IV. Alexander Hamilton to Thomas Jefferson
Treasury Department, 15 April 1791
The letter you sent me from Mr. Short and others which I have received, since mine to you, confirm the view of the subject therein taken. This you will perceive from the following passages extracted from one of them. “Since then (speaking of former overtures) another Company has presented itself for the same object, with a scheme by which the United States are to make the sacrifices on which they count for their profits.” “The object of this Company is, as you will see, to pay livres tournois in their present depreciated State and to receive from the United States florins at the usual exchange. By this means France would receive from them as much as she is entitled to receive from us, but we should be obliged to pay the Company much more than we are obliged to pay France.” “Had I had powers competent to the purpose,1 I should not have thought myself justified to have opened such a negotiation where there was all loss and no prospect of advantage to the United States.” “I must also add that the house which makes these propositions is entirely unknown here and that I never heard even their names at Paris, which proves that it must be an inconsiderable one.” Consequently the credit of the United States would be in imminent danger of suffering in their hands.
I have authorised Mr. Short to apply a million and a half of florins of the loan he has opened to the use of France, and shall press as large payments, as may be practicable, to her.
I take it for granted that the Court of France will not attempt any operation with the debt, without the consent of the United States. Any thing of this sort, considering the efforts which are making on our part, to discharge the debt, would certainly be very2 exceptionable. Indeed2 I do not see how any valid disposition of the debt of a sovereign power can be made without its consent; but it would be disagreeable to have to use this argument. I trust it will never be rendered necessary.—I have the honor to be, with great respect, Sir, Your obedt. Servant,
RC (DLC: Madison Papers); in clerk’s hand except for signature and two interlineations in Hamilton’s hand (see note 2 below); endorsed by TJ as received 15 Apr. 1791 and so recorded in SJL. The extracts made by Hamilton are from Short’s letter to him of 18 Dec. 1790, enclosed in his to TJ of 30 Dec. 1790. Both were received by TJ on 14 Apr. 1791, and that to Hamilton was forwarded to him the same day. The italicized passages were not underscored in Short’s letter, but whether emphasis was given by Hamilton or by some later hand cannot be determined. For one instance of a departure from Short’s text, see note 1 below.
As indicated in the Editorial Note, Short assumed as a matter of course that his dispatches to the Secretary of the Treasury pertaining to the loans and to the debt to France would be shared with the Secretary of State. Thus he did not forward to TJ the various documents enclosed in his letters to Hamilton of 18 Dec. 1790, 15 Jan. 1791, 7 Feb. 1791, and 11 Mch. 1791. Neither did he keep TJ informed of the complicated maneuvers of Schweitzer, Jeanneret & Cie. and their supporters in and out of office. His assumption that a full and free exchange of information would take place between the two heads of department is understandable. The subject under discussion involved both finance and American foreign relations. Also, as Short knew, it was for this reason that Washington had required consultation and concerted action by the two members of the Cabinet having responsibility in these areas. But that Short’s assumption was ill-founded is proved—among other things—by the above letter in which, instead of enclosing the full text as Short had supposed would be done, Hamilton excluded far more from the lengthy dispatch than he included. Also, while assuring TJ that he had authorized Short to apply 1.5 million florins to the debt to France and would “press as large payments, as may. be practicable, to her,” he failed to disclose that a third of this sum was being withheld for further instructions.
Thus, while Short’s letter was intended for TJ’s eyes as well as for Hamilton’s, the Secretary of State never saw the perceptive account therein of the Dutch money lenders, undertakers, and brokers or Short’s observations on the status of American credit in Europe. This would have added little to what TJ had learned from personal experience in 1788 when he persuaded John Adams to negotiate a loan in order to sustain American credit during the transition to a form of government which had power to tax. But among the parts of the letter that Hamilton excluded there was much else about the scheme of Schweitzer, Jeanneret & Cie. then formally under discussion between the Secretary of State and the French chargé d’affaires. Short opened this topic with a statement about the attitude of the French ministry which TJ should have seen as Short intended: “I have informed you of the several attempts which have been made to speculate on the debt due by the U. S. They were averted by different means, but particularly by the governments acquiring full information of the value of that debt. At the time of my leaving Paris the ministry were fully determined as far as depended on them to listen to no negotiation of that sort. This put an end to the schemes of those who placed their profits in the sacrifices to be made by France.” Short then gave a brief history of the negotiations of Schweitzer, Jeanneret & Cie. that was documented by his enclosures. The latter included the two letters from Swan of 12 Dec. 1790 and also that written two days later (Syrett, Hamilton, vii, 361–5). These of course were not included in the documents TJ received from Otto. Hamilton also excluded Short’s remarks about Lambert and about his own response to Montmorin: “As this [the proposal of Schweitzer, Jeanneret & Cie.] was envelopped in such a manner as not to strike the Comptroller General, he espoused it with much warmth and recommended [it] to M. de Montmorin. That minister wrote me a letter on the subject… . You will see that the minister has misstated a little my conversation with him, though it is of no consequence. As I had no power to act I thought it best to rest my answer on that footing, but as I feared the company meant to submit their offers to the assembly where a discussion of them could not have failed to have been inconvenient at least, perhaps injurious, I wished to stop it if possible in the hands of the minister, and therefore added the observations contained in my answer… .” Hamilton also excluded Short’s account of the subsequent pressures from Swan and from the company which induced him to write to Montmorin and “to shew that the U. S. did not refuse absolutely every kind of negotiation, and that there was a real insufficiency of power.” To this Short added and Hamilton excluded the following: “I thought it probable this would put an end to the prosecution of this business without the U. S. being placed in an unfavorable light in the assembly in case of the matter being carried there. It is particularly important that we should be well regarded there at present as the discussion of the objects of our commerce in France is now open.”
Perhaps most significant of all, Hamilton did not reveal Short’s comment about the Genoese capitalists who were reputedly connected with the scheme. In these remarks he indicated his willingness to negotiate with them as potential purchasers of the debt: “You observe it is stated as if they [the Genoese capitalists] were wholly interested. Should they be induced to change their interests in the French funds to the American debt, and in order to effect this change submit to the loss of exchange, viz. pay France the number of livres, and receive the American new obligations here in florins of the value of those livres at the present rate of exchange, this which would be perfectly just would at the same time be advantageous to the U. S.” Short admitted that this would involve risk by placing the obligations in private hands, but he added: “on the other hand the wants of America would cease as far as relate to the loans to be made for the liquidation of the debt due to France. Should it be thought proper to set on foot the conditional negotiation mentioned in my letter to M. Montmorin it will be then seen whether such a scheme would be acceptable to the Genoese and that without its coming from the U. S.” (Short to Hamilton, 18 Dec. 1790; printed with enclosures in Syrett; Hamilton, vii, 348–68).
The extracts made by Hamilton from the letter of Short thus failed to reveal the latter’s willingness to place the debt in the hands of presumably more reliable capitalists. But what he did disclose was sufficient to show that, on the matter of taking advantage of the depreciated value of the livre in order to benefit the United States-that is, to take advantage of the distressed situation of the ally—Short had proved himself to be more Hamiltonian than Jefferson in his views. TJ recognized the fact and treated it with silence. But in his instructions to Short he made it clear that the policy of the government was altogether different and that it condemned all speculators’ plans to buy the debt, whether these originated at home or abroad (TJ to Short, 25 Apr. 1791).
The protégé and surrogate son of the Secretary of State, who was increasingly revealing his differing attitude toward the political situation in France, paid little if any attention to these unequivocal instructions. Within the year Short was suggesting to Hamilton that the first banking firm in Paris, Boyd & Ker, might be induced to pay off the entire remaining debt to France at one stroke. He argued that Boyd & Ker—an English house—were connected with the richest person in France, the Marquis de Laborde, banker to Louis XV; with Henry Hope & Co., the leading banking firm in Amsterdam; and, through that house, with their London correspondents. If such powerful auxiliaries invested in American funds, this would do much to support their credit (Short to Hamilton, 24 Mch. 1791, Syrett, Hamilton, xi, 178–85). Hamilton replied that he would be gratified to see the plan to settle the debt through Boyd & Ker carried into execution. Speaking as if for the Secretary of State, he informed Short that, if the assistance of the new minister to France, Gouverneur Morris, would help to carry the plan into effect, he would be “instructed to co-operate” (Hamilton to Short, 14 June 1792, printed in same, xi, 519 20). Hamilton did not need to point out that American funds in the hands of houses so closely connected with England might be expected to strengthen Anglo-American relations.
1. What Short actually wrote in his letter of 18 Dec. 1790 was: “Had I power I should not have thought myself justified. …”
2. This word interlined in RC by Hamilton.