George Washington Papers

To George Washington from Oliver Wolcott, Jr., 31 May 1796

Treasy Departmt May 31st 1796

At a Meeting of the Commissioners of the Sinking Fund, at the office of the Secretary of the Treasury on the first day of June 1796.

Present,  The Secretary of State,
The Secretary of The Treasury
The Attornay General.

A Report of the Secretary of the Treasury dated May 31st 1796, respecting the measures proper to be adopted by this Board, for the due execution of the act entitled "an act making provision for the payment of certain Debts of the United States" was read; and is as follows—To wit.

The Secretary of the Treasury respectfully reports to the Commissioners of the Sinking fund.

That the following sums of the capital or principal of the public debt, already have or will become due and payable in the course of the present year, the reimbursement of which according to law is to be made under the superintendence of the Commissioners of the Sinking fund—vizt.

To the Bank of the United States.

Three instalments of a Loan of 400,000 dollars obtained pursuant to an act entitled "an act for raising a further sum of money for the protection of the frontiers & for other purposes," passed on the 2d day of May 1792 300,000.
Two instalments of a Loan of two millions of dollars obtained pursuant to an act passed on the 18th day of December 1794 for that purpose 200,000.
Two Loans of 500,000 dollars each obtained pursuant to an act making appropriations for the military & naval establishments & for the support of Government passed on the 3d of Mmarch 1795 1.000.000.
A Loan of 500,000 dollars obtained under the 1st section of the act for the support of public credit & for the redemption of the public Debt, passed on the 3d of March 1795 500,000.
Two instalments of the Loan of 2.000,000 of dollars obtained pursuant to the act for incorporating the Bank of the United States 400,000.
An instalment of a Loan of 800,000 dollars obtained pursuant to an act passed on the 21st day of February 1795, for the expenses of foreign intercoarse 200,000.
To the Bank of New York for amount of a loan obtained pursuant to an act passed on the 20th of March 1794 for expenses of foreign Intercourse 200,000.
To Creditors in Holland for, An instalment of one million of Guilders due on a contract dated June 11. 1782 400,000.
Amounting in the whole to five Millions of Dollars. } $5,000,000.

That by an Act passed during the present session of Congress entitled "An Act making provision for the payment of certain debts of the United States" the Commissioners of the Sinking Fund are authorised with the approbation of The President of the United States to obtain the said sum of five millions of Dollars upon Loan, by creating a funded stock transferable at the Treasury & Loan offices respectively bearing Interest at six per centum per annum payable quarter yearly, which stock at the said rate of Interest is to remain fixed & irredeemable until the close of the year 1819 and to be redeemed thereafter at the pleasure of the United States.

That the Creditors of the United States before mentioned may pursuant to the said act subscribe to the said Loan & receive the said Stock in payment of their respective demands, or the Commissioners of the Sinking fund may cause certificates for the said stock to be constituted & sold in the United States or elsewhere, applying the proceeds thereof to the payment of said demands, provided that not more than two millions five hundred thousand Dollars of the said Stock be sold under par; or the said Commissioners may sell the shares of the stock of the Bank of the United States, belonging to the United States, in lieu of selling the funded stock before mentioned, if in their judgments sales of the said Bank shares will be most advantageous to the United States.

Upon this recital of facts The Secretary of the Treasury represents, that dividends upon the Stock of the Bank of the United States, have been for several years, made at the rate of four per Centum half yearly; that there is a reasonable prospect that future dividends will be declared at the same rate; that by a resolution of the President & Directors of the said Bank, the proprietors of the capital Stock thereof residing in Europe are entitled to receive either in London or in Amsterdam, the half yearly dividends which may be declared, six months after the said dividends are declared in the United States: in London at the rate of one pound sterling for every four dollars and forty five cents; or in Amsterdam at the rate of one Guilder current money for every forty cents & four mills money of the United States; that the Bank undertakes the risque and expense of remittances at these rates, & therefore that Bank Stock when transferred to a foreigner possesses the essential properties of a Debt contracted in a foreign Country, that it is the policy of the United States not to increase unnecessarily public debts in foreign countries; that the present price of Bank Stock is no more than twenty seven perCentt advance upon the original capital when sold in the United States; that the price in London by the last advices was even considerably below this rate; that sales to any great amount would probably depress the price here to a level with the current price in London, & that for these reasons a comparison between what now is the price of a stock bearing eight per Centum per annum, with a stock bearing six per centum per annum does not afford a correct criterion to guide the choice of the Commissioners upon the alternative contained in the Law; he is therefore of opinion that the Commissioners of the Sinking fund ought to attempt to raise the requisite funds upon Loans; or by sales of the proposed new funded stock, and that recourse ought not to be had to the authority to sell the Bank shares belonging to the Ud States except in the case of the utmost emergency, or without the absolute injunction of Law.

The Secretary is moreover of opinion, that the Commissioners ought to be restrained from selling the said Bank shares, not only by the improvidence of such a measure, but also by their respect for the principles of public credit, and their duty as Trustees for the Creditors. By an Act of the last Session the dividends on the Bank stock belonging to the United States were declared to be appropriated to the Sinking fund & vested in trust in the Commissioners until the whole of the then present debt of the United States except the three perCent stock should be fully reimbursed & redeemed; the faith of the United States was moreover pledged that the said dividends with the other funds mentioned in the Act should inviolably remain appropriated & vested to be applied to the said reimbursement & redemption. Under these circumstances the Secretary considers the said dividends as having been compleatly alienated by the Legislature and as cloathed with all the qualities of private property in the hands of the Commissioners who are answerable not only to the United States, but also to the creditors for the faithful discharge of their trust. On these principles the Secretary presumes that the Commissioners will not judge it to be advantageous to the United States to authorise sales of the said Bank stock, & he therefore submits the following resolutions to their consideration.

Resolved that application be made to the President of the United States for his consent & approbation to the opening of a Loan for Five millions of Dollars pursuant to the terms & conditions of the Act entitled "An act making provision for the payment of certain Debts of the United States & for the purposes therein mentioned."

Resolved that if the consent & approbation of The President of the United States be obtained for opening the said Loan, the same be conducted under the direction of the Secretary of the Treasury in manner following—to wit.

1st. That the President & Directors of the Bank of the United States be invited to subscribe the whole or any part of the said five millions of Dollars upon condition that so much of the said sum as shall be subscribed & as shall be necessary to satisfy the Loans & Instalments had of said Bank which already have or will fall due—on or before the first day of Januy next, shall be applied to that purpose, and upon condition that for such further sums as shall be subscribed, the said Bank will advance & lend an equal amount to be applied in payment of the Loan had of the Bank of New York or the Instalment of foreign Debt which will fall due in the course of the present year.

2d. That in case the said President & Directors of the Bank of the United States shall decline to subscribe the whole sum of Five millions of Dollars, that then the President and Directors of the Bank of New York be invited to subscribe the sum of Two hundred thousand dollars to be applied to the payment of the Loan had of said Bank.

3rd. That for such sum of the Loan of Five millions of Dollars as shall not be subscribed by the President & Directors of the Bank of the United States or the President & Directors of the Bank of New York as before proposed, there be constituted certificates of Stock in the manner authorised by Law, and that the same be sold for account of the United States by the President & Directors of the Bank of the United States on such terms and pursuant to such directions as shall from time to time be given by the Commissioners of the Sinking Fund, or the Secretary of the Treasury, for that purpose. So however that not more than two millions & five hundred thousand dollars be in any event sold for less than par including Interest thereon to the time of sale.

4th. That the proceeds of all sales of Stock be placed in the Treasury of the United States & forthwith applied to the payment of some part of the capital or principal of the public debt, now due or to become due in the course of the present year, to the Bank of the United States, the Bank of New York or the Creditors of the United States in Holland; and that in the application of the monies so placed in the Treasury, the Secretary of the Treasury have regard to the priorities already established by Law in favor of the Creditors respectively. All which is respectfully submitted by

Olivr: Wolcott Jr

Secty of the Treasy

Whereupon, it was resolved that this Board agree to the resolutions proposed in said Report and that a copy of this proceeding be laid before the President of the United States for the purpose of obtaining his consent & approbation to the opening of said Loan of Five millions of Dollars.

Timothy Pickering

Olivr. Wolcott Jr

Charles Lee

Approved

June 2d 1796

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DLC: Papers of George Washington.

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