
and perhaps unable to pay. The amount, which in 1861 was about
$21,000,000, incurred principally in aid of railroads and turnpikes, was
largely increased under Republican rule, and most of the money received
for the bonds was stolen or wasted. No interest had been paid during the
War, and the accrued interest was funded in 1865, 1869, and 1873. The
debt was somewhat reduced by permitting the railroads to pay their debt
in state bonds which they purchased cheaply on the market. Other
defaulting railroads were sold, but the State still could not meet the
interest. Many discussions with the creditors were held, but the people
had the idea that much of the debt was fraudulent and they consequently
voted down proposals which they thought too liberal to the creditors. The
question temporarily split the Democratic party, but after much
discussion a long act was passed in 1883 which finally settled the matter.
A part of the debt, with interest, was funded at 76 to 80 cents on the
dollar. The major part was funded at 50 cents on the dollar with interest
thereafter at three per cent.

The financial difficulties of Virginia excited more interest than did
those of any other commonwealth, for this St