The Founders' Blog

January 18, 1791

My Dear Sir:

I have learnt with infinite pain the circumstances of a new bank having started up in your city. Its effects cannot but be in every way pernicious. These extravagant sallies of speculation do injury to the government and to the whole system of public credit, by disgusting all sober citizens and giving a wild air to every thing. ’t is impossible but that three great banks in one city must raise such a mass of artificial credit as must endanger every one of them, and do harm in every view.

I sincerely hope that the Bank of New York will listen to no coalition with this newly engendered monster; a better alliance, I am strongly persuaded, will be brought about for it, and the joint force of two solid institutions will, without effort or violence, remove the excrescence which has just appeared, and which I consider as a dangerous tumor in your political and commercial economy.

I express myself in these strong terms to you confidentially, not that I have any objection to my opinion being known as to the nature and tendency of the thing.

(Source: http://oll.libertyfund.org/)

January 13, 1791

Dear Sir:—I thank you for the printed papers you have been so obliging as to send.

I cannot forbear a conjecture that the communications of the Chargé des Affaires of France are rather expedients to improve a moment in which it is perceived questions concerning navigation are to be discussed, than the effects of serious instructions from his court.

Be this as it may, I really have not thought of any substitute for your proposition to which objections do not lie. And, in general, I have doubts of the eligibility of ex-parte concessions, liable to be resumed at pleasure. I had rather endeavor, by a new treaty of commerce with France, to extend reciprocal advantages, and fix them on a permanent basis. This would not only be more solid, but it would, perhaps, be less likely, than apparently gratuitous and voluntary exemptions, to beget discontents elsewhere, especially (as ought to be the case) if each party should be at liberty, for equivalent considerations, to grant like privileges to others. My commercial system turns very much on giving a free course to trade, and cultivating good humor with all the world. And I feel a particular reluctance to hazard any thing, in the present state of our affairs, which may lead to a commercial warfare with any Power; which, as far as my knowledge of examples extends, is commonly productive of mutual inconvenience and injury, and of dispositions tending to a worse kind of warfare. Exemptions and preferences which are not the effect of treaty, are apt to be regarded by those who do not partake in them as proofs of an unfriendly temper towards them.

(Source: http://oll.libertyfund.org/)

Philadelphia, January 11, 1791

Dear Sir:—I have perused with attention your intended report to the President, and will, as I am sure is your wish, give you my opinion with frankness.

As far as a summary examination enables me to judge, I agree in your interpretation of the treaty. The exemption sought does not appear to be claimable as a right. But I am not equally well satisfied of the policy of granting it on the ground you suggest. This, in my mind, stands in a very questionable shape. Though there be a collateral consideration, there is a want of reciprocity in the thing itself; and this is a circumstance which materially affects the general policy of our navigation system. The tendency of the measure would be to place French vessels upon an equal footing with our own in our ports, while our vessels in the ports of France may be subjected to all the duties which are there laid on the mass of foreign vessels. I say the mass of foreign vessels, because the title of “most favored nation” is a very extensive one, the terms being almost words of course in commercial treaties. And consequently our own vessels in the carrying trade between the United States and France would be in a worse situation than French vessels. This is the necessary result of equal privileges on one side and unequal on the other, in favor of the vessels of France.

Though, in the present state of the French navigation, little would be to be apprehended from the regulation; yet, when the probable increase of that navigation under a free government is considered, it can hardly be deemed safe to calculate future consequences from the actual situation in this respect.

And if the principle of the regulation cannot be deemed safe in a permanent view, it ought not to be admitted temporarily; for inconvenient precedents are always embarrassing.

On the whole, I should be of opinion that the introduction of such a principle without immediate reciprocity would be a high price for the advantage which it is intended to compensate.

It will, no doubt, have occurred to you that the fund has been mortgaged for the public debt. I do not, however, mention this as an insuperable objection; but it would be essential that the same act which would destroy this source of revenue should provide an equivalent. This I consider as a rule which ought to be sacred, as it affects public credit.

I have the honor to be, etc.

P. S.—If you have any spare set of the printed papers, I should be obliged by having them.

(Source: http://oll.libertyfund.org/)

December 8, 1790

Fellow-Citizens of the Senate and the House of Representatives

In meeting you again I feel much satisfaction in being able to repeat my congratulations on the favorable prospects which continue to distinguish our public affairs. The abundant fruits of another year have blessed our country with plenty and with the means of a flourishing commerce.

The progress of public credit is witnessed by a considerable rise of American stock abroad as well as at home, and the revenues allotted for this and other national purposes have been productive beyond the calculations by which they were regulated. This latter circumstance is the more pleasing, as it is not only a proof of the fertility of our resources, but as it assures us of a further increase of the national respectability and credit, and, let me add, as it bears an honorable testimony to the patriotism and integrity of the mercantile and marine part of our citizens. The punctuality of the former in discharging their engagements has been exemplary.

In conformity to the powers vested in me by acts of the last session, a loan of 3,000,000 florins, toward which some provisional measures had previously taken place, has been completed in Holland. As well the celerity with which it has been filled as the nature of the terms (considering the more than ordinary demand for borrowing created by the situation of Europe) give a reasonable hope that the further execution of those powers may proceed with advantage and success. The Secretary of the Treasury has my directions to communicate such further particulars as may be requisite for more precise information.

Since your last sessions I have received communications by which it appears that the district of Kentucky, at present a part of Virginia, has concurred in certain propositions contained in a law of that State, in consequence of which the district is to become a distinct member of the Union, in case the requisite sanction of Congress be added. For this sanction application is now made. I shall cause the papers on this very transaction to be laid before you.

The liberality and harmony with which it has been conducted will be found to do great honor to both the parties, and the sentiments of warm attachment to the Union and its present Government expressed by our fellow citizens of Kentucky can not fail to add an affectionate concern for their particular welfare to the great national impressions under which you will decide on the case submitted to you.

It has been heretofore known to Congress that frequent incursion have been made on our frontier settlements by certain banditti of Indians from the northwest side of the Ohio. These, with some of the tribes dwelling on and near the Wabash, have of late been particularly active in their depredations, and being emboldened by the impunity of their crimes and aided by such parts of the neighboring tribes as could be seduced to join in their hostilities or afford them a retreat for their prisoners and plunder, they have, instead of listening to the humane invitations and overtures made on the part of the United States, renewed their violences with fresh alacrity and greater effect. The lives of a number of valuable citizens have thus been sacrificed, and some of them under circumstances peculiarly shocking, whilst others have been carried into a deplorable captivity.

These aggravated provocations rendered it essential to the safety of the Western settlements that the aggressors should be made sensible that the Government of the Union is not less capable of punishing their crimes than it is disposed to respect their rights and reward their attachments. As this object could not be effected by defensive measures, it became necessary to put in force the act which empowers the President to call out the militia for the protection of the frontiers, and I have accordingly authorized an expedition in which the regular troops in that quarter are combined with such drafts of militia as were deemed sufficient. The event of the measure is yet unknown to me. The Secretary of War is directed to lay before you a statement of the information on which it is founded, as well as an estimate of the expense with which it will be attended.

The disturbed situation of Europe, and particularly the critical posture of the great maritime powers, whilst it ought to make us the more thankful for the general peace and security enjoyed by the United States, reminds us at the same time of the circumspection with which it becomes us to preserve these blessings. It requires also that we should not overlook the tendency of a war, and even of preparations for a war, among the nations most concerned in active commerce with this country to abridge the means, and thereby at least enhance the price, of transporting its valuable productions to their markets. I recommend it to your serious reflections how far and in what mode it may be expedient to guard against embarrassments from these contingencies by such encouragements to our own navigation as will render our commerce and agriculture less dependent on foreign bottoms, which may fail us in the very moments most interesting to both of these great objects. Our fisheries and the transportation of our own produce offer us abundant means for guarding ourselves against this evil.

Your attention seems to be not less due to that particular branch of our trade which belongs to the Mediterranean. So many circumstances unite in rendering the present state of it distressful to us that you will not think any deliberations misemployed which may lead to its relief and protection.

The laws you have already passed for the establishment of a judiciary system have opened the doors of justice to all descriptions of persons. You will consider in your wisdom whether improvements in that system may yet be made, and particularly whether an uniform process of execution on sentences issuing from the Federal courts be not desirable through all the States.

The patronage of our commerce, of our merchants and sea men, has called for the appointment of consuls in foreign countries. It seems expedient to regulate by law the exercise of that jurisdiction and those functions which are permitted them, either by express convention or by a friendly indulgence, in the places of their residence. The consular convention, too, with His Most Christian Majesty has stipulated in certain cases the aid of the national authority to his consuls established here. Some legislative provision is requisite to carry these stipulations into full effect.

The establishment of the militia, of a mint, of standards of weights and measures, of the post office and post roads are subjects which I presume you will resume of course, and which are abundantly urged by their own importance.
Gentlemen of the House of Representatives:

The sufficiency of the revenues you have established for the objects to which they are appropriated leaves no doubt that the residuary provisions will be commensurate to the other objects for which the public faith stands now pledged. Allow me, moreover, to hope that it will be a favorite policy with you, not merely to secure a payment of the interest of the debt funded, but as far and as fast as the growing resources of the country will permit to exonerate it of the principal itself. The appropriation you have made of the Western land explains your dispositions on this subject, and I am persuaded that the sooner that valuable fund can be made to contribute, along with the other means, to the actual reduction of the public debt the more salutary will the measure be to every public interest, as well as the more satisfactory to our constituents.
Gentlemen of the Senate and House of Representatives:

In pursuing the various and weighty business of the present session I indulge the fullest persuasion that your consultation will be equally marked with wisdom and animated by the love of your country. In whatever belongs to my duty you shall have all the cooperation which an undiminished zeal for its welfare can inspire. It will be happy for us both, and our best reward, if, by a successful administration of our respective trusts, we can make the established Government more and more instrumental in promoting the good of our fellow citizens, and more and more the object of their attachment and confidence.

George Washington

(Source: http://www.yale.edu/lawweb/avalon/presiden/washpap.htm)

December 1, 1790

I.—Confidence that measures for the further support of public credit, and for the payment of the interest and gradual extinguishment of the principal of the public debt, will be pursued with zeal and vigor; and that, as one means to this, a plan for the sale of the western lands will be adopted, which will give them the effect intended, appropriating them to the sinking fund, and which will extend the agriculture of the United States.

II.—Felicitation on the success of the measures hitherto adopted for the support of public credit, as witnessed by the rise of American stock, not only in the United States, but in Europe. The public credit cannot but acquire additional energy when it is known that the resources hitherto in activity have been more productive than was calculated upon. As proof not only of the resources of the country, but of the patriotism and honor of the mercantile and marine citizens of the United States, the punctuality of the former in discharging their obligations has been exemplary.

III.—Information that a loan of 300,000 florins has been effected in Holland, the terms and disposition of which (as far as any has been made) the Secretary of the Treasury has been directed to explain.

IV.—Growing conviction in the minds of the great body of the people of the utility and benefits of a National Government. It is not to be doubted that any symptoms of discontent which may have appeared in particular places, respecting particular measures, will be obviated by a removal of the misapprehensions which may have occasioned them.

V.—Communication of the expedition against the Indians, and of the motives to it.

VI.—Disturbed situation of Europe, particularly of the great maritime powers. The precautions of a prudent circumspection on the part of the United States ought not to be neglected.

VII.—Almost total interruption of our Mediterranean trade, from the dread of piratical depredations. Great importance of opening that trade, and expediency of considering whether protection cannot be afforded to it.

IX.—Symptoms of greater population than was supposed—a further proof of progressive strength and resource.

X.—Remarks on the abundance of the harvests, affording an assurance of internal plenty, and the means of easy payment for foreign supplies.

(Source: http://oll.libertyfund.org/)

Philadelphia, November 28, 1790

Hon’d Sir

We arrived here yesterday was a week without any occurrence on the road worth mentioning. The President arrived yesterday & the members are coming in for Congress. I have made inquiry with regard to the articles you want, and send you the inclosed paper which will give you information not only with respect to them, but all others in the market here. The high price of sugar makes it advisable I think not to purchase at present. Coffee seems low enough but I do not see any probability of a rise that will be more than equivalent to the loss of the money vested in an article stored away. I shall however await your instructions on this point as well as others; or if I should meet with a bargain on account either of cheapness or quality, perhaps embrace it for you.

The price of securities at which Majr Moore’s certificates would have been sold is 12/6 in the pound, at which of course you are to settle with him. I have forwarded his letter to his son John, with 3 half Jos. & notice of the fund in my hands for him. Of this you will inform my Uncle.

I hope this will find all well and my bro’r Ambrose restored. Tell him I shall expect to hear often from him as well as yourself. I hope you have not forgotten to pay Majr. Lee, and that Robin & the will have given Sawney the aids necessary for the jobb I left unfinished. With my love to my mother & regards for the family I remain your afft son.

Treasury Department, September 1, 1790

Sir:—Two acts of the Legislature, of the fourth and twelfth of August, of which I inclose you copies, authenticated according to law, empower the President to cause to be borrowed on their behalf fourteen millions of dollars, subject to certain restrictions and qualifications, to be applied in payment of such part of our foreign debt as shall have become due, and to a new modification of the remainder, if it can be effected upon terms beneficial to the United States. The execution of this authority he has committed immediately to me, and ultimately through me to you; except as to three millions of florins, part of the above sum, of which, as you are informed, a loan has been anticipated by Messrs. Willinks, Van Staphorsts, and Hubbard, and of which a confirmation, with correspondent powers, has been sent directly to them. Among the documents which accompany this letter you will find a copy of the commission from the President to me, and a power founded on it from me to you.

It remains for me to give you some indications for your government, conformable to the general tenor of the instructions which I have received from the President, and of which I transmit a copy; premising that it is understood, between the Secretary of State and myself, that you are to proceed to Amsterdam without delay, and to continue there, in the first instance, for a term not less than three months.

A primary and principal object of your attention will be, to acquire as exact knowledge as may be of the footing upon which the different foreign powers who borrow in Holland have usually obtained their loans, since the commencement of our independence, and upon which they at present obtain them; the prices of foreign stock in the Dutch market, including our own; the state of our credit compared with that of other nations; the extent and the conditions to and upon which we shall be likely to borrow in case of war between England and Spain, and in the alternative of our being ourselves at peace or war; the principal houses and brokers concerned in the negotiations of foreign loans; their characters; comparative solidity and influence with the money-lenders; the terms upon which their agency is afforded to their employers; the manner in which those whom we have heretofore employed are understood to have conducted themselves in relation to our interest and credit; and particularly their solidity and influence with the money-lenders.

Most if not all these inquiries will be immediately serviceable to you. They will all be productive of information useful to my department; and I will therefore thank you for successive communications of the result.

One consequence of them to you will be, that they will enable you to judge whether our confidence in our former commissioners or agents ought to be continued, or withdrawn in order to the substitution of others; or, if continued, whether the terms of their agency may not be meliorated; or whether, with their consent, some other house or houses may not be combined with them, with an increase of credit and resource to us.

These, as you will be sensible, are delicate points. They are, however, left to your prudence and discretion, according as facts shall be ascertained to you.

I shall only remark, that changes of public servants ought never to be made but for cogent reasons. If lightly made, they are not only chargeable with injustice and are a symptom of fickleness in the public counsels, but they destroy the motives to good conduct, and, in money concerns especially, are apt to beget a disposition to make the most of possession while it lasts. Circumspection in the present case is also recommended by the consideration that those whom we have heretofore trusted risked themselves and their fortunes upon our affairs, when the doing it was not without serious hazard. This is a reason for permitting them to reap the benefits of our more prosperous days, if they have been faithful and are adequate to the trust. A further reason is, that they are now deeply interested in our funds, and consequently, it is presumable, in our credit. Competition and variance once existed between the house of Willinks and that of the Van Staphorsts; but these appear some time since to have been compromised. The latter have most merit for early exertions, the former are said to be most solid. This union is desirable for the greater security it affords.

Suggestions of this nature are not dictated by any distrust of the fidelity or good conduct of our former commissioners. As far as I know, they deserve well of us. My object is, in entering upon a new stage of our affairs, to have the ground over which we have passed well examined, that we may the better judge whether to continue or alter our course.

In the consideration of our foreign debt, it naturally divides itself into two parts; that which is now payable, and that which will be payable hereafter. The first we are bound to discharge as soon as may be, and upon the best terms we can. The last we are not bound to discharge but as the times of payment elapse, and therefore are not called upon to do it unless some positive advantage accrues from it to ourselves. This view of the matter governs the instructions of the President to me, which, of course, regulate mine to you.

You are accordingly to borrow, on the best terms which shall be found practicable, within the limitations prescribed by law, such sum or sums as shall be sufficient to discharge as well all instalments or parts of the principal of the foreign debt, which now are due or shall become payable to the end of the year one thousand seven hundred and ninety-one, as all interest and arrears of interest which now are or shall become due in respect to the said debt to the same end of the year one thousand seven hundred and ninety-one. But you shall not extend the amount of the loans which you shall make or cause to be made beyond the sum which shall be requisite for that purpose, unless it can be done upon terms more advantageous to the United States than those upon which the residue of the said debt shall stand or be.

And in order that you may judge what will be due to the end of the year one thousand seven hundred and ninety-one, I refer you to the papers marked A and B, which contain statements of principal and arrears of interest of our foreign loans to that period; and shall, by the next opportunity, send you a copy of the contracts respecting them, from which you will derive a more accurate knowledge of their terms.

You will perceive, by the act which authorizes the loan for paying off the foreign debt, that there is no other restriction as to the terms except that, in the contracts to be made, the United States shall be left at liberty to reimburse the sum borrowed, within a period not exceeding fifteen years. As this seems to be the usual period for the reimbursement of moneys borrowed in Holland, that restriction can constitute no embarrassment.

In the second act there is no restriction as to time of repayment, but there is one as to the rate of interest, which must not exceed five per cent. This, however, I consider as compatible with the allowance of those premiums, commissions, and other charges which are customary in ordinary times; and which, I am informed, are, in the aggregate, about four and a half per cent. But the allowance of unusual or extraordinary premiums to obtain loans upon a nominal interest of five per cent., as well because it is a pernicious mode of borrowing as because it would be an invasion of the law, is inadmissible.

If war should continue or become more general in Europe, it is to be apprehended that the demand for money will raise its price upon us, and that loans will not be practicable upon so good terms as in time of peace. The situation of this country, too, authorizes us to expect that as our resources become more unfolded and better understood, we shall be able to borrow upon easier terms than we have at any time heretofore done. On both these accounts it would be very desirable, while we did not oblige ourselves to reimburse the principal borrowed in less than fifteen years, commencing at the end of ten, that we could stipulate for a right of reimbursing it sooner,—that is to say, either upon giving notice of our intention to do it for a limited time beforehand, or at the end of a short period, say five years. I should consider a stipulation of this kind as a valuable ingredient in your contracts.

I have intimated above the inexpediency of extraordinary premiums to purchase a nominal low rate of interest. Against this error I would particularly guard you. It is sacrificing a real future interest to an appearance, at best, to temporary accommodation. A higher rate of interest upon a sum actually received, is preferable to a lower rate upon a nominal sum, with large deductions in the first instance, or considerable premiums afterwards; this will be more especially the case if we can reserve a right to repay when we please or after a short period; as we may reasonably contemplate, with the return of peace, a fall of interest.

But every thing of this kind is, after all, matter of calculation, and to be tested by the evidence of figures. I can only, therefore, mean to give you a caution, referring you to that test, and intimating to you this general principle, that the name of a low interest ought not to betray us into giving more for it in the shape of premium or discount than it is worth, and that, as we shall borrow at a time when circumstances will render interest high, we had better pay that interest on actual value received, than a lower one on a fictitious value, or for future and exaggerated compensations; reserving, as far as it can be done, the right of paying off at pleasure, or at an early period. The future fall of interest will, in the first case, turn to our advantage, in the last, to our disadvantage.

You will not pass unnoticed the circumstance that the laws contain actual appropriations of very adequate funds for the payment of interest upon the sums you shall borrow. The first act, indeed, after reserving six hundred thousand dollars for the support of government, gives a priority in payment to the foreign debt out of revenues which are calculated upon the estimate of a much larger product. You may confidently assert that the duties hitherto have produced at the rate of one million eight hundred thousand dollars; which alone would leave twelve hundred thousand dollars, as the fund out of which the interest on your loans would be payable. But the augmentations which have been made in the rates are computed to be capable of affording an addition of eight hundred thousand dollars; and I believe the computation to be well founded.

You will also, no doubt, make a proper use in your communications of the actual situation and future prospects of this country. The economical scale of our establishments, civil and military; the comparative smallness of our debt; the reliance which may be had on the stability of our pecuniary arrangements once made, from the nature of our government in respect to the mutual checks inherent in its organization; the rapid progression of population and resources to which we may look forward; the actual and probable emigrations occasioned by the troubled state of Europe; the hope that we shall continue in peace, while other Powers are accumulating their debts by new wars; the very favorable situation in which we shall find ourselves at the end of a general war in Europe, if we avoid participating in it, etc., etc. These are topics which ought to have weight in our favor, and, within due limits, may be urged with force and assurance.

With regard to that part of the debt which does not become payable till after the year one thousand seven hundred and ninety-one, you will have observed that nothing is to be done by you in respect to it, unless it can be done upon terms of advantage to the United States. However cordial our disposition to come to the pecuniary aid of France in her present affecting and embarrassed condition, in this early stage of our finances we could not in prudence volunteer payments not due by the terms of the contract, especially, too, by the expedient of new foreign loans, unless it should be attended with some circumstance of advantage in the operation to ourselves. By this I understand a lower rate of interest.

For, according to my speculations on the probable rate of exchange between this country, France, and Holland, and between Holland and France for some years to come, I deem it better (whether our payments proceed directly from hence, or circuitously through Holland) to have to pay a given sum to France, than an equal sum to Holland.

The charges too upon the new loans will have to be taken into the account, and an indemnity for them included in the terms of the operation. Calculating only upon the ordinary ones, it does not appear to me that it would be the interest of the United States to change the form of this debt, unless the rate of interest on the new loans did not exceed four per cent. And I own that, in the present aspect of affairs, I see no ground to expect that loans will be obtained at so low a rate.

If the thing should be possible, it must be on the score of some collateral advantages to the lenders; such, for instance, as their being permitted to pay a part in the effects or stock of France, as was contemplated in the last negotiations. Whether any arrangement of this nature will be a desirable accommodation to France; whether persons of real capital, who would not in the execution be obliged to use means prejudicial to the credit of the United States, would be willing to embark in such a plan; whether it would prove an obstacle to other loans which we may have occasion to make for other purposes, are circumstances essential in determining its eligibility, which cannot be known to me, and can only be accurately judged of by one on the spot.

I suggest them as hints to you. In exploring or feeling the ground, you will recollect that propositions of such a nature ought not to come from us. If the thing should be capable of being placed upon a footing conducive to our interests, we ought only to appear to sanction what other parties desire of us. And we should in no event make any movement that may injure our reputation, or place us in the light of a people desirous of making hard bargains at the expense of friends.

Neither can I authorize you to conclude any general arrangement of this nature, without a previous communication of it to me, to be submitted to the consideration of the President; there being a separate instruction from him to me, that no loan shall be opened for more than a million of dollars, and that no new loan shall be undertaken until the preceding one shall have been announced to him, and shall have received his sanction.

This limitation, therefore, in all your proceedings, you will of course attend to, and you will perceive the utility of making the earliest communication of every loan you shall set on foot, in order that you may know the determination of the President before its completion, and be prepared in time to commence another.

It has been suggested that loans may be made with advantage in certain parts of Italy. I do not count on this resource, but I shall be glad to know how far, from inquiry, it shall appear to be an eligible field for an experiment.

With regard to the application of the moneys to be borrowed, you will, from time to time, receive special directions.

The foregoing are the only observations which the time I have will permit me to make. They contain general indications of the course you are to pursue; the rest must be left to your judgment, circumspection, and delicacy. I doubt not you will be duly impressed with the importance of the trust; how much the interest and reputation of our government are concerned in its proper execution. And I feel a confidence that they will not suffer in your hands.

P. S.—I send for your information a copy of my letter to Messrs. Willinks & Co., by which you will perceive the footing on which the provisional loan of three millions of florins is placed.

(Source: http://oll.libertyfund.org/)