From James Madison to Thomas Jefferson, 8 August 1791
To Thomas Jefferson
N. York Aug: 8. 1791.
My dear Sir
I take the liberty of putting the inclosed into your hands that in case Col: Lee should have left Philada. the contents may find their way to Col: Fisher1 who is most interested in them. And I leave it open for the same purpose. The Attorney will be a fit channel in the event of Col: Lee’s departure, for conveying the information. You will find an allusion to some mysterious cause for a phœnomenon in the Stocks. It is surmized that the deferred debt2 is to be taken up at the next session, and some anticipated provision made for it. This may either be an invention of those who wish to sell: or it may be a reality imparted in confidence to the purchasers or smelt out by their sagacity. I have had a hint that something is intended and has dropt from —— —— which has led to this speculation.3 I am unwilling to credit the fact, untill I have further evidence, which I am in a train of getting if it exists. It is said that packet boats & expresses are again sent from this place to the Southern States, to buy up the paper of all sorts which has risen in the market here. These & other abuses make it a problem whether the system of the old paper under a bad Government, or of the new under a good one, be chargeable with the greater substantial injustice. The true difference seems to be that by the former the few were the victims to the many; by the latter the many to the few. It seems agreed on all hands now that the bank is a certain & gratuitous augmentation of the capitals sub[s]cribed, in a proportion of not less than 40 or 50 PerCt. And if the deferred debt should be immediately provided for in favor of the purchasers of it in the deferred shape, & since the unanimous vote that no change shd. be made in the funding system,4 my imagination will not attempt to set bounds to the daring depravity of the times. The stockjobbers will become the pretorian band of the Government—at once its tool & its tyrant; bribed by its largesses, & overawing it, by clamours & combinations. Nothing new from abroad. I shall not be in Philada. till the close of the Week. Adieu Yrs. Mo: Affy
Js. Madison Jr
RC (DLC). Docketed by Jefferson, “recd Aug. 11.” For enclosure, see n. 1.
1. JM’s enclosure no doubt included Charles McKnight’s diagnosis, which Henry Lee requested, of Daniel Fisher’s ailment (Lee to JM, 3 Aug. 1791).
2. The Funding Act of 1790 refinanced the various depreciated securities originally issued to finance the Revolutionary War. The act provided that subscribers could redeem the old paper for new bonds, receiving 66⅔ cents on the dollar in 6 percent bonds immediately and 33⅓ cents on the dollar in 6 percent bonds that would not earn interest until after 1800. The so-called indents or certificates of interest would be exchanged for 3 percent bonds, with interest paid quarterly and redemption for the face amount to be delayed until “whenever provision shall be made by law for that purpose.” In the years following passage of the act, “deferred debt” was a term applied to the one-third that Congress postponed until 1800 or beyond, earlier provision for which would have meant a windfall for speculators. “The market value of all these securities rose above par after June 1791” (, I, 140; Ferguson, Power of the Purse, pp. 297, 330).
3. For an example of rumors then current concerning speculation in the stock of the Bank of the United States, see Hamilton to William Duer, 17 Aug. 1791, , IX, 74–75.
4. JM probably alluded to the resolution, passed by a 53–2 vote in the House on 24 Feb. 1791, declaring in part “that it would be inexpedient to alter the system for funding the public debt, established the last session of Congress” (, 1st Cong., 2d sess., 2023).