Alexander Hamilton Papers

Report to the Governor of North Carolina, [31 July 1794]

Report to the Governor of North Carolina

[Philadelphia, July 31, 1794]

The Secretary of the Treasury on the Letter from the Governor of North Carolina1 of the 25 of February last and the accompanying documents referred to him by the President2 respectfully makes the following Report.

William Skinner Commissioner of Loans for North Carolina, by two letters dated at Hillsborough the 22 of July 1791, informed the Secretary of the Treasury of certain resolutions of the Executive of that State, which bore date the 20th. of July 1791 for authorizing Francis Childs, Comptroller, to subscribe to the Loan then depending in certificates of State debt, on or before the last day of September following, all such Certificates of the debt or other public securities of the State of North Carolina as then were in his possession or might come into his possession before the said day.

The Secretary by a letter of the 12th. of August, in reply to those letters, instructed the Commissioner of Loans to receive provisionally the Certificates which should be offered by the State; giving a receipt expressing that they were to be submitted to the Secretary of the Treasury for his decision. This was done in order that the question might be decided upon mature consideration with the aid of the advice of the proper Law Officer. It appeared advisable to act with circumspection in a case which affected the pretensions or claims of all the States severally.

But the Commissioner proceeding on a former intimation of an opinion from the Treasury, that the Certificates or Securities of a State once discharged or redeemed could not rightfully be subscribed to the Loan, refused to receive the subscription offered on behalf of the State, which he announced in a letter of the 11th. of August.

And by one of the 29th of that month he transmitted information, that an attempt had been made to impose on him a subscription, as on account of an individual, of Certificates, which in fact belonged to the State and were to accrue to it’s benefit.

On the 8th. of September, the Secretary wrote a letter to the Commissioner recurring to and confirming the instruction of the 12th of August. In that letter, he animadverted upon the deceptive transaction, which had been announced by the Commissioner, and directed him to make it known to the Governor, as a matter which it was not doubted he would disapprove and take measures to prevent a repitition of.

The Commissioner in consequence of the before mentioned instruction of the 12th of August, on the 30 of September following, accepted a provisional subscription on behalf of the State amounting to 409570 Dollars and 17 Cents, that is to say, subject to the decision of the Secretary of the Treasury. This acceptance was communicated by a Letter of the 15th. of October, which letter confirmed the fact of an attempt circuitously and deceptively to impose a subscription, as on behalf of an individual, which was in reality on behalf of the State; naming Duncan McRae as the agent in this dishonorable proceeding, who appeared as the Attorney of Duncan McAulan. The letter from the Governor to the President speaks of this transaction, as of a sum of 22415 Dollars and 10 Cents which “were lodged in the hands of the Commissioner of Loans by a certain Duncan McAulanand by him transferred to the State of North-Carolina.

On the 2d. of November, the Secretary requested the opinion of the then Attorney General of the United States3 on the question, upon which the validity of the subscription by the State of North-Carolina depended, which on the 9th. of that month was received and is to this effect. That certificates issued by a State, which had been redeemed by that State, could no longer be considered as a debt due by the State and were therefore inadmissible on the Loan.

In conformity with this opinion agreeing with that entertained by the Secretary on the maturest reflection, and as is believed unquestionably just, the Comptroller of the Treasury, by direction of the Secretary, on the 16th. of november informed the Commissioner of Loans of North Carolina,4 of the opinion of the Attorney General and directed him to surrender the Certificates, which had been deposited, to the State; having first indorsed upon them that they had been presented on Loan and rejected.

The motive to this last precaution was plainly this. It appeared, by direct official information, that some agent of the State had so far forgotten what was due to it’s character and to the rules of fair proceeding towards the Government of the United States, as to have attempted, in an indirect and clandestine manner, to impose on the officers of the latter, as Certificates belonging to an individual, and consequently unredeemed and intitled to be subscribed to the Loan, Certificates which in fact belonged to the State, and which consequently had been redeemed and were not intitled to be subscribed to the Loan. It was thought adviseable by some memorandum upon each of these certificates to prevent the possibility of a future consummation of the reception, which had once been detected and defeated. It was certain, that no injury to the interest of North Carolina could arise from a memorandum of that kind on papers which were the mere vouchers of a debt extinguished; a character which could in no wise be impaired by such memorandum. It was not foreseen, that the sensibility of the State could have been excited by a precaution calculated to guard the United States from imposition (which had been once attempted) by the infidelity of some of it’s agents: and it is confided, that on a review of the circumstances, with the aid of more accurate information, the displeasure of the State will find no other object, than that infidelity; the only thing in the whole transaction which has a real tendency to disparage it’s dignity.

With regard to the second point, namely the non payment of interest on the difference between the sum, which had been subscribed in certificates of State Debt, and that which was permitted to be subscribed, The following particulars will explain, and it is hoped justify the course which has been pursued by this Department.

Money with suitable instructions for the payment thereof to the state of North Carolina, as in other like cases, was lodged with the Commissioner of Loans in season to meet the first dividend which became payable on the 1st. day of April 1792. According to the instructions from the Treasury, this dividend might at any time have been demanded until May 1st. 1793. It is however proper to observe, that a letter was received from the Commissioner dated April 4th. 1793,5 which first announced, that an instruction from the Secretary of the Treasury, dated August 15th. 1792, had been mis-construed, so as to suspend the payment to the State, from the time that letter was received; but even according to the erroneous ideas entertained by the Commissioner, the State might at any time have received the first quarters interest by application between April 1st. 1792 and the receipt of the Secretary’s letter beforementioned. The reasons for the suspension on the 1st of May 1793 will hereafter be stated.

No money was placed with the Commissioners for the payment of interest to the States in the subsequent quarters of 1792 & 1793, for the following reasons—

By a supplementary Law passed on the 8th. of May 1792,6 the term for receiving the assumed debt on Loan, was prolonged until the 1st. of March 1793. This rendered it impracticable to ascertain what sum would be payable to the States, until the proceedings under the supplementary Loan were known at the Treasury; the suspension of payments for the ensuing quarters was therefore a necessary inference from the Law.

The circumstances which caused the instruction of May 1st. 1793, for a final suspension of the payment of the first dividend are these—

The seventeenth section of the Act making provision for the Debt of the United States,7 directs the payment of interest to a State on differences of the abovementioned kind “until there shall be a settlement of accounts between the United States and the individual States and in case a ballance shall then appear in favour of such State until provision shall be made for the said ballance.”

The payment of such interest, as to it’s continuance, was therefore conditional and contigent.

When the Commissioners were about completing the settlement of accounts between the United States and individuals States (to wit in 1793) they demanded of the Treasury a statement of such payments of interest as had been made to any state,8 in order that the proper debit against the State might be made, agreeably to the 19th. section of the Act9 which directed it’s payment. This statement was accordingly furnished. It could of course only include such sums as had been actually paid. North Carolina New York, New Jersey and Delaware had received nothing, having themselves omitted the requisite measures for the purpose.

The return to the Commissioners corresponded with the fact, and that return once made, it became necessary in order to fulfil the intent of the Law to suspend future payments. The States to whom they might have been made could not afterwards have been debited with them as the Law contemplated and Justice required. It was even presumeable, that States which had delayed receiving the sums to which they were intitled had done so from the uncertainty (till a settlement was effected) whether they could retain the sums received; not choosing to receive them temporarily under an obligation to reimburse, if a balance should appear against them.

But however this might be; as the completing of a payment depended on the Willingness of a State to receive—no payment could be considered as made, till the money was received on behalf of a State none could be returned to the Commissioners as made, till so consummated—and after a return was made to those officers, no further payment could be allowed, consistently with the general intent of the Law for the reason already given til the result of the settlement was known.

In the State of North Carolina, the Commissioner was not able to ascertain the amount of the subscriptions under the supplementary Law until May 1793, and his return was not received at the Treasury, until June following, at which time it was evidently impracticable to effectuate a payment to the State, so that the sum could be included in the general settlement.

A ballance having been reported on that settlement against North Carolina The suspension of the payment became by this circumstance absolute. It would have been clearly illegal afterwards to make payment.

Such was the reasoning by which The Treasury was guided.

The proceedings, in regard to the final suspension of the interest for the first quarter of 1792, were uniform in respect to all the States, which had foreborne to avail themselves of the provision seasonably. A similar suspension actually took place, in the States of New York, New-Jersey and Delaware. In the States which received payment, the first quarters interest for 1792, was deducted from the dividends in favor of the subscribing creditors, who were referred to the respective States for payment.

A Confidence is entertained that it will appear in this as in the other case, that justice impartiality, the true meaning of the Laws and the general interest have been consulted and promoted without injury or intention of injury to the State of North Carolina.

The Conduct of the Commissioner, as suggested, in refusing an inspection of the Certificates, was unauthorized by this Department. He has been written to on the subject and his answer when received shall be communicated.

The documents herewith marked A. B. C. D. E. F. G. H. I. and K. will further explain the above representation.10

All which is respectfully submitted

Alexander Hamilton
Secry. of the Treasury

Copy, North Carolina Department of Archives and History, Raleigh.

1Richard Dobbs Spaight.

3The letter which H wrote to Edmund Randolph has not been found.

4A copy of Oliver Wolcott’s letter to William Skinner may be found in the North Carolina Department of Archives and History, Raleigh.

Wolcott’s statement concerning the question of payment of interest to North Carolina, from which H’s statement in this and the following paragraphs is taken in part, may be found in RG 217, Oliver Wolcott’s “Explanation of Accounts, 1792–1794,” Comptroller of the Treasury, National Archives.

5Skinner’s letter to Wolcott reads in part as follows: “Your favor of the 20th. of February 1793 respecting Subscriptions made in my office under the Supplementary Act, with your particular directions for issuing certificates of funded Debt &ca: never came to my hand untill yesterday: in consequence of that letter being so long delayed it may at first view be thought I have been guilty of some misconduct, in the Certificates issued previous to the rect: of your letter above alluded to, as the six & three ⅌ Cents bear Interest from January 1st. 1792, but I flatter myself when the facts are attended to, I shall not be thought very blameable. True it is that the Act of Congress of the 4th. of August 1790 directed that the interest on the unsubscribed part of the assumed Debt should be paid to the State in trust for the nonsubscribing Creditors, and it is also a fact that I was furnished with drafts on the Collectors for Cash sufficient to pay the first Quarter’s interest on that part; but before I even drew any part of the money, the Secretary of the Treasury instructed me not to pay that interest to the State and recalld. the Drafts. I cancelld. them, and returnd. them according to orders. The State since that day by their Treasurer have applyd. to me for the first Quarter’s interest, I could only answer that I was not provided with funds for that purpose, and that in fact I was instructed not to pay it, matters remained in Situation until March 1793, when the time of issuing certificates commenced, I considered it a very natural construction for me to make, that as I was directed not to pay the interest to the State and that the fund which had been provided for that purpose were recalled, I concluded that the six and three ⅌ Cents should bear Interest from January the 1st. 1792. in consequence of that construction I proceeded to issue Certificates in that manner, until the rect. of yours of the 20th. of February 1793. when this true State of facts are attended to I flatter myself it will not be thought at the Treasury Department that I have committed any capital blunder …” (copy, North Carolina Department of Archives and History, Raleigh).

6“An Act supplementary to the act making provision for 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 281–83 [May 8, 1792]).

8The certificate of Joseph Nourse, register of the Treasury, dated June 27, 1793, which contains this information, may be found in RG 53, Register of the Treasury, Estimates and Statements for 1793, Vol. “135-T,” National Archives.

9Section 19 of “An Act making provision for the (payment of the) Debt of the United States” reads: “And be it further enacted, That so much of the debt of each state as shall be subscribed to the said loan, and the monies (if any) that shall be advanced to the same pursuant to this act, shall be a charge against such state, in account with the United States” (1 Stat. description begins The Public Statutes at Large of the United States of America (Boston, 1845). description ends 144 [August 4, 1790]).

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