From Gouverneur Morris
Paris 31 January 1790
I did expect that in congratulating you, which I do most sincerely, upon your Appointment, I should have communicated a Matter which would have administred much Ease and Convenience to the Affairs of your Department. I learn this morning that these Expectations are frustrated from a Quarter and in a Manner which would excite my Surprize had I not long since acquired the Habit of wondering at Nothing. I will tell you a plain story.
Mr. Necker,1 pressed for Money, had listened to overtures for selling the Debt of the United States,2 and mentioned the Matter to some Members of the national assembly by which Means it became known to the principal Americans and Friends of America here. I own that upon the first Mention of the Matter it appeared to me a Matter of Indifference and so I expressed myself. Our Duty is to pay to such Creditors as may possess the Demand. But further Information placed the Affair in a different Point of Light. It appeared that the Offer was for a small Part at a great Discount, and that the terms of the Bargain were to be debated in the national Assembly and consequently our Reputation sported with. Mr. Short did every thing in his Power, but having no pointed Instructions, could only express the Result of his own Judgment and Feelings. But the minister was pressed for Money and he had the Offer of Money. Under these Circumstances in Connection with a Society of Friends to America,3 I made Mr. Necker an Offer such as in my Conception was honorable to france, to America, and to the Parties. This Proposition (after stating the Amount of the Principal and Interest which would be due on the first of January 1790 and considering that as a new Capital on which the Interest was to run) contains the following Terms “On propose de l’acquerir du Gouvernement, et a cet Effet de l’acquitter en entier par des Rentes perpetuelles de la france montantes a la meme Somme.” This Payment was to be made in the Year 1790 & 1791, consequently so far as france is concerned, the Offer went to a full compleat and entire Payment and that at a much earlier Period is stipulated by the Terms of the Loans themselves. To this was added a further Offer, in Case the Situation of Affairs in this Kingdom should require it, in the following terms “On rechargera de soldes en Argent la Moitie de la dite Reule au prix courant des Effets royaux.” This Part of the offer has no other Merit than to secure to the Minister the Sale of the french Effects if he thought proper and is therefore a Matter rather of Convenience than advantage. I communicated this Plan before hand to Mr. Short and to the Marquis de la fayette who both considered it as an excellent Means of saving at the same time the Honor and Interest of America, while it furnished an useful Resource to france. I shewed it also to Monsieur de Montmorin, who having well weighed and considered it, assured me that he most heartily approved and would do everything in his Power to secure the Success. In the Supposition that this Plan were adopted here Application was to be made thro you to the United States to pay the Amount of this Debt in Obligations for current Guilders, calculating the Exchange at Par. Those Obligations to bear five per Cent Interest and to be paid in Installments, the first of which to commence five Years hence; consequently, as the Society was to bear all Charges of Negotiation &ca. &ca. &ca. it follows clearly that the United States would have obtained the needful Time required for their Accomodation without a farthing of Expence and without the Pain of soliciting it from this Court. It was therefore equally honorable and useful for them. It was honorable also to the Parties. First because they became eminently useful to the Societies of which they are respectively Members. And secondly because the Advantage (if any) which they were to derive, would result meerly from a careful and industrious Attention to the Variations of the Exchange and fluctuations in the Effects, and by the Use of their Funds and Credit to make Investments &ca. &ca. at the proper Times and Seasons which (as far as the Sum of forty Millions of Livres & upwards can go) must necessarily have sustained the Value of the Stocks here. And you will observe that this was clearly stated and understood.
The Proposition was delivered to Mr. Necker on the fifth of December. You will observe that in framing it, we counted upon the Aid of Money Lenders in Holland, and in Preference to others upon the Commissioners of the United States.4 We learnt however that these Gentlemen had (notwithstanding the Remonstrances of Mr. Jacob Van Staphorst who has a real and warm Regard for America) joined with those who made the Offer to Mr. Necker. Thro the Channel that brought us this Information an Interview was brought about between Monsieur de la Chaise5 and Mr. Van Staphorst charged with the final Proposition to Mr Necker, and me. I told those Gentlemen I was convinced that their Offer could not be accepted (by the bye Mr. Necker had told me that the Sum offered was not sufficient) and that if accepted by the Minister it could not be adopted by the Assembly and that they risqued doing great Injury to America without any Advantage to themselves. That I would communicate to them an Offer I had made and which I had great Reason to believe would be adopted. That I would offer them an Interest in it, or a Commission at their Option. That if they should not approve of holding a Concern, I would then lie still and let them make the Most of their Plans without Opposition but asked the Assurance on the Part of themselves and of their Principals (those whom they represented) that if they found their own Scheme impracticable and did not chuse to adventure with me, that they should only not oppose. This being solemnly promised, I stated the Matter to them at large, and they came so fully into my Views as to withhold the Proposition they were directed to make and send an Express on the Subject to Amsterdam. This Interview was on the eleventh of December in the Evening. Some farther Discussions were needful which we had the next Day. I avoided going to Mr. Neckers because I was to do Nothing which would defeat their Plan. On the twenty sixth Mr. Hubbard6 Partner of the House of Staphorst, arrived charged to make their Offer and with a Budget of Reasons in Support of it. This offer was to purchase the 6,000,000 at a Discount of about 11 Ct. It was made immediately, and on the Morning of the 28th. he called on me in Company with Mr. Van Staphorst. I had been repeatedly assured from different quarters that Mr. Necker was ready to treat with me but had not put myself in his Way. The Conversation with Mr. Hubbard was not very long. I heard what he had to say and replied with very great Precision, but so as to change entirely his Opinion. You will not wonder at this when I tell you the Purport of the Objections he had brought forward. 1st. that it was too profitable to the Parties. 2ly too burthensome to france and 3ly might injure the Credit of America by selling the Obligations too low. To the first I replied by a Smile, and the Assurance that I never expected such an Objection from Holland. This disconcerted him. To the second I answered that Mr. Necker understood his own Business and might safely be trusted in making a Bargain: but I shewed him farther that the Bargain was a good one. To the last I made the Answer which I am sure you have already made in your own Mind viz That if the Commr. of the United States could safely be trusted in making Negotiations where the Loss was to be borne by their Employers a fortiori might they be trusted where the Loss was to be borne by themselves. As all this was meerly ostensible, I pressed him hard for the real Reasons, but could get Nothing more than Assurance that there were no other than those abovementioned. As these were clearly refuted, of Course he acknowleged himself converted; but Hudibras7 has very well observed that Who’s convinced against his Will is of the same opinion still. A more effectual Change was wrought by Mr. Necker who on the 2d of this Month refused their Offer. On the Morning of the third Mr. Hubbard called and informed me of this, and in the Afternoon of the fifth he set off for Amsterdam, apparently desirous of bringing all his friends into my Views. The Business went on but slowly in Amsterdam, and Mr. Jacob Van Staphorst was amused from Time to Time and amused me with the Expectation that each succeeding Post would bring their definitive Answer, but this Morning he tells me with very sincere Regret what has been done. The Letter to you on this Subject8 I have read, and will make a few Remarks on it, but shall not be very precise perhaps, as it is only from Memory of what it contained that I write. The Idea of an enormous Profit, admitting for a Moment that such were to accrue would hardly have been with them what Candid calls the sufficient Reason for Refusal, altho perhaps it might have been for Acceptance. But you can judge of the Extent of that Profit, and you will with me smile at the Absurdity of connecting with such Profit a Sacrifice in the Price of American Obligations on the vending of which at or near Par the profit must certainly depend. There is something else which perhaps is more ridiculous still viz that the United States (whose Obligations belonging to numerous Individuals are daily sold on the Change of Amsterdam) should apprehend an Injury to their Credit from trusting a farther Negotiation to Persons whose immediate Interest in supporting that Credit would be so great. They state as a great Difficulty the borrowing of twelve Millions within the Term when on the same Pledge they can borrow twenty. Their Statement of Sums is not I believe very accurate or perhaps my Memory is not accurate. However I am sure the Idea is that the greater Sum can be borrowed more easily than the lesser. There is also the further very extraordinary Idea that it is for the Interest of the United States to pay between four and five per Cent upon a Negotiation, rather than get it done for Nothing. I shall not notice many Expressions which are injurious but make, to their Affectation of Disinterestedness, the answer which Jacob Van Staphorst made to me. It is very strange that they should say all this when they must remember that in Mr. Calonne’s9 time, they offered him only fourteen millions of Livres for one Half of the thirty two and arrearages of Interest, but would not take the whole even at that Rate which is the Reason why the Bargain was broken off. I should make but a poor Excuse for so long a Story if I stopped here; but I will now proceed to give you what I conceive to be the Key of the Riddle.
These Gentlemen are engaged, as I suppose you knew in very extensive Speculations upon the funded Debt of America. They have lately worked this Matter to a most astonishing Benefit. Above three Millions of that Debt which cost them five Shillings in the Pound has been made the Basis of a Loan on which they receive sixty per Cent and are bound to repay it by Installments from the Interest receivable in America. The Dutch however prefer lending at five per Cent to the Congress direct. It is therefore essential to the Success of their Schemes that they should be able to suspend the one Loan always till they have compleated the other, and thus our national Interests are rendered subservient to their particular Negotiations. You will easily see that one such Operation in which there is no Risque is better worth pursuing than the very great Profit they complain of. With this Hint I think you will understand the Matter thoroughly. I must come to a Conclusion.
I did not see Mr. Necker as I expected this Afternoon, because he was gone to Council; however I must suspend (at least) the Matter with him; but you may rely on it that if the Minister at this Court, or any other Agent, be authorized fully to deal in the Business, and if the Court will not readily agree to a new arrangement respecting the Debt to contract with Individuals that the Matter can be yet managed in the Manner abovementioned; provided it be not too long delayed. As to the Loan which the Commissioners have undertaken of their own Heads, you may I think derive great Advantage from it: for in the first Place your Minister or Agent can make Terms with them to that Amount at Pleasure for the Benefit of the United States. And you may in the next Place convert the Money to very useful Purposes by sinking three or four times as much of the domestic Debt and raising the Price at the same time towards Par which will prevent the Success of Speculations by foreigners which are a Loss to America.
LC, Gouverneur Morris Papers, Library of Congress.
1. Jacques Necker.
3. The “Society of Friends to America” was a business association which included at various times Daniel Parker, Robert Morris, Gouverneur Morris, the Van Staphorsts, the Willinks, and Le Couteulx. The partnership existed to obtain control of the American debt to France. The story of its complicated negotiations may be followed in Gouverneur Morris, A Diary of the French Revolution, ed. by Beatrix Cary Davenport (Boston, 1939), 2 Vols.
4. The Dutch bankers, Willink, Van Staphorst, and Hubbard.
5. Ferdinand Grand de la Chaise, a member of the French banking house of Grand and Company.
6. Nicholas Hubbard.
7. “Hudibras” is the title and hero of a mock heroic satirical poem by Samuel Butler (1612–1680). Hudibras was a Presbyterian justice of the Commonwealth who set out to enforce the strict laws enacted by Parliament.
9. Charles Alexandre de Calonne, French Minister of Finance, 1783–1787.