Alexander Hamilton Papers

From Alexander Hamilton to William Seton, 16 August 1791

To William Seton

Private

Philadelphia Aug 16. 1791

My Dear Sir

I send you herewith an official letter.1 This private one I write as explanatory of it.

I hardly expect that you will be able to procure the debt within the limits prescribed—And yet I do not know what effect the imprudent speculations in Bank Script may produce. A principal object with me is to keep the Stock from falling too low in case the embarrassments of the dealers should lead to sacrifices; whence you will infer that it is not my wish that the purchases should be below the prescribed limits. Yet if such should unfortunately be the state of the market it must of course govern.

The limits assigned for the purchases of Three per Cents and deferred debt are founded on a calculation of the Government rate of interest being 5 per Ct.2 The same rule has not been extended to the Stock bearing an immediate interest of 6 per Ct because the Government have a right to redeem it at par in certain proportions;3 and though to individual purchasers it is worth more than par, because a part only can be redeemed, yet it is not at present the interest of the government to give more than par for it, because of the right to redeem a part. Indeed the law limits the Commissioners in this particular.4

You recollect that the act requires that the purchases should be made openly.5 This has been construed to mean by a known agent for the public. When you make a purchase therefore it will be proper that it should be understood that it is on account of the United States but this need not precede the purchase, and it will be best that there should be no unnecessary demonstration lest it should raise hopes beyond what will be realised.

Yrs.   with great regard

A Hamilton

Wm Seton Esqr.

P S If the prices of Stocks should exceed the prescribed limits, you may retain the letter to the Directors.6

If there are any Gentlemen who support the funds and others who depress them, I shall be pleased that your purchases may aid the former. This in great confidence.

ALS, Mr. Pierce Gaines, Fairfield, Connecticut; copy, in the handwriting of William Seton, Hamilton Papers, Library of Congress.

3The relevant part of “An Act making provision for the (payment of the) Debt of the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 138–44 [August 4, 1790]) reads as follows:

“Sec. 4. And be it further enacted, That for the whole or any part of any sum subscribed to the said loan, by any person or persons, or body politic, which shall be paid in the principal of the said domestic debt, the subscriber or subscribers shall be entitled to a certificate, purporting that the United States owe to the holder or holders thereof, his, her, or their assigns, a sum to be expressed therein, equal to two thirds of the sum so paid, bearing an interest of six per centum per annum, payable quarter yearly, and subject to redemption by payments not exceeding in one year, on account both of principal and interest, the proportion of eight dollars upon a hundred of the sum mentioned in such certificate; and to another certificate purporting that the United States owe to the holder or holders thereof, his, her or their assigns, a sum to be expressed therein, equal to the proportion of thirty-three dollars and one third of a dollar upon a hundred of the sum so paid, which after the year one thousand eight hundred shall bear an interest of six per centum per annum, payable quarter yearly, and subject to redemption by payments not exceeding in one year, on account both of principal and interest, the proportion of eight dollars upon a hundred of the sum mentioned in such certificate: Provided, That it shall not be understood that the United States shall be bound or obliged to redeem in the proportion aforesaid; but it shall be understood only that they have a right so to do.” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 140.)

4This provision is in Section 1 of “An Act making Provision for the Reduction of the Public Debt” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 186 [August 12, 1790]).

5This provision is in Section 2 of “An Act making Provision for the Reduction of the Public Debt” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 186).

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