James Madison Papers

To James Madison from Manuel Torres, 11 February 1815

From Manuel Torres

Philadelphia feby 11th 1815


Without having the honour of being Known by your Excellency, I take the Liberty to call your attention, upon an important matter for the Nation, who has so wisely entrusted its honour and prosperity to the accreditted talents and integrity of your Excellency: the Undertaking is daring, but I hope, that the intention and the object which dictate it, will Serve me as an appology.

With Some Experience in finances, and a great desire to acquire all possible informations on So important a Matter, I was Stimulated, Since my arrival in the united States in 1796, to Study and become familiar, with the financial affairs of this country; assisted by the Knowledge, that this Step procured me, when I Saw By mr Galatin’s report to the comitee of ways and means, of the 10th. January 1812, that in case of a War taking place, ten millions of dollars, raised by way of loans, added to nine millions, accruing from taxes and Sale of Lands, were considered Sufficient for the Yearly ordinary & Extraordinary Expenses, even if war was to last five years,1 I found No difficulty in foreseeing, that the ways and means proposed, being inadequate to its object, government would be in the necessity, to raise new taxes to Enable him by a Surplus of revenue, to create an Efficient new Sinking fund, in order to keep its Credit unimpaired.

But a little knowledge on the Effects of Banking-System was Necessary, to anticipate also, the fatal results to the public, that were to be Expected from the prodigious number of chartered Banks: the Jealousy that was Naturally to arise among them, for the Sake of profits too much Subdivided, could not otherwise, but viciate the System, and occasion the absence of the precious metals; those results were the more to be feared in a country, where the consumption of foreign goods, exceeds the amount of its domestic Exports; those founded causes of the disappearance of gold & Silver, were Strengtened, by the impolitic measure adopted by the banks in 1810, in diminishing by better than 4 p%, the accustomed and assigned value by law, of the Spanish Gold coins; and that, at a time when france & England, allowed a premium of from 5. to 12 p% upon the Same.2

Persuaded by the aforesaid considerations, of the Embarassments and inconveniences government would be Involved in, I dedicated myself to try, to discover the means to remedy if possible, or at least to diminish them in part: the result of So bold an attempt, Encumbered with many difficulties, Will I hope, prove advantageous to the United States, as well as to the undertaker. It consists in a plan of Internal taxation, (in my opinion) the most equitable and better adapted to the Situation of the united States, and to the genius and Spirit of its free government; because it bears equally, upon all Sorts of real capitals, as well as on those proceeding from industry and proffessions. By the plan, the direct tax has Experienced important improvements, So as to bear equally in all its operation. The amount of the actual direct tax is 6 millions of Dollars, and by the Plan, 7.600000. are raised, upon land in its three Branches, and upon houses: Those already authorised upon a part of domestic manufactures, and that to be raised on each Barrel of flour, by the treasury department, amount to more than 3.800000. dollars; and by the plan, all upon manufactures without Exception, amount to 4.200000.drs.; an other like Sum is produced by the plan by other items, making together a total amount of 16.000000; to which, 8.970.000 are to be added, accruing from the Sale of lands; Customs & many other internal taxes, already in operation, making an aggregate of 24.970000.: and allowing 20 p% for charges of Collection, and Errors in the Estimates, it will form a Neat amount of revenue, of 20.000000. of dollars, Sufficient to meet the ordinary Expenses of government, and to Leave a Surplus of one million of Dollars.

To facilitate the operation of the finances, a National Bank is a ramification of my plan; the Shape I have given to this institution is truly national and will in my opinion, answer all the purposes of Government, and reconcile the Opinion as well as the interests of all classes of citizens. As the Credit of government can be retrieved, but by the creation of an efficient new Sinking-fund, the plan embraces also an establishment of this Kind, the operation of which, will Gradually and finally Extinguish a national debt of more than 250 millions, in a Short period of years: The plan contains also, many other items, to provid⟨e⟩ for a Common Circulating-medium, to preserve the precious metals in the country, and to Encourage the importation of the Same from abroad.

I went to Washington in october last (as your Excellency will See by the enclosed Letters of Introduction) for the Sole purpose of Submitting my plan to your consideration, But a Violent indisposition Compelled me to return home, 15 days after my arrival; Since that time, I have been confined in my room, from whence, I have the honour to address your Excellency.

Should your Excellency think of any advantage to the united States the Ideas I have pointed out in this Letter, I shall have the honour to forward them, on the first intimation of your Excellency. I am with Great consideration Sir Your obedt. humble Servt

Manuel Torres

RC (DLC). For enclosures, see Anthony Charles Cazenove to JM, 31 Oct. 1814, and n.

1In the report, Gallatin emphasized that the estimate of $10 million per year in loan revenue originated with the House of Representatives Committee of Ways and Means, and that it was “not more than will be wanted.” He nevertheless used this figure in a hypothetical example that assumed a five-year war, asserting that if the total war debt did not “exceed fifty millions,” the United States could easily pay the principal as well as the interest (ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States … (38 vols.; Washington, 1832–61). description ends , Finance, 2:523–24, 527).

2The bank policy to which Torres referred probably came about as a result of the 1809 expiration of “An Act regulating the currency of foreign coins in the United States,” 10 Apr. 1806, which made other nations’ gold and silver coins legal tender in U.S. currency at specified rates carried over from a 1793 currency law. In the case of Spanish gold coins, however, the rate had been known since 1801 to be at least four percent too high, and was therefore unlikely to be observed when no longer established by law. Near the end of 1810, the Senate passed a bill to reinstate the currency law with a corrected, lower value for Spanish gold coins, but after amendment by the House of Representatives the legislation was indefinitely suspended in the Senate (U.S. Statutes at Large, description begins The Public Statutes at Large of the United States of America … (17 vols.; Boston, 1848–73). description ends 1:300–301, 2:374–75; ASP description begins American State Papers: Documents, Legislative and Executive, of the Congress of the United States … (38 vols.; Washington, 1832–61). description ends , Finance, 1:688, 690, 2:456–58; Annals of Congress, description begins Debates and Proceedings in the Congress of the United States … (42 vols.; Washington, 1834–56). description ends 11th Cong., 3d sess., 83–84, 99, 391, 468–73, 479, 481–82; David A. Martin, “Bimetallism in the United States before 1850,” Journal of Political Economy 76 [1968]: 432 n. 10). In Great Britain, by contrast, gold prices were inflated and Spanish gold was found to be significantly “better than standard” in 1810 (William Graham Sumner, The English Bank Restriction and the Bullion Report of June 8, 1810 [New York, 1920], 335–36).

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