Alexander Hamilton Papers

To Alexander Hamilton from William Bingham, [25 November 1789]

From William Bingham

[Philadelphia, November 25, 1789]

Dear sir

Some particular Avocations that have engaged my Attention Since the receipt of your Letter of the 10 October, (with which I was honoured) have prevented my Sending an earlier Communication in reply to it.

Inclosed are Answers1 to the Several Queries, which I hope will embrace the Objects you were desirous of being more fully acquainted with.

I have made Some Observations on the Operation of the Impost & Navigation Laws, which I Shall have the pleasure of forwarding to you, when additional Experience & Reflection will admit of my bringing them to a more matured State.

A Disposition to comply with your Desires, has induced me to convey my opinions freely on the Finances & Debts of the United States. It is a Subject that requires a deeper & more accurate Investigation than I can possibly give it.

The Necessity of funding the public Debt as Soon as possible, is So prevalent an Idea; & So well founded, that it Scarcely requires the Aid of Argument to Support it.

I take the liberty of inclosing Some Reasons in favor of the Measure, that were published at a Period, when an Union of Sentiment on this subject was not So distinguishing a Feature in the public Body.

I think it will be necessary to ascertain with the most accurate precision the Amount of the public Debt, arising out of established Claims.

That Ways & Means Should then be adopted to provide by Taxes, a Sufficient Sum punctually to pay the Interest of that Debt, which, (when the public Creditors have agreed to convert their Demands into Government Annuities) should be mortgaged to them for this Specific Purpose.

Should the Revenue fall short of the necessary Sum (& no means can be devised to make up the deficiency,) it should be divided proportionally amongst the Claimants

Should there be an Excess, the Surplus Produce Should be reserved in the Treasury of the United States, for the purpose of being applied to the discharge of part of the Capital of the public Debt.

I think it very impolitic to limit the operation of the Revenue System, that is to provide the funds for Satisfying the Claims of the public Creditors, as has been done by Congress in the Case of the Impost Law;2 as it will evidently be accompanied by an injurious Tendency, as it respects public Credit.

Other Nations are in the practice of mortgaging their revenues to their Creditors.

If we offer a less Substantial Security, we must Submit to a consequent Depreciation in the Value of our Funds; This will essentially tend to raise the Market rate of Interest, of which the public Funds are generally the Index. Now, a great Object of Government should be to lower the Interest of Money, which, independent of other Advantages (as connected with the flourishing State of Agriculture, Manufactures, & Commerce,) would enable the Public to borrow on Such Terms, as would admit of extinguishing part of the Capital of the Debt, if its Creditors would not assent to a reduction of their Interest. A Government should therefore pledge every security it can offer, to engage the Confidence of the public Creditors, which, if once impaired, the pernicious Effects can be felt in all its future Dealings.

The Conduct of G Britain on this subject is very exemplary. When the various Duties & Customs, Excise &c, were by the Act of 1787 consolidated, a Sufficient Portion of their Produce was Set apart to pay the Interest of the public Debts, before any Monies could be issued for any other Purpose whatsoever; And So attached was the Administration to Satisfying the most Scrupulous of the public Creditors, that those Classes of them which had their Claims funded on Duties arising out of Specific Articles, were not compelled to abandon their particular Appropriations, & place their Security on the consolidated Fund; But, (if they thought it adviseable to embrace it) an opportunity was given to them to Signify their Dissent, in Books that were kept open for a limited Time, at the Bank, for that purpose.

I do not See why the Jealousy of the House of Representatives should be awakened, or their Fears excited, by the Creation of Funds, by Laws which should be commensurate in their Duration, with the Necessity that gave Birth to them, & with the Engagements they are meant to relieve.

The Credit of the Funds must essentially depend on the permanent Nature of the Security; & if that is not to be relied on, they will fall in Value, the disadvantage of which, Government will experience by the payment of an exorbitant Interest, whenever it is compelled to anticipate its revenues, by the Negotiation of domestic Loans.

The public Debt for obvious reasons should be consolidated, & an Uniformity of Appearance prevail in all the public obligations. To effect this purpose, & as the preliminary Step towards funding the Debt, would it not be proper to make known, by a resolution of Congress,

That, all Persons possessed of established Claims on the United States, might on or before (Such a Day) carry the same to the Auditor of the Treasury, who should compute & indorse thereon, the Interest due on the Said Claims respectively,

That, on application to the Treasurer of the United states, they should exchange the Same, by the Treasurer giving a Certificate or Certificates, in lieu thereof, expressive of the Said applicants being entitled to the Amount of Said Claim, & Interest added thereto, in Capital Stock of the United states, bearing an Annuity at the rate of Six per Cent per Annum. I mention, “Interest added thereto,” because it is always the practice in England to pay off the Interest in the aggregate, by annexing it to the Capital, whenever a public Debt is funded. The Said Annuities to be redeemable, whenever the Congress of the United States, shall find it expedient to pay off the Same; which Annuities should be charged on certain Specific funds (to be enumerated) established by Congress as a security therefore.

By conditioning that the Annuities should be redeemable, Government will have it in its power to take Advantage of the Fall of Interest below 6 ⅌ %. Great Attention should be paid to give Satisfaction to the public Creditors, by making Such Proposals to them, as are consistent with the Principles of Justice & Equity, especially, as they will constitute an essential part of the monied Interest of the Country to whom Government will often be compelled to have recourse; To take Advantage of their Necessities, would be to lose their Confidence. It will be recollected that their Demands on the United states are for Specific sums due in Specie, for the reimbursment of a Capital borrowed, & not for the Payment of an annual Interest.

However, there is every reason to believe that they will readily engage to commute their Claims for Annuities properly Secured, they will thereby relinquish their right to the Demand of Capital, & will only be entitled to the regular Interest, untill it Suits the Convenience of Government to extinguish the Principal.

By effecting this Object, Government will gain a very essential Point, for it is the Practice of all Countries that attend to the Support of their Credit, whenever a Debt is paid off by funding, to offer the Creditors the funds that are meant as a substitution for payment, at the Market rate; otherwise, it would not be Supposed that the Proposals conveyed the offer of an equitable equivalent; for the Value of Stocks does not depend upon what price they in reason & fair Calculation, ought to bear, but on public Opinion, & what the Purchasers in the Market, chuse to give.

The Navy Bills,3 part of the unfunded Debt of Great Britain, bear 4 ⅌ % Interest after Six Months have elapsed from their Date, whilst in that Situation, But it is injurious to the Credit of the Country that they Should remain without appropriated funds for their Support, as it exhibits the appearance of Want of Sufficient Resources to provide for them, which has an unfavorable Effect on the public Debt; Government is therefore compelled to make provision for them, not by offering the Holders to transpose their Claims into a four per Cent fund; but by proposing a Sum in Annuities, whose current Price would produce the Amount of their respective Demands; In the Year 1785, when the Navy Debt was funded, £111.8 of a five per Cent fund was given to every Holder of £100, (including Interest as well as principal) of Navy Bills, the Current rate of five per Cent fund being then 89 3/4 ⅌ %.

The United States will not readily be induced to fund their Debts on Such Terms, owing to the Current low price of a Six per Cent Fund, whose intrinsic Value must always depend on the Market Rate of Interest, connected with the ordinary Profits attendant on the Employment of Stock, And this too, on a supposition, that the Resources of the Country appropriated by Government, are abundantly Sufficient to provide the necessary Sums to pay the Interest regularly.

According to this Criterion of the Value of Stock, which I think may be relied on, a six per Cent Fund is not worth more at present than about 60 ⅌ %, however well the Interest may be Secured.

The Eagerness of the public Creditors to turn their securities into available Property, is a Circumstance that will greatly facilitate the operations of Government; It will induce them (almost universally) to Subscribe to a Commutation of their Claims for a Six per Cent Fund, at par, altho it would produce a far inferior Sum in the Market; they will [be] led to accept these Terms from the Consideration of Six per cent being the Stipulated Interest engaged to them by the United States, & of the Inability of Congress to provide funds for the extinction of the Capital.

But an Idea has been Suggested, (tho it has made little Impression) that Government might lessen its Expenditures, by lowering the Interest on the public Debt to 5 ⅌ %.

Such a Plan may have its adherents amongst those, who do not consider the Nature & Value of public Credit; It has been Supposed that it might be effected, by having recourse to an Expedient, that would not carry the Appearance of a compulsory Proceeding which should be an Offer on the part of Government to compound the Demands of the public Creditors for a five per Cent Fund; But this would be opposed to every Principle of a sound & magnanimous Policy.

The public Creditor would in this Case be exposed to the Alternative of accepting the proposal of Government, or of waiting an indefinite Time, without payment; It resembles the offer of a Bankrupt Debtor to his Creditors requiring that they would compound for less than their just Demands, & give him a Discharge, as he is incapacitated from paying the full Amount of his obligations.

If the public Creditors of the Country agree to accept a six per Cent fund, at par, for the Amount of their Demands, which Fund from the scarcity of Money, the State of public Credit &c, is not worth intrinsically more than half the Amount of their Claims, Government should be well Satisfied, & not attempt to grasp at greater Advantages to the Injury of the Holders of its obligations; for a reduction of the Interest proportionally lessens the Value of the Principal.

Another objection to the offer of a five per Cent Fund as a Substitution, is, that there would be a large Proportion of the public Creditors, who would refuse to Subscribe; The Minister of Finance would consequently be very much fettered in his Operations, by an immense Sum of unfunded Debt, which would be floating in the Market, & would tend greatly to depress the Stocks.

Besides, those who were not willing to Subscribe, but on the contrary decidedly rejected the proposed equivalent, would be clamorous for the payment of their Demands according to the Tenor of the Engagements of the United States; for their rights would continue unimpaired, & the national Faith is pledged for the inviolable Preservation of them.

If government takes advantage of the Distresses of the Times & a general Want of Confidence, in order to pay a Debt which it has justly contracted, at a reduced Value, it can never be expected that it will be able to make new Loans on advantageous Terms, whenever a critical Emergency may impel it to have recourse to them.

The Conduct of G Britain in a Similar Situation conveys an important Lesson & is made Known by an Act of the 8 & 9 William 3d Chap 20 sect 1.4 The Injury which that Country Sustained by the low State of the public securities, owing to the Want of Funds to Support a regular & punctual Payment of the Interest, induced the Necessity of that Act; part of the 1st section of which sets forth, “that whereas by reason of the deficiencies of Several of the Aids &c, which have not or will not be Sufficient to answer the principal & Interest charged thereupon, & by reason of the remoteness of the Course of Payment of the Tallies &c, the Owners of the Said Tallies are frequently necessitated to Sell & dispose of them at a great Loss or at an excessive Discount, whereby the public Credit is very much prejudiced & impaired, & the Trade & public & private affairs within this Realm do exceedingly Suffer—& whereas it is computed that the Deficiencies &c may amount to the sum following—Vizt—

“We your Majesty’s most faithfull & loyal Subjects, having duly weighed & considered the premisses, & being desirous to raise Such Aids & Supplies, & to use Such proper Methods as may make good the Deficiencies, & raise the public Credit, have cheerfully & unanimously given & granted, unto your Majesty, the Supplies, Impositions, & other Duties, hereinafter mentioned &c &c”

Here was no attempt to Subtract from the Claims of the public Creditors, altho the public obligations had fallen to a Discount of 40 to 60 ⅌ %. Indeed the most intelligent Writers of the Day concur in opinion, that if this Step had not been taken, public Credit would inevitably have been destroyed.

No Part of the fiscal Administration of the Chancellor of the Exchequer5 redounded so much to the Advantage of the Country.

From the Year 1690 to the Date of this Act (1697) 8 per Cent was uniformly paid for all Loans of Money but in 1699 Interest was reduced as low as 5 ⅌ % & continued at that rate untill a new War6 raised its Value from the Demand it occasioned.

Interest will always be reduced when the public Debt of a Country is well funded, which brings into the Market a Quantity of circulating Medium, readily transferable, & which represents all the alienable Property of the Country, almost as well as Specie; Was it not for the Funds in G Britain, real Estate (which is generally Sold thro the Medium of the Funds) would fall to 20, instead of 35 Years Purchase; In the Year 1783, when the 3 per Cent Consols7 fell to 53 ⅌ %, from a general Distrust of the resources of G Britain, there was a temporary Stagnation in the Market, & very little Stock was bought or Sold; The Consequence was, that the Price of real Estate lowered in Value, & fell from 35 to 25 Years Purchase; This Shows how much the landed Interest will be benefited by the Circulation of a funded Debt.

It will probably be alledged, as a popular Argument in favor of lowering the Interest, that many of the Claimants purchased the public securities on very low terms, & can afford to Submit to a reduction in their Value

But Such reasoning is devoid of foundation; for the public securities, like other Property, always brought their Market Price. The Scarcity of Money had reduced even real Property 40 ⅌ % below its Standard Value before the War; but the public obligations had Superadded thereto, another Cause of Depreciation, which was a Want of Confidence in the Power of Government to command Sufficient resources to do Justice.

The Purchaser of them may be resembled to a Dealer in a Lottery, where there are many Blanks to a Prize. Would it be just to contest the payment due to the fortunate Ticket because it had comparatively cost a Trifle.

The Interest of the public Debt was never reduced in England, but when the Market rate of Interest was lower than that paid by the public to the Stockholders

This naturally occasioned Stock to rise above Par, which gave Government an opportunity of borrowing Money on lower Terms, than it paid to the public Creditors; they were induced from this Consideration, rather to assent to a Diminution of their Interest, than receive the Capital of their redeemable Annuities; G Britain now pays but 3 ⅌ % Interest, for money originally borrowed at 8 ⅌ %; A Similar operation will probably take place in this Country at no distant Period, when Confidence is restored, & the representative Medium is augmented by a more extensive Circulation of Paper.

The Interest of Money is perpetually diminishing, with the increasing Wealth & Commerce of a Country, of which favorable Circumstance the public is expected to avail itself.

But it is not alone Sufficient to provide for the payment of the Interest of the existing Debt; Every Operation of Finance ought to be directed to the wise pursuit of gradually redeeming the Capital; The Impression which it gives to the World, from the disposition & Powers which it manifests, is very favorable to Credit; Besides, this Country is happily circumstanced to Support Such a System, when it is considered, that an Increase of Population & consequently of Industry, of internal Consumption & external Commerce, will naturally Swell the Produce of the Taxes beyond the Estimates of a moderate Calculation; this annually progressive Augmentation may be carried to the Credit of the Sinking Fund.

Indeed, if Congress determine that the Country shall experience all the Benefits that flow from the Establishment of public Credit by a permanent Provision for its Maintenance, it will be essentially necessary to lay Taxes to Such An Extent, as to constitute a Surplus. to be applied to the Diminution & Discharge of the public Debt; I was witness to the Advantages resulting from Such an Arrangement when I was in England,8 & can therefore undertake warmly to recommend the Measure.

The immense Debt that Country had contracted in the prosecution of the American War,9 combined with the Injury She would Sustain by the Loss of the Monopoly of the Colony Trade, impressed all those who were interested in her funds, with a Want of Confidence in her resources to do Justice to all her Engagements. This Circumstance begat a general Competition amongst the Stockholders, both foreign & domestic, to dispose of their Interest in the Stocks.10 This occasioned the Consolidated 3 per Cents to fall to 53 ⅌ %.11 The affairs of the Country assumed a deplorable Aspect—landed Property fell, & So great was the general Scarcity of Money from Want of Confidence, that the Court of Chancery would not Suffer a Mortgage to be foreclosed, on Account of the State of Credit, & the lowered Value of Lands.

When Mr Pitt came into Administration,12 he Saw the deranged State of the national Affairs, & the Necessity of restoring public Credit.

By a Variety of Skillfull Operations in Finance, he not only Secured a Sufficient revenue to pay the regular Interest of the Debt, but obtained a considerable Surplus, which constituted a Sinking Fund of a Million ⅌ Annum, which by Act of Parliament was put out of the Power of Administration, & was vested in Commissioners, in Trust for the purpose of being invariably applied to the gradual Extinction of the National Debt;13 This Stroke of Finance operated like a Charm; As Soon as the Resources of G Britain were discovered to be So far beyond the actual Demands for Interest, as to admit of annually extinguishing so large a Portion of the Capital, public Credit revived, & all the Train of Advantages that result from it, accompanied it; the Consolidated 3 per Cents rose to 79 ⅌ %; Navy Bills had been at 25 ⅌ % discount, which must always happen when considerable Sums of unfunded Debt are floating in the Market;14

New Taxes were laid, & they were funded, which raised them to a Value proportional with other Stock; Money then flowed into the Country in Sufficient Quantities to Stock the Demand, & every Channel of Industry was Supplied.

It is inconceivable what a Progress, a respectable Appropriation of Revenue would make in the Diminution of the Debt in a few years, by the operation of compound Interest.

In our Case, it would perhaps be expedient to hold out the Sinking Fund as a collateral Security to the public Creditors, that in Case the Taxes should fail, their Annuities would Still be regularly paid.

Objections will probably be made to a Sinking Fund from the Circumstance of the Increase of Taxes, that it will occasion—but there is no Danger of their being oppressive; for if Skillfully imposed, they will in Some measure beget the Means of paying them; The Exertions of Industry increase, in proportion to the Demands that are made upon it; these Demands arise from Taxation, which increases the Difficulty of obtaining the Means of Subsistence; Now every political Arrangement that induces an additional Employment of Industry tends to increase the Capital Stock of Society, by the necessary production of increased Labor.

Taxes, when used for this Stimulating purpose, do not impoverish the Society by diminishing the common Mass of Property; they may only be Said to interrupt the Circulation to the Extent of the Sum drawn from the People, combined with the Time that elapses, before it returns into the common Mass.

G Britain affords a conspicuous Example of the Truth of these Observations. Her Revenue has more than kept pace with her Expenditures, notwithstanding the heavy Weight of Taxes that she has been compelled to Support, Since the Period of the American War.

With respect to Taxation, I think the Mode should be So varied, as to admit of embracing every contributive faculty of the Community, & to make (as far as practicable) every Class of Citizens Support, proportionally with their Circumstances, the federal Treasury

To Select Such Taxes as would be the most productive & least burthensome on the Society, requires a perfect Knowledge of their various Interests & Pursuits.

The Tax by Impost, if carried too far, would Subject the Merchants to an unequal Burthen, & would probably occasion Some clamorous Complaints on their Part.

It is a received opinion, that the Consumer pays the Tax, as blended with the Price of the Commodity he purchases; But this Observation will only apply, when there is no possiblity of avoiding the Tax; for illicit Dealers will constantly elude the Vigilance of the Custom house Officers, will enter into Competition with the fair Trader, & will be able to undersell him, by the difference of the Amount of the Duties; In proportion as the Impost is heavy the Temptation to escape it will increase, & the Smuggler will find additional Incitements to exercise his Contraband Practices.

The present Period is very favorable for carrying into Effect a System of Taxation, as the Affections of the People are So riveted to the new Government, that their Mind will be easily conciliated to all its operation

The Representatives of the People will therefore not be discouraged from performing their Duty, in creating efficient Funds by Taxation, to the full Extent of the national Demand.

The Field for Taxation is as unbounded as the Wants of Society but Some Taxes are less exceptionable than others—amongst Such may be reckoned,

a Tax on all legal Instruments of legal Procedure in the different Courts of Justice

a tax on the Transfer of real Property, in proportion to its Value, to be levied on the Acts of Conveyance, either by the Intervention of Stamps, or on the Registry thereof in public Offices.

a Tax upon Bonds & Mortgages.

a Small Tax on the Transfer of the Stock of the United States; which would be popular & productive, paid without murmur, & collected with facility.

a Tax on Tavern Licences, & on Licences to retail Wine, Beer, & Spirituous Liquors.

a Tax on Policies of Insurance.

an half years Income of all Persons, to the Extent of public stock they might die possessed of—to be established, as a Condition at the Time of Subscribing into the Funds.

all articles of general Consumption, Such as Wines, Rum, Brandy, Sugar, Coffee, Tea, Chocolate, Salt Pepper &c might be made to contribute, (by Excise or otherwise) much more abundantly, without any oppressive Tendency on the Consumption of the People, & by Such means equalize Taxation amongest the different Classes of Society.

It will be impossible to estimate the Amount of the Taxes, with any Degree of Precision, as it must depend on a Variety of Contingencies; It must be left to Experience to discover their Defects, when new Regulations may be applied to assist their Collection, & increase their Produce.

In Submitting a System of Taxation to the House of representatives, as part of the official Duty of a Minister of Finance, I do not know in what manner the various objections that will naturally be made to So complicated a System, will be answered, without He is personally present to obviate them, or without Some Persons coincide with his View; & from being acquainted with all his Plans, (thro’ all their Connections & Combinations) are fully prepared to advocate them.

To propose Taxes, is at any rate an arduous and invidious Task; as it is impossible to Select those, that are free from Solid & manifest Objection, considering the various Interests of the different States.

However, a Zeal for the national Credit will necessarily impel the Government, to bring the revenue to Such a State, as will enable it, after all the Demands of the public service are Satisfied, to afford a Surplus, which if applied to the gradual Diminution of the national Debt, will hold out a Hope of future relaxation from Taxes, & will place the Country in a situation to Support that Rank of Power & Grandeur, which She is entitled to enjoy.

Scarcely an Instance occurs in parliamentary History of an opposition to the Extent of Taxes, which a Minister deems necessary, to Support the national Credit.

But as an Accumulation & Increase of Taxes forces money out of its natural Circulation, as representing Industry & carries it into a new Channel, towards other Objects of Exchange, which the System of public Contributions opens to it, (thereby raising Interest & occasioning a diminished Production & Consumption) it becomes necessary for a Statesman, who has recourse to the Expedient of augmenting the revenue of the Society by Taxes, to endeavor, by all possible Means, to increase the Quality of Circulating Medium.

This may be effected by turning a great Portion of the Gold & Silver of the Country into an active & productive Stock, by taking it imperceptibly out of Circulation, & Supplying the full Demand, by Substituting Paper to perform their functions, & become the dead Stock of the Community.

At present Gold & Silver Supply almost universally the representative Medium of Exchange; & it costs the Country a vast sum of productive Labor, to purchase the necessary Quantity of this expensive Medium, to discharge the Duties of Circulation.

In this point of View, the fiscal Administration may derive immense Advantages from the Operations of a national Bank.

But the Capital of this Bank must be extensive, in proportion to the Demands that will be made on it, for the purposes of Circulation; Indeed, it is the Duty of Government to take care, that the Interests of the Society are not endangered; & therefore to provide, that the Funds of Such an Institution should be Sufficient to answer all its Engagements, & thereby Secure the public Confidence in the fullest Extent; especially, as the Government will give a Sanction to the Circulating Notes of the Bank, by receiving them in Taxes, Duties &c.

From the Credit they will thereby obtain, they will probably remain a long time Suspended in Circulation, to the great Benefit & Emolument of the Bank; & this would more peculiarly be the Case in this Country, as the Scene of Circulation would be So extended, & Some parts of it, So remote from the local Position of the Bank.

A close & intimate Connection will naturally take place betwixt the Government & this Institution, cemented by the Strongest Ties that can bind them together—viz—a common Interest.

To carry into proper Effect this essential Object, might not a more extensive Superstructure be engrafted on the present Establishment of the National Bank,15 by an Enlargement of its Capital Stock?

This might probably be accomplished in various Ways; but that, which would be attended with the most success, considering the state of the Resources of the Country would in Some respect resemble the following Propositions—Vizt

That the Capital Stock of the Bank of North America should be enlarged, by new Subscriptions, to the Extent of 4 or 5,000,000 Dolls That previous thereto, a fair & accurate Account should be taken of the present Capital Stock of the Bank of No America, by computing the Principal & Interest owing to it, (that may be estimated recoverable Property) over & above the sums it may be indebted; & if it appears there is an Excess beyond its original Capital, the same shall be divided amongst the Proprietors of the old stock, or their legal representatives, according to their respective Interests therein; and, if the present Capital should on an accurate Adjustment prove to be less than the original Stock, in that Case, the Members should be bound to contribute as much, as will make up the Deficiency.

That all Persons, as well Foreigners as Citizens, Bodies politic or corporate, may Subscribe any Sum or Sums of Money for the purpose of enlarging the Capital of the Said Bank, at the rate of £115 for every £100 of Bank Stock which Sums Shall be accounted to the Corporation in the Manner following; Vizt. five sixths of the Said subscription to be paid by the Assignment of that Proportion in the Government Securities, & the remaining Sixth part shall be made good by the Payment of So much Specie or Bank Notes.

That out of Funds provided for the purpose Viz—(here enumerated) there shall be paid half yearly to the President & Directors of the Said Corporation, So much as will fully make up to them an Interest at the rate of Six per Cent on the Sums So Subscribed in the securities of the United states, to be divided amongst the Proprietors of the Bank stock, according to their respective Proportions.

That in Case, at any Time the joint Stock of the Said Corporation Shall be So diminished as not to afford a Sufficiency to answer their just Debts, the respective Proprietors shall be liable, in proportion to the Extent of the Dividends they have from Time to Time received, in Virtue of their respective shares of Bank stock; to be appropriated to the Extinction of the just Demands against the Said Corporation.

That the Bank Bills or Notes emitted, or to be emitted, by the Said Corporation, Shall be received & taken by all Receivers & Collectors of Taxes, Duties &c, & in payment of all the Claims whatsoever of the United States, as So much Specie Gold & silver.

The new Subscription is fixed at £115 for £100 Stock as there is about that difference betwixt the present Dividends of the Bank (7 ⅌ %) & the Amount of the Annuity to be received from Government.

It is probable that the present Proprietors would think it an unfavorable Arrangement to pledge their Dividends on an equal Footing with Government Annuities, as the former have been always punctually paid, & the latter would be exposed to the adventitious Produce of the Fund, destined for their support.

To remedy this Objection, it might be provided that the subscribers to that part of the new Stock, which consisted of public Securities, should only be entitled to a Dividend thereon proportional to the amount of Annuities, as received from Government; The Produce of Taxes to pay the Government annuities, would (as has already been remarked) depend on Contingencies. In Case they should be insufficient to answer their destined purposes, it would perhaps become expedient to issue Treasury Notes, bearing a Small Interest, for the Circulation & Credit of which, a provision Should be made by engaging the Bank to receive & pay them, (when called upon) on certain Terms of competent recompence; the Time of cancelling & discharging the Same to be fixed previously, & a Sufficient fund to be provided for repaying the Amount of Principal & Interest.

An Engagement should be entered into, on the part of Government, that no larger Sums Should be issued, than what the President & Directors of the Bank think proper & prudent to give a Circulation to.

Some temporary Expedients of this Nature will be necessary to Supply any Deficiency in the Taxes, & enable the Government to Support inviolably its Credit.

I have ventured thus freely to impart to you my sentiments on Some of the most interesting Points of National Attention. I can have no expectation of throwing new Light on Subjects, which your deeper Investigation must have fully penetrated.

I know no subject that is So little understood or has been less profoundly examined by the legislative Characters of America, than that of Finance: & yet there is no one that So deeply involves the essential Interests of the Country.

Much Dependance is placed on your Exertions, & I am happy to find that there is a general Disposition, to give you Credit by Anticipation, for the Soundness of your Systems, & the Honesty of your Views. I hope for the Credit of the Country, a corresponding Character will exist in the federal Legislature, that will induce it, to patronize your Plans, & make Suitable provision for carrying them into Effect.

I have the Honor to be with much esteem & Regard   Dear Sir   Your obed hble serv

Wm Bingham

P S   I Shall be very happy of a Leisure Moment to be informed, how far any of my Sentiments coincide with yours.

Honble. Alexander Hamilton Esqr

ALS, Connecticut Historical Society, Hartford.

1Bingham’s “answers” are printed at the end of his letter as an enclosure.

2The last section of “An Act for laying a Duty on Goods, Wares, and Merchandises imported into the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 24–27 [July 4, 1789]) provided that the duties imposed by this act should remain in force until June 1, 1796, “and from thence until the end of the next succeeding session of Congress which shall be held thereafter, and no longer.”

3Short-term notes drawn by the Admiralty on the Treasury and payable at the Bank of England, but unsecured by any parliamentary vote of funds.

4The various parts of this act, which was introduced by Charles Montagu, were debated and passed during late 1696 and early 1697.

5Charles Montagu was Chancellor of the Exchequer from 1694 to 1699. He later was created the first Earl of Halifax.

6Queen Anne’s War, which began in 1702.

7The British funded government securities, also known as consolidated public securities.

8Bingham had been in England from 1784 to 1786.

9The war added £115,654,000 to the debt. By January, 1783, the total debt was £215,717,709.

10The causes of the economic crisis of 1783 were not so simple as Bingham represents them. See Sir John Clapham, The Bank of England, A History (Cambridge, 1944), I, 253–56.

11They reached this low point in January, 1784, and rose during the next few months to 58.

12On December 19, 1783, William Pitt was appointed First Lord of the Treasury and Chancellor of the Exchequer.

13The act of May 26, 1786, which established the sinking fund, did provide, however, that a ministry might borrow from the fund.

14In 1784 the unfunded debt amounted to about £14,000,000. Pitt funded £6,600,000 of the floating debt by forming it into stock bearing five percent interest and issuing it at 93.

15The Bank of North America of which Bingham was a director.

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