From Alexander Hamilton
[New York, 26 August 1790]
The Secretary of the Treasury respectfully begs leave to submit to the President of the United States copies of a letter from Messrs Wilhem & Jan Willink and Nicholas and Jacob Van Staphorst & Hubbard of the 25th day of January last,1 and of an answer thereto of the 7th day of May following.
The President will perceive that the last mentioned letter was formed upon a plan not to discourage the progress of the Loan which had been set on foot, and yet to leave a final determination upon it open.2
The undertaking that loan without previous authority, was irregular and in that view exceptionable; though the motives assigned for it have considerable force as they respect the credit of the United States; and, so far as they may be supposed to have really operated, afford a plausible apology for the measure.
As far however as the giving a sanction to it might serve as a precedent, it would not be free from objection; for it certainly would consist neither with the dignity nor the interest of the government to encourage its Agents in the practice of employing its credit in unauthorised loans.
But as an acceptance of the loan may be accompanied with a prohibition of similar attemps hereafter, which would doubtless have the effect of preventing them, it is submitted as the opinion of the Secretary, that the irregularity of the proceeding ought not to preclude such acceptance, if the loan itself be in other respects desirable; and the following considerations appear in his judgment to render it so. The terms are probably as advantageous as the present agitations of Europe, which must necessarily create an unusual demand for money, authorise an expectation of obtaining.3
A sum of one hundred and seventy two thousand Dollars will be wanting at the commencement of the ensuing year to discharge the interest which will then fall due on the Dutch Loans, which it is essential to the credit of the United States should be paid, and the timely payment of which could with difficulty be accomplished in any other way.4 There was on the 21st of March last due to Spain for principal and interest of her advances and loans, the sum of, two hundred & forty thousand and eight Dollars, and eighty nine Cents:5 and to France there will be due at the end of the present year for arrears of interest and certain instalments of the principal of her Loans a sum little short of three millions eight hundred thousand Dollars.6
Powerful considerations of different kinds, which will readily occur to the mind of the President urge to exertions to discharge these demands. The Minister of the Finances of France has, thro’ the Chargé D’affairs of the United States at that Court, solicited that the money arising from the Loan in question, of which he had been apprised, might be applied in part payment of the Debt due to that nation.7 Its peculiar situation at the present juncture contains an appeal to the sensibility, as well as to the policy and honor of this Country in favor of that requisition.
If these reasons appear to the President sufficient to induce his sanction to the loan in question, it will remain to consider, under what act, it will be most expedient to authorise its being made, whether that of the 4th or that of the 12th of the present month, or whether it may not be advisable to authorise it partly under one & partly under the other.
It is conceived that the business may easily take the latter form, if deemed eligible; and this is recommended by the consideration that it will contribute in a degree to all the purposes which require to be promoted.
If two thirds of the sum should be borrowed on account of the twelve millions and the remaining third on account of the two millions, the next half years interest in Holland may be discharged, the arrears of Interest on the Debt due to Spain may be paid off, a respectable payment may be made to France as a prelude to more considerable ones, and a sum of consequence to the operation, would remain towards the reduction of our Debt and supporting our funds in conformity to the intention of the last mentioned Act. All which is humbly submitted.
secretary of the Treasury
1. In their letter to Hamilton of 25 Jan. 1790, the bankers of the United States in Amsterdam, Wilhem and Jan Willink, Nicholaas and Jacob Van Staphorst, and Nicholas Hubbard, reported the inability of the French government to meet the payments due on the loan the government had raised for the United States in Holland in 1782. At that time the United States had attempted to raise its own loan for money needed to pursue the war. No Dutch bankers were willing to take the risk until Louis XVI guaranteed a loan for five million florins, or approximately ten million livres tournois. Although it was agreed by the States General that the loan was for the use of the United States, France remained legally responsible for its repayment. Louis had agreed to repay the capital of the loan and 4 percent interest per annum in ten equal installments, beginning the sixth year after the loan was contracted and continuing for five years. In turn, the United States agreed to reimburse the French government, at 4 percent per annum, in ten equal payments of one million livres each, beginning on 5 Nov. 1787. A copy of the contract for this loan is in DNA:PCC, item 135. See also the Board of Treasury to GW, 15 June 1789, n.13.
In their 25 Jan. letter, Willink, Van Staphorst & Hubbard informed Hamilton: “We have now to acquaint you that the persons employed by the Court of France here, and the principal broker in the french funds, foreseeing that the situation of the finances of that Country would put it out of the power of the government to make timely provision for the payment of the Interest and reimbursment of the installment of capital due the 5th Decr last on the loan raised here by the Court of France under guarantee of their High Mightinesses, the monies of which were applied to the services of the United States. They made overtures to Mr Neckar the first Minister of the finances to purchase the title of six millions of Livres furnished by the Court of France to the United States in 1783. and the arrears of interest due thereon in order to furnish monies for the above and other pressing objects. As this transaction tended to commit the credit and reputation of the United States to the management of persons unconnected with their Government and without any strong motives to induce them to uphold it, but who on the contrary would be spurred by the urging necessities to raise Monies, to effect the same on terms injurious to the rising credit of America, we on the first intelligence of any movements here, exerted ourselves to prevent the success of the business, and succeeded so far, that in order to remove the ground of our objections, the french house offered to assume us in the execution of the business, as the only certain way of securing the event, and hindering any depression to the credit of the United States. We refused, so long as we could imagine that by keeping aloof, we might defeat the business; but when we saw that the Minister had touched upon the Negociation here, in his Memorial to the National Assembly, and were informed from an authority we would have been unjustifiable in doubting, that if we did not determine to coalesce, the affair would be proposed, and certainly be accepted by the French Minister, so great were his then actual wants, and thus the credit of the United States be sported with, owing to our declining to interfere in its support, which we were enabled to do, by the confidence the money lenders place in us, from the care we have always taken to insure the regular payment of their interests, we judged it our Duty to submit notwithstanding we constantly entertained the most eager wish that the matter could have been postponed until we should receive the directions of the united States upon what we wrote the commissioners of the Treasury, and communicated to his Excellency Thomas Jefferson respecting the transfer to the Money Lenders here, of the debt due by the United States to France. In the interval of the negotiations upon this subject, and the time the offer could be formally made to the Minister for his final determination, a settlement of considerable magnitude of the French finances, by rendering the Minister more easy in money matters thro’ the receipt of Eight millions of Livres the caisse d’Escompte supplied to the government, inclined him not to accept the proposal, one of us went to Paris expressly to make him for the purchase of six millions Livres capital, and the arrears of interest, alledging that this was too small an object to trouble the National Assembly with, but that if we would treat for the whole debt he was ready to enter into arrangements for it. This issue to the business was highly agreeable to us, as would be the possibility of the matter lying dormant until we receive instructions from the United States, subsequent to the arrival of our letter of 11th Septr, and of his Excellency Thomas Jefferson; but we have had the chagrin to learn that some gentlemen have formed, and presented to the Minister a plan for the puchase of the whole claim of France against the United States, half of the consideration to be paid in french effects, and the other half in money at the current prices of those Effects, which afford the prospect of a most enormous profit to the speculators, and we have but too much reason to apprehend there are persons concerned in the affair, capable of influencing its acceptance by the french Ministry. The parties confident that no house could succeed to negotiate the business, or at least with anything near the facility or advantage, as the commissioners of Congress Loans, applied to us to know if we would consent to undertake it, and to obtain our acquiescence, offered us the alternative of a share in the profits, or a valuable commission. Deeming ourselves the natural Guardians of the honor and Credit of the United States in their Financial concerns here, we stood in need of no other consideration to induce us to forego any personal advantages, in order to ward off the depression such a bargain would cause to the credit of the United States; these being our sentiments, even if we had the chief direction in the business and consequently a great Controul over the timely opening of the loans; you will easily conceive how much stronger are our objections against assuming the commission to negotiate upon the credit of the United States for these speculations, and the eager desire we have by every possible means to prevent the realization of this project, to avoid that, from the certain knowledge our money lenders would have of this transaction, as it must pass thro’ and be ratified by the National Assembly, they would learn that the credit of the United States is held in so little repute that the french Ministry at an enormous great profit to the speculators, uncompensated by any early desirable supply of money to that nation, had abandoned it to the mercy of speculating Individuals, who to fulfil their Engagements of paying off the whole in two years would be compelled to launch upon this Market, American Loans to the extent at least of twelve million of guilders to purchase the necessary french funds, an information that would immediately check, nay destroy, the credit of the United States, as the money lenders would naturally conclude, that by waiting untill the speculators must make good their payments, they would be necessitated to vend their American Bonds at almost any rate, exclusive of the danger, that when the french funds shou’d be low they might find it their benefit to force the sale of the American Bonds at low prices, to profit of the fall of the french stocks. To remedy which evils our remonstrances or opposition might prove entirely fruitless, as when once possessed of these claims, upon our refusal to open the Loans requisite to enable them to complete their views or engagements, they might commission any other house to do it, which not having the same relation with the United States and consequent interest to support their credit, would not hesitate sacrificing it to give satisfaction to their employers, adding to all which the impossibility there would be for the United states, during the long time it would take to place the nineteen millions in Bonds that would issue from this exchange of Debts, as the value at par of that due by the United States to the court of France, and the still longer period that would be necessary to raise the credit of the United States from the injury it would unquestionably sustain to negotiate any other monies they might desire to appropriate to the support of their credit here, their interior arrangements or ameliorations, and we are persuaded the Government will fully applaud our anxious solicitude to avert the many and great evils that would flow from the completion of this purchase, and thankfully approve of the only step we have judged efficacious to overturn it immediately, which is, of availing ouselves of the present plenty of money here to open a loan the 1st proxe. of three millions florins for account of the United States, reimbursable by yearly installments of f600.000. commencing in 1801. and ending in 1805. which we communicate to the French Ministry with information of our having so done, from our knowledge of the wishes and intentions of the United States, to evince their friendship to the french nation by reimbursing so soon as in their power the Debt due to France, and that we would be ready to pay them these three millions, on receipt of directions from the United States to negotiate monies of this object, which we had reason to expect shortly, and assuring them that we would second with all our power, the wishes of our Employers, to transfer this Debt for the French nation unto the money lenders here in a manner not derogatory to the dignity and honor of the Government of the United States or injurious to their credit, which flattering ouselves to be able to complete within the course of the next year; and at all events with more expedition than the money could be procured in any other manner or through any other persons; we trusted the Ministry would refrain by any bargain with Individuals for the sale or transfer of the claim against the United States, from compromising the dignity & honor of their Allies, and overturn their well established Credit here in comitting it to the direction of persons whose engagements or interests may tempt them to sacrifice it. We make not the least doubt of the success of this measure, to defeat entirely all further Treaty between the french Ministry and the persons offering to puchase the claims of France against the United States. However to render our object the more certain we transmit the duplicate of this letter, open, to Mr Short chargés des affaires of the United States to be forwarded to you by him, acquainting him of our proceedings, and urging his utmost exertions to engage the french Ministry to suspend the idea of treating with Individuals about the claim against the United States, untill the desire and intentions of their government shall be known on the subject, and we are without apprehension of this Gentleman’s obtaining the promise we are so solicitous the french Ministry shall make, from our experience of his zeal for the service of the United States, and the opinion he testified to us in Paris, that the commissioners here were unquestionably the most fit persons to decide upon every thing relating to the credit of the United States in Holland.
“The actual state of the credit of the United States will permit us to open the loan, upon the most favourable terms any nation borrows monies here, so that there will be only a deduction of 4½ Cent for premiums, brokerages, commissions and all other charges, and we the more readily agreed to open this loan for three millions as we now avail the United States of the plenty of money here, which will probably have subsided or be less brisk on arrival of their orders, and because there will be no question of obtaining a lower rate of interest than five per cent, now universally established here by all the powers borrowing money, which rise of interest is the only reason why the United States pay the same for this, as for the first loan opened for their account, altho’ their credit now is equal to that of any European government accustomed to raise monies in Holland.
“To spare the United States all possible advance of interest while the money shall remain unappropriated, we shall issue the recepisses at the option of the buyers to take them so late as they please, on the expectation the three millions will be placed in a few months. Having thus explained our motives for opening this loan, and our attention to the interest and credit of the United States in its price and conditions, we firmly rely upon our obtaining that approbation and ratification from the United States, which they have hitherto constantly bestowed upon all our discretionary proceedings, dictated as this has been by our sincere zeal to cherish and promote their credit. But if after all this our conduct shall not be honored with their approbation, you will please to observe that we have not assumed to bind the United States to accept the monies arising from this Loan, which the purchasers will furnish solely upon our personal credit and the confidence they place in us, and in such case we shall have to return back the monies with one years interest to the proprietors of the Bonds sold. A sacrifice, that with the other charges we chearfully submit to the decision of your government, if it ought to be borne by us who expose ourselves thereto only thro’ zeal for the credit of the United States, or whether the United States will not deem it just to assume the same.
“A speedy decision, be it either way, is of too great consequence to render it necessary for us to press your obtaining and transmitting it to us with the least possible delay. If as we do not doubt the United States will accept and confirm this Loan, we will follow their directions for disposal of the monies, on receipt of the necessary powers to enable us to pass the bonds on their behalf, and may we request your care Sir, that these may be ample and satisfactory, to prevent all reclamation of that point. We further submit to you, whether considering that the wants and necessities of the french nation may render it extremely desireable to the Ministry to raise all the monies they can, and thus tempt them to hearken to proposals for purchasing parts or the whole of their claims against the United States, It would not be proper to lodge the needful powers and authority in an Agent, or with us to negotiate monies here as opportunities might offer upon favorable terms to be paid to the french Ministry against their deliverg us discharged the titles of the claims of the French Nation against the United States until their final extinction, which would be the sure means of defeating any other projects of Individuals by rendering themselves possessors of such enormous claims to become Masters of the Credit and in some degree of the dignity of the Government of the United States, and the only possible mode, by which the United States could in the interval of the realization of the transfer of this object to our Money-lenders, apply any part of the monies raised upon its engagements to the support of its credit here, temporary or permanent provision for the interests of its foreign Debts or other Engagements in Europe exclusive of any sums they may wish to appropriate for the purposes of their Domestic finances or local improvments” (DLC:GW).
As they explained in their letter, Willink, Van Staphorst & Hubbard had negotiated the unauthorized loan of 1790 at least partially to circumvent an attempt on the part of a group of speculators to capitalize on the French government’s need for money by purchasing the Revolutionary War debt the United States owed to France. In 1788 Daniel Parker and occasional partners Andrew Craigie and William Duer had formed a consortium with Jean Pierre Brissot de Warville, Etienne Clavière, and Rouen banker Le Couteulx de Cantaleu to purchase the debt. The group was joined in 1789 by Gouverneur Morris, who, upon his arrival in Paris, became the principal European agent for the partners. William Short, American chargé d’affaires in Paris, reported that the “plan proposed first by Mr Parker of Boston, & afterwards by Mr G. Morris in conjunction with him & others was to pay the full amount of the american debt (with the interest & installments accrued) in French stocks due in Amsterdam—the first proposition made by this company was to pay only the amount of the principal of our debt—they afterwards offered to pay the full amount of the principal & interest. the profit which they count on is to arise from the present depreciation of the French funds.” A second group of Amsterdam bankers, which included Willink, Van Staphorst & Hubbard, was also making overtures to the French government for the purchase of the American debt. Short observed that the “Amsterdam bankers to which are joined those of the United States there, wish to purchase for the present only the loan of six millions—the nature of their proposal is to furnish cash for it to such an amount that it is a loan to the minister at an interest of eleven & two thirds per cent, all the charges of negotiation included” (Short to John Jay, 2 Jan. 1790, DNA: RG 59, Despatches from U.S. Ministers to France, 1789–1906). For further details of the Parker-Morris offer, see Gouverneur Morris to Hamilton, 31 Jan. 1790, in Syrett, Hamilton Papers, description begins Harold C. Syrett et al., eds. The Papers of Alexander Hamilton. 27 vols. New York, 1961–87. description ends 6:234–39. The Amsterdam group quickly withdrew their offer, but the Parker-Morris consortium continued to pose a threat to American credit in Paris until at least April 1790 when Short informed Hamilton that the U.S. bankers’ unauthorized loan had removed the incentive from French negotiations with Parker and Morris. The French government hoped to receive at least part of the newly available funds in satisfaction of the debt (Short to Hamilton, 4 April 1790, in Syrett, Hamilton Papers, description begins Harold C. Syrett et al., eds. The Papers of Alexander Hamilton. 27 vols. New York, 1961–87. description ends 6:349–52).
2. In his letter of 7 May, Hamilton had informed Willink, Van Staphorst & Hubbard that “as the success of the negotiations for the purchase of the Debt due from the United States to France would have been an unwelcome circumstance; I learn with pleasure that it has not taken place.
“The distinguished zeal you have in so many instances shewn for the interests of this country, intitles you upon all occasions to a favourable interpretation of the motives by which you are actuated; and is calculated to inspire a disposition to co-operate in your arrangements, though without previous authority, as far as circumstances will justify—Nor should I be apprehensive, that a sanction to the step you have taken, would form an inconvenient precedent for the future.
“But the delays naturally incident to deliberations on a matter of the first consequence, the road to which had not been made easy by the anticedent state of things, having hitherto suspended any definitive resolutions concerning the public debt, I am not now in a situation to speak explicitly in regard to the measure you have undertaken. I can only say that the United States will stand in need of the aid of Loans abroad, and that I expect the requisite provision for making them upon solid, and consequently advantageous terms, will shortly be concluded upon; in which case you will immediately hear from me” (DLC:GW).
3. On 28 Aug. 1790 Hamilton wrote Willink, Van Staphorst & Hubbard informing them that Congress had passed two acts: the 4 Aug. 1790 “Act making provision for the [payment of the] Debt of the United States” and the 12 Aug. 1790 “Act making Provision for the Reduction of the Public Debt” (1 Stat., description begins Richard Peters, ed. The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845 . . .. 8 vols. Boston, 1845-67. description ends 138–44, 186–87). Section 2 of the act of 4 Aug. empowered the president “to cause to be borrowed on behalf of the United States” a sum not exceeding twelve million dollars to be applied to the payment of the foreign debt. Section 4 of the act of 12 Aug. authorized the president “to cause to be borrowed, on behalf of the United States, a sum or sums not exceeding in the whole two millions of dollars, at an interest not exceeding five per cent.” Hamilton further informed the bankers that “in consequence of these proceedings I am now in condition to determine on the provisional Loan announced in your letter of the 25th day of January last; and after due consideration I have concluded to accept and ratify it. For this purpose I send a power, which I doubt not you will find competent, executed under my hand and the seal of the Treasury.
“While I pursue, by this acceptance, what appears to me to be the interest of the United States, I am pleased with the opportunity of doing a thing, which will be agreeable to you. At the same time, your own judgment will suggest to you, that in dismissing all scruple about the manner in which the business has been undertaken, I give you a proof of my confidence, that no inconvenience will result from the precedent. The qualifications annexed by you to the undertaking, shew, that you were fully sensible of its delicacy, and satisfy me, that I need not press upon you the inadmissibility of any thing of a like nature in future; however cogent the motives to it. The situation of the United States, hereafter, will not, I trust, expose their friends to such disagreeable dilemmas, as they have been accustomed to in times past.
“You will perceive, that my authority to you goes as well to the making a new loan, as to the confirmation of that, which you have undertaken. The design of this is, not to double or increase the loan, but to enable you to give such a form to the business, as circumstances may require. Your engagements, of course, must not extend beyond the sum of three Millions of Florins.
“You will observe also, that by the first act the time of reimbursement of the loans to be made in virtue of it, is not to exceed fifteen years. That which is mentioned in your letter, will somewhat, though but little exceed this limit. I presume you can easily arrange the installments so as to come within it. I shall be glad it may be so modified, if the state of the business will permit. But as the last act has no such limitation of time, I do not mean that the difference should be an obstacle.
“I should also wish for particular reasons, that the business may be so regulated as to give it the form of two loans; one, for two millions under the first Act, and the other, for one million under the second. But neither about this am I so solicitous, as to be willing that it should constitute an embarrassment. And it can only be proper, if the time of reimbursement can be made to correspond with the first act.
“I destine a million and a half of this sum as a payment to France under the direction of Mr. Short our Chargé des affaires at that Court, whose order for the purpose you will be pleased to follow. Of this, however, I rely on your prudence, that nothing will be said, till you receive his instructions to remit or pay.
“It cannot escape your observation, not only, that the faith of our Government is fully pledged by the laws, of which I send you copies, for the performance of the conditions of the Loans which shall be made in consequence of them, but that there is an actual appropriation of unexceptionable funds for the payment of the Interest. This, if properly considered, ought materially to influence the terms upon which the future loans shall be made. The nature of our present Government is such, that absolute reliance may be placed on its pecuniary dispositions, once made” (Syrett, Hamilton Papers, description begins Harold C. Syrett et al., eds. The Papers of Alexander Hamilton. 27 vols. New York, 1961–87. description ends 6:580–82). A copy of an authorization to the bankers for the 1790 loan of three million florins was enclosed in Hamilton’s 28 Aug. letter to Willink, Van Staphorst & Hubbard (ibid., 583–85).
A draft of the authorization was evidently submitted to GW before 26 Aug., since Lear wrote to Hamilton on that day that “In obedience to the command of the President of the United States, I have the honor to inform you that he approves of the enclosed Drafts of a Power and Instructions which have been submitted to him, respecting a Loan of twelve million of Dollars; but thinks an addition to the instructions given to the Agent, to the following effect might be proper, for reasons which he will assign to you, Vizt ‘That the Agent shall never open a loan for more than one million of Dollars at a time, nor open a new loan ’till the old one has been expressly approved of by the President of the United States’” (DLC:GW). See also Thomas Jefferson to GW, 26 Aug. 1790. The suggestion was not incorporated into the bankers’ authorization.
4. Hamilton is referring to the loans negotiated by the United States in Holland: the Holland loan of 1782 for five million guilders, the Holland loan of 1784 for two million guilders, the Holland loan of 1787 for one million guilders, and the Holland loan of 1788 for one million guilders. See the Board of Treasury to GW, 15 June 1789, nn.6, 15, 16, and 17.
6. The French loans to the United States included a loan from the Farmers General in 1777, a loan of eighteen million livres in 1782, a 6,000,000–livre loan in 1783, and repayment of the 10,000,000–livre loan guaranteed by France (see n.1 above). For the earlier French loans, see the Board of Treasury to GW, 15 June 1789, nn.7, 12, and 13.
7. William Short had written Hamilton on 4 April 1790 that the loan negotiated by the Willinks in Amsterdam for three million florins had put an end to Jacques Necker’s negotiations with speculators in the American debt. However, Short wrote, “The Minister who was fully disposed to treat the American debt in such a manner as to give the greatest possible facility to Congress, finding now that they have three millions of florins at their disposal, & feeling every day the pressure of present exigencies, views the subject somewhat differently. He went fully into it with me some days ago. After complaining of the conduct of our bankers who had precipitated this loan in order to prevent his completing the negotiation which he had begun for the transfer of the American debt in a manner which would have been honorable & advantageous for all parties . . . he added that he hoped I would take on myself to give him an order on them for the three millions of florins at present in their hands” (Syrett, Hamilton Papers, description begins Harold C. Syrett et al., eds. The Papers of Alexander Hamilton. 27 vols. New York, 1961–87. description ends 6:349–52). Hamilton authorized the payment of one and a half million florins to the court of France in his letter to Willink, Van Staphorst & Hubbard of 28 Aug. 1790 (see n.3 above).