From John Jay to Edmund Randolph, 31 March 1792, enclosing Report to the Board of Trustees of the Sinking Fund, 31 March 1792
To Edmund Randolph
New York, 31 March 1792
The Chief Justice of the United States presents his compliments to the Attorney General, and requests the favor of him to lay before the Board of trustees, the opinion herewith enclosed, on the question stated in their act of the 26th instant, a copy of which the Chief Justice yesterday received, enclosed in the letter which the Attorney General did him the honor to write on the 29th instant.1
[Enclosure]
Report to the Board of Trustees of the Sinking Fund
New York, 31 March 1792
Qu. 1st. do the words ‘if not exceeding the par or true value thereof’ in the act making provision for the reduction of the public debt, restrain the purchase of any part of the debt of the U.S. (whether subscribed & bearing an immediate interest of 6. pr. Ct. or an immediate interest of 3. pr. Ct. or a future int. of 6. pr ct. or unsubscribed) so long as the market price of the same shall not exceed 20/ in the £.
Qu. 2. if these words do restrain the purchase of any species of the public debt within limits narrower than 20/ in the pound, what rate of interest shall be adopted, as the rule for computing the value of each kind of stock at this day?
The meaning of the word par is well ascertained. when cash equal in amt. to the sum specified in a bill of exch[ang]e. is paid for it, that bill is said to have been bought & sold at par. when stock is bought & sold for more or less than what the public have engaged to pay, that stock is said to have been bought & sold above or below par. bank notes usually pass, in the vicinity of the bank, for the sums they promise, that is, at par.
The true value of stock, considered as merchandise, is the market price. The true value of stock, considered as evidence of money due from debtor to creditor is regarded by the law as being precisely so much cash as was contracted to be paid. hence it seems that the value of stock is of two kinds, the one commercial & fluctuating, the other legal & fixed. The act adverts to & recognises both; the former in restraing the trustees from giving more than the market price tho’ below par; the latter in restraing them from purchasg at prices above par.
Is there not a kind of value distinct from either? I think there is; & that it is the one alluded to in the 2d. question above stated. it is the result of comparison, combination & calculation, & governed by some principle assumed as a standard. it differs therefore from the legal value, which always is the exact sum promised to be paid: & it differs from the market price, which has no standard, but depends on momentary & fluctuating circumstances.
Is the true value mentiond in this act, of this latter or third kind? I think not.2
As this is not the ordinary sense of the word value, & as a standard to ascertain it is neither indicated by the act, nor very easy to find, it seems singular that the Congress, if they really contemplatd that ^kind of^ value, should omit not only to declare this meaning particularly & expressly, but also to fix the standard whereby the trustees should be regulated.
As the act distinguishes the market value, from the legal value, so also the value in question, if intended, would probably have been distinguished from both;3 & not confounded as it now is, with the legal value, by so connecting the words the par, with the words true value, by the particle Or, as naturally & grammatically to exclude the idea in contemplation. For the particle or, placed as it is, appears to me to be precisely equivalent to that is to say, in other words, to wit.
No other than the legal value, can accurately be called the true value, in general terms. the laws of morality & of the land oblige the debtor to pay the sum promised, & they entitle & direct the Creditor to recieve it. Debtors & Creditors are the only persons interested strictly in the value of debts. whatever is the true value between them, must be seen as being so by others, as well as by them; & therefore4 when laws or persons, & especially laws, speak of the true value of a debt, they are in my opinion, always to be understood as intendg the sum due, or legal value, unless they use additional expressions to particularise their meaning.5
For these reasons, I am of opinion that the words ‘if not exceeding the par, or true value thereof’ do not restrain the purchase of any part of the debt of the U.S. so long as the market price of the same shall not exceed the sum actually due from & payable by the U.S. in discharge of these debts.6
John Jay
PrD, , 1: 236. No manuscript text of the cover letter has been found. Enclosure: JJ’s report, C, in TJ’s’s hand, DLC: Jefferson (EJ: 10217); Dft in JJ’s hand, with numerous excisions and corrections, only the most significant of which have been noted, NNC (EJ: 13078).
1. See ER to JJ, 29 Mar. 1792, above, and the editorial note “The Sinking Fund.”
2. Here, in the dft, JJ excised several lines of text, mostly illegible, regarding the meaning of the word “value”.
3. Here, in the dft, JJ excised the following: “but the Fact is that if the Congress had meant that kind of Value they have very [meanly?]”.
4. Here, in the dft, JJ excised the following: “which as the true Value of a Debt as relative to them, is and ought to be considered as the just Import of those words when used in that general Manner.”
5. Here, in the dft, JJ excised the following sentence: “for these words may also be used with Propriety when speaking of the true Value of Debts ^public and private^ in as relative to the Solvency & Honor of the Creditor, to the Terms of payment, Rate of Interest, place where Time when &c &ca.”
6. JJ’s report of the legality of AH’s policy of purchasing debt certificates at par broke the impasse on the question and permitted AH to make additional purchases to support the market in the wake of William Duer’s financial collapse. However, in May 1792 Congress ruled that in future purchases for the Sinking Fund were to be made at the lowest possible (market) price.
In addition to his copy of JJ’s report, TJ’s papers include his notes on his dissent from AH’s purchasing policies, which he alleged unnecessarily tripled the national debt. See , 27: 825.