It is regretted that the pressing business of this Department has not till this time permitted a reply to the questions stated in Mr. Gallatin’s letter of the 14th: of January respecting the new loan certificates of the State of Pennsylvania.1

It has been the uniform construction of the act making provision for the debt of the United States, that to render any certificates receivable on the loan, it was not only necessary that they should have been issued for services or supplies towards the prosecution of the late war; but also, that they should at the time of being subscribed be recognized by the existing laws of the States as evidences of debts by them respectively owing.2

It was not, till lately understood, that any doubts were entertained whether the new loan certificates were in fact debts due by the State of Pennsylvania, in every sense necessary to bring them within the meaning of the act of Congress; it is certain, that no such doubts were suggested to the Treasury.

The Commissioner of loans was accordingly advised in June 1791, that the certificates which had been received of the State in lieu of certificates of the United States were receivable on loan, though at the same time he was instructed, with a view to future convenience, to use his endeavours with the holders, to exchange them with the State.3

In consequence of an explanation which was rendered necessary by the provisions contained in the 18th. section of the act making provision for the debt of the United States, it appeared, that none of the new loan certificates of Pennsylvania had been subscribed to the loan of the United States—that only the sum of about forty thousand pounds of said certificates remained to be exchanged, and that adequate and final arrangements had been made for exchanging the remainder by the State.4

This being the state of the case, it became necessary to determine, whether the payment of interest on the assumed debt of Pennsylvania was to remain suspended, until a sum in certificates of the United States, equal to the amount of new loan certificates remaining unexchanged, was surrendered to the Treasury.

As the provision in the law was expressly designed to prevent interest from being twice paid on what originally constituted but one debt; an event which could not in this case happen; as it appeared inconsistent with equity, that the State should be required to surrender the certificates which were the sole consideration for which they had become indebted to their citizens, when no equivalent had been stipulated therefor by the United States; as such a surrender would defeat the arrangements made by the State, for effecting a reexchange of the outstanding certificates, and a just settlement with their Creditors—as a suspension of the payment of interest on the assumed debt of Pennsylvania, would prove highly injurious to the rights of Individuals. And lastly, as it appeared to me, that the terms and intent of the law could be satisfied without assuming a construction liable to the strong objections before stated, I could not hesitate to determine, that a surrender on the part of the State was not necessary.

I have been the more explicit in my reply to the first question proposed by Mr. Gallatin, as it appears to be the most important; and for the purpose of evincing, that as the case was then presented, no doubt was, or could be entertained, that the new loan certificates might have been subscribed to the loan of the United States. If however the new loan certificates are not by the laws of Pennsylvania to be considered as debts, but merely as receipts for certificates of the United States, which may be demanded at pleasure—then according to the general rule of construction, the new loan certificates of the State will not be considered as receivable on loan to the United States, and will be restored to the Subscribers.

As the engagements of the United States appear to be somewhat implicated in a right decision of this question, I shall take measures to have the case stated to the Attorney General of the United States, for his opinion. At the same time I suggest the expediency of some measures being taken on the part of the Government of the State, for expressing their sense, respecting the certificates in question.5

[With great consideration and esteem   I have the honor to be Sir   Your obedient servant]6