From William Short
Amsterdam Dec. 2. 1790
My last letter of the 26th of November will have informed you of my arrival at this place. I have been hitherto employed in ascertaining what measures would be most conducive to the honor & interests of the United States in the execution of the commission you have confided to my care.1 In the course of this business several of the objects to which you directed my enquiries naturally presented themselves, & particularly those which relate most immediately to a present loan.
I very soon satisfied myself that the rate of interest could not now be reduced below five percent. This was indicated as well by the loans at present open here for other powers which produce that rate, as by those made on the liquidated debt of the United States which produce an higher rate. Besides the acts of Congress were well known here2 & left no doubt in the minds of those employed in loans, that the advantages to be derived to the United States from the purchase of their own funds at their present price would induce them to borrow willingly on those terms.
It remained therefore only to be examined if the rate of commission paid by the United States on their last loan & which their bankers3 had proposed to me as the lowest on which they would undertake the business, could not be meliorated. To do this it was necessary to ascertain the rate paid by other powers who borrow here, which is the less easy as it is an article which only regards the borrower & the agent & which they are both disposed to keep to themselves. Enquiries of this nature also were the more delicate in the present case, because as I had every reason to believe it would be proper finally to commit this business to those who have hitherto been employed in it, it was to be wished that they should have as little ground as possible to suppose in us a disposition to suspect or a desire to change them.
I found that most of the borrowing nations paid a much higher commission, & I had good reason to believe that the Emperor4 alone was served at the lower rate of four p cent. After several conversations with the agents of the United States in which they urged the impossibility of their accepting lower conditions than those they had prescribed to themselves in the last loan, where the circumstances under which they opened it obliged them to confine their profits to the lowest possible terms, they consented to a diminution of ½ p. cent on the commission so as to leave it at four.
It was consequently agreed between us that they should open a loan for two millions & an half of guilders, equal to a million of dollars upon the above terms of interest & commission, the reimbursement to begin at the end of ten years & to be completed in the five following, the United States having a right to reimburse the whole or any part of the same at any earlier period they should judge proper. This latter clause which you seemed desirous of obtaining & which is certainly desirable under the circumstances of the United States is admitted here without difficulty.
Matters being thus settled between these houses & myself it still remained for them to consult with the brokers who are employed in this business about the best time of opening the loan. In the course of my different conversations with the Agents & also with two of the principal brokers in the American business with whom I had made myself acquainted I had already had occasion to observe that they considered the present as an unfavorable moment for making loans in general & particularly so for the United States because their five p. cent loans were below par at present owing to many people selling out of these loans in order to place their funds in those made on the liquidated debt, these latter producing an higher rate of interest & presenting also the United States ultimately as their security.
The result of the conference therefore which the bankers had with the brokers yesterday evening was that if Congress was in absolute want of the money they would set the loan on foot & had no doubt of having it filled before the expiration of the term generally allowed in these cases—that it was however certain it would at present go on slowly and heavily, & might thus be injurious to the future views of Congress as it appeared from their acts they would have occasion to make a series of loans—that it would therefore be best to postpone opening the loan until the beginning of february at which time such a loan would be desired on the market & greedily sought after—that if any favorable circumstances should turn up sooner, which however they did not foresee, they would in that case give notice of it & advise the loan being brought on the market.
It was impossible for me to hesitate in subscribing to this sentiment concurred in both by bankers & brokers & confirmed by reason & example. I did it with the less reluctance because I saw that under present circumstances & agreeable to the mode of making loans here any given sum would be raised probably as soon if brought on the market in the beginning of february as at present.
Whenever a loan is opened the undertakers, who are an order between the money lenders & brokers, require a certain time always much more than necessary for furnishing the money for which they engage, with the privilege however of furnishing it at any time sooner if they think proper; & this is done sooner or later according to the favor with which the loan is recieved. It is the opinion of Stadnitzki5 particularly that any given number of loans could be effected for the U.S. at an earlier period beginning the first of february than at present, because the readiness with which the first loan would probably be taken up in that case would accelerate the others.
These considerations together with the propriety of endeavouring to augment the credit of Congress by having their loans not barely taken up when brought on the market, but sought after with avidity have determined me to fix with the bankers only the terms of interest & commission & to leave the time of opening the loan dependent on the circumstances abovementioned. No inconvenience can result as to such parts of the money as you may destine to continue the payments to France, as after recieving your orders the minister may be authorized to draw on this place at terms which may be adapted to the agreements made with the undertakers. As to such parts as you may chuse to call for there will probably be no inconvenience either, the terms of the bills, if you should draw, leaving sufficient time for filling the loans & if you should desire the coin to be sent the delay will not be considerable.
Having thus informed you, Sir, of the present situation of the intended loan & the particular circumstances which have led to it, I will endeavour to put you in possession of such parts of the general information you desired as I have been able to collect, premising however, that from the time & manner in which these notions have been acquired there may be some errors & that I reserve a right to correct them in my future letters. These errors however I think will be few & inconsiderable as I have endeavoured to keep separate in my mind such information as appeared to me ascertained by a coincidence of circumstances or the corroborating evidence of different people (counting only as different those who have different professions & different & frequently opposite interests) from such as was derived merely from isolated conversations with people of similar professions & interests.
With respect to the footing on which foreign loans have been made here since our independence & at present it may be observed that the interest of money has taken a gradual rise, owing as well to the greater quantities which are demanded here by the several powers who borrow, as to a general increase of industry in Europe which enables every one to make greater profits from his capital in whatever manner he employs it, & consequently induces him to ask more if he is a lender & enables him to give more if he is a borrower. Besides this use which is independent of the circumstances of the borrowing powers, there is a variation as to the facility & terms on which they have obtained money, relative to the different situations in which they have been at the time of making their loans; such as war or peace, their domestic administration, the influence of their agents employed here, & the intelligence which they have used, in the time & manner of making the loans. The standing rate of interest fifteen years ago may be estimated at four p. cent as it may now at five. No foreign power who has occasion to make loans here at present pays less. Denmark has the appearance of making a loan at four, but it is only the exchange of old obligations bearing that interest for others at the same rate; & the price of this stock in the market shews that the interest which that power would be obliged to pay on a new loan would be five.
The borrowing powers here are the Emperor, Russia, the United States, Denmark, Sweden, Poland. I do not speak of domestic loans as they are never considered as a criterion for foreign nations. The East India company of this place has however lately made one which costs them about five p. cent, as it is said. It was sought after with avidity for that reason, and because it was by lottery, a mode in which the lenders are fond of placing some part of their money, because it holds out the possibility of extraordinary gain, & also because they wish not only to multiply the different persons with whom they place their capital, but also to vary the manner of placing it.
Of the above mentioned powers, the Emperor & the United States only have not a loan open at present. The emperors last was closed I think in June. Poland has its first loan on the market. The Emperors five p cent stock may be purchased at two p cent above par, that of Russia and the U.S. a little below par, the latter particularly at ½ or ¾ p cent Viz from 99¼ to 99½ the hundred. The comparative degree of estimation in which foreign credit is held by the money lenders is 1. The Emperor. 2. Russia, the U.S. & Denmark. 3. Sweden. Poland cannot be well judged of yet. Its credit depends principally upon its being known to have little or no public Debt—on the prospect of its constitution meliorating,6 and also on the disposition in the money-lenders to multiply as much as possible the persons with whom they place their capital.
As to the influence which the war between England & Spain would have had on the American loans, it seems to me it would have facilitated them because many would in that case have sold out of the English funds, & some of them would have vested their money in the American. It is proper to observe however that many people here are of a different opinion & think that those who should have sold out would have kept their money to be revested in the English funds when they should have fallen to their lowest. But as this war is now out of the question it is useless to reason on it.
The extent & conditions of our loans in the case of our being at war ourselves it is impossible for me as yet to form any probable conjecture about. The bankers however say that it would be impossible to obtain more than very inconsiderable sums, & these by an extraordinary interest & extraordinary means, such as a lottery of some kind or other.
The conditions on which our loans [are] to be made at present I have already mentioned. The extent to which they may be carried in any given time depends so much on the changeable circumstances of Europe and their influence on this place that it is impossible to reduce it to certainty. It seems to be thought by Stadnitzki & by our bankers also that in the case of no other war taking place in Europe than that which exists at present between Russia and the Porte we may be able to borrow from 9 to 12 Millions of guilders in 14 months from this time. It must be observed however that in making this estimation they calculated on the loans being of 3 millions of guilders each; & of their being opened successively whenever there was a favorable moment. I did not think it necessary to inform them that the sum of each would be limited to a million of dollars, & that no succeeding loan would be opened until the preceding one had been confirmed. I do not think it probable that this latter condition will occasion any delay as a confirmation may generally be recieved in three months. The bankers insisted much on fixing the loans at three millions of guilders, urging that that sum was the one to which the undertakers here were so much accustomed that it would probably be as soon taken up as one of two millions & an half. I did not however think myself authorized to subscribe to their wishes.
This view of the matter will shew that it will take a longer time to complete the sums wanted for the year 91. than you had probably imagined. I own I had supposed before my arrival here that they might be obtained sooner: but the loans made on the liquidated debt, which amount nearly to six millions of guilders have done considerable injury to the loans of Congress. The only remedy to this evil is in the rise of the American funds at home. The calculation here is that when they get to 15. shillings in the pound those who borrow on them cannot give more than five p cent interest. In that case the loans of Congress would be always preferred. The lowest interest which has as yet been given on the loans of the liquidated debt is six p cent; except indeed a small one of half a million of guilders which was proposed a few days ago at 5½ p cent. The house of Cromelin7 who set it on foot finding that it would not take, & being unwilling to have the appearance of having failed in an undertaking, withdrew it from the public under pretence that they had placed it among their friends. It is generally understood however that money cannot be raised on these funds at less than six p. cent.
As the business of loaning is one of the principal branches of industry there are several of the richest houses here employed in it. The House of the Hopes,8 who borrow at present for Russia, seems on all hands to be considered as forming a class of itself separate from the rest on account of its extensive connexions & immense wealth. After this house come several others who though differing somewhat in the extent of their capital are considered as on the same footing in point of solidity & responsibility for any engagement they may take. In this number is de Smeth9 who has formerly made loans for Russia & now borrows for Poland. Goll10 for the Emperor. Hasselgreen11 & Hogguer & Co.12 separately for Sweden. Willink & Van Staphorst in conjunction, for the United States. These two houses taken separately would be ranked in the first class after that of Hope viz among those of the second order. United, their solidity & influence with the moneylenders may be considered as equal to that of any house making loans here, & superior as to American loans; because any house which has been previously employed will always, ceteris paribus, have more influence in loans for the same power than one that has not been. The knowlege which the money lenders have of the powers to whom they lend being founded for the most part on conjectural basis, leaves a wide field for their imagination & fears. Every change tends therefore to rouse those fears & excite their distrust. It must require an accurate knowlege of the place & people to be able to judge what difference in the conduct of agents or the terms of their agency is equivalent to the probable ill arising from such a change. I am happy that circumstances have been such as to have left no room for the exercise of my discretion on this subject. The terms on which they are now employed are certainly as low, probably lower than those on which any other houses of equal solidity & influence would have undertaken the business.
I find also that they are generally understood to have acted with propriety & intelligence in regard to the interests of the United States, & that the price of their agency is considered by those to whom it is known as perfectly reasonable—some say it is much too low these however are persons who are employed in similar business for other powers & who recieve a great deal more from them.
As it was necessary to ascertain fully whether 4½ p. cent was really the lowest terms on which they would undertake this business, I endeavoured to do it without giving Congress the appearance of an hard employer. After hearing their terms & a variety of arguments which they adduced to prove the modesty of them & the propriety & advantage of their being employed, such as their present profits being barely adequate to the time & trouble spent in making the loans, their early efforts in the cause of America, their risking their fortunes in the last loan to prevent a speculation disadvantageous to Congress, their being able to act more for the interest of the United States than any other house on account of their influence particularly with those persons here who hold the American liquidated debt &c. I observed that they might be persuaded you would on equal terms prefer their services to those of any other house—that they had recieved a convincing proof of your confidence & satisfaction in the confirmation of the last loan—that they could not doubt that to me personally it would be still more agreeable that they should continue the business—that as to the argument they had used they would readily see it was not possible for me to exercise my discretion in judging of them—that it was my duty not only to procure these loans on the best terms possible but to be able to shew you that better could not be obtained—that Congress certainly expected, & from their view of their present circumstances, had a right to expect loans on better terms than the one last made—that I had however satisfactory evidence as to myself (& did not doubt it would appear so to you) in the present price of American stock, & the present situation of loans in the Dutch market, that the rate of interest could not be lowered—that it was not the same as to the rate of commission—that however I might be disposed myself to believe, on what they assured me that it could not be lowered, yet I considered as it incumbent on me, & did not doubt they would consider it in the same manner to transmit to you proper evidence of it—that I could do this only by taking proper measures for examining into the terms on which other houses would undertake this business, in the case of their persisting in the terms proposed—that I gave them a proof how disagreeable this would be to me, in allowing them the time they should judge proper to reconsider them, & in coming to no determination until they should finally have decided what they would do: They had begun by saying they had no objection to my applying to any other houses as they were sure none could undertake the business on better terms than they offered & now they plead this as a proof of their conviction on the subject, & consequently a sufficient presumption for me. After several desultory conversations of this kind, during which time I had satisfied myself there would be no possibility of having this business done at lower rate than 4 p. cent, I brought them to agree to give me their final answer in two days. It was in this interval that I had an opportunity of writing (through their hands) my letter to the Secretary of State of the 25th. of Novr.13 At the expiration of the term they came & proposed themselves the reduction of ½ p. cent on the commission which I accepted. During the course of our conversations they had urged in favor of the terms they proposed: that they never made any charge to Congress for the disbursement of the loans, which as they say is done by other branches & is from ½ to 1 p. cent. I know not whether this is the case, & it is the less necessary as they are to continue their usual mode: so as that the United States actually receive & dispose of 96. florins for every 100. for which their obligations are given.
Besides the reasons which you mentioned for preferring the present agents & those which I have stated above, they seem as far as I am able to judge from a short acquaintance with the two houses, to have a combination of character which is for the interest of the United States. The House of Willink consists of two brothers of that name & is among the first of the second order as to wealth. They have besides numerous & rich connexions of family & friends & are precluded from the political parties which have, & still may, rage here, by their religion & particularly by their disposition. Avaricious & indefatigable to an extreme they value money more, & labour less than perhaps any other house here of equal wealth.—They are cited for this circumstance by all & ill regarded by several on account of it as such a disposition in one house tends to reduce the price of mercantile agency in others. I have no doubt it is this circumstance which has principally influenced in their being brought to offer to serve Congress at 4 p cent. The House of Van Staphorst & Hubbard is composed of two brothers also (of whom one has been forced to leave this country on account of the part he acted in the revolution14 attempted here) & a young Englishman probably without capital, who was formerly a clerk in the house. They are inferior certainly in wealth to the Willinks, but still are ranked in the same class. They are much more popular than them with all those who are of the patriotic party & who form a rich & numerous body. They appear also to be much more generous, & would be more ready to make advances or risk their fortunes for their employers. This disposition was valuable to us at a time when our circumstances might have rendered such advances & such risks necessary; but our present & future situation seem to render those qualities, wch. although always highly estimable in them as men, less essential in them as bankers. Both these houses are deeply interested in the funds of the United States, & the Willinks on the bank of Pennsylvania15 also. I have had no reason since my arrival here to suppose any difference existing between them; & I hope their union & services will be found for the interest of the United States.
With respect to uniting some other house to them with their consent I have not proposed it because I have found that their solidity & influence was considered as fully sufficient; & because an addition to the number of houses would necessarily have involved an addition to the expence. When the commission was at 4½ p. cent the two houses had 1. p. cent each for their share as they told me—another house being added they would insist on its profits being paid over & above that is to say on a third share being allowed by the U.S.
Most of the borrowing powers here who have employed two houses seem to have employed them to make separate loans. They are all getting into the mode of confining their business to one chanel, & in general only one house is employed, as separate loans have been found to counteract each other.
The price on which the agency of these houses is afforded varies infinitely & is dependent on the wants of the borrowers. I am assured that Sweden has paid as high as 10. p. cent commission. Russia it is affirmed pays Hope 9. p. cent. Poland certainly allows 7. p. cent on the loan now open. The Emperor was served at 4. p. cent, & this seems to be the lowest rate at which any power pays. I am happy to have been able to have put the United States on this footing at present. I should not despair of this being reduced at a future period when their debt & resources are more at their command, by reducing one of the intervening orders between the actual lender & borrower—there are always the bankers, brokers & undertakers. I cannot see any reason why the bankers & brokers might not be reduced to one order although it would be highly impolitic to attempt it under present circumstances as it would certainly be without success.
This letter has been unavoidably extended to such a length that I must postpone other matter to a future opportunity. I have spoken with the less reserve on all these subjects because this letter will be delivered into the hands of the American captain who sails immediately & will go through no other hands or port in Europe. I have the honor to present you assurances of the sentiments of respect & attachment with which I am,
Sir, Your most obedient humble servant
The Honble Alexander Hamilton, Secretary of Treasury
ALS, letterpress copy, William Short Papers, Library of Congress; LC, George Washington Papers, Library of Congress; copy, New-York Historical Society, New York City; copy, Duke University Library.
2. “An Act making provision for the (payment of the) Debt of the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 138–44 [August 4, 1790]); “An Act making Provision for the Reduction of the Public Debt” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 186–87 [August 12, 1790]).
3. Willink, Van Staphorst, and Hubbard, the bankers of the United States in Holland, had received 4.5 percent commission on the 1790 Holland loan.
4. Leopold II, Holy Roman Emperor.
5. Pieter Stadnitzki, a Dutch banker who speculated in the securities of the American government. In 1789, in cooperation with the Van Staphorsts and two other Dutch banking houses he sent Théophile Cazenove to America as a purchasing agent. Stadnitzki and Company was one of the six Dutch banking houses which later formed the Holland Land Company.
6. At this time Poland was in the midst of a revolution. The Diet completed a draft constitution in December, 1789, but did not approve it until 1791.
7. Daniel Crommelin and Sons, a Dutch banking house whose owners were related to a New York City merchant of the same name.
8. Henry Hope of Scotland founded Hope and Company in Amsterdam in the early years of the seventeenth century. Although the firm engaged in trade, in the course of the eighteenth century it invested most of its capital in banking, foreign governmental loans, and stock speculation. The House of Hope in the seventeen-nineties was managed by Henry Hope who was born in Boston in 1736. At the age of thirteen he went to England and in 1754 entered the House of Hope of which he became the head in 1780.
9. Herman Isaac de Smeth was the London representative of the banking house which dealt with Russian loans.
10. Johann Goll van Frankenstein.
11. Jan and Carel Hasselgren.
12. Hogguer, Grand, and Company. The partners in this banking house included Paul Iwan Hogguer and George Grand, the brother of the Paris banker, Ferdinand Grand. After 1795 the company was known as Hogguer and Company.
14. Jacob Van Staphorst. In 1787, democratic elements comprising the Patriot party led an uprising against the Stadtholder, William V, and his supporters, the Republican party. Britain and Prussia, intervening on the pretext of dynastic ties, crushed the Patriots and restored William V to power.
15. The Bank of North America.