To George Washington from Oliver Wolcott, Jr., 12 November 1795
From Oliver Wolcott, Jr.
Treasury Departmt Nov. 12. 1795.
The Secretary of the Treasury respectfully represents to The President of the United States, that the following are the principal occurrences in the Treasury Department since the first of January 1795.
In relation to Domestic Loans obtained.
1st A sum of 800,000 Dollars has been borrowed under the Act of March 20th 1794 making further provision for the intercourse between the United States and foreign nations, and the Act of February 21st 1795 in addition thereto; the rate of interest to be paid by the United States is 6 ⅌Ct per annum payable quarter-yearly; and the principal is to be refunded in four annual instalments of 200,000 Dollars each on the last days of December in the years 1796, 1797, 1798 & 1799.1
The above mentioned Loan was received of the Bank of the United States in 6 prCent stock of the United States, and has been transmitted to John & Francis Baring & Co. of London to be sold by them. Letters from Messrs Barings have been lately received stating that funds to the amount of one hundred and sixty thousand pounds sterling were held by them subject to the order of Colo. Humphreys. Of this sum the value of forty thousand Dollars, has been remitted to Hamburgh as is understood, pursuant to the directions of Colo. Humphreys from Paris.2
2d Under the authority of the Act passed March the 3d 1795. entitled, “An Act making further appropriations for the military and naval departments and for the support of Government”—two Loans have been obtained from the Bank of the United States, for five hundred thousand Dollars each, bearing interest at six per centum, payable half yearly on the 1st of July and first day of January. The first Loan bears interest from April 1st 1795, and is repayable on the first of April 1796; and the other bears interest from the 1st of October 1795 and is repayable on the 1st of October 1796. A sum of one million has been also received on account of a Loan made in the last year.3
In relation to Domestic Loans repaid.
1st Repayments of former Loans in anticipation of the Revenue, have been made during the year 1795. to the amount of one million and four hundred thousand Dollars.
2d The third instalment of the Loan of two millions of Dollars had of the Bank of the United States, has been paid pursuant to the act of January 8th 1795 containing a provision for that purpose.4
In relation to Foreign Loans.
Measures were seasonably taken by the Treasury for reimbursing the instalment of one million of Florins which became due in Amsterdam on the first of June last; but owing to the operation of the war and the revolution in Holland, the measures which were adopted had not been successful in August last. As the delay has been produced by causes over which the United States could have no controul or influence, and as the Interest has been punctually paid, the public Credit is understood to have suffered no blemish.5
In relation to the Foreign Debt.
1st. The instalments of the Debt due to the Republic of France which by contract became payable in the present year, have been discharged at the Treasury, amounting to 453,750 Dollars.
The remaining debt has been amicably adjusted and finally settled in concert with an authorised agent of the French Government, and the sum which appeared to be due from the United States, has been subscribed to the Loan proposed by the second section of the act entitled “an act making further provision for the support of public credit & for the redemption of the public debt.” The pecuniary obligations of the United States to France as subsisting under former Contracts may therefore be considered as discharged.6
In pursuance of the act last recited, measures have been taken for ascertaining whether the remainder of the foreign Debt can be reloaned with the consent of the Creditors. Though the experiment has not been fully made, yet from what is already known there is much reason to conclude that the mutation of the Contract as proposed in the act of the last session, will not be chosen by the Creditors.7
As unprecedented difficulties attend the fulfillment of the Public engagements in Amsterdam and Antwerp at present; as the same difficulties will always be experienced in a greater or less degree during a War in Europe, & as in proportion to their extent and operation they must hazard the credit of the U. States in foreign Countries, it may be expedient for Congress to consider whether the important object of reloaning the foreign Debt, cannot be accelerated by some modification of the proposal, at once inviting to the Creditors, and at the same time consistent with the public interest.
At present their is no provision made by Law for discharging the Instalments of principal of the foreign debt, which are annually falling due, except from the proceeds of new loans. During the continuance of the war there is no probability that foreign Loans can be obtained on eligible terms: besides if this were not the case, Congress have by the act of the last session wisely manifested an indisposition to authorise a recurrence to this resource, except in cases of urgency.8 The authorities for obtaining monies on Domestic loans are at present subject by law to such conditions, that doubts are entertained whether they contain an adequate resource against every exigency.
A general recommendation to Congress to consider whether some further provision for the Foreign Debt be not necessary in case it shall not be reloaned, appears therefore to be expedient.
In relation to the Domestic Debt.
The redemption of the public debt being an object of the greatest importance to the happiness & security of the United States, it cannot be too urgently pressed upon Congress to consider whether the provisions in former Laws are calculated to produce the desired effect. The points on which the Law of the last session in particular requires alteration can be suggested by the Treasury, but a general referrence to the subject by the President is necessary to attract the attention of Congress.
In relation to the appropriation for the Current Service.
1st. The estimates for the year 1796 are preparing and will be reported as usual; a general intimation to that effect is all that has been customary.
In relation to the Revenue.
The Revenue from importations and the tonnage of vessels continues to be increasing. this fact, considering the embarrassments and heavy losses which the commerce of the Country has suffered in consequence of the War, is at once a pleasing demonstration of the great resources of the Ud States, and of the virtue & patriotism of the mercantile community.
The Revenues from internal duties have not yet equalled the anticipations which were formed of their product. This has been owing to various causes. In respect to the duties on distilled spirits and on Stills, it may be observed, that the want of the foreign materials, which were used before the war, and the new directions which have lately been given to the industry of the country, are causes sufficient to account for a considerable deficiency. In respect to the other objects subject to duty, the time has not yet been sufficient to organize the arrangements for the collection & to receive information of the results from every quarter. Considerable inconvenience has moreover been experienced from the want of authority to allow compensations adequate to the service of the officers. But notwithstanding the operation of all these causes, tending to prevent or postpone the receipt of monies into the Treasury, still there is reason to believe that a considerable part of the deficiency is owing to the want of a system of collection sufficiently energetic & coercive.
It remains with Congress to determine whether there be not some defects in the Laws which require correction. The establishment of an efficient and productive internal Revenue is truly interesting, as connected with a speedy reduction of the public debt, and no period can be more fit for the accomplishment of this object, than the present, when the internal resources of the Country are flourishing in a degree hitherto unprecedented.
In relation to the purchase of supplies for the War Department.
The purveyor of public supplies is an officer of the Treasury, and he is moreover charged with the agency of superintending the purchases for the Frigates. By information from this officer and from other sources it is rendered certain that the public supplies cannot be certainly obtained except by means of systematical & permanent public arrangements. A time of War in Europe, and a state of neutrality on the part of the United States, however eligible in some respects, is not without its peculiar dangers and disadvantages. In such a state of things, all kinds of articles necessary for military operations are liable to be suddenly withdrawn from the Country, and are at the same time generally prohibited from being imported; the consequence is, that the country is left without any considerable resources except what it may possess in public magazines; and the small supplies which remain in the market, are greatly enhanced in price by the competition of foreign Agents.
The present state of this Country in respect to military supplies, is such as forbids the idea of War, even if on other accounts, it might reasonably be judged to be necessary. The only remedy against the dangers resulting from such a situation, obviously is a systematical provision for the purchase in time of peace, of all articles which cannot be manufactured here, especially such as are not liable to damage and waste. It is also presumed that a wise and provident policy wou’d dictate the establishment of public foundaries and manufactories for arms, to prevent the loss of skill in the fabrication of arms, which must degenerate in a state of peace. The experiments which have been made for obtaining cannon for the Frigates and batteries, only evince that a skill which was common during a part of the late war, has deplorably declined.
The frigates which were ordered to be built in the year 1794, would, however, have been in a state of considerable forwardness, had not unexpected difficulties attended the procuring of Timber from Georgia. It is believed, however, that they will soon be surmounted. It has not been possible to substitute the timber of this part of the Country for that expected from Georgia, without a great loss of time, as the northern timber is said to require a long seasoning before it is fit for use.9
As incidental to the business of the Treasury, it is necessary to mention that the execution of the Laws is weakened by the want of adequate compensations to certain officers, especially the Marshalls & District Attornies. In some of the States these offices are a heavy burthen to the possessors, hence a want of zeal & frequent va[ca]ncies. All which is respectfully submitted
Oliv: Wolcott Jr
Secy of the Treasury.
LB, DLC:GW; ADf, CtHi: Oliver Wolcott, Jr., Papers.
1. The act of 20 March 1794 appropriated $1 million out of treasury funds “to defray any expenses which may be incurred, in relation to the intercourse between the United States and foreign nations,” and authorized the president “to borrow the whole or any part” of that sum ( 345). “An Act for the reimbursement of a Loan authorized by an Act of the last Session of Congress” of 21 Feb. 1795 authorized the Bank of the United States to lend to the United States $800,000 “(remaining unapplied)” authorized by the previous law, and identified the duties from which funds were to be drawn for a reimbursement of the loan by 1800 ( 418).
2. The partnership of the brothers John Baring (1730–1816) and Francis Baring (1740–1810) was largely under the management of Francis at this time. The stock was transmitted to that firm in March (see Wolcott to David Humphreys, 19 March, CtHi: Oliver Wolcott, Jr., Papers). The letters from the firm have not been identified.
3. The act of 3 March 1795 appropriated “a sum not exceeding” $1,469,439.29 for the military establishment, with smaller appropriations for militia pay and subsistence and for pensions. Again the president was authorized to borrow the amount of the appropriation ( 438–39).
4. Wolcott is referring to “An Act providing for the payment of certain instalments of foreign debts; and of the third instalment due on a loan made of the Bank of the United States,” 8 Jan. 1795, which directed payment “out of the proceeds of any foreign loans heretofore made” ( 409).
5. For a statement of the Dutch debt, see ASP, Finance, 1:373–76. In April, Wolcott had sent to Amsterdam, as the safest way of transmitting the necessary funds, U.S. stock certificates, which were to be sold to pay the installment (see Edmund Randolph to GW, 12 July, n.27). On 17 July, the Dutch bankers Willink, Van Staphorst & Hubbard wrote Wolcott that they had received the stock but that it would be “almost … an impossibility” to sell the certificates there because of a new law “compelling every Inhabitant to furnish Six per Cent of his whole property on Loan to the Province.” Moreover, the British act to prohibit intercourse with Holland after the recent revolution there “has been construed … to forbid the Negotiation or Sale of all American Stocks.” Nicholas Hubbard would travel to London in an attempt to remove that impediment and sell the stock. The most recent communication received from the bankers, of 4 Aug., indicated that some of the American stock was being sold in London, albeit on unfavorable terms (CtHi: Oliver Wolcott, Jr., Papers).
6. The debt due to France arose out of contracts of 3 June 1777 (with the Farmers General of France), 16 July 1782, and 25 Feb. 1783 ( 24:51–63, 25:773–78). The second section of the cited act of 3 March 1795 ( 433–38) directed the treasury to open a loan “to the full amount of the present foreign debt, to continue open until” 31 Dec. 1796, thus converting the foreign debt into a domestic debt. Some of Wolcott’s correspondence with the French agent James Swan about the debt can be found in DNA: RG 59, Records Relating to Foreign Accounts, and in CtHi: Oliver Wolcott, Jr., Papers. For a statement of the payments in 1795 and the final liquidation of the debt (communicated to the U.S. House on 19 Jan. 1796), see ASP, Finance, 1:380–81.
7. On 13 April, Wolcott wrote to the American minister John Quincy Adams and to the bankers Willink, Van Staphorst & Hubbard with the proposal for a reloan of the Dutch debt (see Edmund Randolph to GW, 12 July, n.27). In a letter to Wolcott of 5 July, Adams quoted the Dutch bankers as reporting: “This mutation will not be chosen by the holders of a small number of Bonds, it not being worth their while to hold a Correspondence about them in America, and we are inclined to believe, but few of the possessors of large Quantities will avail themselves of it; their objection will we presume be the preference they give to the receipt of their Interest upon Coupons, which they can employ even before they fall due, to its being remitted for their account from foreign Parts and especially from so far as is America, attended with a Correspondence, that the far major Part of our monied men wish to avoid; which joined to the Idea that the addition to the rate of Interest, is not a compensation for the Commission in America Charges, Loss upon Exchange and Risque of Remittances, will we think deter them from acceding to the Proposal, at least so long as we remain without Paper money.” In his letter to Wolcott of 5 Aug., Adams added that he believed “the measure will never have” the “cordial co-operation” of the bankers, in part because it would “dissolve the pecuniary agency of the present Bankers” in regard to the loan. On 13 Aug., Adams wrote Wolcott to report that the bankers had advertised the reloan proposal but had received “scarcely any” response, which the bankers attributed to the “difficulty of transfer of stock under the proposed loan” (all letters, CtHi: Oliver Wolcott, Jr., Papers).
8. Wolcott evidently is referring to “An Act making further provision for the support of Public Credit, and for the redemption of the Public Debt,” 3 March ( 433–38).
9. The frigates were authorized by “An Act to provide a Naval Armament,” 27 March 1794 ( 350–51). About the difficulties in procuring timber from Georgia, see Pierce Butler to GW, 30 Nov. 1794; GW to Henry Knox, 23 Dec. 1794, n.2; and Alexander Hamilton to GW, 21 Jan. 1795 (third letter).