Your letter of the 16th is just recieved, and I have maturely considered it, as well as the papers you were so kind as to inclose in it. it is with real pain that I feel myself irresistably forced to a conclusion which I percieve to be different from what would be yours. mr Parker’s estimate of the proceeds of Genl Kosciuzko’s 8000.D. in 13. years, makes a difference of 2046.D. in favor of employing it in the new loan of the US. while yours makes one of 1234 D. in favor of it’s remaining in the bank of Pensylvania. both go of necessity on conjectural ground as to what will be the course of these establishments during the next 13. years; he counting on a stationary interest in the bank of 9.p.c. and a value of 40.p.c. above par; and you on a progressive rise both of interest and value, the former to 11.p.c. & the latter to 55.p.cent. both suppose either a stationary or progressive course without giving sufficient weight, I think, to the progressive multiplication of banks and banking capital; a progression far more rapid than that of our population. the new banks must of necessity circumscribe the business of the old, lessen of course their profits, and the value of their capital. while the increase of our population is not more than of 3. or 4.p.c. a year, every winter’s sessions of the different legislatures adds 50.p.c. to the existing number of banks, and amount of banking capital. and it is impossible to foresee where this progression, or it’s effects on the present banks will stop. one effect however we cannot be decieved in, that their discounts must be curtailed, and all their surplus paper flow back upon them, and drain their vaults. considering them as having reached their maximum, & that their future values will be retrograde, I think it important to sieze the present moment of advantage, and to advance Genl K.’s capital from 8000.D. to 12,700.D. at which it will be fixed in the hands of the government; & altho’ it will yield a lower rate of interest, yet this being on a greater capital, it’s amount will be equal; 6.p.c. for instance on 12,700.D. yielding something more [than]1 9.p.c. on 8000.D. the amount of interest too being the same, every one would prefer to own the larger, rather than the smaller principal. while Gl Kosciuzko will be recieving from this2 stock between 7. & 800.D. interest in either way, it is better he should own a deposit of 12.700 D than of 8000.D. the difference of value will be palpable enough when pay-day comes. suppose at the end of 13. years, when he will recieve 12,700 D. instead of 8000.D. there is another consideration too of which we must not lose sight, because no man on earth feels it more powerfully than Genl Kosciuzko; that, our profit remaining the same in both cases, it is a duty to aid our country, of preference, with the use of our principal, during the pressure of a war for the most sacred of rights.

But there is a more serious view of this subject to be offered yet. taking a mean between the wildest and the soundest estimates of the quantum of circulating medium necessary for a country under all the circumstances of ours, we might carry it to an amount of 30. millions of Dollars, while the soundest principles really fix it at not more than 8. millions, or a dollar a head on the population. before the legislative sessions of the last winter the existing capital employed in banking thro’ the whole US. was about 70. millions of Dollars, which authorised an issue of 200. millions. the legislatures of the last winter have made up the capital 100. millions, and the circulation authorised 300. millions; which is ten times more than the highest, and 40. times more than the soundest estimate of our competent circulation; and in fact advancing fast to the point of 40. for 1. at which the paper money of the revolution began generally to be refused. bank paper then must depreciate, has depreciated, and will be refused, and it would be against the evidence of our senses to suppose the banks have cash enough in their vaults to meet their issues of paper, if any circumstance of alarm should produce a run on them. the single consideration that this is the fact, whenever any accident shall draw the public attention to it, will produce that run; and this, once begun, on 2. or 3. banks, the alarm will become general. and it will be too late then to begin to save ourselves.

I will not say that this will take place on the bloated circulation of this year; yet I think it possible and probable. but if it should not this year, the next winter adds 150. Millions more: for the bank-mania raging among our legislatures is such that it will not be stopped but by a general bankruptcy. in this crush the holder of stock incurs it’s total loss, because if worth any thing at all, it must go to pay the debts of the bank. their credits are a fallacious resource; for the same crush which prostrates them, bankrupts most of those who are in their debt. that this event is to take place, and that it is not distant, I as firmly believe, as that the hand of death is suspended over us all. in this belief, how could I suffer a beloved friend to remain exposed to a loss which would trench so deeply into the resources for his daily subsistence: and especially when a deposit is opened & offered to us, yielding an equal profit, and a security as stable as the earth we stand on. for such I deem the abilities and the faith of the US. I could not answer it to my friend, or to my conscience. after such a calamity to him I could never have another sound night’s sleep. we must then, my dear friend, place our General in safety. we must transfer his stock into the hands of the US. on the newly proposed loan. all the details in the execution of this change I leave to you; and will at a moment’s warning execute any power or do any other act which you shall inform me to be necessary. the two certificates, one of them for 18. shares & the other for 2 shares are in my possession, and shall be forwarded to you if requisite. it will be well so to time the sales as to interrupt as little as possible the course of the current interest; and if in this way there should be some little loss, the object justifies it. for this would be the only consequence of the error of my opinion, if it be erroneous. whereas that of the contrary opinion would be a total loss. I pray you then to proceed in this matter, as being ultimately decided, and not to let slip the opportunities of subscribing.

I inclose you a letter from the General expressing his distress for want of remittance. return it to me if you please, and tell me what you think I can say to him. as to the channel of mr Crawford, I have no expectation we can use it. perhaps on a consultation with the Secretary of the Treasury, he could help us to a channel; and perhaps in the new loan the government may have the means of paying in Europe the interest of lenders residing there. the necessity of my departure for Bedford the first week in May requires that you should be so good as to inform me quickly of whatever may be necessary for me to do to enable you to proceed in the business of transfer. ever & affectionately yours

Th: Jefferson