To Gouverneur Morris
Philadelphia September 12th 1791.
Your letter of the 27th of may with its enclosures came duly to hand.
During my absence on my late southern tour the proposals of Messrs Schweizer and Jeannerett, made their appearance here, as well through Mr Otto, Chargé des Affaires of France, to the Secretary of State, as through Mr Short, to the Secretary of the Treasury—In pursuance of certain arrangements, made previous to my departure, an answer was given—which answer was in substance that it did not appear to be for the interest of the United States to accept those proposals.
The reasons which have been assigned to me as having dictated this answer are as follow.
First, That the rate of interest to be stipulated in the new contract, as well upon the part of the debt which had not fallen due, as upon that which had fallen due was 5 cent. It was a question whether a contract stipulating such a rate of interest with regard to the first mentioned part of the debt was fairly within the meaning of that clause of the law which requires that the payment of it should be made upon “terms advantageous to the United States”,1 and while there was no reason to apprehend that it would be necessary to allow a higher interest than 5 cent on any loans, which might be made to discharge the arrears of principal and interest, it did not appear expedient to forego the chance of a lower rate.
2nd The commission or premium of 5 ct demanded in the proposals is one ct more than is given upon the loans going on in Holland—This would amount to a loss of one ct on the part, which the United States were bound immediately to pay; and in respect to that, which had not become due, would be an unnecessary sacrifice of 5 cent.
3rd The immediate proposers are understood to be a House not of primary consequence themselves, and though they alledged, they did not prove, that they were supported by others who could be deemed Capitalists equal to the undertaking. From the difference of exchange between Holland and Paris they could afford sacrifices in the sale of the bonds of the United States; and if there was not great force of capital among those engaged in the undertaking, such sacrifices were to be expected—A great quantity of bonds, thrown suddenly onto the market, by persons, who were pressed to raise money from them could not but have effects the most injurious to the credit of the U.S.
4th Paris being the stipulated place of payment, if, from the state of exchange payments could be made there in gold and silver with a saving to the United States, there could be no good objection to profiting by the circumstance—but this advantage, and more, even to the full extent of the depreciation of the Assignats, would be transferred by the proposed bargain to the undertakers.
5th The single advantage which the proposals held out, of a prolonged period of reimbursement would be obtained of course by loans in the ordinary way—and as to the effect of the measure upon loans for the redemption of the domestic debt, this would be good or bad according as the undertakers might or not have occasion to bring the bonds of the United States to market.
The foregoing reasons appeared to me to have so much weight that I saw no ground for directing any alteration in what was done.
It appears in their letter to you that the Gentlemen in question are willing to wave the claim of premium or commisssion on the part of the debt not yet due; but this obviates only one of the objections which have been stated.
You observe also that they had given you proofs that persons of the first fortune were connected with them in the business—They were deficient in not having given the like proof to Mr Short, whose enquiries had been directed to this object.
The observations you make concerning the views, which ought to govern the United States in their reimbursements to France are founded in propriety—You may conclude that no unequitable advantage will be taken; and it is hoped that the measures now in execution will be more conducive to the real interests of that country than would have been an acceptance of the proposals of Messrs S. & J., who, it is presumable, founded their speculation chiefly upon the idea of availing themselves of the full benefit resulting from the depreciation of the Assignats.
Thanking you for the communication you have made me on the subject, I assure you that I do justice to the motives which dictated it.
Your other letter of the 27. of May by Mr Ternant and that of the 8th of June from London, have both been received—I am much pleased that you drew the balance only from Welch and Son—The deficiency was paid to Wm Constable & Co. as soon as this circumstance was made known to Dear Sir, Your much obliged and most affecte hble Servt
For background to this document, see Alexander Hamilton to GW, 26 Aug. 1790 and notes; Gouverneur Morris to GW, 27 May 1791 (first letter) and notes.
1. See section 2 of “An Act making provision for the [payment of the] Debt of the United States,” 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 139.