To Theodore Foster
Philadelphia, 1 Sept., 1791.
I have had the pleasure of receiving your two letters of the 23rd July & 4th of August.1 You concluded rightly that it could require no apology for entering into the detail with which you have favored me. On a subject so interesting to your State, your desire to communicate information was indulged with peculiar propriety, & on any subject I shall always esteem myself obliged by your sentiments. Thoroughly impressed with the hardship of a decision against the certificates which had been surrendered to the State by their Proprietors, I did not come to it without a serious struggle between my Judgment & my Wishes; but after mature deliberation I saw no way of allowing those Certificates to be received on the proposed loan which would not involve inextricable embarrassment. All the States have called in large portions of their respective Debts.
There is good reason to believe, that on a close investigation Rhode Island might not be found to be the only State in which they had been so called in for a very inadequate consideration. And tho’ it might be urged to distinguish the case, that Rhode Island alone compelled the surrender, on pain of forfeiture, it might be answered that in sound equity, there is no very material distinction between obliging Persons to surrender their property for less than its value, under the penalty of confiscation and laying them under a necessity of doing the same thing, from the total and deliberate neglect of a better provision. Be this as it may, I saw no safe rule, that would be admitted to be such by even the candid part of those, whose interest it might be to dispute it, by which I could pronounce that Certificates surrendered and cancelled by the Mutual Acts of the Creditor and Debtor should be permitted to receive and acquire validity in respect to one State and not in respect to another. And without such rule, all the extinguished portions of the Debts of all the States might, if they should think proper to make it so, acquire a capacity of being subscribed towards the assumption. Where this would lead it is not necessary to say. The two Carolinas have actually passed laws for subscribing the portions of their respective Debts which have been extinguished by them2—the only answer I can give is that a Bond surrendered as discharged constitutes no Debt and that in every such case, there is no Debt to be assumed.
I cannot allow an after act of a State3 to create a Debt within the meaning of the funding Act,4 which it cannot be admitted to have contemplated as then in existence. It may be asked, How then shall the Certificates which remained in the hands of Individuals, but which were forfeited by the law of the State, be admitted upon the Loan, any more than those which were surrendered? This is a question not wholly free from difficulty; but if I had found no distinction satisfactory to my own mind, I should have been obliged to reject the whole. Such a distinction, however, was in my opinion to be found. Upon principle, it is a general rule, that the dissolution of a contract by one party without the concurrence of the other, is void.
The Creditors who did not concur may claim the benefit of that rule and it is to be supposed that it was the intention of Congress, they should have it. It may be said to be a legal presumption that Congress, at the time of passing the funding Act, was acquainted with the laws of Rhode Island respecting the Certificates. And in point of fact the generality of them were so at least in substance. They must, therefore, have been apprised, that if the forfeiture annexed in those laws to the not bringing in the certificates for payment was to prevail, there was no debt of the State of Rhode Island to be assumed. By assuming a Sum of 200,000 Dollars, a sum by the way nearly corresponding with the amount of the outstanding Certificates, the clear inference is that they meant to consider those Certificates as in force, and the forfeiture as far as regarded the assumption, as inoperative. But it is not a reasonable presumption, that they could have intended to comprise the surrendered Certificates, which could not even be repossessed by the individual proprietors without a subsequent act of the State.
I have made some suggestions in this letter, which I should perhaps have omitted if I had considered it as strictly official, and therefore request that it may be received as a private and in some sort a confidential communication.
I cannot lose the opportunity of expressing to you that I feel myself truly and very much indebted to the Senators of Rhode Island for the very flattering manner in which they have made mention of the Secretary of the Treasury in their late communication to the State.5
The measure of their approbation certainly exceeds that of his services or pretentions.
With respectful consideration and real regard, I have the honor to be Dear Sir Your obedient Servant.
HCLW description begins Henry Cabot Lodge, ed., The Works of Alexander Hamilton (New York, 1904). description ends , X, 220–23.
1. Letters not found.
2. On February 19, 1791, the South Carolina legislature had passed “An Act for loaning to the United States, a sum of the Indents of this State under certain Limitations therein mentioned” (State of South Carolina. At a General Assembly, begun and holden at Columbia, on Monday the third day of January, in the year of our Lord one thousand seven hundred and ninety-one, and from thence continued by divers adjournments, to the fourteenth day of February, in the same year, and in the fifteenth year of the Independence of the United States [n.p., n.d.], 72–74). See also William Skinner to H, July 22, 1791. For an account of the actions of the North Carolina legislature in this matter, see H to Skinner, August 12, 1791.
3. In June, 1791, the Rhode Island legislature passed “An Act relative to certain securities heretofore granted by this state, and for repealing certain acts of the legislature of this state hereinafter mentioned.” It reads in part as follows:
“Whereas, during the war between the United States of America and the kingdom of Great Britain, this state (from its eminently exposed situation, and its great exertions in support of the war,) for the common defence, in raising and keeping up its quota of troops, in the federal army, and from the long continued depredations of the enemy … was subjected to the unavoidable necessity of incurring great and heavy charges, whereby the debt of the state was greatly accumulated, insomuch that after the close of the war it became impracticable for the state, in the then scarcity of specie, to discharge the same in the usual mode by taxes in specie.
“And whereas, to facilitate the payment and discharge of the said securities, paper-bills of credit were issued pursuant to an act of the legislature of said state, passed at their session in May, A.D. 1786, which the holders and proprietors of the said securities were required to receive from time to time, in payment and discharge thereof, on the penalty of forfeiting the same, and many of the said holders and owners of the said securities in compliance with the said several acts of the legislature before mentioned, received the said paper bills of credit for their said securities, or part thereof, when the same had greatly depreciated.… And whereas, at the second session of the Congress of the United States … by … ‘An Act making provision for the debts of the United States,’ it was provided that certain descriptions of the debts of the several states therein mentioned, within the purview and meaning whereof are the greatest part of the beforementioned securities, required to be discharged by the said paper bills of credit of this state as aforesaid, and the sum of two hundred thousand specie dollars was by the said act of Congress assumed, to be paid by the United States, as part of the debt of this state, required by the acts of the legislature of this state to be paid by the said paper money bills as aforesaid, which said bills having gradually depreciated to the discount of fifteen for one, compared with gold and silver coin, at which rate they are finally to be discharged, agreeable to an act passed by the legislature of this state in October, in the year of our Lord 1789, so that without the interposition of this General Assembly very great and manifest injustice will be done to those who received the said paper money bills in a state greatly depreciated, for their said securities. Therefore, that equal justice may be done, as well to those who received the said paper money bills for their securities respectively, as beforementioned, agreeable to the requisitions of the laws of this state, as to those who did not comply with the said requisitions.
“Be it enacted by this General Assembly, and by the authority thereof it is hereby enacted, that all the acts, laws, and resolutions of the legislature of this state, passed at different times between the first day of September, A. D. 1786, and the first day of January, A. D. 1790, requiring the holders and owners of the said securities to bring them into the general treasury, and to receive the said bills of credit in payment and discharge of the said securities, so far as the said several acts, laws and resolutions, declare and enact, that the said securities should become null and void and of no effect, in case the same should not be brought into the general treasury, and the said bills received in discharge thereof, within certain limited periods, be, and the same are, hereby repealed.…
“And be it further enacted by the authority aforesaid, that each and every person who delivered into the general treasury any of the securities of this state, dated prior to the first day of July, A. D. 1788, and which were lodged there, and the said bills of credit received thereon at any time between the first day of December, A. D. 1786, and the first day of July, A. D. 1789, be, and they are, hereby authorized, by themselves, or their lawful representatives, agents, or attorneys, after the beforementioned endorsement shall have been made thereon, to receive from the said general treasurer, any, or all of such securities of him, her or them respectively belonging.…
“That thereupon, it shall and may be lawful for such owner or proprietor of any such security or securities, to receive the same, and to apply to the commissioner of the loan office to this state, and to have such part loaned and funded as shall remain undischarged of such securities, as would have been receivable in the National Loan Office open in this state, if no acts of the legislature of this state had been made for calling in and discharging the said securities by the paper money as aforesaid, on the same terms and conditions as any other of the securities of the said state, whereof no part hath been paid by the said paper money bills as aforesaid.” (Records of Rhode Island description begins John Russell Bartlett, ed., Records of the State of Rhode Island and Providence Plantations in New England (Providence, 1856–1865). description ends , X, 447–49.)
5. On February 17, 1791, Joseph Stanton, Jr., and Foster, Senators from Rhode Island, had written an account of Government activities to Arthur Fenner, governor of Rhode Island. The section of the letter concerning H reads as follows:
“The confidence of the nation at large in the secretary of the treasury is deservedly great. Possessed of a contemplative, comprehensive, energetic, independent mind, he unites the strictest integrity to the most indefatigable industry, which on all occasions he incessantly applies to the service of the public. Prudent, active yet deliberate, studious, firm and candid, he may be said to invigorate the whole fiscal system of our country. Ability, foresight, decision, and a comprehensive view of the remotest consequences, are so conspicuous in all his reports respecting the finances and national arrangements, which he recommends that they seem generally to carry conviction as they go. With a fertile invention, added to real science and patriotic views, he has the talent of bringing his information into action, with that perspicuity, method and forcibleness of reasoning, that his country generally acquiesces in the propriety of the measures he recommends.” (Records of Rhode Island description begins John Russell Bartlett, ed., Records of the State of Rhode Island and Providence Plantations in New England (Providence, 1856–1865). description ends , X, 424.)