To James Madison from James Monroe, 14 May 1814
From James Monroe
Washington may 14. 1814.
Dear sir
I enclose you two letters on the subject of finance, one from mr astor, the other from mr Parish, the latter sent me by mr Dallas whose letter is also enclosed.1 The two last have been shewn to mr Campbell; the first would have been, had mr astor not have written it to Mr. C. himself.
On this subject I have put together some few remarks, suggested to me, by what I saw abroad, particularly in the negotiation for Louisiana, and the communications into which it led, with the houses of Hope and Baring, which I also enclose to you.
The agent to be employed in such a trust, should in my opinion be a political character of respectability, & of great purity, unconnected with commerce and loans. In looking about for such a person, mr short, has occurr’d as the most fit, but I have not mentiond him to any one, nor indeed have I spoken to any one, mr. Campbell excepted of late, on the subject. Mr Campbell thinks that a contract might be form’d with messrs. astor, Parish & Girard, for 5 or even ten millions, on the terms of the last loan, giving them credit for the payments.
I receiv’d yesterday a letter from Col: Pinkney communicating the result of a conference with Col. Baynes, by which it appears, that much surprise was expressed by Prevost, that the idea of an armistice along the coast, should have been thought of, after the reply to Genl winder, on that point.2 Mr Prevost, in appointing Baynes to treat gaschonades as usual, accepting to the overture as a favorable evidence of the sincerity of this government to terminate the negotn. at Gottenburg by peace.3 I sent the dispatch to Genl. armstrong yesterday, but will endeavour to get & forward it to you today. Very respectfully & affecy yours
Jas Monroe
The gentn of the depts. have been together, and agreed that a strong letter shall be written to Genl. Winder, instructing him to return the power of Sr. G P., as unfounded in point of fact, indecorous, & unsuited to the occasion, but offering to receive one correspondent with his own, & to proceed to treat, for an armistice. I send within the papers.4
[Enclosure]
The letters of mr Astor and mr Parish prove, that the loans which have been already made to the govt., have been made on a foreign capital. Hence it follows that those which may hereafter be expected must be drawn from the same source. Loans are in fact nothing more than purchases on speculation. Those having the best foundation, and who can avoid sales longest, can afford to give most for the stock, and are of course the safest men to deal with. Men of small capital, and limited connections, making very extensive bargains, are driven to the necessity of selling, to meet their payments, whenever the terms arrive. The consequence is, their situation being known, that they sell to disadvantage. Other speculators look on, and profit of their distress.
By opening loans in Europe for a considerable part of the sums requir’d, at least, we have the following advantages. The credit of the UStates is higher than that of any European nation. Their debt is less, their resources greater, and their future prospects more favorable. The question on the exchange at amsterdam, and London, is simply, which nation is most likely to fulfill its contracts, and preserve its credit. All the money lenders in Europe will give the preference to the UStates. They will examine the question without prejudice, and doing so, they cannot withhold that preference. The contract being made, which may be done, by stipulating the payment here, the parties will find ample means to effect it.
A sale at amsterdam is a sale at London. The houses of Hope & Co:, & Baring & Co:, act as one, in all great transactions, and each has extensive connections, in the city, & indeed in the community, to which it belongs. If, for example, the house of Baring, took 10. or 20. millions, it would probably sell out the whole, to distinguished capatalists & merchants, in London, Liverpool, & the manufacturing towns in England. Many of these have funds in the UStates, all of them friends & credit. They would instantly set themselves to work to place the money here in fulfilment of their contracts. All their resources, credits, and influence here, would be applied to that object, in aid of which goods would be sent, by which the govt. would derive the double advantage of getting the loan filled, and the revenue increased. It happens that most of the British merchants trading to this country, are connected, with the people called federalists. It is by this connection, and the bias it forms for the country with which they trade, that these merchants, are said to belong to, if they do not constitute a British party. The British merchants having to pay a considerable sum to the govt, must do it thro’ their friends. Under that impulse, we should soon see all the banks, which are now marshalled against the govt., and making every possible exertion to paralize its efforts, destroy its credit, & defeat the loan, turned round, and exerting all their means in its support. The same effect would be produc’d in Holland, and wherever else any part of the loan might be taken. It is almost incredible, how small a sum, comparatively speaking, disposed of in Europe & operating in the mode suggested, by simple cause & effect, in the ordinary course of trade, without any degree of corruption, would produce a complete revolution, in one of the great parties in this country, of interest, sentiment, and action.
By opening the loan here, exclusively, the disadvantages are numerous & striking. The money lenders in Europe do not look so far, as to anticipate a law of Congress, authorizing a loan, the failure of our own people, by inability or other cause to take it, and to send agents over for the purpose. Money lenders never go in pursuit of such adventures. The law is probably passed, before the affair is taken into serious consideration, even by our own people. Thus the loan is opened to them only, and they are, unprepar’d, for it. None will come forward but the friends of the govt., who must do it, under the greatest discourag’ment & disadvantage. Their funds, (speaking of the future), limited at first, have been much diminish’d, and the banks which supported them almost demolished. In addition to which, the vast and powerful combination, which by another arrangment, might be brought to cooperate with them, will be seen exerting all their faculties to defeat them. Those who bid, must bid low, and there being no other resource, the govt. must accept what they offer, or become bankrupt.
Other advantages attend opening the Loan in Europe. There, the sole object for consideration would be, which government is entitled to the best credit. Here, other circumstances would be attended to. The pressure of our affairs, the wants of the govt., difficulty of supplying them, and the consequences of failure, at home, as well as on negotiations abroad, would be known, and taken advantage of. If there should be present, agents of foreign houses, they would possess all that knowledge, and might act under political impressions, by no means favorable to us. By making the operation abroad, and taking steps in advance, all these inconveniences might be avoided, and the high credit of the country, turned to the best account.
RC and enclosures (DLC: Rives Collection, Madison Papers); FC (DLC: Monroe Papers). FC in a clerk’s hand, with Monroe’s note: “To the President”; does not include postscript. For enclosures, see nn. 1 and 4.
1. In the enclosed letter from John Jacob Astor to Monroe, 30 Apr. 1814 (4 pp.), Astor observed that the terms of the current loan provided no incentive for American capitalists to lend large sums, noted that the loan might fail, and proposed that he, Stephen Girard, and David Parish be given advantageous terms to negotiate for money in Europe. He added that he had sent a similar letter to George W. Campbell. Also enclosed was a private letter from Alexander J. Dallas to Monroe, 3 May 1814 (1 p.), enclosing David Parish to Dallas, 2 May 1814 (3 pp.), which Dallas requested that Monroe either submit to Campbell or return to him. Like Astor, Parish anticipated the failure of the current loan and suggested raising money in Europe. He offered to undertake the project himself, drawing on the resources of his “particular friends Messrs Hope &ca of Amsterdam & Messrs. Barings of London,” and predicted that U.S. government stocks could be sold in the Netherlands at ninety-five percent of face value. In addition, “granting facilities” to Parish’s European merchant friends would encourage them to ship large quantities of goods to the United States, which would facilitate the flow of funds and increase government revenue (DLC: Monroe Papers).
2. Writing to Monroe on 22 Mar. 1814, Winder had stated that Sir George Prevost did not consider himself authorized to conclude an armistice covering “naval operations on the oceans” (DNA: RG 45, Subject File RE, box 591, Correspondence Relating to Exchange and Release of Prisoners, American and British). In addition to describing Prevost’s reaction when the U.S. government nevertheless proposed that the armistice include the Atlantic coast, Col. Ninian Pinkney’s 3 May 1814 letter to Monroe (DNA: RG 45, Area File 7) stated that he had been unable to negotiate an agreement due to certain unacceptable requirements in Col. Edward Baynes’s instructions. Pinkney forwarded the instructions and also enclosed documents [not found] explaining the difficulties, which probably had to do with Prevost’s lack of provision for an armistice on the Atlantic coast and to his proposals for the termination of the agreement (Baynes to Prevost, 3 May 1814, Michigan Pioneer and Historical Collections 15 [1909 reprint]: 547–48; for the proposals, see n. 4, below). Finally, Pinkney suggested that if the administration still wished to pursue a cease-fire, its agent should be instructed regarding the treatment of Great Britain’s Indian allies.
3. Prevost’s 29 Apr. 1814 letter empowering Baynes to negotiate an armistice did so on the basis of Prevost’s “presumption” that JM was seeking such an arrangement “with a sincere desire of conciliation, and in the firm belief the negotiation at Gottenburg will lead to a speedy & amicable adjustment of the differences existing between the two countries, & not merely for the purpose of obtaining a temporary cessation of Hostilities.” Prevost added that his course in pursuing a cease-fire was in accord with that of the British government, “not the Aggressor in the War,” which stood ready to reciprocate “every just and honorable measure” of the United States in pursuit of peace (Michigan Pioneer and Historical Collections 15 [1909 reprint]: 543).
4. Monroe evidently enclosed copies, forwarded by Pinkney, of Prevost to Baynes, 29 Apr. 1814 (see n. 3 above), and Prevost’s draft of an armistice agreement of the same date, which cited as a basis for the discussions his own and Monroe’s shared wish to pursue a cease-fire “in consequence of the negotiations pending between their respective nations.” The agreement would include no naval forces but those on the Great Lakes, would terminate only in the event of an “absolute and unequivocal rupture” in the peace negotiations between the two nations, and then would require a thirty-day notice before the resumption of hostilities. Indian allies on both sides were to be included in the armistice. The United States would retain possession of Amherstburg and Sandwich, and the British of the forts at Niagara and Michilimackinac; armed forces were to remain at least five miles from the opposite side’s outposts along the border of Lower Canada; no boats were to enter Lake Huron from Lake Erie or to have any interaction with enemy possessions on the lakes; and travel by individuals between the two countries could be restricted at the discretion of their governments (ibid., 544–45).