Special reasons for drawing for the last sum of one million two hundred and thirty seven thousand five hundred guilders.20
Mr. Short, from his own view of the situation of French affairs, had concluded to suspend further payments in consequence of the Revolution of the 10th of August last, as appears by his letter of the 30th of that month, in possession of the Senate. This letter contains the following passage “It is impossible to say how long the position of affairs will last. There will probably be several changes before a permanent order is established. This of course will occasion a suspension in our payments.” And in addition to this, he expresses in another place a wish to receive orders from hence for the disposition of the monies in hand.
The propriety of a suspension of payments under the then existing circumstances, was considered and admitted here by the executive; and a correspondent intimation was given both to Mr. Morris and Mr. Short.21
It remained for the Secretary of the Treasury to decide pursuant to the general discretion vested in him, what should be done with regard to the monies undisposed of in the hands of our Bankers. It had so happened that they had already been a considerable time unemployed, at the expense of the United States. In the language of Mr. Short, it was impossible to say how long that position of affairs, which had induced the suspension of payment would last22—and every appearance at that time indicated that it would be of no inconsiderable duration. It might last six months, a year, or a much longer term.
When it would cease was altogether uncertain, but it was very certain, that the leaving the money unemployed would occasion further loss and involve some risk to the United States—as must always be the case in a degree when large sums are left long in the hands of private individuals engaged in extensive money operations.
Had it been left as it was, and had any accident happened, or had a long period elapsed before it could have been prudently applied, as was originally intended, it must have been very difficult to have justified the measure. This delay and loss which had been incurred served to enforce the motives which pleaded for putting the money in a train to be as speedily as possible useful. The past was calculated to inspire an anxiety that no further delay or loss should ensue.
A train of events, in favor of the change which took place, more rapidly prosperous than could reasonably have been expected, cannot impeach the prudence of having contemplated as possible a different course of things, and of having elected to proceed in a manner in which there was no doubt that the safety and interest of the United States would be consulted. This was evidently to put the money on hand in a train to be employed at home as early as might be; except so much of it as was wanted in Europe for other purposes, as for the payment to Spain &C.
This course was accordingly concluded upon. The remaining difficulty was how to effect it with security and advantage. It happened that there were some expressions in Mr. Shorts letter which appeared to me to render it not perfectly certain, though highly probable that orders from hence would in every event be waited for.
The unconditional sale of Bills to individuals in such a situation would have been unsafe and imprudent, besides that, a considerable fall of exchange at the moment, with a probability of a still greater fall interfered with an advantageous sale. It was known that the bank of the United States had contemplated a plan for regulating foreign exchanges so as to obviate the inconveniences to trade of sudden and violent fluctuations, and at the same time to check the exportation of specie, from momentary causes, occasioning a great rise in exchange.
It occurred that the Bank might be disposed to possess itself of a fund in Europe to begin the operation, and might be willing with this view to purchase and remit Bills upon its own account, with an understanding, that in case the fund upon which the Bills were drawn should happen to be applied otherwise, no inconvenience to the public was to ensue from their non-payment.
A proposition to this effect was made to the Bank and after consideration accepted. Bills for 1,237,500. guilders, equal at the rate of 36⁴⁄₁₁ ninetieths of a dollar, to 500,000 dollars were directed to be furnished which, if paid, are on the 1st of April next, to pass to the credit of the United States; unless provision by law shall be made, in the mean time, to convert that sum into a payment to the Bank.23
This disposition will be to the government equivalent to a sale for cash. It is now known that the fund will remain to answer the Bills—and as the punctual payment by the bank at the time may be absolutely relied upon, the public monies on hand or coming in, destined for the next quarterly payments, may be applied to any purpose to which the proceeds of the bills if received would be applicable, in the full assurance of finding a substitute in that fund at the moment it may be necessary.
It is however to be observed that prior to the receipt of Mr. Shorts letter of the 30th of August, and upon the arrival of the intelligence of the event of the 10th of that month, and those which shortly succeeded—I had entertained an opinion that a suspension of payments to France was adviseable ’till further light should be thrown upon the situation and prospects, and had expressed that opinion to Mr. Short.24 The change that had taken place, was so great, and apparently attended with so much hazard; the circumstances that had accompanied it, were, in several respects, so inauspicious, as, in my then view, to render the issue extremely precarious. I reflected that should a reverse of fortune follow, not only the validity of further payments might be called in question; but questions of a still more delicate nature might be raised; especially as those payments would be anticipations of sums not yet due. The making of them, therefore, might be construed into taking part with the new order of things, and might not only commit the United States, with regard to the powers at War with France, but might interrupt the good understanding between them and France herself. Those who should possess the power in case of the restoration of the constitution just overturned, could not fail to take ill a voluntary payment of sums not due to those by whom it had been overturned. Such were the reflections that presented themselves upon the occasion and that induced the communication of the opinion which has been mentioned.
It need only be added, that at the time of taking this step, the President was absent from the seat of government—And it became my duty to act provisionally according to the best dictate of my judgment.
21. See H to Short, October 1–15, 1792. The instructions to Morris, sent by Thomas Jefferson on October 15, 1792, are printed in Ford, Writings of Jefferson description begins Paul Leicester Ford, ed., The Writings of Thomas Jefferson (New York, 1892–1899). description ends , VI, 120–21.
23. For a discussion of this transaction, see “Report on the Balance of All Unapplied Revenues at the End of the Year 1792 and on All Unapplied Monies Which May Have Been Obtained by the Several Loans Authorized by Law,” February 4, 1793 (Hamilton Papers, XIII, 552).