Thomas Jefferson Papers

Second Opinion on a New Foreign Loan, 17 June 1793

Second Opinion on a New Foreign Loan

I cannot see my way clear in the case on which the President has been pleased to desire my opinion, but by recurring to these leading questions.

Of the 7,898,999.86 D. borrowed, or rather of the 7,545,912.D. nett proceeds thereof, how much has been applied to the payment of the foreign, and purchase of the general debt?

To the balance thereof, which should be on hand, and the 2. millions of florins now borrowing, is any and what addition necessary for the same objects for the years 1793. 1794?

The statement furnished by the Secretary of the Treasury does not answer these questions. It only shews what has been done with somewhat less than 3. millions out of near 8. millions of Dollars which have been borrowed: and in so doing it takes credit for two sums which are not to come out of this fund, and therefore not to be left in the account. They are the following.

1. a sum of 284,901.89 D. expended in purchases of the public debt. In the general Report of the trustees of the Sinking fund, made to Congress the 23d. of Feb. last, and printed, it appears page 29. that the whole amount of monies laid out by them was 1,302,407.64 D from which were to be deducted, as is mentioned in the note there subjoined, the purchases made out of the interest fund (then about 50,000.D. as well as I recollect.) Call the sum paid then 1,252,407.64 D. By the Treasury report pa. 38. (new edition) it appears that the surplus of domestic revenue to the end of 1790. appropriated to this object was 1,374,656.40 D and page 34. that the monies drawn from Europe on account of the foreign loans were not the instrument of these purchases: and in some part, to which I am not able just now to turn, I recollect pretty certainly that it is said these purchases were actually carried to account, as was proper, against the Domestic surplus. Consequently they are not to be allowed in the foreign account also. Or if allowed in this, the sum will then be due from the Surplus account, and so must lessen the sum to be borrowed for the sinking fund, which amounts to the same.

2. The 1st. instalment due to the bank 200,000.D. Though the first payment of the subscription of the US. to the bank might have been made, in the first instant, out of the foreign monies, to be immediately repaid to them by the money borrowed of the bank, yet this useless formality was avoided, and it was a mere operation of the pen on paper, without the displacement of a single dollar. See Reports pa. 12. And, in any event, the final reimbursement was never to be made out of the foreign fund, which was appropriated solely to the paiment of the foreign, and purchase of the general debt.1

These two sums therefore of 284,901.89 D. and 200,000.D. are to be added to the balance of 565,484.28 D. subject to future disposition, and will make 1,050,386.17 D. actually here, and still to be applied to the proper appropriation.

However, this account, as before observed, being only of a part of the monies borrowed, no judgment can be formed from it of the expediency of borrowing more: nor should I have stopped to make a criticism on it, but to shew why no such sums, as the two above mentioned, were inserted in the general account sketched for the President June 5. I must add that the miscellaneous sum also of 49,400.D. in this account, is probably covered by some other articles of that, as far as it is chargeable to this fund, because that account under one form or another, takes up all the articles, chargeable on this fund, which had appeared in the printed Reports.

I must therefore proceed to renew my statement of June 5. inserting therein the 1st. instalment of the Dutch loan, 404,040.40 D. payable this month, which not having been mentioned in any of the Reports heretofore published, was not inserted in my statement. I will add a like sum for the year 1794. because I think we should now prepare for the whole of that year.

As the Secretary of the treasury does not seem to contemplate the furnishing any fixed sum for the Sinking fund, I shall leave that article out of the account. The President can easily add to it’s result any sum he may decide to have furnished to that fund. The account, so corrected, will stand thus.

The Trust for loans Dr. D.
To Nett amount of loans to June 1. 1792. 7,545,912.   
To loan now going on for 2,000,000 florins 808,080.  D
florins s.
By charges on remittances to France 10,073–1
By reimbursement to Spain 680,000.  
By Interest paid to Foreign officers 105,000.   D.
795,073–1 = 321,239.46
By Principal paid to Foreign officers 191,316.90
By amt. of French debt, Principl. livres
    & Intt. payable to end of 1791. 26,000,000.  
By do. for 1792. 3,450,000.  
29,450,000.   = 5,345,171.  
By do. for 1793. 3,410,000.   618,915.  
By 1st. instalmt. of Dutch debt due June 1793. 404,040.40
By Instalment & Interest to France for 1794. 3,250,000.   569,875.  
By Instalment to Holland for 1794. 404,040.40
  Balance will then remain in hands of the trust 499,393.84

So that it appears there would be a balance in the hands of this trust at the close of 1794. of 499,393.84 D. were no monies to be furnished in the mean time to the Sinking fund. But should the President determine to furnish that with the 900,000. D. proposed in my statement of June 5. then a loan would be necessary for about 400,000.D. say in near round numbers 1,000,000. of guilders, in addition to the 2. millions now borrowing. I am, individually, of opinion that that sum ought to be furnished to the Sinking fund, and consequently that an additional loan to this extent should be made, considering the subject in a legal point of view only.

It remains then to see whether, under any other point of view, the loan should be extended still 2. millions further.2

The reasons in favor of the extension of the loan are

The apprehension of the extension of our war to other Indian nations, and perhaps to Europe itself:

The disability this might produce to borrow at all: [this is, in my judgment, a weighty consideration]

The possibility that the government of France may become so settled, as that we may hazard the anticipation of payments, and so avoid dead interest.

The reasons against it are

The possibility that France may continue, for some time yet, so unsettled as to render an anticipation of payments hazardous:

The risk of losing the capital borrowed, by a succesful invasion of the country of deposit, if it be left in Europe, or by an extension of the bankruptcies now shaking the most solid houses, and when and where they will end, we know not:

The loss of interest on the dead sum, if the sum itself be safe:

The execution of a power for one object, which was given to be executed but for a very different one:

The commitment of the President, on this account, to events, or to the criticisms of those who, tho’ the measure should be perfectly wise, may misjudge it through error or passion:

The apprehension that the head of the department means to provide idle money to be lodged in the banks ready for the corruption of the next legislature, as it is believed the late ones were corrupted by gratifying particular members with vast discounts for objects of3 speculation.

I confess that the last reasons have most weight with me.

Th: Jefferson
June 17. 1793.

PrC (DLC: TJ Papers, 88: 15207–10); brackets in original. Tr (Martin Weiner, Clifton, New Jersey, 1959); entirely in TJ’s hand; contains marginal query (see note 1 below) and omissions and variations, only the most important of which are noted below. PrC (DLC: TJ Papers, 88: 15201–4); lacks marginal query. Entry in SJPL: “Opn of Th:J. on [Hamilton’s report on applicn of the loans].” Enclosed in TJ to James Madison, 29 June 1793.

This is the last document exchanged between TJ and the President respecting Alexander Hamilton’s proposal to open a new loan of 3,000,000 florins in Europe (for the antecedents, see Opinion on a New Foreign Loan, 5 June 1793, and note; Washington to TJ, 16 June 1793, and enclosure). With this second opinion from TJ in hand, over the next month Washington sought to clarify with Hamilton the statutory authority behind his proposal and satisfy himself as to the amount to borrow. When, in their correspondence, Washington posed to the Treasury Secretary the substance of TJ’s question as to whether the government’s first $200,000 reimbursement of its loan from the Bank of the United States was chargeable under the acts of 4 and 12 Aug. 1790 or any other statute, Hamilton pointed to an act of 2 Mch. 1793 stipulating that the payment was to come from the $2,000,000 loan authorized by the act of 12 Aug. 1790, thus demonstrating that the Secretary of State had been mistaken in asserting that the $200,000 reimbursement of the bank was never to be made out of the Foreign Fund, as TJ’s subsequent marginal note on a collateral text of his opinion appeared to acknowledge (see note 1 below). The President, however, deferred a final decision until he could obtain the opinion of Attorney General Edmund Randolph, who did not return from a trip to Virginia until around 21 July 1793 (TJ to James Madison, 21 July 1793). Meanwhile, having received news from Hamilton on 19 July 1793 that the American bankers in Holland had renegotiated over a term of ten years repayment of a loan of 1,000,000 florins which came due on 1 June 1793, Washington obtained his concurrence in reducing by half the existing loan of 2,000,000 florins intended in part to repay that debt. Then, instead of the additional 3,000,000 florins which Hamilton had originally wished to borrow, Washington, carefully distinguishing between the two 1790 acts, authorized Hamilton to borrow the remaining balance of $1,515,098.11 (about 3,787,745 florins) from the $2,000,000 authorized by the 12 Aug. 1790 act for application to the general debt, and 1,000,000 florins under the 4 Aug. 1790 act, to be used to meet the installment on the Dutch loan of 1782 coming due in June 1794 (Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , xv, 9–10, 21–4, 118, 119, 125–6, 136–8; Annals description begins Annals of the Congress of the United States: The Debates and Proceedings in the Congress of the United StatesCompiled from Authentic Materials, Washington, D.C., Gales & Seaton, 1834–56, 42 vols. All editions are undependable and pagination varies from one printing to another. The first two volumes of the set cited here have “Compiled … by Joseph Gales, Senior” on the title page and bear the caption “Gales & Seatons History” on verso and “of Debates in Congress” on recto pages. The remaining volumes bear the caption “History of Congress” on both recto and verso pages. Those using the first two volumes with the latter caption will need to employ the date of the debate or the indexes of debates and speakers. description ends , iii, 1452). The President’s careful review of Hamilton’s proposal, especially his insistence on scrupulously dividing his own authorization into separate parts linked to specific statutes, underscored his intention to exercise stricter financial oversight in the wake of Republican attacks on the Secretary of the Treasury during the 1792–93 session of Congress, but ultimately he authorized a larger loan than Hamilton had originally sought, being more impressed by the need to have money available in case of the extension of our war against the Western Indians to those in the South than by the Secretary of State’s fears that the money might be at risk abroad or used at home for the corruption of the next Legislature. In the end, however, Hamilton only sought a new foreign loan of 3,000,000 florins (Syrett, Hamilton description begins Harold C. Syrett and others, eds., The Papers of Alexander Hamilton, New York, 1961–87, 27 vols. description ends , xv, 230–3).

The date of the report of the Trustees of the sinking Fund was actually 25 Feb. 1793 (Commissioners of the Sinking Fund to the Speaker of the House of Representatives, 25 Feb. 1793). The new edition of the treasury report was Communications from the Secretary of the Treasury, to the House of Representatives of the United States. Printed agreeably to a Resolution of the House, of the 2d of March 1793 (Philadelphia, [1793]).

1Here in margin of Tr TJ wrote: “but see act 1793. c.69. [and?] qu?”

2Preceding sentence omitted from Tr.

3Preceding two words interlined.

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