Notes on Alexander Hamilton’s Report on Foreign Loans
[ca. 20 Feb. 1793]
Extracts from Colo. Hamilton’s letters to Mr. Short,
laid before the H. of Representatives. Feb. 1793.
|A.H.’s letter to W.S. Nov. 26. 92.||in the observations on it1 to justify his idea of a suspension of payment for 6. months, a year, or much longer he says the Executive here had considered and admitted the propriety of a suspension of payments.|
|The opinion given in the first week of Nov. to the Presidt. by those whom he consulted was unanimously that after the dethronement of the king the government was become incomplete and incompetent to give a valid discharge for any payment, that therefore payments should be suspended till there was some legitimate body authorized to receive and discharge. Three out of four were of opinion the National convention, about to meet, would be such a body, but as we did not know whether it’s meeting might not be prevented by the D. of Brunswick then marching directly on Paris, it was thought safest to suspend payment till further orders. Before such orders could be renewed, it was found there was no money left for them to operate on. They now await for money.|
|do. Aug. 29. 90.||he confirms the loan made by our bankers without previous authority. (It2 was for 3. Milln. flor.) He destines 1½ Milln. of it to French debt. Why was not the whole so destined? What other foreign purposes could be adequate to such a defalcation?|
|do. 91. May. 9.||directions to Treasurer to draw 800,000|
|24.||to reserve in the hands of bankers 1½ milln. of the next succeeding loan, and one million of the one immediately succeeding that for completing the purposes of the act for borrowing 12. Milln.|
|Nov. 1.||has directed Treasurer to draw for 1. Milln. flor. and at the close of this month shall direct him to draw for another milln.|
|30.||the prices of the public debt here rendering it questionable whether to purchase with monies borrowed @ 5. per Ct. and there being reasons of the moment against beginning the redemption of the 6. per Cts. I shall forbear drawing for the 2d. milln. mentioned in my letter of 1st. inst. Payments for interest on Dutch loans for 92. to be out of monies borrowed abroad, which will leave in the Treasy. the sums which ought to be remitted for interest as part of the 2. Mills. authorised to be borrowed by the act for the redemption of the public debt.|
|1792. Apr. 2.||the Treasurer will draw for 500,000ƒ—I consider it as for the interest of the U.S. to prosecute purchases of the public debt with monies borrowed on the terms of the last loan, and mean as fast as it can be done with safety to draw for a further sum of 2½ millns. florins to complete the 3 millns. intended by my last mentioned letter|
|July 25.||has drawn for 500,000ƒ and shall draw for 500,000ƒ|
|by my letter of June 4. last your agency in the whole of the pecuniary business to continue and Mr. Morris as representative of the U.S. at France instructed to cooperate. I understand the Secy. of state that this instruction has been forwarded.|
|Sep. 13.||Mr. Morris authorised to pay interest to foreign officers and to draw 105,000ƒ for that|
|Dec. 31.||has drawn for 1,237,500ƒ and 24,750ƒ|
|1790. Aug. 8.||the Presidents instructions to A.H. committing to him the charge of borrowing under the two acts for 12. Mills. and 2 Millns.|
|to employ W.S. except where otherwise specially directed.|
|to borrow (within the limitations prescribed by law as to time of repayment and rate of interest) so much as necessary to pay instalments and interest of foreign debt becoming due before end of 1791. to apply the money to that with all convenient dispatch.|
|not to extend the loan beyond that amount unless it can be done on terms more advantageous to U.S. than those on which residue of said debt shall stand or be.|
|but if residue can be paid off on terms of advantage you are to borrow and apply accordingly.|
|empowers him to make the necessary contracts.|
|if any negociation with any prince or state to whom any part of the debt is due be requisite he shall carry it on thro’ the Minister &c of the U.S. with that prince or state ‘for which purpose I shall direct the Secy. of state, with whom you are on this behalf to consult and concert, to co-operate with you.’|
MS (DLC: TJ Papers, 82: 14225); entirely in TJ’s hand; undated. Recorded in SJPL under 20 Feb. 1793: “Extracts from Hamilton’s Ires to Mr Short.”
This document, consisting of TJ’s notes on some of the letters and papers appended to the first of two reports on foreign loans that Alexander Hamilton submitted to the House of Representatives on 13–14 Feb. 1793, marks the continuation of the Secretary of State’s efforts to document what he believed to be Hamilton’s maladministration of the nation’s finances (TJ’s notes on Hamilton’s earlier report on foreign loans are printed under 4 Jan. 1793). Hamilton drew up the February reports in response to two resolves, introduced by Congressman William B. Giles and passed by the House on 23 Jan. 1793, calling upon the President to provide it with copies of the authorities under which he had arranged for the negotiation of European loans under two acts of Congress—one of 4 Aug. 1790 authorizing the loan of up to $12,000,000 to pay the foreign debt, and another of 12 Aug. 1790 authorizing the loan of up to $2,000,000 to redeem the domestic debt—and with statements of the payments made on the American debts to France, Spain, and investors in the Netherlands with the proceeds of these loans. In response, Hamilton included in the first report copies of the authorizations he had received from the President in August 1790 to negotiate these loans, as well as his correspondence about them with William Short, the agent he appointed to transact the loans, and Willink, Van Staphorst & Hubbard, the bankers of the United States government in Amsterdam. Both reports sought to refute Republican charges that he had corruptly drawn some of the borrowed funds to America for the benefit of the Bank of the United States (Annals description begins Annals of the Congress of the United States: The Debates and Proceedings in the Congress of the United States … Compiled from Authentic Materials, Washington, D.C., Gales & Seaton, 1834–56, 42 vols. All editions are undependable and pagination varies from one printing to another. The first two volumes of the set cited here have “Compiled … by Joseph Gales, Senior” on the title page and bear the caption “Gales & Seatons History” on verso and “of Debates in Congress” on recto pages. The remaining volumes bear the caption “History of Congress” on both recto and verso pages. Those using the first two volumes with the latter caption will need to employ the date of the debate or the indexes of debates and speakers. description ends , iii, 835–40; Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , xiv, 17–67).
As these notes reveal, TJ concluded that the documentation appended to the first report substantiated Republican suspicions that Hamilton had exceeded his authority from the President and failed to comply with the express intent of Congress in regard to the negotiation of the loans and the disposition of their proceeds. This document, therefore, forms an important link in the chain of events that soon led to TJ’s involvement in the effort by Congressman William B. Giles to censure Hamilton and call for his dismissal by the President (Editorial Note on Jefferson and the Giles resolutions, at 27 Feb. 1793). About this time James Madison wrote a series of observations on the same set of documents, with special emphasis on Hamilton’s correspondence with Short, in which he also concluded that they supported Republican charges against the Secretary of the Treasury (“Notes as to Charges vs Secy Treasury brought in by Mr Giles’ Resolns,” undated but filed at 31 Dec. 1792 in DLC: Madison Papers and calendared in Madison, Papers description begins William T. Hutchinson, Robert A. Rutland, J. C. A. Stagg, and others, eds., The Papers of James Madison, Chicago and Charlottesville, 1962–, 17 vols. description ends , xiv, 450–1, under the conjectural date of 15–19 Feb. 1793).
Hamilton’s observations on his 26 Nov. 1792 letter to Short are in Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , xiv, 23–6. The President and the Cabinet approved the suspension of payments on the American debt to France in the middle of October rather than in the first week of Nov. 1792 (see TJ to Gouverneur Morris, 15 Oct. 1792, and note).
The loan made by our bankers without previous authority was a provisional loan of 3,000,000 florins negotiated on behalf of the United States government in January 1790 by Willink, Van Staphorst & Hubbard in order to forestall a plan under consideration by the beleaguered French finance minister Jacques Necker to allow a group of private speculators to purchase the American debt to France. Hamilton retrospectively approved this loan under the authority of the aforementioned debt acts of August 1790 empowering the President to borrow up to $14,000,000 in order to discharge the foreign debt and redeem the domestic debt (Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , vi, 210–18, 580–6). Then, as he explained in his second 13 Feb. 1793 report to the House on foreign loans, which TJ evidently did not read before he wrote these notes and which failed to persuade him afterwards, he decided for what he regarded as urgent reasons of national interest to apply part of this loan to the payment of the foreign debt as well as to the redemption of the domestic debt. Invoking the principle of executive discretion and insisting that his actions were consistent with the terms of the two 1790 debt acts, Hamilton informed the House that although in August 1790 he had regarded it as important to resume debt payments to France, he had considered it no less vital to maintain the government’s credit by ensuring that in the event of an unanticipated deficiency in ordinary revenues it had adequate funds on hand to make the first scheduled interest payments to holders of the domestic debt in April 1791. He revealed, therefore, that he had used only half of the 3,000,000 florins to help pay the French debt, that he had drawn about 800,000 florins to the United States to help redeem the domestic debt, and that he had reserved the remainder for payment of the Dutch debt (same, xiv, 30–7; Editorial Note on Jefferson and the Giles resolutions, at 27 Feb. 1793; TJ to Hamilton, 27 Mch. 1793).
TJ based his belief that Hamilton was guilty of a defalcation in the handling of this loan on two documents contained in the Secretary of the Treasury’s first report to the House of 13 Feb. 1793 on the subject of foreign loans. These were Hamilton’s letter of 29 Aug. 1790 to William Short, which directed him to apply only half of the 3,000,000 florins from this loan to the french debt, and the presidents instructions to Hamilton, actually dated 28 Aug. 1790, on the negotiation of the loans in pursuance of the two debt acts-instructions which TJ construed as confining the loan strictly to the payment of the foreign debt. TJ’s reading of these documents was influenced, in turn, by his own involvement in the original approval of this loan and the drafting of Hamilton’s instructions. On or about 26 Aug. 1790 Hamilton wrote a letter to the President recommending that the government retrospectively approve the loan for 3,000,000 florins under the authority the debt acts, that it apply two-thirds of the proceeds, to be borrowed under the first act, to the payment of the debt to France, Spain, and Dutch investors, and the remainder, to be borrowed under the second act, to the redemption of the domestic debt. Hamilton also sent the President drafts of the powers and instructions Washington was to issue to him for negotiating loans under the acts. The President thereupon submitted Hamilton’s letter and instructions to the Secretary of State for his opinion. In a 26 Aug. 1790 opinion for the President, TJ approved all of Hamilton’s recommendations, suggesting only that the 1,000,000 florins be used in Amsterdam to purchase the domestic debt held by Europeans instead of drawing this money to the United States, and recommending that the instructions be amended to forbid Hamilton’s agent in Europe to borrow more than $1,000,000 at a time. Although TJ had signified his support for Hamilton’s proposals to sanction the January 1790 loan and to divide its proceeds between the foreign and domestic debts, he did not see the President’s final instructions to Hamilton of 28 Aug. 1790, which pertained to both debts, until they appeared in the Secretary of the Treasury’s first 13 Feb. 1793 report to the House on foreign loans. When he finally did read them he concluded that their failure specifically to approve Hamilton’s proposed division of the loan meant that the Secretary of the Treasury had not received presidential authorization for applying part of it to the domestic debt. In contrast, Hamilton in this case apparently operated on the assumption that the Secretary of the Treasury might do what the President did not explicitly forbid, for immediately after he received these instructions from Washington he notified Willink, Van Staphorst & Hubbard that he intended to apply the loan to both debts in the same proportions he had originally suggested to the President (Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , vi, 566, 568–70, 579–86, xiv, 30–7; Jefferson’s Opinion on Fiscal Policy, 26 Aug. 1790; TJ to Hamilton, 27 Mch. 1793). In any case, Hamilton’s alleged deviation from the President’s instructions in the commingling of funds borrowed under the authority of the two acts figured prominently in the resolutions of censure in TJ’s hand that have since been lost (see Editorial Note on Jefferson and the Giles resolutions, at 27 Feb. 1793).
the act for the redemption of the public debt was the 12 Aug. 1790 act mentioned above (Annals description begins Annals of the Congress of the United States: The Debates and Proceedings in the Congress of the United States … Compiled from Authentic Materials, Washington, D.C., Gales & Seaton, 1834–56, 42 vols. All editions are undependable and pagination varies from one printing to another. The first two volumes of the set cited here have “Compiled … by Joseph Gales, Senior” on the title page and bear the caption “Gales & Seatons History” on verso and “of Debates in Congress” on recto pages. The remaining volumes bear the caption “History of Congress” on both recto and verso pages. Those using the first two volumes with the latter caption will need to employ the date of the debate or the indexes of debates and speakers. description ends , iii, 2369–70). The letter of june 4 mentioned in Hamilton’s 25 July 1792 letter to Short was actually a letter of 14 June 1792 (Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , xi, 519–20, xii, 104).
1. TJ here canceled “he says to support.”
2. Before this word TJ canceled “I think.”