James Madison Papers

To James Madison from Albert Gallatin, 1 March 1806

March 1st. 1806

Dear Sir,

I enclose the rough draft of an Article for Spain, which tho’ I have rejected a number of modifications, contains in fact eight distinct modifications or plans vizt.

1. To pay 2 millions down, 1 million twelve months after ratifications and residue to Claimants under Convention.
2. do.  do. & do. to Spain; in which case an additional article is provided for paying the Claimants in Colonial bills.
3. do. and residue to Claimants under Convention.
4. do. & do. to Spain with provision of Colonial bills-- } to pay 2 millions after ratification &c.

The modifications 1 & 2, are on the supposition that Spain may be willing to allow a Sum to the Claimants less than the whole residue after paying her the two first millions.

I think that if left to myself, the proposition to take Colonial bills for the Spoliations, instead of deducting the amount of those spoliations from the purchase money, would be considered as inadmissible. At all events I hope that it may not be resorted to but as an Ultimatum and in case of absolute necessity; and you will perceive that I have omitted altogether the proposition of taking anything short of Colonial bills, or, in other words of paying Spain in full & leaving our Merchants to the mercy of a Commission & to the chance of being paid by Spain.

As the subject is complex I will recapitulate some points relative to the Treasury, to which the negotiators should particularly attend.

1. Payments in Specie must not be stipulated beyond two millions of dollars, unless it shall be found necessary to accept for Spoliations a sum less than the residue; in which case the difference say one million which shall then be payable to Spain, may be stipulated to be paid in Specie but not sooner than twelve months after the exchange of ratifications.

2. The payments in Specie must, exclusively of the million for which credit shall be given in Holland to our negotiators, be made in bills of the Ministers of the U.S. at Paris or Madrid, and at different sights, so that the payments shall not at once fall upon us.

3. If the million now provided for in Amsterdam, shall not be used immediately, it must not be counted upon for future payments, as we will apply it in a different way before the exchange of ratifications can take place.

4. For any payment in Amsterdam, either of that Million, or of interest on Stock to be created, the rate of Exchange must be fixed and not to be more unfavorable to the U. States than par, or one Current Guilder of Holland for every 40 Cents.

5. Any Stock to be created must be of the description stated in the Article, that is to say Six per signCent, and the Principal at least payable in America & not irredeemable for a longer period than four years. It would be better that the Interest should be payable also in America, & the Principal redeemable absolutely at will.

6. Payments by the U. States for Spoliations must be provided in three Annual Instalments.

As the importance of the 2d. point may not be perceived, it is proper to State, that a payment in bills drawn on the Treasury, prevents both the inconvenience of making provision for payments abroad, & the exportation of Specie, as in the case of the provision for paying 200,000 Stg to Gt. Britain. For when Bills are given, they are negotiated, come to America through the usual Commercial Channels and as remittances, so as to produce no kind of inconvenience. Yours truly

A. G.

NHi: Papers of Albert Gallatin.

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