To the President and Directors of
the Bank of the United States
January 28, 1792.
In order to a final arrangement on the subject, I have the honor to recapitulate to you the suggestions made by me in our late conference.
First I am authorized to make known the wish of the President of the United States, that the provision in the 11th. Section of the Act constituting your institution may be carried into effect, and to take with the Bank the requisite arrangements for that purpose.1
It is conceived that it will be for the mutual interest and convenience of the Government and of the Bank, to fulfil the object of that provision by one operation. This may be done by a subscription on the part of the Government of the whole two millions of Dollars, and an immediate loan to the Government of an equal Sum.
The terms of reimbursement are prescribed by the law.2 The rate of Interest and the time when the arrangement shall be deemed to have taken effect, only remain to be adjusted. It appears equitable, as it relates to the constitution of the Stock of the Bank, that the interest to be paid in this case by the public should be six per Centum per Annum: This however would not be considered as a precedent for any future loan; the prices of the public funds indicating that it cannot hereafter be necessary for the Government to borrow at so high a rate of Interest.
As to the circumstance of time it is presumed that it will be thought most adviseable to let it retrospect to the commencement of the operations of the Bank.
If this arrangement shall meet the approbation of the directors, the proper form of a contract, to be ratified by the President of the United States, will be mutually adjusted.
The Treasurer3 in conformity to directions from me has begun to deposit the Public monies in the Bank of the United States. The sum already there by his return of this date is 464.177 Dollars and 68 cents. Considerable sums still remain and will shortly accrue in the Banks of North America and New York. It is my intention as fast as it can be done without producing any embarrassment elsewhere, to transfer to, and pass the whole of the public monies through the Bank of the United States and its departments.
Second. It will probably be found mutually convenient to the Government and to the Institution under your direction, to carry on through you the negotiations concerning the public Revenues.
Hitherto the following plan has been pursued with the Banks of North America and New York.
The several Collectors of the Customs have been instructed4 to receive the Notes of those banks in payment for the duties, as they became payable, and to exchange for them any specie which they should have received, between one weekly return and another weekly return; but not to exchange for them any specie which they had once returned to the Treasury as in hand.
The notes which, in either way, have come to their possession, have been remitted to the Treasurer, in moieties under an agreement and instructions copies of which (A & B) are enclosed.
With regard to the specie sums which have been returned as in hand, draughts have been drawn for them by the Treasurer, and deposited for sale in the Banks with direction to sell those upon Georgia and South Carolina at forty five days credit, on North Carolina and Virginia, and the ports on or southward of Patuxent; on the western shore and on the eastern shore of Maryland; except Baltimore, at thirty days; on Connecticut and Rhode Island at thirty days; on Massachusetts forty five, and on New Hampshire sixty days, taking satisfactory Notes for the same, with two good names or two good firms upon them.
It has been lately the practice to pass the draughts deposited immediately to the Credit of the Treasurer as cash; an arrangement of considerable moment to the order of his accounts, with which view it was adopted.
But it has nevertheless been understood that the Credits which were allowed to be given for those draughts, should be at the public risk.
I propose a similar arrangement on this point, with the Bank of the United States; unless the following arrangement in lieu of it should appear preferable to the directors. Viz:
Weekly returns of cash from the Collectors of Customs to be made to the Bank. The monies returned from time to time to be immediately passed to the credit of the Treasurer and of course to be at the disposal of the Bank.
In this case it will be necessary for the Bank to undertake to furnish the monies for all public payments in the several states to the extent of the funds of the Government in their disposal.
The amounts of all Stated payments to be notified to the Bank at certain periods, preceeding such payments, to be regulated between the Treasury and the Bank.
If the first mentioned arrangement should be preferred, it may deserve the consideration of the directors whether they will engage to take the risk of the credits which they shall give, upon themselves on being permitted to take discounts upon the amount of the bills sold for the emolument of the Bank.
Third. The payment of the interest on the public debt at the Bank and its several Departments, by the officers of the institution according to such forms and under such regulations as shall be concerted with the Treasury, will be an accommodation to the Treasury and a security to the public, at the same time that it will probably be also an accommodation to the Institution and to Individuals.
This has been hitherto done by the Bank of North America as to payments on the Spot.
Fourth. The sale of public bills, generally will, if agreeable to the Bank, be committed to it and to its Departments; to be made according to such terms as shall be prescribed from the Treasury.
It will be understood that in every instance, in which public bills or draughts are confided to the disposition of the Bank, the Credits allowed to be given will be at the risk of the Government; (unless where the Bank shall be willing to take that risk upon themselves for the benefit of discounts as before intimated). Nothing more will be required than due discretion as in other cases of agency, and immediate notice to the Treasury of any delay of payment, which may at any time happen.
This last requisite will be deemed indispensable. If any delay happens and immediate notice be not given, the Bank will be considered as thenceforth responsible to the Government for the money, the payment of which shall have been delayed, and any interest which may accrue during such delay shall be for the benefit of the Bank.
Weekly returns of the sales of all bills confided to the Bank and its departments for sale will be expected.
It will be considered as a principle in all transactions between the Bank and the Treasury, that the Government is to bear all losses which may happen from the defaults of its own officers.
It will at once occur to the directors that arrangements, which are calculated to repose so great a public trust in the Institution, ought to be accompagnied with every proper precaution for the public satisfaction.
They will therefore permit me to call their attention to the provision contained in the Sixteenth clause of the Seventh Section of the Act which constitutes the Charter of the Bank.5 If no particular objection occurs a weekly statement will be most satisfactory. To answer the design of the Act it must of course include the several departments of the Institution.
There is but one more point on which I shall at present trouble the Directors.
If it should be convenient to the Bank to undertake the paying and remitting of these compensations, it would be a great and grateful accommodation to the public Officers.
In this case they will be advised to send the requisite powers to such Officer of the Bank as the Directors shall indicate, and a list of the Sum payable to each person will be made out Quarterly, and deposited with the Bank, in conformity to which a warrant upon the Treasurer in favor of the Bank will issue.
All necessary forms will be so regulated as to occasion as little trouble as possible to the Bank.
With very respectful consideration I am Gentlemen &c
A. H. Secy
Sparks Transcripts, Harvard College Library.
1. Section 11 of “An Act to incorporate the subscribers to the Bank of the United States” states that the President of the United States could authorize the Federal Government to subscribe two million of the ten million dollar capital stock of the bank. It also authorized the Government to borrow two million dollars from the bank “reimbursable, in ten years, by equal annual instalments; or at any time sooner, or in any greater proportions, that the government may think fit” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 196 [February 25, 1791]).
2. See note 1.
3. Samuel Meredith.
5. The sixteenth clause of Section 7 of “An Act to incorporate the subscribers to the Bank of the United States” reads in part as follows: “The officer at the head of the head of the treasury department of the United States, shall be furnished, from time to time, as often as he may require, not exceeding once a week, with statements of the amount of the capital stock of the said corporation, and of the debts due to the same; of the monies deposited therein; of the notes in circulation, and of the cash in hand; and shall have a right to inspect such general accounts in the books of the bank, as shall relate to the said statements” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 195).