Draft of a Report on the French Debt1
[Philadelphia, June 5, 1793]
The Secy. of the Treasury, to whom were referred by the President of the US. sundry documents communicated by the Min. Plenipy. of the Republic of France, respectfully makes the following report thereupon.
The object of the communication appears to be to engage the US. to enter into arrangements for discharging the residue of the debt which they owe to France by an anticipated payment of the instalments not yet due, either in specie, bank bills of equal currency with specie, or Government bonds, bearing interest & payable at certain specified periods, upon condition that the sum advanced shall be invested in productions of the US. for the supply of the French dominions.
This object is the same which came under consideration on certain propositions lately made by Colo. W. S. Smith who appeared to have been charged by the Provisional Executive Council of France with a negociation concerning it; in reference to which it was determined by the President with the concurring opinions of the heads of department & the Attorney general that the measure was ineligible, & that the proposer should be informed that it did not consist with the arrangements of the government to adopt it.2
The grounds of the determination were purely political. Nothing has hitherto happened to weaken them. The decision on the application of the min. pleny. of France will therefore naturally correspond with that on the propositions of Col. Smith. This indeed is signified to be the intention of the President.
It consequently only remains to make known the determination to the minister, in answer to his application with or without reasons.
The following considerations seem to recommend a simple communication of the determination without reasons, viz.
I. The US. not being bound by the terms of their contract to make the anticipated payments desired, there is no necessity for a specification of the motives for not doing it.
II. No adequate reasons but the true ones can be assigned for the non-compliance, & the assignment of these would not be wholly without inconvenience. The mention of them might create difficulties in some future stage of affairs, when they may have lost a considerable portion of their force.
The following answer in substance, is presumed then to be the most proper which can be given.
“That a proposition to the same effect was not long since brought forward by Col. Smith, as having been charged with a negociation on the subject, by the Provisional Executive Council of France. That it was then, upon full consideration, concluded not to accede to the measure, for reasons which continue to operate, & consequently lead at this time to the same conclusion. That an explanation of these reasons would with pleasure be entered into, were it not for the considerations that it would have no object of present utility, & might rather serve to occasion embarrasment in future.”3
Letterpress copy, in the handwriting of Thomas Jefferson, Thomas Jefferson Papers, Library of Congress.
3. An entry in JPP description begins “Journal of the Proceedings of the President,” George Washington Papers, Library of Congress. description ends for June 6, 1793, reads as follows: “The Secretary of the Treasury sent me a sketch of his report in answer to Mr. Genet’s communication relative to the French debt. This is not according altogether with my ideas, as being rather too dry & abrupt an answer. I sent it to the Secretary of State for his remarks thereon” (JPP description begins “Journal of the Proceedings of the President,” George Washington Papers, Library of Congress. description ends , 140).
At the bottom of his copy of H’s report Jefferson wrote: “The above having been communicated by the President to me, I wrote the following letter.” Jefferson’s letter to Washington, dated June 6, 1793, reads as follows:
“I cannot but think that to decline the proposition to mr Genet on the subject of our debt, without assigning any reason at all would have a very dry and unpleasant aspect indeed. We are then to examine what are our good reasons for the refusal, which of them may be spoken out, & which may not. 1. want of confidence in the continuance of the present form of government, and consequently that advances to them might commit us with their successors. This cannot be spoken out. 2. since they propose to take the debt in produce, it would be better for us that it should be done in moderate masses yearly, than all in one year. This cannot be professed. 3. when M. [Charles-Alexandre] de Calonne was minister of finance, a Dutch company proposed to buy up the whole of our debt, by dividing it into actions or shares. I think mr [Etienne] Claviere, now minister of finance, was their agent. It was observed to M. de Calonne that to create such a mass of American paper, divide it into shares, and let them deluge the market, would depreciate them, the rest of our paper, and our credit in general. That the credit of a nation was a delicate and important thing & should not be risked on such an operation. M. de Calonne, sensible of the injury of the operation to us, declined it. In May, 1791, there came, thro’ mr [Louis Guillaume] Otto, a similar proposition from Schwizer, Jeanneret & co. We had a representation on the subject from mr [William] Short, urging this same reason strongly. It was referred to the Secretary of the Treasury, who in a letter to yourself assigned the reasons against it, and these were communicated to mr Otto, who acquiesced in them. This objection then having been sufficient to decline the proposition twice before, & having been urged to the two preceding forms of government (the antient & that of 1791) will not be considered by them as founded in objections to the present form. 4. The law allows the whole debt to be paid only on condition it can be done on terms advantageous to the US. The minister foresees the objection & thinks he answers it by observing the advantage which the paiment in produce will occasion. It would be easy to shew that this was not the sort of advantage the legislature meant, but a lower rate of interest. 5. I cannot but suppose that the Secretary of the Treasury much more familiar than I am with the money operations of the treasury would on examination be able to derive practical objections from them. We pay to France but 5. per cent. The people of this country would never subscribe their money for less than 6. If to remedy this, obligations at less than 5 per cent were offered & accepted by mr Genet, he must part with them immediately at a considerable discount to indemnify the loss of the 1. per cent: and at a still greater discount to bring them down to par with our present 6. per cents: so that the operation would be equally disgraceful to us & losing to them &c. &c. &c.
“I think it very material myself to keep alive the friendly sentiments of that country as far as can be done without risking war, or double payment. If the instalments falling due this year can be advanced, without incurring those dangers, I should be for doing it. We now see by the declaration of the prince of Saxe-Cobourg on the part of Austria & Prussia that the ultimate point they desire is to restore the constitution of 1791. Were this even to be done before the pay-days of this year, there is no doubt in my mind but that that government (as republican as the present except in the form of it’s executive) would confirm an advance so moderate in sum & time. I am sure the nation of France would never suffer their government to go to war with us for such a bagatelle, & the more surely if that bagatelle shall have been granted by us so as to please and not to displease the nation; so as to keep their affections engaged on our side. So that I should have no fear in advancing the instalments of this year at epochs convenient to the treasury. But at any rate should be for assigning reasons for not changing the form of the debt. These thoughts are very hastily thrown on paper, as will be but too evident.” (ALS, letterpress copy, Thomas Jefferson Papers, Library of Congress.)
Jefferson then stated: “The President concurring with the Preceeding letter, and so signifying to Colo. Hamilton he erased the words ‘which is humbly submitted’ on the former report, & added on the same paper as follows:
“‘If nevertheless the President should be of opinion that reasons ought to be assigned the following seem to [be] the best which the nature of the case will admit, viz.
“‘Two modes of reimbursing or discharging by anticipation the residue of the debt which the US. owe to France are proposed.
“‘The first by a payment in specie, or bank bills having currency equal with specie which amounts to the same thing.
“‘The second by government bonds, bearing interest, & payable at certain specified periods.
“‘With regard to the first expedient the resources of the Treasury of the US. do not admit of it’s being adopted. The government has relied for the means of reimbursing the foreign debt of the country on loans to be made abroad. The late events in Europe have thrown a temporary obstacle in the way of these loans producing an inability to make anticipated payments of sums hereafter to grow due.
“‘With regard to the second expedient, it has repeatedly come under consideration, & has uniformly been declined, as ineligible. The government has perceived, & continues to perceive great inconveniences to it’s credit tending to the derangement of it’s general operations of finance in every plan which is calculated to throw suddenly upon the market a large additional run of it’s bonds. The present state of things, for obvious reasons, would serve to augment the evil of such a circumstance; while the existing & possible exigencies of the US. admonish them to be particularly cautious, at the present juncture, of any measure which may in any degree serve to impair or hazard their credit.
“‘These considerations are the more readily yielded to, from a belief that the utility of the measure to France might not on experiment prove adequate to the sacrifices which she would have to make in the sale of the bonds.
“‘All which is humbly submitted.’” (D, in the handwriting of Jefferson, Thomas Jefferson Papers, Library of Congress.)
The report was again submitted to Jefferson, and on June 7, 1793, he wrote to Washington: “Th. Jefferson has the honor of returning to the President the Report of the Secretary of the Treasury on the proposition of Mr. Genet. He is of the opinion that all may be omitted which precedes the words, ‘Two modes of reimbursing,’ etc., which follows ‘of the reasons that are proper and not offensive.’ The following passage should perhaps be altered: ‘It has repeatedly come under consideration, and has uniformly been declined as ineligible.’ The present proposition varies from that repeatedly offered in the circumstances which are of some importance, and is accordingly made by the minister, viz., the offer to take the payment in the produce of the United States. A very slight alteration will qualify this expression—thus agreeing to the fact without abating the force of the argument” (HCLW description begins Henry Cabot Lodge, ed., The Works of Alexander Hamilton (New York, 1904). description ends , IV, 425–26). An almost illegible letterpress copy of this note may be found in the Thomas Jefferson Papers, Library of Congress.
On June 8, 1793, Washington “Put into the hands of the Secretary of the Treasury the observations of the Secretary of State on his Report on Mr. Genet’s communication & desired him to alter his report in some measure to conform to the suggestions of the Secretary of State” (JPP description begins “Journal of the Proceedings of the President,” George Washington Papers, Library of Congress. description ends , 141).