The contents of this letter can best be understood in the context of Hamilton’s “Report on a Plan for the Further Support of Public Credit,” January 16, 1795. Congress considered Hamilton’s proposals in February, 1795, and in the following month enacted “An Act making further provision for the support of Public Credit, and for the redemption of the Public Debt.”1 In this letter Hamilton is advising Wolcott on how the Treasury Department should implement Section 2 of this act. Section 2, which deals with the foreign debt, reads: “That a loan be opened at the treasury, to the full amount of the present foreign debt, to continue open until the last day of December, in the year one thousand seven hundred and ninety-six, and that the sums, which may be subscribed to the said loan, shall be payable and receivable, by way of exchange, in equal sums of the principal of the said foreign debt; and that any sum, so subscribed and paid, shall bear an interest equal to the rate of interest which is now payable on the principal of such part of the foreign debt, as shall be paid or exchanged therefor, together with an addition of one half per centum per annum; the said interest to commence on the first day of January next succeeding the time of each subscription, and to be paid quarter yearly, at the same periods at which interest is now payable and paid upon the domestic funded debt: Provided, That the principal of the said loan may be reimbursed at any time, at the pleasure of the United States.”2

On April 13, 1795, Wolcott wrote to Willink, Van Staphorst, and Hubbard, the United States bankers in Amsterdam: “… These great events … have for the present greatly embarrased the pecuniary operations of this Department in respect to remittances for the support of our foreign Credit. It will be readily seen that sums adequate to the payment of the interest & installments falling due cannot at this moment be supplied from this Country without great difficulty & risque & that events may happen, to render remittances impracticable. It will however be my care to suffer no possible doubt to rest upon the conduct of this Department; you may therefore safely assure our creditors, that punctual provision will be made to answer their demands, unless uncontroulable events shall produce a temporary disappointment.

“As the only safe mode of remittance which occurs at present I have purchased & caused to be transferred in your names, the sum of 160,000 Dollars in the six ⅌ Cent Stock of the United States, which I request may be sold to enable you to meet the payments which will be demandable on the first of June,3 on the same terms & conditions as were prescribed by my predecessors Letter of January 25th….4

“Herewith you will receive an authentic Copy of an Act of the last session of Congress entittled ‘an Act making further provision for the support of public Credit, & for the redemption of the public debt.’ This measure of our government, while it affords a new proof of its solicitude for the support of public Credit; while it indicates the sufficiency of its resources, by having vested funds for the extinction of the present debt; contains a proposition which I flatter myself the foreign Creditors of the United States will readily embrace.

“It is proposed as a measure of mutual accomodation to the Government & its Creditors, to convert the present foreign Debt into a funded Domestic Stock redeemable at the pleasure of the United States. The stock to be transferable in the books of the Treasury & the respective Loan Offices, and the Interest to be payable quarter yearly, in the same manner as has been practised in respect to our present Funded Debt.

“The advantages offered to the Creditors are an addition of one half ⅌ Cent ⅌ Annum, to the rate of Interest secured by their present Contracts, and a quarterly instead of a yearly payment of the annuity or Interest.

“It may be probably objected to this proposal, that a Capital fined for a certain reasonable time ought to have been offered instead of a Capital redeemable at the pleasure of the Government. It is believed however that such an objection, though naturally suggested on a slight view of the proposition will be considerably obviated if not wholly removed by a mature consideration of the system which has been adopted for the extinguishment of the present Domestic Debt.

“If the Creditors in Holland & Antwerp embrace the proposal which is now made, their claims will be converted into Stock bearing Interest at five & an half ⅌ Cent, five ⅌ Cent & four & an half ⅌ Cent ⅌ Annum.

“Considering the immense objects which continually offer in this country, for the profitable employment of Capital, it is unlikely that any considerable sums will be soon obtainable, on domestic Loans, below the highest rate of Interest which would be payable on the new Stock—with respect to that which will bear Interest at five ⅌ Cent ⅌ year & an half ⅌ Cent ⅌ Annum, a further reduction appears to be highly improbable.

“The probability that foreign Loans will hereafter be obtainable on reasonable terms is in my judgement constantly declining … at any rate the proposition now made to the foreign Creditors is an unquestionable evidence, that this government is indisposed to have recourse to foreign Loans, unless in cases of urgent necessity. A direct payment of the debt which would arise from the proposed reloan, is not to be expected, untill an extinction of the present six ⅌ Cent & Deferred Stock shall have been accomplished. The amount of these debts is nearly forty five millions of Dollars. The prior appropriations of the ordinary Revenue, to the discharge of these great sums of capital, bearing a higher rate of Interest than will be payable on any part of the new Stock may therefore be considered as affording reasonable ground for belief, that the proposed new Capital will remain fixed for a period sufficient to satisfy the Creditors.

“In respect to the proposed rate of Interest it appears proper to observe that an increase of one half ⅌ Cent ⅌ Annum, with a quarterly payment, affords a liberal compensation for occasional delays in remittances, loss by exchange & expences of Agency….

“But after a suitable explanation of the proposition which our government has thought proper to make, it remains for the Creditors ⟨only⟩ to determine whether it is acceptable. The United States can & will perform their engagements & no sacrafice of opinion still less of Interest, is expected or desired.

“As our foreign debt is understood to exist in bonds transferable by delivery, it has been foreseen that the Creditors may be unwilling to trust their obligations to insecure conveyances. I have therefore judged it proper to recommend a form of proceedure which I doubt not will meet with your concurrence from its obvious tendency to facilitate the proposed negociation.

“It is desired that suitable notice may be given to the creditors, that they are at liberty to surrender their obligations to you, which you will cause to be cancelled, so as to prevent their affording a future claim in case of any accident & in lieu thereof you will be pleased to issue triplicate Certificates…. These Certificates may be transmitted by different conveyances to the Treasury, & on the rect. of any one of them the proper Certificate of Domestic Stock … will be issued in the name of the Creditor indicated in your Certificate.

“As this arrangement is a matter of official discretion, it is proper that it be conducted with a due regard to the magnitude and delicacy of the trust & under such precautions as shall secure the United States from any possible injury. I must therefore desire that the Certificates which you may issue for any cancelled obligations may be uniform….

“It will also be proper to furnish me punctually with lists of the Certificates which may be issued therein describing their dates, numbers the names of the Creditors, & the amount—specifying also, the dates & numbers of the obligations Surrendered & cancelled, on what Contract on Loan they were issued & the rate of Interest payable therein. The utmost correctness in issuing the Certificates & in the lists to be transmitted must be observed, to prevent errors & perplexity in the accounts of the Treasury.

“According to calculations made at the Treasury founded on the best information which could be obtained, the value of the current florin of Holland, is found to be a small fraction less than forty Cents in money of the United States. In converting Florins into Dollars forty Cents will however be assumed as the par of exchange.

“It will be observed that the Interest on the Domestic Stock arising from a reloan, is to commence from the first day of January succeding the year in which the transfer shall be effected. The Certificates which you may issue during the present year … will therefore indicate that the Interest payable in the United States, is to commence from the first of January 1796—and those which may be issued during the year 1796, will promise a like Interest from the first of January 1797. I shall take care to supply you with funds to discharge the arrears of Interest which may be due to any subscribers to the reloan at the close of the years 1795 & 1796….

“As it is proper that the United States should be possessed of their obligation, whenever they shall be discharged, I shall for this purpose & to exonerate you from an unnecessary charge of papers, request our Minister Resident at Holland [John Quincy Adams] to receive from you any cancelled obligations and to grant acknowledgements therefor, which shall at all times prove to you full & sufficient Vouchers.

“It has occurred that if the Creditors under the four ⅌ Cent Loan, negociated pursuant to the Contract of March 9th: 1784,5 should reloan their claims, some special arrangement will be necessary in respect to the premium & gratifications hereafter payable. My construction of the act now transmitted, in respect to the Creditors under said Contracts, is, that they may convert the Capital of two millions of florins, into Domestic Stock bearing interest at four & half ⅌ Cent—and may leave the premiums & gratifications hereafter demandable on the basis of the present Contract. Some evidence of the residuary tittle, will of course be necessary in case the existing obligations are surrendered. I leave it to you in concert with our Minister, to settle what this evidence shall be….

“As it is not improbable that opinions unfavourable to the late Revolution in your government may have induced some of our Creditors to emigrate to England or Germany or to neutral Countries special measures may be necessary on their behalf. If in respect to such Creditors, there shall be found any difficulty in complying with the form herein proposed, you are requested in concert with our Minister to devise some safe mode to enable them to reloan their demands which on notice, I will readily adopt.

“Though the proposition for reloaning the foreign Debt now made, & which will be communicated to Mr. [Charles John Michael] De Wolfe of Antwerp,6 considerably diminishes the force of any obligations on the part of the United States to listen to the requests of the emigrant Brabanters, yet I think proper to consent that the Interest on the Antwerp Loan7 be paid according to the mean course of Exchange between Holland & that City, prior to the introduction of Assignats. The Government of this Country is not desirous to derive an advantage from the misfortunes of individuals….

“To prevent misapprehension, it will be proper to inform the Brabanters, that the accomodation conceded in their favour is to respect merely the Interest which became due in Decr. 1794. & that which will fall due in Decr of the present year. During the pendency of the proposed Loan, it is reasonable that all the Creditors should receive an equal provision. I am not however authorized to make a stipulation which shall permanently affect the existing Contracts, nor is it proper, that this Government should be answerable for depreciation in case the circulation of Assignats8 shall become more general….”9

It should perhaps be noted that neither Hamilton’s advice nor Wolcott’s efforts could effect the conversion of the Holland loans. On July 17, 1795, Willink, Van Staphorst, and Hubbard wrote to Wolcott: “… We think the 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, that a Bond to Bearer is generally of more easy and advantageous realisation than Registered Funds, and 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 far the 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 the 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, which we most ardently hope and trust will be the case.”10

In a letter to Wolcott on August 29, 1795, the Amsterdam bankers offered the following reasons for the failure of the conversion of the Holland loan: “… The proposal for reloaning and Domesticating the Debt due to Individuals in this Country, that we advertised in compliance with your orders, not only met with little or no success, but even concurred with the General cause that affects the Market, to keep down the prices of your Bonds, and it is not looked upon by our Money Lenders, as a proof of the easy and growing State of your public finances. To the reasons that we mentioned in a former Letter, would deter our Capitalists from acceding to the Conversion may be added, that the present prohibition laid in England on the Sale of all Funds, to Credit of Persons resident in Holland, or subjects of our Republick, offers a Striking Instance, how much preferable it is to the Dutch Money Lenders to have their Capital invested in Bonds, that can at all times be converted into Cash, under the sacrifice of the Current depreciation, to having only a foreign Certificate of Credit, for the realisation of which they are forced to resort to a neighboring Market, liable to the Arbitrary clogs, Government is pleased to lay upon it. Besides which, another reason that we now experience to be most Powerfull upon the Holders of Bonds, is the Article whereby the United States reserve to themselves, the reimbursment of the Debt at their option.

“We find our exertions to convince people of the little weight of their arguments, of the futility of their apprehensions, and of the far superior consideration of their being at perfect Liberty to reject the measure if it does not suit them, inadequate to the large field, the bad impression already gained. Nothing will in our opinion do more effectually, than a speedy discharge of the Installment of one Million due the first of June last, and should not Mr. Nichs. Hubbard’s next Letters inform us the further Sale of your Stocks, We shall in all probability engage him to determine to the hard but unavoidable operation of pushing off such a proportion of them in London, as will be requisite to face the reimbursement.

“As yet, only 6 Bonds have been subscribed to the conversion.”11

In describing this situation in his report to Congress on December 14, 1795, Wolcott stated: “Measures have been, moreover, taken for ascertaining whether the residue of the foreign debt, due in Amsterdam and Antwerp, could be re-loaned with the consent of the creditors. The experiment cannot yet be considered as fully made; but the prospect of success is not encouraging. The objections against a mutation of the contracts in the manner proposed, which have been stated, are, generally, 1st. That the proposed new stock will be redeemable at the pleasure of the United States, by which condition the Government will possess the power of reducing the rate of interest, or refunding the capital at periods when the reimbursement may be difficult, or disadvantageous to the creditors. 2d. That the proposed addition of one half per centum per annum to the rates of interest, does not afford an equivalent for the expenses of agency, loss upon the exchange, and the risk of remittances from America. And, 3d. That the facilities which attend the negotiation of bonds payable to bearer, over funds which can only be transferred at the treasury or loan offices in the United States, render the obligations of foreign debt, in their present form, particularly eligible for foreign creditors.

“It is not yet ascertained, that these objections will be conclusive in the minds of the creditors against the proposed re-loan, and circumstances are not unlikely to happen, which may, in some degree, abate their force. Nevertheless, as the object of converting the foreign debt into domestic stock, is of real importance to the United States; as unprecedented difficulties attend remittances at present; as similar difficulties will always exist, in a greater or less degree, in time of war; and, as in proportion to their operation, they must endanger the public credit; the Secretary respectfully submits it to the House of Representatives, to consider and determine whether some modification of the existing proposal be not expedient.

“Considering the actual state of Holland, and the restrictions upon our intercourse with that country, it was deemed for the interest of the United States to propose a postponement of the instalment which fell due in the present year. It has, however, been conclusively ascertained, that no additional loans can be obtained in Holland; of course, that the United States must be provided to make the reimbursements, stipulated in their contracts.

“The measures adopted by this Department, to effect a reimbursement, were seasonable, and such as promised to be effectual; but, owing solely to the war, and the stagnation of credit occasioned by the Revolution, the instalment which fell due on the first of June, had not been paid at the date of the last advices in August.

“The causes of the delay were, however, well understood by the creditors; and as they neither originated with, nor could be controlled by, the United States, and as the interest has been paid, the public credit has yet suffered no blemish.”12

The negotiations with France were in marked contrast to those with the Dutch creditors. A historian of the national loans of the United States has written concerning the conversion of the French debt: “The foreign debt not payable in Holland was due to the government of France, and the revolutionary authorities of that country proved easier to deal with in the conversion than the private holders of the Holland loans. The terms of conversion provided for in the act of March 3, 1795, were accepted by James Swan, the authorized agent of France, and the full amount of the debt due that country, consisting of balances due on various loan accounts, was subscribed and paid for in the new stock. The amount so subscribed was $2,024,900, which, by the original contracts, bore interest, part at 4 and part at 5 per cent. Certificates of stock were therefore issued as provided for in the act, bearing interest at one-half per cent. more than had been previously paid on the amount subscribed. Of these certificates, $176,000 bore interest at 4½, and $1,848,900 at 5½ per cent. The issue of these certificates closed the accounts of the French debt, and it became merged in the domestic debt of the United States. A small amount of this stock was received for lands in 1797. Redemption of the remainder began in the year 1807, and was completed in 1815.”13