From William Short
Paris April the 4th. 1790
In my letter of the 28th. of January & the postscript of the 31st. of the same month, which I had the honor of addressing you, I made you acquainted with the then situation of the debt due by America to France & the precipitate loan negociated by the bankers1 of the United States at Amsterdam. I informed you at the same time that I did not doubt a stop would be thus put to Mr. Neckers2 negociation with some gentlemen here for the purchase of the American debt.3 I find at present that the loan has produced another effect also which it was natural enough to apprehend. The Minister who was fully disposed to treat the American debt in such a manner as to give the greatest possible facility to Congress, finding now that they have three millions of florins at their disposal, & feeling every day the pressure of present exigencies, views the subject somewhat differently. He went fully into it with me some days ago. After complaining of the conduct of our bankers who had precipitated this loan in order to prevent his completing the negotiation which he had begun for the transfer of the American debt in a manner which would have been honorable & advantageous for all parties & that after having made him propositions themselves which were inadmissible even in the present distresses of the finances, he added that he hoped I would take on myself to give him an order on them for the three millions of florins at present in their hands. He stated the circumstances under which France had made her advances to the United States, & the embarassed situation in which she was at present—he did not doubt that Congress would regard this as the most sacred of their debts, & thought it impossible, now that they had the money at their command, they could refuse to discharge a part of that debt. I easily convinced him of the impossibility of my taking on myself to give such an order. I added my doubts whether the bankers who had undertaken this loan without consulting me,4 would consider themselves bound by my order, & further that not knowing in what light Congress would view the loan undertaken in so unwarrantable a manner, I could not think of engaging in a business of the propriety of which I could not possibly judge without some indication from you. He was satisfied with my observations on this subject. He added that he hoped it would occasion only a small delay, as it was impossible Congress could refuse to acknowlege a loan negociated on advantageous terms, & equally impossible that having acknowleged it, they should refuse to discharge with it a part of their debt to France. He begged I would write to you fully on this subject & mention that he (Mr. Necker) had sollicited it. You will easily perceive from hence Sir the present situation of the minds of ministry relative to our debt & loan lately made in Amsterdam. The decision of Congress will certainly be taken before the arrival of this letter. Still I write it as a discharge of my promise made to Mr. Necker. I suppose it useless to repeat here the advantage which might be derived from Congress having some representative in Europe authorized to control their finances at Amsterdam. The late step of the bankers shews that they must otherwise be exposed to be embarassed by measures which may be entered into subservient rather to private speculations than public good.
I have endeavoured to find out what has been the late rate of loans made in Amsterdam by other powers—one part of the loan is always public, that is to say, the interest which the real lender recieves from the borrower—the lowest rate of this for some time past has been 5 Cent Ann.—but there is another part of the loan called commission, which the parties are always unwilling should be known. This commission is sometimes as high as 9 or 10 Cent. The commission we pay, you know, is much lower & I thought from some enquiries I had made that the King of Sweden in the last loan he made had paid a commission still lower than ours. I have since been assured that he paid a commission of about 5 Cent. From equally good authority I was assured not long ago that the commission was really not more than 1. Cent for all charges. I recieved this assurance twice—still as this is the banker’s secret, it is difficult to ascertain it fully. The person from whom I get the information is a Dutchman of large fortune, & on an intimate footing with the person who procured this loan for Sweden—he is not at all interested in business—he thinks that the United States, from the present rate of their stocks at Amsterdam, & from their present flourishing situation, ought to borrow money on better terms than any power at war & particularly on better terms than Sweden—this however is only the private opinion of a private man. I have not yet recieved your plan of finance proposed to Congress,5 but I have heard that your opinion there is that Congress could borrow in Europe at 4 Cent Ann. The bankers here think that could not be done. Still they all agree that a good commission properly employed would produce a considerable effect, & particularly if Congress begin to re-imburse a part of the principal of their debt.
It may not be improper to inform you that a person left this place a few days ago with a large sum in specie to go & purchase the public securities in America. Although I know of this person only with certainty, yet I have no doubt the present situation of affairs will induce many others to adopt the same plan. As nothing has been done by Congress to prevent these foreign speculations in their funds it is probable they have found it impracticable. Still the circumstance of this person’s departure worthy your notice as it is for indication of a spirit which may become extensive.
Another scheme which has been set on foot here & which regards in some measure the United States has lately come to my knowlege. The Sioto Company which has been for some time selling the lands which they purchased from Congress,6 in order to facilitate these sales, propose to recieve in payment debts due by France to individuals provided the government will recieve of them those sums & transfer to them an equal part of the debt due by the United States to France. It is certain they have been in correspondence with M. Lambert7 the Controller general who seems disposed to adopt the plan. Yet Mr. Necker told me some days ago in speaking of the American debt that no such plan would be entered into. I suppose the reason is that under the pressure of the present moment he chuses to make use of the American debt as a means of commanding real cash rather than discharging a small part of the immense debt at present exigible. The various attempts which are thus making as well here as at Amsterdam to speculate on the American debt shew the necessity of the sentiments of Congress being made known here in order that these circumstances may be adapted to their views. I flatter myself with the hopes of hearing from you ere long on these subjects. In the mean time I beg you to recieve assurances of the sentiments of respect with which I have the honor to be Sir, your most obedient humble servant
The Honble. Mr. Hamilton
ALS, letterpress copy, William Short Papers, Library of Congress.
1. Willink, Van Staphorst, and Hubbard.
2. Jacques Necker, French Director General of the Finances.
5. Short is referring to H’s “Report Relative to a Provision for the Support of Public Credit,” January 9, 1790.
6. In July, 1787, the Scioto Company, which was composed of a group of speculators headed by William Duer, had secured from Congress an option on approximately five million acres of land in the Ohio Valley. Joel Barlow had gone to France as the agent of the Scioto Company, and while there had organized the Compagnie du Scioto to sell the company’s lands.
7. Charles Guillaume Lambert.