To Alexander Hamilton from John Nicholson, 26 July 1792
From John Nicholson1
Comptroller Genl. Office [Philadelphia]
July 26th 1792
sir
I sit down to answer your letter of the 24th Instant2 which was received by me on my return home last night.
1st Your Office hath been furnished from time to time from me with the actual state of the New Loan Certificates out, that is those issued for Continental Certificates—And more especially about the period to which you refer when the sum thereof outstanding was stated to be between forty and fifty thousand pounds,3 and this hath since been reduced near one half by subsequent Exchanges.
2d. The provision made by Pennsa. for the redemption of this paper with the Continental Certificates to such as so chose, was co-extensive with them all, as represented, this representation was agreeable to the Act of the Legislature which accompanied it.4
3d The point of inquiry at the conference I had the honor to hold with you on the subject of our negociation at the close of 1791 and beginning of 17925 (the period refered to) was whether any of these New Loan Certificates had been subscribed to the Loan of Congress which had closed the last of September preceding. I stated there were none, if you find it otherwise I will pay you treble their amount. On this and on the subsequent reports of the Commissioner6 concerning the sums the restriction on transfers from one Office to another was removed.
4th That these Certificates might have been subscribed to the said Loan had the possessors chose,7 was evident not only from the Act of Congress8 but these enquiries after the fact made by you in pursuance of that law, to prevent the Union from paying interest twice on the same debt, and considering the different terms between the loan of the State and Continental debt, the short arrears of interest on State debt and the year’s interest for 1791 paid in the one case and not in the other, The United States would have been advantaged by such subscription, but from these or some other causes, existing until the Loan closed as before mentioned none were subscribed.
5th. A Loan is afterwards opened upon the same terms under another Act of Congress,9 in which last Loan an additional provision for Subscribers thereto, is made, different from the former and such as to make it the interest of the holders of such debt to subscribe to it—and they accordingly do so.
Under this view of the subject I think you will see nothing incompatible with what passed between us for
1st I did and only could speak with a reference to the Loan then closed.
2d. I did not then know that a further or future Loan would ever have been opened.
3d Or if it had whether the terms would have been similar or otherwise—which is the case as it respects the State and the Creditor though not as it respects the United states. The Creditors by a late Act of the State until the 1st of August next have a motive which (in the circumstances of public credit at the time the former loan was opened) did not before exist to subscribe this species of State Certificates10—otherwise at the former enquiry on the closure of the Loan you would have found some of this debt subscribed there also.
4th If I could have foreknown all the events which have happened as to the State of public Credit, the opening the Loan by subsequent Act of Congress, the terms thereof and the encouragement of the Legislature of Pennsa. to subscribe thereto, It would not have been compatible with common sense in me to have stipulated with you that the holders of these Certificates so far as they were not exchanged having two offers, would not embrace the most advantageous. The encouragement proposed by the Legislature of this State as afore-said I thought unwise at the time they deliberated thereon, and mentioned the effect it would have on this Species of our debt as well as on the unfunded depreciation debt, neither of which they seemed to intend directly to redeem, but what I said was not attended to.11
After what I have written if any part of what I have said should still seem to militate, I should be glad it would be specified, that I may have an opportunity of shewing you that the character of uncandid or inconsistent (which I heartily despise) are not applicable to sir
Your Most Obt serv
J N
Alexr. Hamilton Esqr
Secty Treasy U states
PS As I informed you on the closure of the former Loan so now on this, I am of opinion that if any New Loans were subscribed the present Laws of Pennsa. would enable me to give for them an equal Sum of principal and interest respectively in the unsubscribed debt of the United States as required by Act of Congress.
Yours as before
J N
LC, Division of Public Records, Pennsylvania Historical and Museum Commission, Harrisburg.
1. In this letter Nicholson in his capacity as comptroller general of Pennsylvania discusses a series of complex arrangements involving the financial relations of certain citizens of Pennsylvania with the Federal Government. During the Confederation period several states assumed the Continental debts owed their citizens. In 1786 the Pennsylvania legislature offered to receive Continental certificates held by its citizens in exchange for “new loan” certificates issued by the state (, XII, 158–64 [March 1, 1786]). In 1789 the state reversed its policy, for when it appeared that the new Federal Government would make some provision for the Continental debt, the state legislature encouraged holders of “new loan” certificates to exchange them for the Continental certificates for which the “new loans” had been issued, or other Continental certificates of the same value (, XIII, 263–67 [March 27, 1789]).
“An Act making provision for the (payment of the) Debt of the United States” ( 138–44 [August 4, 1790]) defined the terms under which the Federal Government would liquidate the Revolutionary War debts incurred under the authority of both the Continental Congress and the state governments. Sections 17 and 18 of this act provided in part as follows: “But as certain states have respectively issued their own certificates, in exchange for those of the United States, whereby it might happen that interest might be twice payable on the same sums: … Be it further enacted, That the payment of interest whether to states or to individuals, in respect to the debt of any state, by which such exchange shall have been made, shall be suspended, until it shall appear to the satisfaction of the secretary of the treasury, that certificates issued for that purpose by such state, have been re-exchanged or redeemed, or until those which shall not have been re-exchanged or redeemed, shall be surrendered to the United States” ( 144). After this act had gone into effect, H wrote a circular letter to the governors of the states calling to their attention the provisions of sections 17 and 18 of the act (“Treasury Department Circular to the Governors of the States,” June 27, 1791). Correspondence and conferences between H and officers of the Pennsylvania government followed. After subscriptions to the Federal loan were closed, Thomas Smith, commissioner of loans for Pennsylvania, assured the Treasury Department that in Pennsylvania no “new loan” certificates had been subscribed to the Federal loan for the assumption of state debts. Therefore, the terms of Section 18 were irrelevant, and interest was accordingly paid on that state’s assumed debt.
On April 10, 1792, Governor Thomas Mifflin of Pennsylvania approved “An Act to Provide for Paying and Redeeming Certain Public Debts and for Defraying the Expenses of Government” (, XIV, 305–12), and on May 8 a Federal statute entitled “An Act supplementary to the act making provision for the Debt of the United States” was enacted providing for the reopening of the Federal loan ( 281–83 [May 8, 1792]). The 1792 Pennsylvania law stipulated that state creditors would be reimbursed at the state treasury for the nominal value of state debts subscribed to the reopened Federal loan if the Federal certificates were transferred to the state treasurer. See Mifflin to H, June 23, 1792.
According to the returns supplied by Thomas Smith, Nicholson owned more than ninety percent of Pennsylvania’s “new loan” certificates which had been presented as payment for the Federal securities offered under the reopened loan (Smith to Oliver Wolcott, Jr., LC, RG 53, Pennsylvania State Loan Office, Letter Book, 1790–1794, Vol. “615-P,” National Archives). Nicholson, who had obtained from Smith a receipt indicating that his “new loan” certificates had been offered to the Federal Government, presented this receipt to Christian Febiger, the state treasurer of Pennsylvania. Febiger then paid to Nicholson cash amounting to the nominal value of the “new loan” certificates held by Nicholson. Despite the fact that he had paid Nicholson, Febiger was “fully convinced … that it never was the intention of the Legislature to embrace within the redemption the so called New-Loan certificates, which in fact never were a state debt” (, 67–68). The state treasurer discussed this question with Alexander Dallas, secretary of the Commonwealth, and on June 23, 1792, Dallas at Mifflin’s request referred the matter to Jared Ingersoll, the attorney general of Pennsylvania. Dallas also warned Nicholson and John Donnaldson, register general of Pennsylvania, not to sanction the view that the “new loan” certificates were assumable by the Federal Government (, 98, 99, 301).
The question whether “new loan” certificates were redeemable under the Pennsylvania act of April 10, 1792 (and as a consequence part of the state’s assumable debt under the provisions of the Federal loan) was a major point at issue in an attempt to impeach Nicholson during 1793 and 1794.
2. Letter not found.
4. Nicholson is referring to “An Act to Repeal So Much of Any Act or Acts of Assembly of This Commonwealth as Directs the Payment of the New Loan Debt or the Interest Thereof Beyond the First Day of April Next, and for Other Purposes Therein Mentioned” (, XIII, 263–67 [March 27, 1789]).
5. See Mifflin to H, December 27, 1791; Nicholson to H, December 29, 1791, January 16, 17, 18, 1792; H to Nicholson, January 16, 1792.
7. See note 1.
8. 138–44 (August 4, 1790).
9. 281–83 (May 8, 1792).
11. Nicholson is presumably referring to “A plan for modifying the present debt of Pennsylvania,” March 15, 1792 (, 279–86). This plan for a state funding law was offered as an alternative to the act of April 10, 1792, which was under consideration at the time (, XIV, 305–12).
The impeachment proceedings against Nicholson indicate that he had shown his plan to the governor and several members of the Pennsylvania legislature. In a footnote to this plan Nicholson commented on the inclusion of “new loan” certificates as follows: “It is proposed that these certificates should be received with the arrears of their interest on the same term as the other preceding debts of the state. The holders nevertheless to be continued in the privilege of exchanging them as at present. But it would seem proper that after due notice so as not to extend to the period of the limitation of the next loan by Congress, a limitation should by law be put to such power of exchanging, that there-after the Continental certificates should be subscribed for the use of the state, and that the state having provided for the redemption of such as might remain unexchanged, unsubscribed to the loan herein proposed or unsubscribed to the assumption of the state debts by the United States, should declare that interest should thenceforth cease thereon unless payment were demanded.
“No sum is extended in this case as the Continental certificates will be in possession of the state to be opposed to this debt as far as the same may be subscribed as herein proposed.” (, 284–85.)