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 University of California 
 
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 Form L I 
 
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 SKETCH 
 
 AMERICAN FINANCES 
 
 1789-1835 
 
 BY 
 
 JOHN WATTS KEARNY 
 
 NEW YORK AND LONDON 
 
 G. P. PUTNAM'S SONS 
 
 2Efje l^nicka-bocker Press 
 
 1887 
 
 OOlOfl
 
 Copyright, 1887, 
 By G. p. PUTNAM'S SONS. 
 
 Press of 
 G. P. Putnam's Sons 
 
 New York
 
 
 
 PREFACE. 
 
 How we may best manage, and most speed- 
 ily pay off, our great public debt, will practically 
 be a vital question in American politics for a 
 long time to come. Every year its importance 
 is, through the medium of taxation and sur- 
 plus revenue, brought home to all classes and 
 to every species of industry ; while at the 
 same time any lack of wisdom or experience 
 .--•; in dealing with this central issue is sure to 
 tH be felt in the wide circumference of the rest 
 of our public questions. A similar inquiry 
 held a dominant place in our national coun- 
 cils from the year 1789, the date of the pres- 
 ent Constitution, down to the year 1835. 
 The financial history of this period is well 
 worth special study, because of the signal 
 ability and sagacity by which the Government 
 brought its difficult problem to a successful
 
 iv PREFACE. 
 
 issue. In dealing with our existing debt, it 
 may therefore be not witliout utility to trace, 
 in a short review, the growth of our national 
 experience in finance during that time, 
 whether as manifested in its prevailing ideas, 
 or as embodied in actual legislation.
 
 CONTENTS. 
 
 CHAPTER I. 
 
 PACE 
 
 Settlement of the Revolutionary War Debt . i 
 
 CHAPTER H. 
 
 Revenue, Expenditure, and the Sinking Fund . 45 
 
 CHAPTER in. 
 
 The War of 1812. — Increase of the Public Debt. 
 
 — Financial Embarrassments . . . . -j^ 
 
 CHAPTER IV. 
 
 Peace with Great Britain. — The Protective 
 Tariff. — Extinguishment of the Public 
 Debt 1 1 1
 
 AMERICAN FINANCES. 
 
 1789-1835 
 
 CHAPTER I. 
 
 SETTLEMENT OF THE REVOLUTIONARY WAR DEBT. 
 
 Our present Constitution owes its origin to 
 the financial embarrassments of the Govern- 
 ment formed under the Articles of Confede- 
 ration. That Government had to depend for 
 its revenue upon the States, by making requi- 
 sitions upon them in their integral and sover- 
 eign capacity. Under this system, however, 
 there existed no power to enforce these requi- 
 sitions ; and hence when the States, some- 
 times by default and sometimes by refusal, 
 failed to pay their respective quotas into the 
 common treasury, the Government found 
 itself reduced to bankruptcy. There were no 
 funds for its own support ; the interest upon 
 the loans which had been contracted both at 
 home and abroad on account of the war of
 
 2 AMERICAN FINANCES, 
 
 the Revolution remained unpaid ; and fresh 
 infractions of treaty, and financial obligations, 
 were daily bringing deeper humiliation upon 
 the country. 
 
 To devise some remedy for this most dis- 
 astrous condition of affairs, delegates from all 
 the States met in convention, in Philadelphia, 
 in the year 1787. This body, as was natural 
 under the circumstances, was at the outset 
 solely intent upon ingrafting needed power 
 and vitality upon the existing Articles of Con- 
 federation. Their deliberations, however, car- 
 ried them beyond this original purpose, and 
 resulted finally in their framing a new scheme 
 of government altogether, — the Constitution 
 of the United States. This Constitution was 
 ratified by the States, and went into operation 
 on the 4th of March, 1789. Ample powers 
 were, in view of recent experience, conferred 
 upon the new Government, both to secure its 
 own maintenance, and to provide for the public 
 credit. 
 
 Among the provisions of this Constitution 
 was one to the effect that all debts for which 
 the United States had become liable as a con- 
 federation, as well as every agreement entered
 
 J78g - 1833. 3 
 
 into by them, were now made valid, by express 
 terms, against the United States. 
 
 The total amount which had thus been for- 
 mally assumed as public debt, was estimated, 
 with principal and arrearages of interest to- 
 gether, to reach the sum of ^54,124,464.56, and 
 became thenceforth distinguished and known 
 under the names of foreign debt and domestic 
 debt. The foreign debt summed up $11,710,- 
 378.62, and resolved itself into (i) loans ob- 
 tained from private lenders in Holland, (2) 
 sums of money furnished from time to time by 
 the King of France, and (3) a small amount due 
 to Spain. 
 
 Our country as a borrowing power (under 
 the guaranty, as will be hereafter seen, of the 
 King of France) was first introduced into Hol- 
 land in the year 1781. John Adams, American 
 ambassador at the Hague, had received general 
 authority to borrow any sums required for 
 necessary expenses, and succeeded by his wise 
 management and perseverance in obtaining 
 loans amounting to nine million florins, equal 
 to $3,600,000. Four separate loans of this 
 description were negotiated by him, — the first 
 in the year 1782, and the last in 1788. The
 
 4 AMERICAN FINANCES, 
 
 rate of interest to be paid on this money was 
 fixed nominally at four and five per cent per 
 annum, but the premiums and gratifications 
 exacted by the lenders ran it up in reality as 
 high as seven per cent. The payment of the 
 interest went on quite regularly, the money 
 coming directly out of the proceeds of the 
 loans. Indeed, the last two loans, each for one 
 million florins, were expressly obtained for this 
 purpose, and were so pledged. Meanwhile, no 
 part of the principal had been paid, the first 
 instalment thereon not falling due until the 
 year 1793. These several loans had been 
 made reimbursable, in equal payments, within 
 fifteen years from date, the first payment to be 
 made in the eleventh year. 
 
 The French debt differed in many respects 
 from the debt owing in Holland. In addition 
 to the support of his arms during the war of 
 independence, the French king had also ren- 
 dered important pecuniary assistance. Between 
 the years 1778 and 1783, in addition to a sub- 
 sidy of six million livres, he had granted under 
 the title of loans thirty-four million livres, equal 
 to ^6,296,296. The amount last mentioned 
 was divided into three parts. The first part
 
 I78g - 1S35. 5 
 
 consisted of loans made previously to the i6th 
 of July, 1782, amounting in all to eighteen mil- 
 lion livres. By a contract between the two 
 countries in relation to these loans, all arrears 
 of interest up to that date, together with any 
 interest that might accrue until the conclusion 
 of a treaty of peace, were made a present to 
 the United States in token of the king's friend- 
 ship. The principal was made payable, with 
 five per cent interest per annum, in ready / 
 money in^ twelve equal parts, and at the royal 
 treasury in Paris, the first payment to com- 
 mence from the third year after a peace with 
 Great Britain. The second part was a loan, 
 made on the 5th of November, 1781, of five 
 millions of florins, computed by agreement at 
 ten millions of livres. Strictly speaking, this 
 was a loan by the States-General of the United 
 Provinces of the Netherlands to the French 
 king, but made in favor of the United States, 
 the king undertaking to guarantee its payment. 
 This debt was to be reimbursed in Paris, in 
 ten equal payments at four per cent per annum. 
 And in order that the king of France might be 
 enabled to fulfil his own obligations in regard 
 to it, the first of these payments was made due
 
 6 AMERICAN FINANCES, 
 
 on the 5 th of November, 1787. The third part 
 was also a single loan of six millions of livres, 
 bearing interest at five per cent. Its repay- 
 ment was fixed within the period 1797- 1802, 
 both years inclusive. 
 
 These engagements with France the old 
 Congress had found itself unable to fulfil ; 
 although prompt payment, owing to the low 
 condition of that country's finances in 1787, 
 when the first instalments of the principal of 
 the debt became due, was especially rtecessary. 
 The arrears accumulating after this fashion 
 swelled the amount of principal and interest 
 due to France at the close of the year 1789 to 
 nearly three millions of dollars. As there was 
 no abatement in their financial difficulties, the 
 double motive of gratitude and justice urged 
 the United States to begin without delay to 
 reimburse the French debt. 
 
 Negotiations were accordingly opened at 
 Amsterdam and Antwerp for the purpose of 
 borrowing money upon the credit of the United 
 States. At first some popular objections were 
 raised against negotiating new loans abroad ; 
 but any other course, if not altogether imprac- 
 ticable, seemed at least to be unwise. The
 
 1789-1835. 7 
 
 supply of money at home was too limited for 
 the pressing needs of the Government, either 
 with respect to amount, or to the length of time 
 for which it could be borrowed. Even had the 
 home market been able to furnish the funds, 
 the drain upon its cash for remittance to 
 France would have been ruinous. Moreover, 
 either plan amounted to the same thing in the 
 end ; as the money of foreigners would have 
 been brought over here to be subscribed to a 
 domestic loan, or to be invested in the stock. 
 This would have induced a higher rate of 
 interest ; and by this means the specie of the 
 country, which did not at the time exceed five 
 million dollars, would have been carried away 
 all the faster. 
 
 Eight loans were obtained in Holland, 
 amounting in all to 23,500,000 florins, which, 
 at forty cents per florin (the treasury-rate of 
 exchange), gave the sum of $9,400,000. The 
 first of these loans was effected on Feb. i, 
 1790, and the final one on the loth of April, 
 1794. The highest rate of interest, counting in 
 extra charges along with the nominal interest, 
 was a fraction more than five and a half per 
 cent ; while the lowest actual interest was a
 
 8 AMERICAN FINANCES, 
 
 fraction less than four and a half per cent. 
 These conditions were quite as favorable as 
 granted, at the time, to any other borrowing 
 power. The proceeds of the loans here spoken 
 of were applied to paying the arrears of interest 
 on the foreign debt, together with the instal- 
 ments of the principal then due; and also in 
 providing for some other engagements and 
 contracts respecting it which availed to the 
 public benefit. 
 
 Before, however, these financial dispositions 
 were fully matured and settled, more than a 
 year had been suffered to elapse ; so that on 
 the 4th of August, 1790, the time when the 
 laws were enacted for carrying them out, the 
 arrears of principal and interest had largely 
 increased. Happily, matters were being accel- 
 erated in the interim by the sagacious action 
 of Mr. William Short, the financial agent of 
 the United States in Europe. Foreseeing the 
 wants of the Government, that gentleman had, 
 in the month of February, previous to the 
 passage of the Funding Act, entered into a pro- 
 visional agreement for a loan of three millions of 
 florins in Amsterdam. This loan was accepted 
 on account of the Government on the 25th of
 
 jySg - JS35. g 
 
 August following, and out of it a first payment 
 was made to France early in December. Other 
 payments succeeded each other at short inter- 
 vals, so that by September, 1792, accounts 
 were adjusted between the two countries. At 
 that time, the policy began to be adopted of 
 paying the instalments in advance, as such a 
 course, it was believed, would tend to revive 
 the friendly feelings of France, already weak- 
 ened by previous breaches of faith. But, from 
 want of confidence in the stability of that 
 Government, this policy was soon abandoned. 
 The regular payments continued to be made 
 promptly up to the 31st of December, 1795. 
 The balance of the debt then remaining unpaid 
 was, under the inducement of an increase of 
 interest, exchanged for domestic securities, 
 created for the purpose, at the rate of 18. 1 5 cents 
 per livre, the par value of the precious metals 
 as agreed upon between the two countries. 
 
 Under this arrangement, certificates of do- 
 mestic debt were issued by the United States, 
 in favor of an agent duly authorized by the Com- 
 mittee of Public Safety of the National Con- 
 vention of France, to the amount of ^2,024,900; 
 ^1,848,900 of this sum bore interest at five and
 
 lO AMERICAN FINANCES, 
 
 a half per cent, and the remaining $176,000 
 four and a half per cent. In this final settle- 
 ment was also included a loan of one million 
 livres from the farmers-general, obtained in the 
 year 1777. Thus was closed the account with 
 the Republic of France, The French debt, by- 
 means of re-loans, had now been transferred to 
 Amsterdam and the United States. 
 
 Out of the proceeds of the Dutch loans was 
 likewise discharged the small debt due to Spain, 
 as also the claims for pay and service of the 
 foreign officers who had enlisted in the army 
 during the late war, amounting to $186,988.23. 
 The Spanish debt originated in this wise : in 
 the year 1780, Congress, then under the press- 
 ure of immediate necessity, had sold bills of 
 exchange on the American minister at Madrid 
 to the amount of five hundred thousand dollars. 
 It was hoped that these bills, which were at 
 long dates, would be met by a loan from Spain. 
 On their presentation for payment, however, 
 the Spanish court refused to advance the 
 money ; and only after repeated solicitation was 
 that government finally persuaded to grant a 
 loan of $174,011, to be payable within three 
 years, at five per cent interest. This debt was
 
 irSg-iSjJ. ir 
 
 paid in August, 1793, at which time it had 
 amounted, with arrears of interest, to some- 
 thing more than $268,000. 
 
 The management of the domestic debt gave 
 rise to more serious difhculties than the foreign 
 debt. On the demise of the late Government, 
 this debt amounted to $42,414,085.94. Out of 
 this total, $27,383,917.74 were represented by- 
 certificates which had been issued on account 
 of the principal of the debt; $13,030,168.20, 
 in indents, went to sum up the arrears of inter- 
 est as computed to Dec. 31, 1790; and two 
 million dollars was the estimate formed of the 
 unliquidated portion, consisting chiefly of Con- 
 tinental bills of credit. The capital of the debt 
 was in the nature of an annuity at six per cent 
 per annum, redeemable at the pleasure of the 
 Government by the payment of the principal. 
 As to the arrears of interest, which bore so 
 large a proportion to the principal of the debt, 
 any immediate payment was not at all practi- 
 cable. While the very nature of these claims 
 made them of necessity a subject for construc- 
 tion, yet they were entitled to the same consid- 
 eration as was given to the principal. 
 
 The ratification of the new Constitution by a
 
 12 AMERICAN FINANCES, 
 
 number of the States sufficient to secure an 
 organized government, exerted a timely and 
 restorative influence upon the pubHc credit. 
 The belief became general that now some effec- 
 tive provision would be made for the payment 
 of the domestic debt. That it was just and 
 valid had never been questioned. It was des- 
 ignated "the price of liberty," and the good 
 faith and honor of the country had been re- 
 peatedly and solemnly pledged for its payment. 
 The late Government had made, it is true, ear- 
 nest and laudable efforts towards fulfilling its 
 obligations ; but these efforts were defeated by 
 the more urgent necessities of the war, as well 
 as by its own inexperience in finance, not to 
 speak of the embarrassments of a defective con- 
 stitution during the last seven years of its 
 existence. Now that the new Government had 
 competent powers to command the resources 
 of the whole country, the confidence of credit- 
 ors began to revive. And this confidence that 
 some action would be taken in their behalf, 
 received new strength and sanction on the 
 adoption by the House of Representatives, at 
 the close of the first session of Congress in 
 September, 1789, of a resolution declaring that
 
 1789-1835- 13 
 
 they considered an adequate provision for the 
 support of the public credit to be a matter of 
 high importance to the national honor and 
 prosperity. A rapid increase took place in the 
 market value of the public securities. They 
 had been selling for no more than fifteen and 
 twenty cents upon their nominal value. But 
 from January, 1789, to November of the same 
 year, they rose thirty-three and a third per 
 cent ; and by the following January they had 
 risen fifty per cent more. 
 
 On the 4th of August, 1790, was passed an 
 Act knov/n as the Funding Act. This was a 
 plan for remodelling the domestic debt, and it 
 grew out of the absolute necessity of bringing 
 the Government's liabilities within reach of its 
 probable income. Were the Government, with 
 its current expenses, — always liable to increase 
 from contingent demands, — to attempt to pay 
 the interest of the entire mass of the public 
 debt on the basis contracted for, it would have 
 to control a revenue of not less than five mil- 
 lions of dollars annually. To undertake to 
 secure this sum by means of taxation, would, it 
 was apprehended, put a very great strain on 
 the nascent capacity of the country, as its
 
 14 AMERICAN FINANCES, 
 
 ability to bear taxation was as yet practically 
 untried. In lieu, therefore, of the original basis 
 contracted for, a provision for the debt was 
 made under the Funding Act on a basis calcu- 
 lated at four per cent. The measure was an 
 appeal to the intelligence of the creditors, and 
 to their interest as well, in favor of an arrange- 
 ment which was considered to be based upon a 
 real and fair equivalent. This re-organization 
 of the old debt made it easier to be provided 
 for, while at the same time it offered unques- 
 tionable security for the strict fulfilment of the 
 new engagements. 
 
 Under the provisions of the Funding Act, a 
 loan was now opened for the full amount of the 
 domestic debt, the subscriptions thereto being 
 made payable in the certificates that had been 
 previously issued for it. For every sum sub- 
 scribed in the principal of the debt, two certifi- 
 cates were issued, — one of them for an amount 
 equal to two-thirds of the subscription, bearing 
 interest (payable quarterly) at the rate of six 
 per cent per annum from the ist of January, 
 1791 ; the other for the remaining third of the 
 sum, bearing the same interest after the year 
 1800. The debt in this new shape was subject.
 
 1789-1835- 15 
 
 upon the accruing of the interest, to redemption 
 in such payments as were not to exceed in a 
 single year, on account of both principal and 
 interest, the proportion of eight dollars upon a 
 hundred dollars. The arrears of interest, com- 
 puted to the last day of December, 1790, were 
 fundable, dollar for dollar, into a stock redeem- 
 able at the pleasure of the Government, and 
 bore interest at three per cent per annum, pay- 
 able quarterly from the ist of January, 1791. 
 
 Lest it might be imputed that this new 
 measure acted upon the necessities of the cred- 
 itors, and so carried with it an appearance of 
 coercing them, the change in the form of the 
 debt was left to their own choice. To this end, 
 a solemn legislative declaration was made in 
 protection of the rights of any creditors who 
 did not think proper to subscribe to the new 
 loan, and which stated that those rights should 
 in no wise be altered, abridged, or impaired, 
 and that their contracts were to remain in full 
 force and validity. An appropriation was made 
 for paying the non-subscribing creditors an 
 interest on their respective claims equal to the 
 interest payable to the subscribing creditors. 
 The sole condition attached to their payment
 
 1 6 AMERICAN FIaXANCES, 
 
 was the return of the old certificates in ex- 
 change for new ones of like tenor, or their 
 registration. This was necessary as a protection 
 against fraud, and also as a help towards ascer- 
 taining as far as possible the extent of the pub- 
 lic debt. The option of separating the arrears 
 of interest from the principal, and funding them 
 at three per cent, was also given the creditors. 
 But it was well understood that no more was to 
 be done for the non-subscribers than was posi- 
 tively due to good faith. 
 
 Under the new form now assumed by the 
 public debt, the Government relinquished the 
 right of redeeming it at pleasure, which it could 
 previously use to its advantage whenever there 
 was a fall in the market-rate of interest. This 
 surrender served to give to the debt a more 
 fixed character. Again, instead of the interest 
 being paid, as originally provided, at the end of 
 the year, and only at the treasury, it was now 
 to be paid in quarterly payments and at thirteen 
 different places, which made it equivalent to 
 6.15 per cent per annum in lieu of the stipu- 
 lated rate of six per cent. Furthermore, by the 
 original contract, only an annual provision for 
 the interest was required ; whereas the Funding
 
 1789-1835- ly 
 
 Act appropriated and pledged funds for both 
 the interest and the principal, and this appro- 
 priation was made co-extensive with the dura- 
 tion of the debt. 
 
 Considerable intrinsic value now accrued to 
 the public debt in its new form from these 
 stipulations. Nor is this statement negatived 
 by the fact of the reduction of the interest 
 from six per cent to four per cent, — a reduction 
 which was considered, at the time, reasonable 
 and necessary, inasmuch as it was made on a 
 conscientious estimate of the resources of the 
 country. This estimate, we now know, was far 
 below the value of their subsequent growth 
 and expansion. And it is this growth in the 
 national finances beyond the most sanguine 
 expectations, which might hinder the measure, 
 without adverting to this fact, from being 
 appreciated in our day at its full value. The 
 very change in the mode of appropriation 
 formed of itself a valuable consideration, and 
 this was evidenced at the time by the opposition 
 of a strong party to the funding of the debt 
 upon terms so advantageous to the creditors as 
 those offered. This party contended that a 
 discrimination should be made between the
 
 1 8 AMERICAN FINANCES, 
 
 possessors of the certificates by purchase, and 
 the original holders ; as the latter, under the 
 pressure of need, had had to sell their certifi- 
 cates at a very great discount. The permanent 
 had this advantage over the annual provision ; 
 namely, that once it was made, it was absolutely 
 safe, at least until all the three departments of 
 the Government should concur in revoking the 
 solemn pledge given to the creditors. The 
 annual provision, on the other hand, was always 
 liable to be defeated by the prevailing passions, 
 prejudices, or intrigues of a majority of but a 
 single branch of the Government. Some of the 
 creditors were at first for insisting on better 
 terms, and in a memorial to Congress entered 
 their protest against the commutation as a 
 breach of faith, particularly in view of the favor 
 shown to the foreign creditors. Nevertheless, 
 seeing, on the whole, that there was now secured 
 to them a permanent and reliable settlement of 
 their claims, all agreed to accept the modifica- 
 tion proposed. 
 
 The books for receiving subscriptions were 
 opened in all the States on the ist of October, 
 1790, and were closed on the last day of the 
 year 1797. During this interval, nearly the
 
 i78g-i835. 19 
 
 whole of the old debt was subscribed to the new 
 loan : there were a few, however, who still held 
 back from funding their certificates, although 
 they had registered them. All evidences of 
 debt presented after the loan was closed, and 
 previous to the 12th of June, 1799, were paid 
 in specie, at their nominal value if registered, 
 and at their market value if not registered. 
 All that failed to be presented within this 
 defined period, became, by the fact, forever 
 barred from settlement or allowance. The total 
 amount of domestic debt that was funded was 
 $41,963,561.98; $19,622,505.52 of this amount 
 were in six-per-cent stock; $9,416,382.92 in 
 deferred stock; and $12,924,673.54 in three-per- 
 cent stock. The difference between the amount 
 actually funded and the amount at first com- 
 puted to be outstanding, was attributable not so 
 much to the Act of Limitation as to the loss or 
 casual destruction of certificates throughout a 
 period of more than twenty years. To this 
 chief cause may be added the errors made in 
 the estimates themselves ; as, for instance, in the 
 old emission bills, which, while computed at 
 forty for one, were actually funded at the rate 
 of one hundred for one. Many loan-certificates,
 
 20 AMERICAN FINANCES, 
 
 also, which were thought to have been already- 
 issued for the public service, were subsequently 
 returned to the Treasury, and cancelled. 
 
 An important feature in the general plan for 
 re-organizing the public debt was the assumption 
 by the National Government of the debts in- 
 curred by the States in support of the war, and 
 which in their nature and of right were properly 
 a charge against the United States. The Con- 
 gress which assembled at the commencement 
 of the war of independence, possessing no 
 defined powers of government, had no right to 
 tax the States. However, when an appeal 
 was made to them, the States furnished money 
 and supplies according to their ability, consider- 
 ing these contributions as loans or advances for 
 the common weal. By the adoption of the 
 Articles of Confederation in the year 1781, no 
 practical change was made in the mode of 
 carrying on the war. The public contracts still 
 continued to be turned over to the several 
 States for settlement, a course which was not 
 only a relief, but a necessity, to a government 
 with an empty treasury. The main obligations 
 thus undertaken by the States were that they 
 should settle the arrears of pay of their respec-
 
 j^Sg-iSjj. 21 
 
 tive lines of the army, as well as the claims of 
 their own citizens, many of whom already held 
 the certificates of the commissioners or other 
 officers of the United States for supplies fur- 
 nished, or services rendered. Now, these obliga- 
 tions the States either paid in their own bills of 
 credit, or substituted their own State certificates 
 for the certificates of the United States. Such 
 creditors, therefore, not only had never been 
 asked to consent to this transfer of their claims 
 from the United States, but had besides re- 
 ceived no actual payment, but only promises of 
 payment, which remained still unredeemed. 
 Here arose a conflict between justice and gen- 
 erosity. Each State from the first was bound 
 for its just proportion of the expenses of the 
 war : any thing advanced in excess of this, of 
 course, gave the State a claim to remuneration. 
 Until, however, the extent of these excesses 
 had been ascertained, the United States were 
 not strictly obligated to assume their indebted- 
 ness. But, on the other hand, it would have 
 been impolitic, and even invidious, to make a 
 discrimination between equally meritorious pub- 
 lic creditors, by providing for one class out of 
 the ample national resources, and leaving the
 
 22 AMERICAN FINANCES, 
 
 Other to look for jiayment to the States, which 
 were already overburdened with debts. Under 
 these circumstances, the debts of the individual 
 States were assumed by Congress. 
 
 The debts of all the States taken together 
 were found to amount to about $21,500,000. 
 For the full sum, a loan was opened at the same 
 time and the same places as already prescribed 
 for the domestic debt ; and to each State was 
 assigned a quota of it about equal to its esti- 
 mated and still unpaid war-debt. The sub- 
 scriptions were paid indiscriminately in the 
 certificates of the principal and of the interest 
 (this latter computed to the 31st of December, 
 1 791) of the debts of the respective States, 
 issued prior to January, 1790, for services or 
 supplies furnished for the prosecution of the 
 late war. Each person subscribing received 
 three certificates, — one for a sum equal to four- 
 ninths of the subscribed sura, with interest at 
 six percent per annum from the ist of January, 
 1792 ; another for two-ninths of the subscribed 
 sum, to bear interest after the year 1800, at six 
 per cent ; and the third certificate for the 
 remaining three-ninths, bearing an interest of 
 three per cent from the first of January, 1792.
 
 1789 - iSjS- 23 
 
 The interest on these several certificates was 
 payable in the same manner, and the principal 
 was made subject to a like mode of redemption, 
 as the correspondent stock created by the loan 
 funding the domestic debt. 
 
 The subscriptions to the funded assumed debt 
 were closed on the ist of March, 1793. Out 
 of the total amount which had been assigned 
 to the States, only $18,271,814.74 had been sub- 
 scribed. This difference is chiefly accounted 
 for by the fact that the sums assumed for some 
 of the States were in excess of the actual 
 amount of their outstanding debts. In some 
 instances, too, the debt was of such a kind as 
 to preclude its being accepted, — in the case, for 
 example, of certificates issued after the ist of 
 January, 1790. A number of persons, besides, 
 not noting the limitation of time for receiving 
 subscriptions, or from entire ignorance of it, 
 lost thereby the opportunity of subscribing. 
 
 The debts of the States did not, however, fur- 
 nish any criterion of their relative contributions 
 to the war. Some of them, escaping more than 
 others the ravages of actual warfare, had there- 
 fore been able, by means of current taxation and 
 their ample resources, to meet their expenses,
 
 24 AMERICAN FINANCES, 
 
 and reduce their debt ; while those which had 
 suffered, and were therefore forced to make all 
 the heavier drafts upon their credit, found them- 
 selves exhausted when the war ceased, and ill 
 prepared to face their liabilities. These grave 
 inequalities in their financial condition, the 
 result of a random distribution of the burdens 
 of the war, it was now necessary to correct ; 
 and accordingly the assumption of the State 
 debts was followed by the appointment of a 
 board of three commissioners for the settlement 
 of the accounts between the United States and 
 the individual States. 
 
 Under the arrangement effected by this com- 
 mission, the States were charged with all 
 advances made to them by the United States, 
 including the amount of assumed debt, with 
 interest computed to the last day of the year 
 1789. The bills of credit, of which the ad- 
 vances principally consisted, were liquidated 
 according to an established scale on a specie 
 value at the date of each of the advances. 
 On the other hand, the States were credited 
 with their individual expenditures, whether 
 of moneys paid, or supplies furnished, to the 
 United States. This total of credit was liqui-
 
 dated to a specie value also, with interest to 
 the last day of the year 1789. The expendi- 
 tures on the part of the States having been 
 found to exceed the advances from the United 
 States by over seventy-seven and a half millions 
 of dollars, an apportionment of this excess was 
 made among the States according to the rule 
 for apportioning representatives and direct 
 taxes, as prescribed by the Constitution of the 
 United States. In order to insure perfect 
 equalization among the States in regard to 
 their contributions in support of the war, it 
 was necessary that the amount of excess 
 apportioned to each State, added to the ad- 
 vances it had received from the United States, 
 should exactly correspond to the war expenditure 
 of that State. This was the standard of adjust- 
 ment. In every State in which the expendi- 
 tures fell short of this amount, a balance equal 
 to the difference became due to the United 
 States ; and where any of them exceeded it, 
 the balance was in that case due the State from 
 the United States. The first were the debtor 
 States, the latter the creditor States. 
 
 The debtor States were New York, Pennsyl- 
 vania, Delaware, Maryland, Virginia, and North
 
 26 AMERICAN FINANCES, 
 
 Carolina. The creditor States, New Hamp- 
 shire, Massachusetts, Rhode Island, Connecti- 
 cut, New Jersey, South Carolina, and Georgia. 
 
 The balances due to the creditor States 
 amounted to ^3,517,584, and were funded by 
 the United States in accordance with the law 
 providing for the settlement of accounts. 
 These balances stood on the same terms as the 
 other part of the domestic debt, except that 
 the stock was not transferable. The purpose 
 of this restriction was to keep as much of the 
 debt as possible out of the hands of foreigners, 
 who were already holders of a large portion of 
 it. But it was soon found necessary to suspend 
 it, so as to enable the States to pay their re- 
 maining creditors. The balances proper were 
 funded in six-per-cent stock, two thirds of the 
 amount to bear interest at once, the other 
 third only after the year 1800. Each State 
 also received interest upon its balance at the 
 rate of four per cent per annum, dating from 
 the last day of December, 1789, to the last 
 day of the same month, 1794. And this 
 interest, which amounted to 1^703,5 16.80, was 
 funded in three-per-cent stock. The annual 
 interest on the whole, except as to the de-
 
 ferred stock, began to accrue on the ist of 
 January, 1795. 
 
 The sum-total of debt undertaken in behalf 
 of the States amounted to $22,492,915.54. By 
 the assumption proper, the public debt of the 
 country at large was not augmented. This 
 measure only transferred a portion of it, which 
 was thereby lifted off the States in their sepa- 
 rate capacity, and placed upon them in their 
 national or united capacity. In this shape, the 
 General Government was able to manage and 
 provide for it ; and it could do it more efficiently 
 than would have been possible under the con- 
 flicting systems and less ample resources of the 
 States. For it must be remembered that the 
 States had now vested in the Federal Govern- 
 ment a concurrent and superior power of taxa- 
 tion ; and, moreover, that, in giving up their 
 right to lay duties on imports and exports, they 
 had parted with their most productive source 
 of revenue. In a word, the assumption was a 
 measure devised for fixing the responsibility for 
 the payment of all the debts arising out of 
 the Revolution upon the National Government, 
 where it properly belonged. 
 
 The case was different with the funded bal-
 
 28 AMERICAN FINANCES, 
 
 ances. Here there was an actual increase of 
 debt. The United States, in funding the bal- 
 ances of the creditor States, acted, in reality, as 
 agents only in behalf of, and as guaranties for, 
 the debtor States, from which their payment 
 was really due. But the United States have 
 never succeeded in collecting the balances due 
 from the debtor States, which would, as was 
 originally intended, have offset the newly 
 created debt. These States were given the 
 option of settling their accounts, either in 
 money or in public stocks, or of expending the 
 sums due upon the fortifications belonging to 
 the United States. This invitation was made 
 to them in the year 1799, at the time of a 
 threatened outbreak with France. The State 
 of New York partially complied with it. With 
 this single and unimportant exception, nothing 
 has ever been recovered upon the balances of 
 the debtor States. 
 
 The funding of the public debt on the terms 
 already mentioned, enabled the Government to 
 introduce system into the finances from the 
 very beginning. The postponement to the ist 
 of January, 1791, of the annual payment of 
 interest (all accruing to that date being con-
 
 1789-1835- 29 
 
 verted into new capital), afforded an opportunity 
 of testing the unknown resources of the coun- 
 try in advance of the necessity of a large 
 revenue. In other respects also, this delay was 
 opportune; for the old Government, not pos- 
 sessing the right to raise direct revenue, had no 
 fiscal service. This branch, therefore, needed 
 to be organized from its foundation. Officers 
 were to be appointed all over the country, 
 buildings provided for the transaction of busi- 
 ness, and all other arrangements entered into 
 incident to the collection of revenue. 
 
 To aid in administering the finances, a 
 national bank, under the name of the Bank of 
 the United States, was also chartered, with a 
 capital of ten million dollars. It was granted 
 the privilege of issuing notes, to be receivable 
 in all payments to the United States ; and the 
 Government likewise subscribed to two million 
 dollars of the stock, paying for it by means of 
 a loan from the bank of the same amount, which 
 was reimbursable in ten years by equal annual 
 instalments. The interest on this loan, at six 
 per cent per annum, was derived from the 
 dividends on the stock. As these averaged all 
 throusrh the duration of the bank's charter
 
 30 AMERICAN FINANCES, 
 
 ^W per cent, a handsome profit was annually 
 coming to the Government. 
 
 On the 4th of July, 1789, a temporary tariff 
 was adopted to meet the immediate wants of 
 the Government. It was based on the one 
 which, as a federal tax, had been proposed to the 
 States by the Continental Congress, and agreed 
 to by all but two. The initiatory expenses 
 of the Government being mainly on account of 
 the current service, the duties for the seven- 
 teen months this tariff was in force yielded a 
 surplus over appropriations of $1,371,430. A 
 large portion of this sum was subsequently 
 invested in purchases of the public debt. 
 
 From the ist of January, 1791, the annual 
 income needed by the Government for all 
 demands was $2,839,163, distributed as follows: 
 for the annual interest on the foreign debt, 
 $542,600 ; for the interest on the domestic 
 debt, $1,896,563; and for current expenses, 
 $600,000. In order to provide this sum, an 
 average increase of two and a half per cent was 
 placed on existing duties. Moreover, on the 
 1st of January, 1792, the date of the interest 
 on the funded assumed debt becoming due, 
 duties were laid on spirits distilled at home,
 
 1789-1835. 31 
 
 while a higher rate was then, too, put on the 
 foreign article. These additional duties gave 
 an annual product of $800,000, and served to 
 raise the national income to the level of all 
 probable demands. All taxes and duties now 
 established were to continue permanent as long 
 as the debt lasted. Moreover, with the single 
 exception of an annual reservation for the Gov- 
 ernment of $600,000, their first proceeds were 
 pledged and appropriated to paying the annual 
 interest of the debt. Congress, however, re- 
 served the right of substituting for these duties 
 others of equal value. 
 
 But no sooner was this equilibrium in the 
 public accounts secured, than it was disturbed 
 by unforeseen causes, demanding a still larger 
 revenue. An expensive war with the Indians 
 of the North-West was almost immediately 
 thrust upon the Government. The Whiskey 
 Insurrection in Pennsylvania, growing out of 
 resistance to the excise law, broke out in 1794 ; 
 and in the same year, our relations with Eng- 
 land becoming critical, the harbors were forti- 
 fied, arsenals and armories established, supplies 
 of arms and stores purchased, and new ships 
 built for the navy ; finally, a treaty at heavy
 
 32 AMERICAN FINANCES, 
 
 cost had to be purchased of Algiers. To meet 
 these unexpected demands upon the Treasury, 
 fresh taxation had to be resorted to. 
 
 Apart from a deficit of ^526,000, to pro- 
 vide for which some additional duties were put 
 upon imported articles in May, 1792, the year 
 1794 was the one of greatest embarrassment 
 during this period. The appropriations in 
 that year exceeded those of any former year 
 by upwards of two and a half millions of dol- 
 lars ; while the revenue, by reason of the in- 
 terruptions to commerce, was estimated to 
 fall off from the receipts of previous years 
 ^1,300,000. The tariff was again increased; 
 and internal duties were laid upon carriages, 
 refined sugar, snuff, licenses for selling wines 
 and foreign liquors, and property sold at auc- 
 tion. Besides this, a prospective deficiency of 
 cash in the Treasury by the ist of April made 
 it necessary to provide immediately a million 
 and a half of dollars. This sum was raised by 
 a loan on the new internal duties, pledged in 
 anticipation. By the close of the year, signs 
 of relief were apparent. In 1795 the Indians 
 made peace ; and England, too, modified her 
 foreign policy in regard to neutral commerce.
 
 I78g-i835- 33 
 
 The public expenditures were at once 
 reduced ; and soon there was a well-grounded 
 assurance, on the basis of the existing reve 
 nues, of a surplus of more than a million of dol- 
 lars in the year 1795, and in succeeding years 
 also. The annual revenue was placed at 
 ^6,552,300.74; the current annual expendi- 
 ture at $5,481,843.90; giving an excess of 
 income of $1,070,456.84. Making allowance 
 for unforeseen demands and for deficiencies, 
 the latter sum was deemed a sufficient guar- 
 anty for commencing a regular and immediate 
 reduction of the public debt. With this view, 
 the temporary tariff duties, which had been 
 imposed under the pressure of recent com- 
 plications, foreign and domestic, were retained 
 as an addition to the permanent revenue ; and 
 the five internal duties, yielding a sum of 
 $380,000, were also continued in force until 
 the 1st of March, i8or, the year in which the 
 interest on the deferred stock was payable. 
 Prudence forbade the making of any provis- 
 ions beyond that date, as at that time Con- 
 gress could decide from the actual condition 
 of things whether those duties or any others 
 would be required.
 
 34 AMERICAN FINANCES, 
 
 There had prevailed from the very outset 
 a paramount determination of lessening the 
 burden of the public debt as soon as practi- 
 cable. By the terms of the Funding Act, the 
 proceeds of the public lands in the Western 
 territory were appropriated solely in redemp- 
 tion of the debt. The fund from this source 
 was set down at between three and four mil- 
 lions of dollars, the estimated jDrice of the 
 lands being twenty cents per acre. Again, 
 after ample provision, according to the Act, 
 had been made for funding the debt, the sur- 
 plus revenue to the end of the year 1790 was 
 set apart for the purchase of any public stocks 
 which were selling below their par value in 
 the market. 
 
 The purchases made by the use of this sur- 
 plus were doubly beneficial at the time ; for, 
 besides sinking a capital often more than fifty 
 per cent greater than the sum expended, they 
 accelerated the rise of stocks that were in 
 great demand abroad, thus producing a clear 
 profit to the nation proportioned to the en- 
 hanced price foreigners were obliged to pay 
 for their purchases. A loan of two millions 
 of dollars was even authorized for the same
 
 1789-1835- 35 
 
 purpose, in order to place in the hands of 
 the Government sufficient means to influence 
 the market whenever it was desirable. In the 
 first quarter of the year 1791, the six-per- 
 cents sold at eighty-two cents on the dollar ; 
 the three-per-cents and the deferred stock at 
 forty-two cents. As early as the ist of Au- 
 gust, the six-per-cents had risen to par value, 
 and the other two stocks to sixty cents ; and 
 in the month of January, 1792, the former 
 commanded a premium of twenty -five per 
 cent, and the two latter as much as seventy- 
 five cents on the dollar. But they all subse- 
 quently declined, owing to the troubled state 
 of public affairs. 
 
 The nominal amount of all the stocks pur- 
 chased was ^1,994,801.43, for which ^1,392,- 
 672.54 in specie were paid. Of this sum, 
 1^957,770.65 were credited to the surplus 
 revenue, and the balance to the loan. 
 
 The first permanent fund for the extinction 
 of the public debt was established by the Act 
 of the 8th of May, 1792. This fund had a 
 twofold endowment : first, it was endowed 
 with the annual interest on the public debt, — 
 that is, on the portion previously purchased,
 
 36 AMERICAN FINANCES, 
 
 redeemed, or paid into the Treasury for any 
 debt or demand of the United States, and 
 also on any portion that might thereafter be 
 purchased, redeemed, or so paid ; and sec- 
 ondly, it was endowed with the surplus remain- 
 ing of the sums appropriated to pay the 
 interest on the public debt. The annual pro- 
 ceeds of this fund, which increased as the 
 outstanding stock decreased, were appropri- 
 ated and inviolably pledged to the purchase, 
 in as equal proportion as possible, of the sev- 
 eral species of stocks constituting the public 
 debt, at their market price respectively, if it 
 did not exceed the par or true value ; and 
 this purchasing was to continue until the 
 annual income of the fund should be equal to 
 two per cent of the whole amount of the out- 
 standing funded stock bearing a present inter- 
 est of six per cent. The fund was thence- 
 forth to be applied to the redemption of that 
 portion of the debt (according to the reserved 
 right of the Government), until the whole of 
 it was redeemed. This redemption being ac- 
 complished, purchases were to be resumed out 
 of the fund of the remaining unredeemed 
 debt.
 
 1789-1835- 37 
 
 The fund was, however, inadequate to any 
 very serious or immediate reduction of the 
 debt. The annual interest account, its only 
 certain resource, was of slow growth, and 
 amounted at that time to less than forty 
 thousand dollars ; whereas a sum equal to two 
 per cent on the whole amount of the six-per- 
 cent stock was upwards of six hundred thou- 
 sand dollars. 
 
 The plan of redemption devised by the Act 
 of the 8th of May, 1792, was now enlarged 
 and perfected by the Act of the 3d of March, 
 1795, in which the name of sinking-fund was 
 first adopted. The resources of the sinking- 
 fund were now enlarged to such an extent 
 out of the permanent revenues, out of the 
 proceeds of former provisions, and from the 
 bank dividends in excess of the annual inter- 
 est on the unpaid instalments of the subscrip- 
 tion loan, as to enable the Government, on 
 the strength of this increase, to commence, 
 on the 1st of January, 1796, the annual reim- 
 bursement of the six -per -cent stock; to pay 
 as they became due the annual instalments 
 themselves of the subscription loan of the 
 National Bank ; and upon the final scttle- 
 
 Q 1 n Ci
 
 38 AMERICAN FINANCES, 
 
 ment of this last-mentioned debt, to begin on 
 the 1st of January, 1802, the regular reim- 
 bursement of the deferred stock. 
 
 The absolute appropriation of more liberal 
 funds was deemed imprudent and unsafe in 
 the existing state of the revenue, but some 
 auxiliary resources of a contingent character 
 were made available to the sinking - fund. 
 These consisted of the net proceeds of the 
 sales of the public lands, of all moneys re- 
 ceived into the Treasury on account of debts 
 which originated under the old Government, 
 and of all surpluses arising from excess of 
 revenue or from unexpended appropriations. 
 These accessions, it was hoped, would amply 
 secure a more speedy redemption of the debt 
 than had been expressly stipulated for. No 
 further provision in the sinking - fund was 
 made applicable to the purchase or redemp- 
 tion of any other component part of the pub- 
 lic debt until the six-per-cent and the deferred 
 stock had been discharged. Upon such dis- 
 charge, all the moneys of the fund were to be 
 used in the purchase or redemption of the 
 remaining unpaid debt, whether funded or 
 unfunded, foreign or domestic. If, however,
 
 i78g - 1835. 39 
 
 prior to the discharge of the six-per-cent and 
 the deferred stocks, the resources of the 
 sinking-fund were found adequate to paying 
 the sums annually applicable to the reim- 
 bursement of these two stocks, and yielding 
 a surplus besides, then this surplus might 
 meanwhile be employed in reducing the other 
 parts of the debt. Nor could the moneys of 
 the sinking-fund be diverted to any other pur- 
 pose than the paying of the public debt until 
 the whole of it was paid, except when its only 
 remaining outstanding portion was the three- 
 per - cent stock ; in which event Congress 
 reserved the right of using the moneys of the 
 fund thereto pledged for any purpose it might 
 see fit. 
 
 The President of the Senate, the Chief Jus- 
 tice, the Secretary of the Treasury, the Secre- 
 tary of State, and the Attorney-General, for the 
 time being, were appointed the commissioners 
 of the sinking-fund. All reimbursements of 
 the capital of the debt were placed under 
 their superintendence ; and all moneys accru- 
 ing to the fund were so vested in them as 
 to acquire the nature and quality of a pro- 
 prietary trust, incapable of being diverted,
 
 40 AMERICAN FINANCES, 
 
 except by a violation of the principles and 
 sanctions of private property, to any other 
 object than the reduction of the public debt. 
 In order that this system of redemption 
 might not be dependent on extraneous pro- 
 visions, but have within itself full means of 
 complete execution, the commissioners were 
 empowered and required to anticipate the 
 revenue already appropriated, and make loans 
 whenever the prompt payment of the annual 
 interest rendered such a course necessary. 
 These loans were not to exceed in any one 
 year one million of dollars, and were to be 
 payable within a year from the date of each 
 loan. F'urthermore, if, in their judgment, there 
 was reason to apprehend that all the prob- 
 able receipts into the Treasury for any year 
 vv^ould fall short of the amount needed for the 
 annual current expenditures of the Govern- 
 ment, as well as for the payments they had 
 in charge, they were in such contingencies 
 also authorized, and even enjoined, to borrow, 
 either by direct loan or by the sale of certifi- 
 cates of stock, any sums requisite for paying 
 instalments falling due of the debt existing 
 on the 3d of March, 1795. For the payment
 
 J78g-i835- 4 1 
 
 of the interest on these projected loans, there 
 were pledged and appropriated, first, the in- 
 terest on the sums reimbursed from their 
 proceeds ; and secondly, such amount of the 
 permanent revenue as might be necessary to 
 make up any deficiency. The interest on the 
 six -per -cent and the deferred stocks was 
 already set apart to form accumulations for 
 paying the successive instalments of the 
 principal of these stocks, for these instal- 
 ments increased each year in the ratio of the 
 interest liberated by each payment. 
 
 The great object of the law of the 3d of 
 March, 1795, seems to have been to make 
 efficient provision for the gradual reimburse- 
 ment of the six-per-cent and deferred stocks, 
 and so pave the way for a future though dis- 
 tant payment of the remainder of the debt. 
 As the successive reimbursement of these two 
 stocks became thenceforth an irrevocable stipu- 
 lation with the creditors, they were virtually 
 converted from an annuity of six per cent per 
 annum for an indefinite period, into an annuity 
 of eight per cent for a period of somewhat 
 less than twenty-four years from the first 
 payment under the new system. The first
 
 42 AMERICAN FINANCES, 
 
 payment made on account of the principal of 
 this stock was in one undivided sum, but 
 after that no distinction was observed in the 
 payments between the interest account and 
 that of the principal. Dividends at the rate 
 of one and one-half per cent on the original 
 amount of stock were paid on the last day of 
 March, June, and September, and of three 
 and one-half per cent on the last day of 
 December, of every year. This arrangement 
 was adopted because of its easy execution, 
 and was most favorable to the equal and 
 regular circulation of the revenue. 
 
 The foreign debt already rested in contracts 
 which provided for its gradual reimbursement 
 at stipulated periods. The Dutch debt made 
 up the largest part of it. This debt amounted 
 to $12,200,000, and for its extinguishment 
 during the next fifteen years required annual 
 payments ranging from $80,000 to $2,220,000, 
 and averaging for each of these years $813,- 
 333.33, not including i)remiums, gratifications, 
 commissions, and expenses of remittance ; for 
 all of these debts no provision was practically 
 made, except by borrowing money. However, 
 as an expedient for postponing these pay-
 
 lySg - 1835. 43 
 
 ments as long as the state of the finances 
 required it, a proposal was submitted to the 
 foreign creditors to conv^ert their debts into a 
 domestic stock, reimbursable at the pleasure 
 of the Government. An increase of interest 
 of one-half per cent per annum, in addition to 
 the rate already secured by the original con- 
 tracts, was offered them in indemnification 
 for incidental charges, — such as the expense 
 and hazard of employing agents in the United 
 States, the chances of exchange, payments of 
 insurance and commissions, and in general for 
 equalizing the facilities attending the payment 
 of interest at home. The French Government 
 only, we have seen, subscribed the remaining 
 portion of its debt to this domestic loan. 
 
 The Act of the 3d of March, 179S, is an 
 event of importance in the financial history 
 of the country. It was the consummation of 
 what remained unfinished in our system of 
 public credit, in that it publicly recognized, 
 and ingrafted on that system, three essential 
 principles, the regular operation of which can 
 alone prevent a progressive accumulation of 
 debt : first of all it established distinctive rev- 
 enues for the payment of the interest of the
 
 44 AMERICAN FINANCES, 
 
 public debt as well as for the reimbursement 
 of the principal within a determinate period ; 
 secondly, it directed imperatively their applica- 
 tion to the debt alone ; and thirdly, it pledged 
 the faith of the Government that the appointed 
 revenues should continue to be levied and 
 collected and appropriated to these objects 
 until the whole debt should be redeemed. 
 
 Under the operation of this sinking-fund, 
 the payment of the public debt was designed 
 and anticipated to take place by the year 1826, 
 or within a period of about thirty years. It 
 did not respond to this aim and anticipation. 
 Indeed, the practical working of a scheme so 
 complex and intricate would have been in the 
 long-run problematical, even had events suf- 
 fered it to take its regular and intended 
 course. Be that as it may, the failure of 
 some of its provisions, in concurrence with 
 fresh troubles both at home and abroad, be- 
 sides aggravating some latent defects, over- 
 strained the weak points of a system which, 
 under more favorable circumstances, might 
 have been atoned for, if not wholly overcome, 
 by the elastic resources of the country.
 
 CHAPTER 11. 
 
 REVENUE, EXPENDITURE, AND THE SINKING-FUND. 
 
 The Sinking-fund Act of 1795, while it made 
 assured and ample provision for reimbursing 
 the six-per-cent stock, failed to extend a simi- 
 lar provision to the other part and descrip- 
 tion of the public debt. This omission proved 
 a defect in that important measure ; and it 
 was so speedily brought to light, that its dis- 
 turbing influence was at once felt in all the 
 estimates of the year following the one which 
 saw the passing of the Act. 
 
 Early in the year 1796, intelligence reached 
 this country that the creditors in Amsterdam 
 and Antwerp had rejected the proposal to con- 
 vert the foreign debt into a funded domestic 
 stock ; and it was also known that the unsettled 
 position of affairs in Europe, caused by the 
 war then waging, would in the interim pre- 
 clude any further loans being obtained there. 
 
 45
 
 46 AMERICAN /-YAA.VCES, 
 
 Funds would therefore have to be transmitted 
 abroad, to meet reimbursements on the for- 
 eign debt, as stipulated for in the contracts. 
 This unforeseen necessity was of itself suffi- 
 ciently embarrassing ; but it chanced to be 
 further aggravated by a request made about 
 the same time by the directors of the United- 
 States Bank, to the effect that the Govern- 
 ment would take measures for paying the 
 loans already due the bank, and would also 
 provide for the loans falling due in the course 
 of the current year. 
 
 Here were sudden and unlooked-for demands 
 upon the Treasury, which raised the expendi- 
 ture for the year 1 796 to the extent of several 
 millions of dollars. Yet no provision what- 
 ever had been made for discharging these 
 obligations. 
 
 The loans made to the Government by the 
 Bank of the United States amounted, on Jan. 
 I, 1796, to $6,000,000. Each of these several 
 loans had been obtained on a pledge of the 
 revenues, with the sole exception of a balance 
 of $1,400,000 yet due on the stock loan of 
 ;^2,ooo,ooo. During the recent troubles, when 
 expenses were mounting up rapidly, every
 
 lySg - 1833. 47 
 
 appropriation that called for immediate pay- 
 ment was compelled to be made against newly- 
 levied revenues, which themselves were already- 
 subject, on their collection, to credits running 
 from six to twenty-four months. In order, 
 therefore, to procure the money at once, loans 
 designed to be no more than temporary were 
 obtained of the bank, in anticipation of the 
 actual receipt of taxes. As, however, the 
 revenue properly belonging to each year was 
 being kept tied up by reason of the long 
 credits given on the outstanding bonds, the 
 pledged taxes, when they reached the Treasury, 
 were all absorbed in defraying the current ex- 
 penditures. Under these circumstances, the 
 Government found itself compelled, in order 
 to keep on hand sufficient cash funds, to re- 
 new the temporary loans, when once they were 
 made ; and so it went on, until the debt owing 
 to the bank grew at length to be so enormous 
 as even to paralyze its operations, depriving 
 it, as the fact proved, of nearly two-thirds of 
 its capital. 
 
 When, therefore, the payment of this debt 
 came eventually to be insisted on, some method 
 of raising the money had to be devised dif-
 
 48 AMERICAN FINANCES, 
 
 ferent from that of taking it from the receipts 
 for the coming year, 1796; for these receipts, 
 although already appropriated to pay the bank, 
 were clearly not available. 
 
 In this conjuncture, a proposal was submitted 
 to the bank, to commute the entire debt into 
 a funded domestic stock, to bear interest at 
 six per cent. This plan met with failure, 
 inasmuch as the bank declined to receive the 
 stock at its par value. The next move was 
 an attempt to negotiate a public sale of the 
 stock ; but the terms offered were so dis- 
 advantageous to the Government, that the loan 
 was withdrawn. Out of this new stock, not 
 redeemable until after the year 18 19, only 
 eighty thousand dollars' worth were sold, for 
 seventy thousand dollars in cash. 
 
 As a fresh resort toward responding to the 
 more urgent demands of the bank, 2,780 shares 
 of the bank-stock, at $400 a share, were sold 
 at a premium, realizing thereby ^1,384,260. 
 The proceeds of this sale had the effect of 
 satisfying the bank, and indeed the relief it 
 produced was such as to allow a postponement 
 in discharging the balance of the loans. These 
 were by degrees subsequently paid out of the
 
 lySg - 1835. 49 
 
 current revenues. As to the Dutch debt, 
 the instalment of $400,000 due upon it the 
 Government found itself enabled to pay by 
 an unexpected increase in the revenue from 
 imports and internal duties. 
 
 The annual addition to the revenue which 
 would be required, in order to ward off the 
 necessity of having recourse to new loans, 
 was found on computation to be $1,229,000. 
 For the purpose of commanding this amount, 
 duties were laid, under the Act of March 3, 
 1797, on certain imported articles. These 
 duties consisted, in the main, of an increased 
 specific duty on sugar, tea, and molasses, and 
 of an extra ad valorem duty of two and a 
 half per cent on cotton goods. This increase, 
 combined with an addition of fifty per cent 
 to the tax on carriages, brought the annual 
 revenue up to nearly $7,500,000. Out of this 
 sum, not only the current service was provided 
 for, but also the interest on the entire debt ; 
 and it was found adequate, besides, for paying 
 any instalments of the principal that might fall 
 due from the year 1797 to the year 1801. By 
 special appropriation, all proceeds arising from 
 the new tariff duties were set apart for the
 
 50 AMERICAN FINANCES, 
 
 payment, first, of the principal of the foreign 
 debt, and then of the principal of the debt due 
 to the Bank of the United States. 
 
 Scarcely had these arrangements been en- 
 tered upon when the Government found itself 
 on the point of a serious difficulty with France. 
 The spoliations of this power upon our com- 
 merce had aroused a determination to protect 
 it. Discretionary powers were conferred on 
 the President in an extra session of Congress, 
 which, in the event of an actual outbreak, 
 were to be employed in such preparations for 
 the conflict as his judgment might deem neces- 
 sary. In anticipation of this possible expendi- 
 ture, additional duties were imposed ; but as 
 the contingent expenditure was not created, 
 the receipts of the year 1797 produced a 
 surplus of upwards of ^1,900,000, which, in 
 accordance with the law, was applied to the 
 reduction of the public debt. 
 
 In the year following, the need of giving 
 greater security to American commerce com- 
 pelled the Government to submit to heavy cost, 
 both for military and maritime armaments. 
 Stamp-duties were now laid upon printed and 
 written documents of various kinds ; and at
 
 iy8g-i835- 5 1 
 
 the same time, there was also placed upon 
 dwelling-houses, lands, and slaves a direct tax 
 of two millions of dollars, which latter tax was 
 apportioned among the States, according to the 
 Constitutional rule. A loan of five millions of 
 dollars was likewise authorized ; and this loan 
 went to supply the deficit in the current ex- 
 penses for the years 1798 and 1799, which was 
 caused by the outlay for defensive operations 
 by land and sea. 
 
 This loan of five millions of dollars is note- 
 worthy as being the first in the United States 
 that was negotiated of its individual citizens. 
 The times looked unpropitious for its success : 
 there was a near prospect of war, and no rea- 
 son to look for any but the most limited assist- 
 ance from the banks. In spite, however, of 
 this untoward outlook, stock, redeemable after 
 fifteen years, was issued, bearing eight-per- 
 cent interest, which was the market- rate at the 
 time. It was all readily disposed of at par. 
 Additional stock on the same terms was issued 
 to the amount of $1,481,700. This latter was 
 for the current service of the year 1800, and 
 its sale realized an average premium of 5.6 per 
 cent. Besides these two loans, certificates of
 
 52 AMERICAN FINANCES, 
 
 indebtedness (known in the Treasury records 
 as "navy six-per-cent stock") were issued for 
 1^711,700, in payment of a number of war-ves- 
 sels furnished to the Government in the year 
 1798. To secure the interest upon these new 
 debts, a furtlier increase of the tariff duties 
 was resorted to. 
 
 The restoration of peace to Europe, coupled 
 with the settlement of our own difficulties with 
 France, relieved the Government of further 
 financial embarrassment. A speedy reduction 
 was made in public expenditures, especially in 
 those connected with the military and naval 
 establishments. The expenditure for the cur- 
 rent service, including in the term all payments 
 excepting those for the public debt, was re- 
 duced from ^9,972,248 in the year 1800, to 
 ^4,958,228 in the year 1802; while, owing to 
 the same causes, the receipts from customs 
 rose from $9,080,932 in 1800, to $12,438,235 
 in 1802. This last-named sum exceeded by 
 $1,200,000 the aggregate up to that time that 
 had been collected in any one year from the 
 customs and internal revenue both together. 
 
 Congress profited by this prosperous condi- 
 tion of the finances of the country, to redeem
 
 178Q-1835. 53 
 
 the pledge given at the different times of con- 
 tracting the public debt. By the terms of this 
 pledge, every deficiency which might occur as 
 to the provisions for paying the interest and 
 principal, Congress had bound itself to supply. 
 How very inadequate the Sinking-fund Act of 
 1795 had proved, needed no further demonstra- 
 tion than recent events. Its operation had 
 been from the first limited to the debts exist- 
 ing on the 3d of March, 1795 ; and this re- 
 strictive feature in its scheme necessarily 
 excluded from its provisions all subsequent 
 debts. The Dutch debt also was placed in an 
 equally improvident condition ; for by their re- 
 fusal to modify their contracts, or to make new 
 loans, the foreign creditors had thereby de- 
 feated the sole provision made in behalf of 
 their debts by the Sinking-fund Act. As a 
 consequence, a permanent and effectual enact- 
 ment covering the whole of the public debt did 
 not at this time exist. Nevertheless, the 
 annual interest had been promptly met, as also 
 such portions of the principal as were abso- 
 lutely demandable. And yet the mode under 
 which these payments were made, was irregular 
 and unauthorized.
 
 54 AMERICAN FINANCES, 
 
 These irregularities, and others of greater 
 moment, were the direct result of not ingraft- 
 ing upon the original plan of the sinking-fund 
 such supplementary legislation as the public 
 exigencies demanded. The auxiliary revenues, 
 for instance, which had been recently and espe- 
 cially created for the interest and principal of 
 the new public debt, had never been pledged 
 on the faith of the United States, as was the 
 case with the other revenues ; nor were they 
 vested in the commissioners of the sinking- 
 fund, under whose direction the law required 
 that all payments on account of the principal 
 should be made. Even this positive injunction 
 came to be continually disregarded, by reason 
 of large payments having at times to be made 
 out of moneys independent of the sinking- 
 fund, and charged to the year in which they 
 occurred. Furthermore, no imperative clause 
 directing their payment accompanied the re- 
 cent appropriations for the debt ; and since 
 these appropriations were not bottomed on any 
 specified source of revenue applicable solely to 
 the debt, they could claim no priority over 
 appropriations for the civil, military, and naval 
 expenses of the Government. In common with
 
 I78g-i835- 55 
 
 these latter, they, too, simply rested upon any 
 moneys in the Treasury. It is clear, then, that 
 these recent provisions were not in the nature 
 of a contract with the creditors ; and besides, 
 like other ordinary enactments, they were liable 
 to repeal at the pleasure of Congress, without 
 involving any breach of faith. Nor was any 
 security afforded by the appropriation of the sur- 
 pluses of the revenue, even though vested in the 
 commissioners, since nothing else v/as needed 
 to defeat this provision than to make appropri- 
 ations for other objects than the public debt. 
 
 The Dutch debt fared like the others, not- 
 withstanding the duties of the year 1797 were 
 expressly appropriated in payment of it. 
 What these duties amounted to, was not easily 
 ascertainable ; for, under the existing mode of 
 ascertaining them, it was not practicable to 
 separate, in the annual total, these particular 
 ad valorem duties from the other proceeds of 
 similar duties. Taking, however, a liberal 
 estimate, the former were set down at 1^500,- 
 000. This sum when added to the revenue 
 from the sale of the public lands, which was 
 to be applied to the same object, produced no 
 more than ^900,000. But it was now that the
 
 56 AMERICAN FINANCES, 
 
 heaviest instalments of the Dutch debt were 
 beginning to fall due : they varied for the year 
 1802, and for the five years thence ensuing, 
 from $920,000 to $2,220,000, averaging for 
 each of these six years nearly $1,600,000. 
 The actual provision for these instalments was 
 therefore not only uncertain, but inadequate. 
 As for the duties of the year 1800, any appro- 
 priation of them to the newly made debts was 
 rendered nugatory by the fact of those duties 
 having been made applicable to the payment 
 of the interest on the public debt. The duties 
 of 1797 were limited in their appropriation to 
 the Dutch debt and to the debts of the Bank 
 of the United States, the appropriation to cease 
 on their extinction. 
 
 To remove this conflict and confusion in the 
 provisions relating to the public debt, Congress 
 enacted a new law on the 29th of April, 1802, 
 which was designed to remedy the defects, and 
 supply the omissions, of the Sinking-fund Act 
 of 1795. The fiscal resources of the country 
 were now subjected to a clear and definite sur- 
 vey, and a like scrutiny was applied in ascer- 
 taining the actual nature and extent of the 
 national obligations.
 
 1789-1835. 57 
 
 Just previous to this re-organization of tlie 
 sinking-fund, the prosperous condition of the 
 revenue had justified a repeal of all internal 
 duties. These duties were peculiarly obnox- 
 ious, and had all along been regarded as hostile 
 to the genius of a free people. Their ten- 
 dency to multiply offices, and to increase the 
 patronage of the executive, was another cause 
 of objection to them. Besides, the established 
 policy of the Government was to abstain, 
 whenever practicable, from exercising the right 
 of taxation on subjects over which the indi- 
 vidual States possessed a concurrent right. 
 
 The revenues which continued in force were 
 the duties on tonnage and imported merchan- 
 dise ; the proceeds of the sale of public lands ; 
 the duties on postage ; and the incidentals aris- 
 ing from fines, fees, and penalties, from repay- 
 ments into the Treasury, and from sales of pub- 
 lic property other than lands. These several 
 sources were estimated to yield yearly ^9,950,- 
 000. There were, besides, resources of a tem- 
 porary character of over ^4,000,000 ; these con- 
 sisting of the balance due on the direct tax, of 
 outstanding internal duties, of the sums derived 
 from the sale of public vessels, of the shares
 
 SS AMERICAN FINANCES, 
 
 of the Bank of the United States, and of the 
 disposable balance of specie in the Treasury. 
 
 Taking the estimate of appropriations as 
 a basis, the annual permanent expenditures, 
 leaving out those relating to the public debt, 
 were found to require the sum of 1^2,650,000. 
 Deducting these expenditures from the annual 
 revenue left a remainder of $7,300,000. Now, 
 to make all the payments actually due, during 
 the years 1802, 1803, and 1804, on the 
 interest and principal of the foreign and 
 domestic debt, would demand a sum equal 
 to the above surplus. And as large a sum 
 could be furthermore absorbed were the Gov- 
 ernment to provide for all the payments for 
 the eight years ending in April, 18 10, which, 
 according to its reserved right, it was at lib- 
 erty to make. But after that date the pro- 
 spective employment of so great a fund as 
 ^7,300,000 was in some measure dependent 
 upon the price at which purchases of the out- 
 standing stocks could be effected. Consider- 
 ing, however, that the ability of the country 
 to bear taxation was now increasing with its 
 rapid growth in wealth and population, thus 
 making the burden lighter year by year, the
 
 lySg-iSjj. 59 
 
 provision deemed necessary for the first three 
 arduous years was accordingly extended to 
 the term of the full redemption of the public 
 debt. 
 
 The sum of $7,300,000 was thus annually 
 and permanently appropriated to the sink- 
 ing-fund, and vested in its commissioners, who 
 were directed to apply it, whether by payment 
 or purchase, to the further and final redemp- 
 tion of the public debt. Not only the re-im- 
 bursement of the principal was placed under 
 their superintendence, but also the payment 
 on account of the interest and contingent 
 charges. And it was made the duty of the 
 secretary of the Treasury to pay over this 
 sum to the commissioners, in such amounts 
 and at such times as a faithful and punctual 
 compliance with the engagements of the 
 United States might demand. 
 
 Against every ordinary contingency to arise 
 out of a possible fall in the current revenues 
 below the estimates on which the appropriation 
 for the public debt was based, the Treasury was 
 effectually provided. Certain eventual demands 
 against the United States, arising under treaties 
 with foreign powers, and amounting to several
 
 6o AMERICAN FINANCES, 
 
 millions of dollars, were made a contingent 
 charge upon the sinking-fund. But, circum- 
 stances permitting it, these demands, together 
 with the temporary bank loans, were payable 
 out of any other moneys at the command of 
 the Treasury. The four million dollars of tem- 
 porary resources previously mentioned, were by 
 this arrangement set free, to be drawn upon, if 
 necessary, in aid of the current revenues. As 
 an additional precaution, authority was con- 
 ferred on the commissioners of the sinking- 
 fund to extend, by means of re-loans, the terms 
 of payment of the Dutch debt, so as to equalize 
 over the eight ensuing years the payments 
 which fell principally on the first five years. 
 This expedient, if made effectual, would go to 
 reduce the payment in Holland from about two 
 millions a year to one million. A million of 
 dollars would in this way become disengaged, 
 and might be employed in payment of the bank 
 loans, or of any other part of the debt held 
 and payable here in America. 
 
 The Sinking-fund Act of 1802 was a marked 
 improvement upon that of 179S, in that it sim- 
 plified a hitherto very complicated system of 
 finance, thus making it fully adequate to its
 
 1789-1833- 6 1 
 
 specific object. Not a single appropriation, 
 not an asset belonging to the old fund, was 
 either deranged or altered by its action. The 
 reform was accomplished by kneading together 
 into one consolidated mass the scattered and 
 special funds already established, and then by 
 adding to this total sum, out of the duties on 
 tonnage and imported merchandise, sufficient 
 to make up the designated amount of ^7,300,000. 
 The actual addition to the permanent and vested 
 revenues of the old fund was about ^1,800,000. 
 
 By the Act of Nov. 10, 1803, six-per-cent 
 stock to the amount of ^11,250,000 was cre- 
 ated, and made redeemable after the year 
 18 17. This was in pursuance of a convention 
 with France for payment in part of the pur- 
 chase of Louisiana. Upon this new burden 
 being thrown upon the sinking-fund, its 
 resources became augmented to the extent 
 of ;^70o,ooo annually. 
 
 At first there was no little misgiving as to 
 the prudence of devoting so large a sum as 
 1^7,300,000 to the use of the public debt. But 
 this misgiving was speedily dissipated when it 
 was found that, for several years, the revenues 
 were in excess of the estimates, and the
 
 62 AMERICAN FINANCES, 
 
 payments made upon the public debt were 
 accordingly far beyond the amount of the 
 appropriation. The rapid extinction of the 
 debt ensuing thereupon hastened the arrival of 
 the time when the application of the full 
 amount of the sinking-fund would have to 
 depend upon purchases. 
 
 In anticipation of this state of affairs, the 
 laws relating to the purchase of the public 
 debt were revised in the year 1806. All the 
 previous Acts had authorized purchases at the 
 market-price, if this did not exceed the nominal 
 value of the stocks. This authority, however, 
 from the nature of the debt, proved to be 
 nugatory. The three - per - cent stocks, for 
 example, were selling below their nominal 
 value, but still at a comparatively higher and 
 less profitable rate than the eight-per-cent 
 stocks, which were held above their nominal 
 value. Now, however, the maximum price 
 which the commissioners might in future give 
 for the different species of stocks was abso- 
 lutely fixed by law. For six-per-cent stocks no 
 more was to be paid than the nominal value of 
 their unredeemed amount. In fixing the rate 
 for the eight-per-cent stocks, they were re-
 
 1789-1835. 63 
 
 garded as consisting of an annuity of six per 
 cent worth its par value, and of an annuity of 
 two per cent a year, to cease on the stock 
 becoming redeemable. A premium was ac- 
 cordingly offered for them, equal to one-half 
 of one per cent for every quarter remaining 
 unexpired from the time of purchase to the 
 1st of January, 1809; this being the date when 
 the eight-per-cent stocks were payable at their 
 nominal value, at the pleasure of the Govern- 
 ment. The purchase-price of the three-per- 
 cent stocks was fixed at sixty-five per cent of 
 their nominal value. Every other limitation 
 upon the powers of the commissioners, whether 
 as to the time or the manner of making pur- 
 chases, was set aside, thus leaving them free to 
 judge and act for the best interests of the 
 public. 
 
 With a view to testing the efficiency of these 
 new provisions, a proposal was shortly made 
 for the purchase of the debt. The experiment 
 did not prove successful. Of the old six-per- 
 cent and deferred stocks, only $17,517.61 were 
 purchased : all other offers, amounting alto- 
 gether to $91,956, were made at rates above 
 the market-price of the stocks. In the course
 
 64 AMERICAN FINANCES, 
 
 of the years 1806 and 1807, somewhat over one 
 million dollars' worth of eight-per-cent stocks 
 was bought ; but the bulk of it was held back, 
 notwithstanding the premium offered, until 
 called in for redemption at maturity. The hope 
 of hastening the reduction of the public debt 
 by purchase was therefore soon abandoned, 
 since the direct tendency of this policy was to 
 raise the price of the stocks. It thus became 
 necessary to find employment for more than 
 three millions of dollars of the appropriation to 
 the sinking-fund, which in each successive 
 year would otherwise remain unexpended. 
 
 The plan adopted was set forth in the Act 
 of Feb. II, 1807, by which it was enacted to 
 change the terms of the six-per-cent, of the 
 deferred, and of the three-per-cent stocks. A 
 proposition was submitted to the holders of the 
 six-per-cent and deferred stocks to exchange 
 the unredeemed amount thereof into a common 
 six-per-cent stock, redeemable at the pleasure 
 of the Government upon public notice being 
 given six months previous. It was stipulated, 
 however, that the total amount of every new 
 certificate should be reimbursed in a single 
 payment. In thus having an investment not
 
 iySg-j835- 65 
 
 subject to partial payments on account, as was 
 the case with the old stocks, there was an ad- 
 vantage in the opinion of the Government. A 
 more favorable offer was made for the conver- 
 sion of the three-per-cent stock, as its value 
 was regulated to some extent by the obligation 
 of the Government ultimately to redeem it at 
 par. By this fact, there was likewise conferred 
 upon it somewhat of the character of a per- 
 petual annuity, the principal of which was 
 never to be redeemed. For these reasons, the 
 three-per-cents had always been worth more, 
 relatively to the interest received, than a six- 
 per-cent stock ; the former never selling for less 
 than sixty per cent of their nominal value, 
 when the latter was at par. Accordingly, the 
 three-per-cent stock, at the rate of sixty-five 
 per cent of its nominal value, was made con- 
 vertible into a six-per-cent stock, not redeem- 
 able until after the whole of the eight-per-cent 
 and four-and-a-half-per-cent stocks, as well as 
 all the stock which might be created in ex- 
 change for the old six-per-cent and deferred 
 stocks, should have been reimbursed. Under 
 the supposition that the plan of exchanging 
 old stock for new was generally to be adopted
 
 66 AMERICAN FINANCES, 
 
 by the public creditors, there was thus offered 
 to the holders of the three-per-cent stock at 
 least eight years' immunity from redemption. 
 The realizing during these years of a double 
 rate of interest was, in the opinion of the Gov- 
 ernment, considered equal to a redemption of 
 more than seventy-two dollars, a price far 
 above the highest this stock had ever reached. 
 
 To the foreign creditors — and these held 
 over eleven millions of the three-per-cent 
 stock, and about fourteen millions of the un- 
 redeemed amount of the six - per - cent and- 
 deferred stocks — was given the option of 
 receiving their interest, either in London, at 
 the stipulated exchange of four shillings and 
 six pence sterling on the dollar, or at Amster- 
 dam, at the rate of two guilders and a half 
 current money of Holland for every dollar. 
 Interest was not due abroad, however, until 
 six months after the date it became payable 
 in the United States ; and it was also sub- 
 ject to a deduction of one -half of one per 
 cent, as commission to the bankers paying it. 
 The stocks bearing foreign-paid interest were 
 convertible at any time into others, with the 
 interest payable in the United States.
 
 1789-1S33. 6; 
 
 Subscriptions were received, both at home 
 and in Europe, from July i, 1807, to March 
 17, 1809. Within this period, ^9,376,439.62 
 (nominal value) in six-per-cent and deferred 
 stocks were surrendered, for which were given 
 1^6,294,051.12 in new stock denominated "ex- 
 changed stock;" and ^1,859,850.70 in new 
 stock known as "converted stock" were issued 
 in lieu of $2,861,309.15, subscribed in the 
 three-per-cent stock. Of the exchanged stock, 
 $168,464.90 were taken in Europe; and of the 
 converted stock, $464,494.74. 
 
 Although the conversion of the old debt 
 could show but this limited success, it en- 
 abled the commissioners of the sinking-fund 
 to do that which otherwise they could not 
 have done ; namely, to apply, from the year 
 1807 to the year 18 12, the entire appropria- 
 tion of eight million dollars to the redemption 
 of the public debt. Before the year 181 1 the 
 whole issue of the exchanged stock was reim- 
 bursed, and during that year and the early 
 part of 18 1 2 the converted stock was re- 
 deemed. Meanwhile, all the other parts of 
 the debt, both foreign and domestic, which 
 the Government was at liberty to discharge
 
 68 AMERICAN FINANCES, 
 
 according to the contracts, had been paid 
 off. 
 
 At the close of the year 1811, the country- 
 found itself on the eve of its second war with 
 Great Britain. This unfortunate but unavoid- 
 able event not only put a stop to the further 
 rapid extinguishment of the public debt, but 
 added to it enormously. The great reduction, 
 however, which had up to this time been 
 effected, proved a seasonable and important 
 advantage to the Government in the coming 
 struggle. Excepting the annual reimburse- 
 ment of the six-per-cent and deferred stocks, 
 no further payments were due on the principal 
 of the debt till the year 1818. Every portion of 
 the debt which was redeemable before that year 
 had already been paid off. The sum required 
 for paying the interest and the reimbursement 
 amounted to $3,792,382 : any surplus over this 
 amount was by the Sinking-fund Act of 1802 
 applicable to the current expenses of the 
 Government. Of the eight million dollars' 
 appropriation, more than $4,200,000 had been 
 liberated ; and this amount constituted, there- 
 fore, a positive increase of revenue at the 
 disposal of the national defence. The impor-
 
 ijSg - 1835. 69 
 
 tance of this fact can be fully appreciated only 
 in the light of subsequent financial difficulties, 
 which of themselves sorely tested the energies, 
 and strained the resources, of the country dur- 
 ing the war of 1812. 
 
 We must here recur to the old Revolution- 
 ary debt, which, liquidated and funded as it 
 was under various Acts of Congress, amounted 
 to ^76,781,953.14. In this total is found in- 
 cluded the funded interest, which had been 
 suffered to accumulate from the date of the 
 organization of the new Government to Janu- 
 ary, 1 79 1. As, however, the Government, not 
 to speak of its want of a system of finance, 
 had to begin its career without revenue or 
 funds of any kind to meet the demands of 
 even the ordinary civil list, it would seem im- 
 possible for it to have made an earlier attempt 
 to pay regularly the annual interest. 
 
 Although the natural result of this delay in 
 commencing the payment of the interest in 
 question was to increase the public debt, still 
 there are several considerations which sug- 
 gest an offset to this increase. The large 
 arrears of interest, which had accumulated at 
 the rate of six per cent upon the old Rcvolu-
 
 70 AMERICAN FIXAXCES, 
 
 tionary debt, were of right demandable by the 
 creditors in cash. By the terms, however, of 
 the new contract with them, that interest was 
 now converted into a capital stock, bearing 
 an interest of only three per cent ; and there- 
 fore the difference between the market value 
 of that stock and an actual settlement in 
 cash represented the gain to the Government. 
 Also, on the principal of the debt, there was 
 a reduction of interest from six per cent 
 to a rate equivalent to four per cent, accord- 
 ing to the basis upon which the debt was re- 
 adjusted. And again, owing to the fact that 
 the interest on the debt did not begin to 
 accrue until the year 1791, a large surplus of 
 revenue was enabled to be collected up to 
 that date, which, under a judicious law of Con- 
 gress, was applied to the redemption of the 
 principal of the debt, by means of purchases 
 on the part of the Government. As the pub- 
 lic stocks were then selling below their nomi- 
 nal value, a saving of nearly fifty-four per cent 
 was effected upon a capital of ^957,770.65 
 invested. Furthermore, in so far as the pur- 
 chased stocks consisted of six -per -cents and 
 three - per - cents, they yielded an immediate
 
 J78g-i835- 7 1 
 
 annual interest of $38,000, and a prospective 
 interest upon the deferred stock of the same 
 amount ; all of which every year as it ac- 
 crued was used in additional purchases. 
 
 Of the original Revolutionary debt, $33,834,- 
 188.86 remained unpaid on Jan. i, 181 2. The 
 whole of it might readily have been paid but 
 for the internal disorders, as well as foreign 
 entanglements of a warlike aspect, ajid but 
 for the Government's consequent inability to 
 apply to its reimbursement all revenues over 
 its ordinary expenditures. From this combi- 
 nation of untoward occurrences, a vast out- 
 lay of money had been required, which, if it 
 could have been applied to the extinguish- 
 ment of the old debt, would have thereby 
 reduced it to quite small and manageable pro- 
 portions. A large increase, also, of the ori 
 ginal debt had become a necessity. There 
 was, for instance, the item of new stock cre- 
 ated to the extent of $18,523,400, and none 
 of it going to reimburse the old debt. Again, 
 under the provisions of a convention with 
 Great Britain of Jan. 8, 1802, in relation to 
 Revolutionary debts known as "British debts," 
 large payments, not appearing in the state-
 
 72 AMERICAN FINANCES, 
 
 ment of the public debt, had been made out 
 of the current revenues : these payments 
 amounted to $6,356,053.45, together with cer- 
 tain claims of American citizens upon the 
 French Government, which, in conformity with 
 the Louisiana convention of 1803, the United 
 States undertook to pay in addition to the 
 direct payment to France for the territory it- 
 self. These items were adequate to reducing 
 the old debt by Jan. i, 18 12, to something less 
 than nine million dollars. 
 
 For the payment of this balance, there 
 must, besides, be taken into account the 
 assets of the Government on the ist of Janu- 
 ary, 18 1 2, in cash or its equivalent, which 
 were applicable to the face of the debt. 
 These assets amounted to $13,500,000, and 
 consisted of the cash balance in the Treasury, 
 of outstanding unpaid revenue bonds, and of 
 sums due on public lands sold to private indi- 
 viduals. The Government was furthermore 
 possessed of other property, which might be 
 considered as additional items in the general 
 account of debt, such as lighthouses, fortifica- 
 tions, military and naval arsenals, with their 
 stores and supplies, and more than one hun-
 
 J7Sg-i835- 73 
 
 dred and eighty-five sail of ships and armed 
 vessels. The balances, also, which were right- 
 fully due to the Government from the debtor 
 States, should not be overlooked in this con- 
 nection. 
 
 Notwithstanding the great enlargement of 
 the public debt in the period from 1789 to 
 1812, the whole amount of it on Jan. i of 
 the last-mentioned year had been reduced to 
 1^45,120,304.53, or less by ^31,661,648.61 than 
 it was at the outset of the new Government. 
 The principal part of this reduction was ef- 
 fected after the year 1802, nor from that date 
 was there any increase of taxation for the pur- 
 pose. In fact, the prosperous condition of the 
 permanent revenues permitted, in the year 
 1807, the repeal of the duty on imported salt. 
 
 The temporary revenues, however, were 
 augmented in the year 1804. The piratical 
 operations carried on by the Barbary States 
 brought our Government, in that year, into 
 hostile conflict with that power for their sup- 
 pression, and a considerable fleet was de- 
 spatched to the Mediterranean. To defray 
 the expenses of this expedition, an advance of 
 two and a half per cent was placed upon all
 
 74 AMERICAN FINANCES, 
 
 existing ad valorem duties on imported goods ; 
 and an extra ten per cent was chargeable 
 against foreign bottoms. These special duties 
 were known as " Mediterranean duties," and 
 they were not to be removed until the ratifica- 
 tion of a peace with the regent of Tripoli. 
 In the year 1806 (when they were to expire 
 by limitation), Congress voted two millions of 
 dollars to enable the President to open nego- 
 tiations for the purchase of territory belong- 
 ing to Spain lying east of the Mississippi 
 River. In order to meet this large appropria- 
 tion, the Mediterranean duties were contin- 
 ued in force for two years longer ; and even 
 before the expiration of this term, it was 
 found necessary to prolong it on account of 
 threatened difficulties between Great Britain, 
 France, and the United States, growing out 
 of the position and claims of neutral com- 
 merce. The extension to the United States 
 of the British orders in council, and of the 
 Berlin decree of the Emperor Napoleon, com- 
 pelled Congress, on the 32d of December, 
 1807, to pass an Act laying an embargo upon 
 all vessels of those two powers in the ports 
 of the United States. This Act was sue-
 
 1789-1835- 75 
 
 ceeded by another of March i, 1809, interdict- 
 ing commercial intercourse on the part of the 
 United States equally with Great Britain, 
 France, and their respective dependencies. 
 
 The warlike preparations necessarily accom- 
 panying these measures largely increased the 
 expenses of the Government, while the suspen- 
 sion of commerce following on the embargo 
 and the non-importation and general non-inter- 
 course Acts caused a great falling off in the 
 revenues. For the year 1808 they were not 
 materially impaired, and for the reason that, 
 from the long credits given, the receipts of 
 that year arose from the revenues belonging 
 to the year preceding. But for the year 1809, 
 the actual receipts of the Treasury fell short 
 of the current expenditures alone by upwards of 
 ^2,507,000. To make up this deficit, and to 
 provide as well for payments on account of the 
 principal of the debt, recourse was had to 
 the surplus revenue of other years, which had 
 accumulated as a balance in the treasury. In 
 the years 18 10 and 181 1, the receipts of the 
 Government, owing to a reduction of expenses 
 in the naval department especially, once more 
 rose above the expenditures.
 
 CHAPTER III. 
 
 THE WAR OF l8l2. INCREASE OF THE PUBLIC 
 DEBT. FINANCIAL EMBARRASSMENTS, 
 
 By an Act of Congress passed June 18, 18 12, 
 war was declared against Great Britain ; and, 
 on debating tlie question of providing means 
 for carrying on the war, loans were fixed upon 
 preferably to taxes. To the inevitable losses 
 and privations of the coming conflict. Con- 
 gress seemed unwilling to superadd the burden 
 of new taxation, and at a time, especially, 
 when the people would be extremely crippled 
 in their ability to pay any considerable revenue. 
 For it must be borne in mind, that just now 
 nearly all the floating property of the nation 
 was lying idle in port, brought and held there 
 by the action of the embargo ; that commercial 
 profits would be curtailed, if not altogether 
 ruined, by the sea-forces of the enemy ; and 
 that also, from the same cause, all surplus 
 agricultural products would be shut out from 
 76
 
 foreign markets. It was observed, on the 
 other hand, that at no one time had there 
 been in the country so much specie, such an 
 overplus of unemployed capital, as at the pres- 
 ent. The public stocks were commanding a 
 high price, and so was every species of stock : 
 the Government credit was unimpaired, and 
 the banks were in possession of large accumu- 
 lations of capital. These several circumstances 
 seemed to place loans within easy reach and 
 reasonable terms : at all events, they served 
 to shape the financial policy then adopted, and 
 which it was intended to adhere to throughout 
 the war. Accordingly, it was determined upon 
 that the ordinary expenses of the Government, 
 and the interest on the public debt, including 
 also that upon any new debt superinduced by 
 the war, should be covered by taxation ; but 
 that the cost of the war itself, as being an 
 extraordinary expense, was to be paid for out 
 of borrowed money. In brief, then, while the 
 annual revenue was to continue as before on 
 the basis of a peace establishment, the burden 
 of providing the sinews of war was placed on 
 loans only. 
 
 Certain duties, then, there were, which, in
 
 78 AMERICAN FINANCES, 
 
 order to maintain their productiveness, de- 
 manded an increase as the natural sequence 
 of a declaration of war. This increase was 
 distributed as follows : on imported articles, 
 all existing duties were doubled ; a further 
 duty of ten per cent was added on goods 
 brought into the country in foreign bottoms ; 
 and the tonnage duty on vessels owned wholly 
 or partially by subjects of a foreign power, 
 was raised from fifty cents a ton to one dollar 
 and fifty cents. These additions to the several 
 duties named were to be maintained until one 
 year after the conclusion of peace. 
 
 Concurrently with the above adjustment of 
 duties, authority was given to raise eleven 
 millions of dollars by means of a loan. The 
 rate of interest was by law limited to six per 
 cent, and the par or nominal value of the stock 
 was fixed upon as its minimum price. Certain 
 banks, chiefly those in large commercial cen- 
 tres, were designated for receiving the sub- 
 scriptions to this loan ; and it was permitted 
 to these banks (in view of securing subscrip- 
 tions on their own account) to retain on deposit 
 moneys received by them for the loan, until 
 such time as there mijrht be need of them for
 
 lySg - JS35. 7g 
 
 the public service. This privilege was ac- 
 corded also to some other banks, which 
 though precluded by their charters, or by 
 other reasons, from subscribing to the loan, 
 and receiving stock, yet advanced money to 
 the Government under special contracts of one 
 and of two years. 
 
 Out of the projected loan of eleven millions, 
 the sum actually borrowed was ^10,284,700. 
 And of this amount, stock was issued for only 
 1^8,134,700 (which included $100,000 borrowed 
 of the Committee of Defence of the City of 
 Philadelphia in 181 3-14). All this stock was 
 made redeemable at the pleasure of the United 
 States after the close of the year 1824, due 
 notice of such redemption to be given by ad- 
 vertisement in a public newspaper printed at 
 the seat of Government. There was annexed 
 also this stipulation, — that the whole amount 
 of stock credited at the time of redemption 
 to any one person on the books of the Treasury, 
 should be reimbursed in a single payment. 
 
 By an Act of June 30, 1812, that is to say, 
 only shortly after the loan for eleven millions 
 had been authorized, an issue of Treasury notes 
 was likewise authorized, to the amount of five
 
 8o AMERICAN FINANCES, 
 
 millions of dollars, to form a part of the loan. 
 By this supplementary enactment, it was in- 
 tended to secure the Government against any 
 disappointment in obtaining money, as it might 
 be wanted. It was also believed, that, by vary- 
 ing in this manner the power of raising the 
 loan, its negotiation in all likelihood would be 
 made easier and more effectual. Even in the 
 event that the loan of eleven millions were to 
 be fully subscribed to, still a positive and inde- 
 pendent issue of Treasury notes was authorized, 
 nevertheless, provided it should appear that the 
 money was demanded by the necessities of 
 the war. 
 
 This issuing of Treasury notes was an ex- 
 periment now for the first time attempted. 
 That the established currency of the country 
 should be injuriously interfered with by them, 
 was by no means contemplated. There was a 
 certainty almost that the negotiation of the war 
 loans, as well as the enlarged transactions of 
 the Treasury, would of necessity impede the 
 circulating medium, particularly as the Treas- 
 ury would always keep a considerable sum out of 
 circulation at the very time it would be needed 
 most. Not the slightest doubt existed that
 
 1789 -iSjj. 81 
 
 Treasury notes, if used judiciously, would have 
 the effect of giving an increased circulation of 
 money, and would in this way operate as a 
 counterpoise to the contraction of the cur- 
 rency, sure to follow upon the commercial 
 activity stimulated by the war, unless neutral- 
 ized in its action by an additional amount of 
 money issued by the banks or by the Govern- 
 ment. 
 
 The first issue of Treasury notes was readily 
 put into circulation within a year. Looking at 
 the security upon which they rested, they em- 
 bodied as safe an investment as the Govern- 
 ment was competent to offer. They were 
 receivable in payment of taxes and duties ; and, 
 moreover, as the duties and taxes of a single 
 year would exceed in amount the issue of notes 
 for that year, the former thus became indirectly 
 pledged for the redemption of the latter. From 
 the fact of their bearing interest, they pos- 
 sessed in some respects an advantage over 
 other kinds of money. They were better than 
 cash to such individual holders of them as 
 needed to collect by degrees funds for a specific 
 purpose ; while in the hands of bankers they 
 became more valuable than specie, from their
 
 82 AMERICAN FINANCES, 
 
 power of constituting a reserve fund, thereby 
 furnishing a basis for discount as well as for 
 current paper. Also do we find that the banks 
 were the largest takers of these notes. 
 
 In September, 1812, the Treasury began to 
 negotiate for the sale of the notes ; and nearly 
 all of them were sold by the 31st of March, 
 1 81 3. They bore an interest at the rate of five 
 and two-fifths per cent per annum, and were 
 charged upon the sinking-fund. They were 
 receivable, not only for duties and taxes, but also 
 in payment of public lands, sold by the United 
 States. They were reimbursable one year 
 after the date of their issue, and by delivery 
 and indorsement were made transferable. 
 
 For the year 181 3, the second year of the 
 war, the revenue at the disposal of the Govern- 
 ment was set down at twelve millions of dollars, 
 including in this estimate an unexpended bal- 
 ance of the loan, and also of the Treasury-note 
 issue of 1 812. Upon this showing, it was mani- 
 fest that sixteen millions of dollars would be 
 required in order to balance the account of 
 receipts and expenditures ; and a loan of this 
 amount was accordingly authorized by an Act 
 of Feb. 8, 18 1 3. In this place it may be well
 
 to remark, that although a considerable portion 
 of the public stocks had been sent from Eng- 
 land, and put upon the market here, yet these 
 stocks, bating a slight decline at first, continued 
 at par during the four last months of the year 
 1 8 12, and this in face of the many additions to 
 the public debt. 
 
 By the terms of the second loan Act, men- 
 tioned above, the stock to be issued under it 
 was to bear interest not exceeding six per 
 cent, and was to be reimbursable at the pleas- 
 ure of the Government, any time after an inter- 
 val of twelve years, dating from Jan. i, 18 14. 
 A commission was offered of one-quarter of one 
 per cent for getting subscriptions, but no 
 restriction was laid on the sale of the stock below 
 its par value. In view of facilitating the loan, 
 and, if necessary, of improving its terms, a dis- 
 cretionary power was confided to the Executive 
 to issue Treasury notes, as part of the loan, 
 for such sums as he might deem expedient, but 
 not to exceed a total of five millions of dollars. 
 This power, however, was not exercised. 
 
 On the 20th of February, 18 13, public notifi- 
 cation was made, inviting subscriptions to the 
 loan of sixteen millions. According to the
 
 84 AMERICAN FINANCES, 
 
 terms offered by the Government, subscribers 
 were to receive for every one hundred dollars 
 loaned, a certificate of six-per-cent stock of one 
 hundred dollars, together with an annuity of 
 one dollar for thirteen years from Jan. i, 1813. 
 All incorporated banks in the cities of Salem, 
 Boston, Providence, Albany, New York, Phila- 
 delphia, Baltimore, Washington, Richmond, and 
 Charleston were authorized to open books of 
 subscription to the loan. Under this first noti- 
 fication, only $3,956,400 were subscribed. The 
 books were opened a second time until the 31st 
 of March, upon the same terms, but only at 
 certain named banks in New York, Philadel- 
 phia, Baltimore, and Washington. Since, how- 
 ever, the result of the first subscription made it 
 evident that the whole amount of the loan 
 could not be obtained upon the terms offered, 
 proposals were solicited simultaneously with 
 this second subscription (to be open till the 
 fifth day of April) for borrowing the whole or 
 any part of the sixteen millions which might 
 remain yet unsubscribed for on the ist of April, 
 thus leaving it to persons making proposals, to 
 state for themselves on what terms they were 
 willing to lend to the Government. And, again,
 
 1789-1835- 85 
 
 that persons might have no cause for withhold- 
 ing either subscriptions or proposals from any 
 apprehension of committing themselves to less 
 favorable terms than might be allowed to other 
 bidders, the several subscribers to the loan of 
 sixteen millions were at liberty to claim the 
 benefit of any of the terms accepted by the 
 Government. Under this liberal expedient, 
 the full amount of the loan came to be nego- 
 tiated. 
 
 The terms accepted by the Government, and 
 which were submitted to the option of all the 
 subscribers, were the two following : — 
 
 1st, The lenders to receive a six-per-cent 
 stock (the interest payable quarterly) at the 
 rate of eighty-eight per cent ; that is, one hun- 
 dred dollars in stock for eighty-eight dollars in 
 money. 
 
 2d, For every one hundred dollars in money, 
 the lenders to receive one hundred dollars in 
 six-per-cent stock, and an annuity for thirteen 
 years from the ist of January, 181 3, of one dol- 
 lar and fifty cents, payable, like the interest, 
 quarter-yearly. 
 
 These terms, it is seen, were equivalent to a 
 premium of thirteen dollars and sixty-three
 
 86 AMERICAN FINANCES, 
 
 seven-elevenths cents on every one hundred 
 dollars loaned to the Government, and in actual 
 interest to seven and a half per cent. Prefer- 
 ence was given to the first alternative offered ; 
 and the stock, for the most part, was taken at 
 the rate of eighty-eight per cent. The whole 
 amount of stock issued was $18,109,377.43. 
 A condition was attached to two of the pro- 
 posals, aggregating $10,250,000, which the Gov- 
 ernment accepted ; namely, should any addi- 
 tional loan for the year 18 13 be made before its 
 close, on other terms than those now offered 
 and accepted, the option should lie with the 
 subscribers of applying them to the loan of six- 
 teen millions. 
 
 In addition to the loan of sixteen millions for 
 the service of the year 18 13, a further issue of 
 Treasury notes was authorized, not to exceed in 
 amount five millions of dollars. These were 
 designed to furnish the means for redeeming 
 the notes of the first issue, as they might be- 
 come due, and were similar to the latter in 
 every respect. 
 
 But, before the close of the year 18 13, new 
 and unforeseen demands came to the surface ; 
 and the alternative had to be confronted of
 
 borrowing more money, or of issuing Treasury 
 notes at a rate far more rapid than would be 
 required to redeem and replace those of the 
 first series. Any issue of Treasury notes be- 
 yond the original issue of five million dollars, it 
 was believed, could not be maintained in circu- 
 lation without great difficulty, and risk even of 
 depreciation. This view was strengthened as 
 well by the limited commerce of the country as 
 by the small amount of outstanding custom- 
 house bonds, to the payment of which the 
 notes were applicable. Congress, therefore, 
 made choice of a loan to cover the increased 
 expenditures of the current year ; and, not to 
 have the public service suffer from delay or 
 embarrassment, the amount of the loan was put 
 at ^7,500,000. This sum, added to the ^2,000,- 
 000 of estimated revenue receipts, would suffice 
 not only for the current year, but for three 
 months of the year 1814 also. A new issue of 
 Treasury notes having thus been obviated, the 
 amount of these notes outstanding Jan. i, 18 14, 
 was ^4,907,300, — an amount not in excess of 
 what a steady and effective demand required. 
 The second series of notes was not fully issued 
 till Feb. 21, 1 8 14.
 
 88 AMERICAN FhXANCES, 
 
 At the same session of Congress in which 
 authority was given to raise the loan of $7,500,- 
 000, a system of internal duties was also 
 established. This latter measure had in view 
 to smooth the way for the loan as well as to 
 obviate any embarrassing terms. For it was 
 now clearly seen that a revenue depending 
 almost wholly upon foreign commerce, as that 
 of the United States, did not afford, and owing 
 to its unstable character, and liability to be 
 ruined by war, could not afford, security even 
 for the regular payment of the interest on 
 the public debt. With the exception of a 
 small duty upon imported wire, no new source 
 of revenue had been opened since the com- 
 mencement of the war. It was found that the 
 receipts from revenue had fallen more than five 
 millions of dollars below the amount required 
 to meet expenditures, calculated upon the basis 
 of a peace establishment ; that is to say, below 
 an amount necessary to provide for the ordinary 
 expenditures of the Government and the inter- 
 est upon the outstanding public debt. This 
 precarious state of the finances had already 
 injuriously affected the public credit, and the 
 unfavorable terms of the last loan were ac-
 
 ijSg - 1S35. 89 
 
 counted for by the omission on the part of 
 Congress to adopt a system of internal taxes. 
 Any further delay in making an increase of 
 taxation was therefore no longer possible. 
 
 The new duties now established would yield, 
 it was estimated, an annual revenue of five 
 million dollars. In determining subjects for 
 taxation, regard was had to such as former 
 experience had taught to be not only most 
 productive, but also acceptable to the people. 
 The term of these taxes was fixed at one year 
 after the end of the war : hence they became 
 soon known as "war-taxes." They consti- 
 tuted, — a direct tax of 1^3,000,000 upon lands, 
 dwelling-houses, and slaves ; a duty upon re- 
 fined sugar, upon carriages ; upon licenses to 
 distillers of spirituous liquors ; upon licenses to 
 retailers of wines, spirituous liquors, and foreign 
 merchandise ; and upon bank-notes, obligations 
 discounted by banks, and bills of exchange, 
 these latter collectible by means of stamps. 
 A duty of twenty cents per bushel was also 
 placed upon imported salt. 
 
 On the settlement of these new duties, a 
 notification of the Treasury Department was 
 issued on the 30th of August, 1813, setting forth
 
 90 AMERICAN F/NAA'CES, 
 
 that proposals would be received until the 
 twenty-fifth day of December following, for 
 loaning the sum of 1^7,500,000, either the total 
 amount or separate portions of it. The rate 
 of interest was not limited by the terms of the 
 law, but it was therein provided that no certifi- 
 cate of stock should be sold at a rate less than 
 eighty-eight per cent. The stock also was made 
 reimbursable at any time after an interval of 
 twelve years dating from Jan. i, 18 14. No 
 proposal was to be received for any sum less 
 than one hundred thousand dollars, but indi- 
 vidual subscriptions might be incorporated into 
 a single proposal for this amount ; and a com- 
 mission of one-eighth of one per cent was 
 allowed for aggregating such subscriptions. 
 Also, to deal equitably in a matter involving a 
 variety of terms offered, it was made optional 
 with any persons whose proposals might be 
 accepted, to adopt, instead of their own terms, 
 the terms of any other subscriber whose pro- 
 posal had equally been accepted. The whole 
 amount loaned was payable by instalments (as 
 had been the case with the previous loans) into 
 certain banks designated by the Treasury. 
 After paying the first instalment, the remaining
 
 i7Sg-i835- 91 
 
 ones might be combined in a single payment ; 
 but, in this case, interest was only allowed as if 
 each instalment had been paid in accordance 
 with the public notification. The sum-total of 
 all the proposals received, and which were at 
 various rates, amounted to $12,791,500. 
 
 After rejecting the least favorable rates, 
 the sum that was accepted on loan was appor- 
 tioned among the successful subscribers by 
 a uniform rule. The rate at which the loan 
 was taken was eighty-eight dollars and twenty- 
 five cents in money for every one hundred 
 dollars in stock, bearing six-per-cent interest. 
 The amount of this stock issued for the pres- 
 ent loan was $8,498,581.95, being a discount 
 of 1^998,58 1.95. 
 
 The Congress which met in regular session 
 in December, 1813, entered at once upon a 
 consideration of the ways and means for the 
 year 18 14. The deficit in the revenue, bclov/ 
 the appropriations made, was estimated to be 
 not far from thirty million dollars. The only 
 resource drawn upon to meet it was the public 
 credit. By an Act of the 4th of March, 18 14, 
 authority was granted to issue five million 
 dollars of Treasury notes absolutely, and with
 
 92 AMERICAN FINANCES, 
 
 it was given a discretionary power to issue five 
 millions more with the understanding that these 
 latter should be deemed and held as a portion 
 of any loan authorized during the session. 
 
 Under sanction of an Act of March 24, 18 14, 
 the Government was empowered to provide for 
 a loan of twenty-five million dollars. By the 
 terms of the Act, the stock was made reim- 
 bursable at any time after the expiration of 
 twelve years from the following January ; but 
 no limitation was placed, either upon the rate 
 of interest, or the price of the stock. 
 
 This loan was so much larger than any 
 heretofore authorized in the United States, that 
 its announcement in Congress gave rise to a 
 very earnest and interesting debate as to the 
 ability of the country to furnish it. The 
 advocates of the measure based their argu- 
 ment upon what they considered to be obvious 
 and reliable statistics. For instance, upon a 
 total property valuation of $2,567,480,000, there 
 was estimated an annual income to the nation 
 of $237,649,600. The maximum amount of 
 currency required for circulation was placed 
 at one-fifth of this amount, making it conse- 
 quently $47,569,120. The bank capital was
 
 I78g-j8s5- 93 
 
 Stated at ^75,000,000, which was computed to 
 sustain a circulation in notes and discount of 
 ^100,000,000. Now, the difference between this 
 last sum of ^100,000,000 and the $47,569,120 
 of circulating medium actually called for by 
 the productive industry of the country, repre- 
 sented the estimated ability of the moneyed 
 capitalists to loan, namely, $52,430,880. And 
 of this sum Congress now proposed to borrow 
 $30,000,000. These computations, together 
 with the argument they were sought to sus- 
 tain, were attacked by the opponents of the 
 loan, and characterized as erroneous, inconclu- 
 sive, and misleading. 
 
 Although the discussion resulted in the 
 adoption of the measure, it was thought, how- 
 ever, that an attempt to obtain the whole 
 twenty-five millions at one subscription would 
 not prove so successful as if only a portion of 
 it were called for. A loan of ten millions was 
 accordingly announced, and proposals solicited 
 for subscriptions to it. The sole conditions 
 laid down by the Government respecting it 
 were, that the stock issued should bear inter- 
 est at six per cent, payable quarterly, and 
 that it should not be redeemable until the
 
 94 AMERICAN FINANCES, 
 
 thirty-first day of December, 1826. A com- 
 mission of one-fourth of one per cent was 
 allowed upon all subscriptions, but no subscrip- 
 tion was accepted for less than $25,000 ; and 
 to subscribers the privilege was given of select- 
 ing for themselves any of the terms that might 
 be accepted by the Government. 
 
 The sums offered for this loan reached a 
 total of $12,466,806. As, however, all offers 
 made at rates less than eighty-eight per cent 
 were rejected, the amount actually taken be- 
 came thereby reduced to $7,935,581. 
 
 A condition annexed to one of the offers 
 resulted in a stipulation which the Govern- 
 ment had reason afterwards to regret. It was 
 to the effect, that, if any of the remaining 
 portion of the twenty-five millions was bor- 
 rowed on terms more favorable to lenders, the 
 benefit of such terms should be likewise ex- 
 tended to holders of the stock issued for the 
 loan of ten millions. This condition had some 
 sanction in precedent ; and the Government, 
 already anticipating the early return of peace, 
 was influenced in acceding to it, in this in- 
 stance, by the importance of upholding mean- 
 while the price of the stock, and so maintaining
 
 1789-1833- 95 
 
 the credit of the country. The condition re- 
 ferred to was annexed to an offer of five 
 million dollars; and to reject it would have 
 reduced the amount obtained to less than three 
 million dollars, — a sum wholly inadequate. By 
 depressing the stock to eighty-five per cent, 
 only a little more than six millions could have 
 been secured, which amount still fell short of 
 supplying the deficiency of the Treasury. 
 
 Shortly after, a loan of six million dollars 
 was opened, under the power contained in the 
 Act of the 24th March, 18 14. It now became 
 evident that the condition insisted upon by 
 the contractors for the ten-million loan was 
 the most injurious to the Government that 
 could have been devised ; and this because it 
 made it for the interest of the contractors to 
 depress the price of the public stocks rather 
 than to sustain it. Except the case of a few 
 small offers, the best terms the Government 
 could now command, and per force accepted, 
 were at the rate of eighty dollars in money 
 for one hundred dollars of six-per-cent stock. 
 The market-price of this stock hardly ex- 
 ceeded eighty per cent ; nor was there any 
 prospect of the Government's obtaining on
 
 96 AMERICAN FINANCES, 
 
 better terms the money which had become so 
 indispensable to its present needs. In virtue 
 of the condition annexed to their contracts, 
 the holders of the ten-million loan demanded 
 and received a premium of eight per cent over 
 and above the twelve per cent already paid to 
 them. 
 
 The proceeds in money of this second loan 
 came to ^2,520,300. Upon terms similar to 
 those already allowed, additional stock was 
 issued, which went in payment of contracts 
 made by the War Department, and of other 
 contracts entered into with certain States and 
 cities which had advanced money for fortifica- 
 tions, supplies, payments to the militia, etc. 
 The total amount of stock issued under the 
 loan of ten millions was 1^9,919,476.25 ; and 
 under the loan of six millions, $5,384,134.87. 
 Subsequently, further sums w^ere raised from 
 time to time, under authority of this same Act ; 
 and undesignated stock, amounting to $746,- 
 403.31, was issued therefor at special rates 
 varying from eighty to ninety-five per cent. 
 The total discount paid upon these later con- 
 tracts summed up $93,868.95. 
 
 The difficulties had now become so great in
 
 lySg - 1835. c,j 
 
 obtaining at home the sums required for the 
 pubHc service, that the Government at last 
 determined to try the market in Europe. At 
 an earlier period, the United States had bor- 
 rowed money there on favorable terms ; and, 
 from having punctually and faithfully fulfilled 
 their engagements, it was believed their credit 
 abroad was on a firm and favorable footing. 
 The necessary instructions and powers were 
 therefore given for negotiating a loan for six 
 million dollars; and six -per -cent stock was 
 transmitted abroad, with directions for its sale. 
 The attempt, however, proved unsuccessful, 
 and no sale of stock was made. 
 
 As a consequence of the failure to obtain a 
 sufficient supply of money by the sale of stock, 
 either at home or abroad, the issue of Treasury 
 notes, authorized by the Act of March 4, 1814, 
 was begun at once, without waiting for the ma- 
 turing of those of the previous issue. It was 
 now no longer in view to limit the amount in 
 circulation to five million dollars ; and, in order 
 to facilitate the increase proposed, notes were 
 prepared of the denomination of twenty dollars. 
 By thus making the notes of lesser amount 
 than heretofore, they passed readily into a
 
 98 AMERICAN FINANCES, 
 
 more numerous class of moneyed transactions. 
 And although less interest was paid on Treas- 
 ury notes than for the money obtained on the 
 funded stock, yet the certainty of their repay- 
 ment at the end of one year, and the facility 
 offered by them for remittances and other 
 commercial transactions, had given them a 
 currency which might now be enlarged upon, 
 in view especially of the recent increase of 
 taxes for which they were receivable. The 
 speedy issue of Treasury notes from the month 
 of March caused the amount in circulation to 
 reach, by September following, nearly to eight 
 million dollars. Of these outstanding notes, 
 1^4,457,069.80, principal and interest, were 
 payable during the last quarter of the year, 
 chiefly at Boston, New York, and Philadelphia. 
 A portion of these were now to be replaced by 
 new notes, leaving still in circulation between 
 six and seven million dollars. And the expe- 
 rience of two years had shown that this was 
 nearly as large an amount of them as could 
 freely and easily be circulated, so long as the 
 rest of the other circulating paper medium of 
 the country remained unembarrassed, and held 
 its own in the public confidence.
 
 It was at this juncture that occurred the 
 suspension of specie payments by all the banks 
 in the country except those of the New-Eng- 
 land States. The operations of the Treasury 
 were at once thrown into embarrassment by 
 this untoward event. The circulation of bank- 
 notes became at once confined within the 
 limits of the State where they were issued ; 
 the notes of New York and Philadelphia would 
 not be received in Boston ; nor would those of 
 Baltimore or of the District of Columbia 
 answer for payments to be made in Philadel- 
 phia. As the bank-notes, in this way, lost 
 their general credit and circulation, so the 
 Treasury Department was deprived of its 
 former facilities in remitting money, and be- 
 came still more helpless in not possessing 
 authority to pay the required rate of exchange 
 for the transfer of its bank-credits from places 
 in which they were lying idle to others where 
 they were needed to meet public engagements. 
 The bank-credits, amounting to about ;^2,5oo,- 
 000, that were scattered over the whole country, 
 became almost useless ; while the credits at 
 the three principal offices where payments on 
 the public debt were made, — in Boston, New
 
 lOO AMERICAN FINANCES, 
 
 York, and Philadelphia, — soon became ex- 
 hausted. As a further consequence, therefore, 
 attributable chiefly, if not entirely, to the sus- 
 pension of specie payments, the dividends on 
 the funded debt were not paid punctually, nor 
 were the Treasury notes discharged at matu- 
 rity. 
 
 In this state of things, neither the public 
 credit, nor the use of Treasury notes, could any 
 longer be preserved. Only the most needy 
 creditors, contractors in distress, commissaries, 
 quartermasters, and navy agents, acting as 
 public officials, were found willing to accept 
 them ; indeed, no sooner were they issued, than 
 they at once fell into the hands of the collectors 
 in payment of taxes, defeating in this way the 
 only remaining hope of a productive revenue. 
 Thus the current supply of money from imports, 
 from internal duties, and from the sale of pub- 
 lic lands, ceased to afford, as heretofore, the 
 data for any rational estimate, or to be relied 
 upon as a reserve in providing for the dividends 
 upon the funded debt. The authority to bor- 
 row money had lost its efficacy. The difficulty 
 already experienced in securing loans, as well 
 as the stringent terms forced upon the Govern-
 
 1789-1835. TOI 
 
 ment, showed plainly, that, if loans were to be 
 further resorted to, only higher and in effect 
 ruinous terms would have to be offered to cap- 
 italists for the use of their money. 
 
 Public credit could now hardly be said to 
 exist. The Government creditors declined to 
 receive drafts on banks outside their own 
 States ; neither would they subscribe the 
 amount of their claims to a public loan, nor 
 accept payment of them in Treasury notes. It 
 was now seen to be inevitable, that, by the 
 close of the year 18 14, there would be a deficit 
 of more than seventeen million dollars, con- 
 sisting mainly of unpaid balances of appro- 
 priations. No help could come from the 
 Treasury, as its resources of every sort — cash, 
 revenue, and loans — were already exhausted. 
 The President resolved, therefore, to summon 
 Congress in extra session in the month of Sep- 
 tember. 
 
 Beset by all the difficulties of a deficient 
 revenue, a suspended circulating medium, and 
 a depressed credit, it was not without the 
 greatest solicitude that Congress perceived, on 
 its assembling, that upwards of forty million 
 dollars had to be raised for the service of the
 
 I02 AMEFTCAN FINANCES, 
 
 year 1815 ; and, moreover, there remained no 
 possible way of effecting this except by an 
 appeal to public credit through the medium of 
 Treasury notes and loans. 
 
 The chief cause of the existing depreciation 
 in the public credit was traceable to an inade- 
 quate system of taxation. The revenue had 
 again fallen below the expenditures of the former 
 peace establishment, and this second time to 
 the extent of ^5,300,000. This fact compelled 
 a review of the financial plan adopted at the 
 commencement of the war ; and it was decided 
 that the theory of defraying all extraordinary 
 expenses by means of successive loans, had 
 proved itself inoperative, and must be aban- 
 doned. The actual wealth of the country was 
 now, in its stead, to be put under requisition ; 
 having remained hitherto almost untouched, 
 considering the variety of its natural products 
 and industrial pursuits. 
 
 In pursuance of this new policy, the existing 
 taxes, at the special session of September, 1814, 
 were largely increased, and new ones created. 
 The direct tax was raised to the yearly sum of 
 six million dollars, and was extended to the 
 District of Columbia for the first time. The
 
 178Q-183S. T03 
 
 duty on carriages was raised, and made to in- 
 clude the harness : on distilled spirits a duty of 
 twenty cents per gallon was imposed, with five 
 cents extra if foreign materials were used, and 
 this in addition to the duty already payable for 
 licenses. The duties on sales by auction, and 
 on licenses to retail wines, spirituous liquors, 
 and foreign merchandise, were doubled ; and the 
 rates of postage were increased fifty per cent. 
 Upon gold and silver watches, upon household 
 furniture, and various manufactured articles, 
 there were laid new duties, both specific and 
 ad valorem. As to the duties on domestic 
 manufactures, it was stipulated, that, so long 
 as they were maintained, no reduction of duty, 
 then payable on the imported articles of the 
 same description, should take place. The faith 
 of the United States was pledged that all these 
 duties and taxes, or others equally productive, 
 should be permanently laid, levied, and col- 
 lected until the terms of the contracts respect- 
 ing the payment of the principal and interest of 
 the public debt should be carried out. 
 
 The yearly value of these increased duties 
 was estimated at ^15,500,000, a sum which 
 raised the national revenue for the year 1815,
 
 104 AMERICAN FINANCES, 
 
 independently of the use of credit, to something 
 more than twenty-six million dollars. Out of 
 this amount, not only the current service of the 
 Government and the interest of the public debt, 
 including therein the redemption of the Treas- 
 ury notes, were amply provided for, but also the 
 payment of all liquidated balances of accounts, 
 leaving besides a handsome surplus towards 
 defraying a considerable portion of the war 
 expenses. 
 
 The next step, on the part of Congress, was 
 to relieve the Treasury from the immediate 
 pressure of demands upon it, amounting to 
 nearly fourteen million dollars, and to be paid 
 during the last quarter of the year 1814. As a 
 portion of these demands consisted in the pay- 
 ment of Treasury notes, an Act was passed on 
 Nov. 15, 1 8 14, by which such notes as matured 
 on or before Jan, i, 1815, were made receiv- 
 able (at par and accrued interest) in payment of 
 subscriptions to all loans ; and further, for the 
 very purpose of absorbing the claims of the 
 Treasury notes, a new loan of three millions was 
 especially authorized. These measures, how- 
 ever, brought but little relief, if any, having 
 been passed too late in the year. Thus it hap-
 
 J78g-iS35- 1 05 
 
 pened, that on the ist of January, 18 15, there 
 were in notes due, but unpaid, $2,799,220 ; all 
 in the cities of Boston, New York, and Phila- 
 delphia. 
 
 Still further to facilitate and complete a 
 settlement of the accounts of the year 18 14, 
 another Act was passed, giving authority for 
 an issue of Treasury notes in two separate 
 amounts, — the one, not to exceed 1^7,500,000, 
 and which was to be credited to the two loans 
 authorized under the Acts of March 24 and 
 Nov. 15, 1 8 14, the full amount of which had 
 not been actually borrowed ; and the other, for 
 1^3,000,000, which was to supply a deficiency in 
 the appropriations for the expenses of the War 
 Department. These new notes were similar to 
 those issued hitherto in every respect, except 
 that the payment of interest and of the princi- 
 pal were not, as in the case of previous issues, 
 charged upon the sinking-fund, but upon any 
 funds in the Treasury not otherwise appropri- 
 ated. 
 
 These new issues of Treasury notes were 
 made under a determination to abandon, as far 
 as practicable, the negotiation of loans, and to 
 rely for the time to come upon Treasury notes.
 
 I06 AMERICAN FINANCES, 
 
 For such a scheme, the present seemed a most 
 propitious opportunity. Ever since the sus- 
 pension of specie payments, which restricted 
 bank-notes not only to the States, but even to 
 the particular localities in which they were 
 issued, there had been no adequate circulating 
 medium common to the citizens of the United 
 States as such. As the moneyed transactions 
 of private life were at a stand-still, and the 
 fiscal operations of the Government put to 
 great inconvenience, the want became univer- 
 sally acknowledged of some medium which, 
 itself resting on a firm and solid basis, might 
 unite public confidence, and betoken, not a 
 local, but a general, circulation. As a remedy, 
 then, for the disordered state of the currency, 
 it was determined, by a special modification of 
 the Treasury notes, to make them a substitute 
 for bank-notes and specie, answering at the 
 same time as a circulating medium between 
 the States. By this measure, it was not in the 
 least intended or insinuated that the accept- 
 ance of the Government paper should, in the 
 course of payments and receipts, be made com- 
 pulsory with the people. A tender-law would 
 have been regarded at the time as a desperate
 
 lySg-iSjS- 107 
 
 expedient, and unworthy of honest and enlight- 
 ened statesmanship. 
 
 Authority was accordingly conferred, by an 
 Act passed Feb. 24, 18 15, to issue twenty-five 
 million dollars in Treasury notes, which in 
 principle were to differ essentially from any 
 of previous issues. The new notes, while of 
 course receivable in all payments due to the 
 Government, were subject, in such cases, to be 
 re-issued ; and their denominations were ex- 
 pressly small enough to meet with ready circu- 
 lation for ordinary current needs. No specific 
 period was indicated for paying the principal 
 and interest of the notes : only they were con- 
 vertible, at the pleasure of holders, into certifi- 
 cates of funded stock, reimbursable at any 
 time after Dec. 31, 1824. These notes were of 
 two kinds : the one which was made payable 
 to bearer bore no interest, and was trans- 
 ferable by delivery ; the other was payable to 
 order, transferable by indorsement, and bore 
 interest at the rate of five and two-fifths per 
 cent. The former class included notes of de- 
 nominations less than one hundred dollars, and 
 were fundable at seven per cent ; the latter at 
 six per cent : but any notes of one hundred
 
 I08 AMERICAN FINANCES, 
 
 dollars and upwards were privileged, at the dis- 
 cretion of the Secretary of the Treasury, to 
 conform to either description. It was also pro- 
 vided at the same time, that holders of Treas- 
 ury notes of any prior issue might convert 
 them, at par value with accrued interest, into 
 funded stock bearing six-per-cent interest. 
 
 Besides these twenty-five million dollars in 
 Treasury notes, there were yet remaining 
 seventeen million dollars liable to be raised, 
 either by loans or notes, under Acts passed in 
 the year 1814, but not carried into full effect. 
 However, even counting in these resources in 
 abeyance, it was found, that, in order to com- 
 plete the ways and means necessary to balance 
 receipts and expenditures at the close of the 
 year 1815, a further sum of fifteen millions 
 would be requisite. To cover this anticipated 
 deficit. Congress had in contemplation another 
 loan ; but before it came to be acted upon, the 
 Treaty of Ghent was announced. This ended 
 the war, and the measure gave way to others 
 more expedient. In fact, the news of the peace 
 reached the country before the Senate had 
 acted definitely upon the Treasury-note Bill. 
 By reason of this information, the interest
 
 1789-1835- I09 
 
 upon the stock, into which the notes were 
 made convertible, was reduced by the Senate 
 below the figures originally adopted in the 
 Lower House. 
 
 Circumstances did not allow of a prolonged 
 trial of the new plan of finance ; and it is 
 therefore not possible to ascertain what its 
 ultimate effects would have been in the matter 
 of restoring the public credit, which was the 
 leading purpose of its adoption. Certain it is, 
 however, that, in the interval between the adop- 
 tion of the new policy and the announcement 
 of peace, the liberal display of national re- 
 sources, made in behalf of the public creditors, 
 failed to exert its expected and natural influ- 
 ence — such is the difficulty in rescuing from 
 reproach a credit over which suspicion and 
 doubt have cast their blighting shadow. De- 
 spite even of the best system of finance, there 
 were undoubtedly causes, which, as they grew 
 out of the war, so they concurred, while it 
 lasted, to depress the public credit. Not to 
 lay any special stress upon the doubtful issue 
 of the contest, there was at all events the un- 
 certain term of its continuance to impress the 
 public mind with a corresponding influence as
 
 no AMERICAN FINANCES. 
 
 to what extent the aid of loans would be de- 
 manded for the public exigencies. Now, how- 
 ever, that the war was terminated, a state of 
 affairs had supervened which gave to the entire 
 public debt a fixed and ascertainable character. 
 No apprehension existed that the most ample 
 provision would be made for the punctual pay- 
 ment of the interest as well as for the gradual 
 extinguishment of the principal of the debt, 
 for Congress had always shown itself inflexible 
 in its adherence to the faith and policy of 
 legislative pledges. Upon the restoration of 
 peace, therefore, proofs of financial confidence 
 became apparent at once, of which the fiscal 
 transactions of the Government reaped prac- 
 tical advantage.
 
 CHAPTER IV. 
 
 PEACE WITH GREAT BRITAIN. THE PROTECTIVE 
 TARIFF. EXTINGUISHMENT OF THE PUBLIC 
 DEBT. 
 
 The financial outlook, on the termination of 
 the war with Great Britain, was not such as to 
 afford an immediate prospect of relief to the 
 public credit from still further demands upon 
 it. It had to be used, not only for the greater 
 convenience of the Treasury, but in the pres- 
 ent juncture an appeal to credit seemed essen- 
 tial even to its solvency. It was discovered, 
 in the first place, that the expenditures of the 
 year 1815, arising, for the most part, out of 
 unpaid war claims, were liable to run up to 
 fifty million dollars ; then, again, that the 
 prospective increase of revenue from customs 
 could not be made available till 1816, owing 
 to the credits given in collecting it ; and 
 furthermore, that the returns of the new in- 
 ternal taxes would not bce:in to be felt much
 
 112 - / M ERICA N FIN A A'CES, 
 
 before the same time. Thus the actual revenue 
 at command for the year 1815 was not able 
 to be estimated at more than $18,200,000. 
 And this total was itself liable to be absorbed 
 by outstanding Treasury notes, even before it 
 reached the Treasury. 
 
 The first move in this state of things was 
 to free this actual revenue of its impediments, 
 and thus bring it directly into the hands of the 
 Treasury. Accordingly, by an Act of March 
 3, 1 81 5, a loan was authorized which was made 
 payable at the pleasure of the Government 
 within twelve years dating from the last day 
 of December, 1815. It was fixed at 1^18,452,- 
 800, as this sum exactly balanced the claims 
 of the outstanding Treasury notes ; and these 
 notes were also made receivable for subscrip- 
 tions to this new loan. Now although the 
 terms of the above-mentioned Act actually cov- 
 ered all the outstanding notes, yet, as some 
 had been issued under Acts making them a 
 charge upon the sinking-fund, it was judged 
 to be more expedient, for the present, to con- 
 fine to this latter class the benefit of subscrib- 
 ing to the loan. Thus, not the full amount 
 authorized was now offered, but only twelve
 
 ij8g - 1835. 1 1 3 
 
 millions. The balance of the loan was for the 
 time being subject to a contingency. There 
 was, however, a provision of a previous law by 
 which all Treasury notes, at the pleasure of 
 the holders, might be converted at their par 
 value and interest into certificates of funded 
 debt bearing six-per-cent interest. Were it 
 now to happen, that, instead of being thus 
 funded, the notes should all be presented for 
 payment, the Treasury was at liberty, in that 
 event, to put out the remainder of the loan in 
 order to meet their full payment. The general 
 purpose, then, of the twelve-million loan was, 
 (i) to absorb a portion at least of the Treasury- 
 note debt, (2) to obtain funds for paying off 
 the unsubscribed arrearages of that debt, and 
 (3) to aid the Treasury by furnishing it with 
 such a supply of the local currency of different 
 places, as should hold some proportion to prob- 
 able demands upon it in those localities. 
 
 By a public notice given March 10, 181 5, 
 proposals were invited for a six-per-cent loan, 
 payable in money, or in approved bank-notes, 
 or in Treasury notes. These several particulars 
 were to be stated in any proposal that might 
 be presented ; viz., the amount of the loan to
 
 114 ^ ME RICA N FIN A NCES, 
 
 be taken, the rate at which the stock would be 
 received, the instalments for its payment (the 
 last not to overpass ninety days from the date 
 of subscription), and the banks into which the 
 subscription would be paid. Quite a number of 
 offers were presented, but all varied widely as 
 to terms and conditions ; none of them, how- 
 ever, going beyond a rate of eighty-nine per 
 cent, while some were even lower than seventy- 
 five per cent. Not a single one was accepted. 
 It was now apparent that some different mode 
 of procedure was to be taken, — one, too, that 
 should be found more in unison with the 
 changed position of the Treasury. Justice to 
 the equal rights of the public creditors, and an 
 honorable regard for the public credit, no less 
 than a sense of its real value on a fair estimate, 
 would not permit a loan to assume the aspect 
 and character of a scramble. As things were 
 now, speculation appeared to be ruling com- 
 pletely the price of the stock, which, in every 
 town and village throughout the country, varied 
 with the varying difference of exchange ; and 
 this latter, adjusting itself to the scale of depre- 
 ciation in the local currency, ranged through all 
 degrees up to twenty, and even to twenty-five,
 
 lySg - 1S35. 1 1 5 
 
 per cent Among the leading Eastern cities, 
 the greatest depreciation was found in Wash- 
 ington and Baltmiore, where the paper of their 
 banks was rated from twenty to twenty-five 
 per cent below par, as compared with specie. 
 In Philadelphia it marked from seventeen to 
 eighteen per cent ; in New York and Charles- 
 ton from seven to eight ; and in the interior 
 of the country, particularly at Pittsburg, and 
 in such portions of Western Pennsylvania 
 where any banks existed, the depreciation was 
 twenty-five per cent. 
 
 To deal properly and equitably with this 
 unsettled state of affairs, the Treasury fixed 
 upon the minimum price of ninety-five per 
 cent for the stock : any offers made at this 
 rate were to be accepted until the wants of 
 the Treasury should be sufficiently supplied. 
 The price of the stock was to be raised, how- 
 ever, at any time when the local funds were 
 seen to approximate the probable amount of 
 local demands ; and whenever this accumu- 
 lation should be fully equal to such demands, 
 the loan was to be closed. In this way the 
 price of the stock was made independent of 
 the up-and-down prices of the stock markets
 
 Il6 AMERICAN FINAAXES, 
 
 through the country, with no other influence 
 to act upon it save the actual progress to the 
 end had in view by the Treasury. Thus, for 
 example, in the District of Columbia, sub- 
 scriptions to the loan in money were at 95, 
 962, 97, 98, and finally at par ; in Philadel- 
 phia, New York, and Boston, they were all 
 at 95 per cent. Subscriptions in Treasury 
 notes, however, were everywhere made at the 
 uniform rate of ninety-five per cent. 
 
 The rapid success of the loan demonstrated 
 the wisdom of the policy adopted. The Treas- 
 ury had secured by the month of June, 181S, 
 in every place, except New York and Boston, 
 enough money in local currencies to enable 
 it to meet the payment of Treasury notes un- 
 subscribed and in arrears. To holders in 
 New York and Boston of notes due and 
 unpaid (no current money having been ob- 
 tained in those cities), was given the option 
 either of accepting drafts on Philadelphia and 
 Baltimore, or of exchanging the old notes 
 (principal and interest) for new ones fund- 
 able at six per cent, or of subscribing them 
 to the loan of twelve millions at the rate of 
 ninety -five per cent, notwithstanding that
 
 I78g-i835- 1 17 
 
 the price of the stock had been raised at the 
 Treasury on June 18 from ninety-five to 
 ninety-eight per cent. This proposition was 
 to continue open until Oct. i, the date on 
 which the loan itself would close. 
 
 The full amount of subscriptions to this 
 loan of twelve millions was ^11,699,326.63. 
 For this sura were issued $12,288,147.56 in 
 six -per -cent stock; representing, as will be 
 seen, a discount of $588,820.93 in placing 
 the stock. With the exception of some tem- 
 porary loans from banks, negotiated under the 
 same authority, at par at the rate of six per 
 cent per annum, and amounting in all to $1,- 
 150,000, no other loan was ever made after- 
 wards in connection with the war of 18 12. 
 
 It was not until Jan. i, 1817, that funds 
 were provided for paying all the Treasury 
 notes in New York. By that time a steady 
 increase of revenue had rendered the active 
 resources of the Treasury everywhere avail- 
 able except in the Eastern States. Fettered 
 by their charter stipulations, the banks in 
 these States were powerless to suspend specie 
 payments ; and thus the circulating medium 
 they required had to be furnished principally
 
 1 1 8 A ME RICA N FINANCES, 
 
 by Treasury notes, and in part also by notes 
 of the New-York banks. In fact, in order to 
 avoid an issue of small Treasury notes, a tem- 
 porary loan was obtained Jan. i, 1817, from 
 the recently chartered Bank of the United 
 States, for the purpose of discharging in Bos- 
 ton claims arising from dividends and reim- 
 bursement of the public debt. And not until 
 some months later did the Government find 
 itself in a condition to pay in local currency 
 all its obligations in the Eastern States, 
 
 The establishment of the Bank of the 
 United States completed the settlement of 
 the finances, in that it created a currency 
 which was alike uniform and independent of 
 the State banks. Since now, through its 
 agency, the people were supplied with a 
 money medium, which should be available for 
 every public and private use, a prohibitory 
 enactment was passed by Congress to the 
 effect, that, after the twentieth day of Febru- 
 ary, 1 817, no taxes, duties, or moneys accru- 
 ing or becoming payable to the Government, 
 should be collected or received in any other 
 than gold and silver coin (the legal currency 
 of the United States), or in Treasury notes,
 
 lySg-iSsS- 1 19 
 
 or in notes of the Bank of the United States. 
 As to other banks, their notes were receiv- 
 able, if, besides being payable, they were 
 actually paid on demand in the legal currency 
 of the United States. 
 
 Through the disorder in the currency at the 
 close of the war, a resort to Treasury notes had 
 been forced upon the Government, and had 
 been constantly followed up, even when the 
 receipts of revenue were ample without them. 
 Of the notes authorized under the Act of Dec. 
 26, 1 8 14, ^8,318,400 had already been issued 
 by Sept. I, 181 5, at which latter date were 
 begun to be issued those which had been voted 
 in the Act of Feb. 24, 181 5. The interest- 
 bearing notes of this issue being all of the 
 denomination of ^100, as they were too high 
 for a current medium of exchange, and as they 
 were fundable at six per cent, had no special 
 restriction laid upon their number. It was 
 different with the "small Treasury notes:" 
 these were limited to cases of peculiar urgency, 
 — to pay off the army preparatory to its re- 
 duction ; to pay dividends on the public debt ; 
 to furnish compensation due to members of 
 Congress, together with several other miscella-
 
 120 AMERICAN FINANCES, 
 
 neous claims, entitled, apparently, to a like dis- 
 tinction. Though convenient for common use, 
 these " small notes " were, for all that, converted 
 into stock as soon as issued, being fundable at 
 an interest of seven per cent : many of them, 
 on this account, were disposed of by the Govern- 
 ment at a premium. ^3,392,994 represented the 
 entire amount of " small Treasury notes " issued 
 under the Act of February, 18 15, which amount 
 virtually came to be increased by re-issues to 
 ^9,916,018. Out of this latter sum, there were 
 funded, in seven-per-cent stock, ^9,070,386 : 
 the residue was either paid in for taxes, or lost. 
 As regards the $100 interest-bearing notes, 
 ^4,969,400 were issued, and the stock taken for 
 this amount was ^1,505,352.18: the remainder 
 of these must Hkewise, for the most part, have 
 found their way back to the Treasury in pay- 
 ments of some sort. 
 
 Congress passed an Act, March 3, 1817, re- 
 pealing so much of all Acts then in force as 
 gave authority to borrow money, or to issue 
 or re-issue Treasury notes. And it was further- 
 more enacted that all notes which at that date 
 were, or which should thereafter become, from 
 whatever cause, the property of the United
 
 1789-1835- 121 
 
 States, should be cancelled and destroyed. This 
 cancelling and final disposition of the Treasury- 
 notes was nearly completed by Jan. i, 18 18. 
 From this date, or say from the last quarter 
 of 18 1 7, the public debt was considerably above 
 par : since all outstanding notes were convert- 
 ible into stock, they were funded preferably to 
 being paid into the Treasury for duties and 
 taxes. And this preference, besides placing 
 local funds into the hands of the Government, 
 relieved it also of the necessity of making any 
 appropriation for reimbursing the notes issued 
 under the Act of Feb. 24, 18 15, which notes, it 
 will be remembered, having been originally 
 designed for use as a circulating medium, were 
 fundable, but not reimbursable. 
 
 The full amount of Treasury notes of all 
 denominations which had been issued since the 
 commencement of the war, was ^36,680,794. 
 The amount still outstanding on Sept. 30, 18 18, 
 was $297,506; but all interest upon these had 
 ceased from that date. 
 
 While thus actively engaged in withdrawing 
 the Treasury notes from circulation, and in the 
 process of funding the public debt. Congress 
 had also turned its attention to a thorough
 
 122 AMERICAN FINANCES, 
 
 revision of the whole system of internal and 
 external taxation. The return of peace had 
 been hailed with joy; and naturally, the people 
 considered that an immediate release from the 
 burdens laid on them by the war, would be the 
 first token of relief. But, as matters then stood, 
 no reduction of taxation was possible before 
 the year 1816, inasmuch as the large arrearages 
 of war-demands had laid an instant and absorb- 
 ing claim upon the entire revenue and re- 
 sources. Now, however, a permanent and 
 uniform, arrangement of the finances might 
 easily be brought about, by reason of the large 
 increase of revenue ; and this from receipts of 
 customs in particular, as, at the close of the war, 
 the supply of foreign merchandise to be found 
 in the American markets was comparatively 
 very limited. 
 
 As soon, therefore, as a reduction of expenses 
 had rendered it possible, the duties were re- 
 pealed upon articles of domestic manufacture, 
 upon furniture, and upon watches ; while those 
 on licenses to retailers in wines, liquors, and 
 foreign merchandise became reduced, and the 
 rates of postage also. The duties on distilled 
 spirits were abolished altogether, though the
 
 lySg-iSjS- 123 
 
 existing duty on licenses to distillers was 
 doubled. The direct tax also was reduced from 
 six millions to three millions, and one year from 
 date it was not to continue any longer in force. 
 These several reductions would aggregate, as 
 was estimated, eight million dollars, with the 
 prospective diminution of three millions more 
 by the discontinuance of the direct tax, already 
 mentioned, after the year 1816 ; as by that time 
 there was in contemplation a further reduction 
 of expenditures. 
 
 These changes in the revenue laws having 
 been instituted, the permanent revenue at this 
 time constituted of, — 
 
 1. The customs (estimated) $17,075,000 
 
 2. The direct tax, net product .... 2,700,000 
 3 The internal duties on stamps . . . 400,000 
 
 " " " licenses to retail, 900,000 
 
 " " " spirits . . . 1,200,000 
 
 " " " refined sugar . 1 50,000 
 " " " carriages and 
 
 harness . . 175,000 
 
 The internal duties on sales at auction, 400,000 
 
 4. Proceeds from sales of public lands . 1,000,000 
 
 Total estimated revenue . . . $24,000,000 
 There were other sources of revenue besides
 
 124 AMERICAN FINANCES, 
 
 these, such as, the duty on postage ; the 
 moneys received from fines, penalties, and for- 
 feitures, together with similar miscellaneous 
 receipts. From all sources combined, the 
 gross revenue was considered to be amply 
 sufficient to provide for all payments on ac- 
 count of the principal and interest of the public 
 debt, and for the support of the Government ; 
 leaving, besides, a surplus which would be quite 
 equal to defraying such contingent and excep- 
 tional expenses as Congress might see fit to 
 authorize. 
 
 The newly adopted plan of finance had 
 settled an increase of forty-two per cent on the 
 average annual product of the tariff duties — 
 the years before the war serving as a basis of 
 computation. The greater part of this increase 
 was made a charge upon the ad valoran duties. 
 The actual addition made to these latter duties 
 were equal, when taken as a whole, to one 
 hundred per cent increase over the duties that 
 were in force previous to the war : still, on the 
 other hand, as the increase upon woollen and 
 cotton goods had, for reasons involved in the 
 system, been fixed at i66| percent, and 124 per 
 cent, respectively, it was consequently esti-
 
 1789-1835- 125 
 
 mated, by reason of this prohibitory feature 
 introduced into the new tariff, that the ad- 
 ditional revenue from the added rates of the 
 ad valorem duties would not reach higher in the 
 aggregate than seventy-five or eighty per cent. 
 Taken in general, the rates of the specific 
 duties were raised in such proportion that their 
 sum, when added to the receipts from the ad 
 valorem duties, would tally on the average with 
 an increase of about forty-two per cent upon 
 the annual product of the tariff duties before 
 the war, which was about ^12,000,000. 
 
 While now the rates under the new tariff 
 were put considerably higher than similar rates 
 before the war, a great reduction was neverthe- 
 less effected upon the double rates levied dur- 
 mg the contest. The war duties amounted to 
 one hundred per cent increase upon all duties ; 
 whilst the new ad valorem duties, except those 
 on woollens, cottons, and some few manufac- 
 tures, ranged from only tv/enty-five per cent to 
 seventy-five per cent ; and the increase was 
 still less on the specific duties. The tonnage 
 duty of $1.50 was also reduced much below 
 that amount ; and there was besides a tempo- 
 rary suspension of all discriminating duties.
 
 126 AMERICAN FINANCES, 
 
 upon goods imported in foreign vessels, in 
 favor of several of the European Powers, under 
 the influence of laws, treaties, etc. ; and later, 
 these duties underwent a permanent modifica- 
 tion. 
 
 A principal and avowed object of the new 
 tariff was to afford protection to our own 
 domestic manufactures. Their growth from 
 the peace of 1783 down to the year 1808 had 
 been slow, and therefore the more sure ; but 
 under the restrictive system, as during the 
 war also, they had attained a rapid and firm 
 expansion. They naturally fell short at the 
 outset in their ability to supply arms and 
 munitions of war, clothing material, and neces- 
 sary articles of comfort generally ; but, as the 
 war went on, all these were gaining a steady 
 increase. Hence, at a time when foreign sup- 
 plies were either prohibited, or not to be ob- 
 tained, the public demand was everywhere 
 opening an inviting career to the investment 
 of private capital, and to remunerative labor 
 as well. Here, however, the question nat- 
 urally arose, how it would fare with these new 
 industries when the day of competition should 
 return. For, unless this question were satis-
 
 1789-1835- 127 
 
 factorily answered, it was clear that capital 
 would shrink from embarking in them. It 
 was well known that the peace of Europe 
 was ready to give a new impetus and new 
 openings to the commerce of the world ; and 
 therefore it was made a matter of great pub- 
 lic concern to preserve and foster the grow- 
 ing manufactures of the country, and partic- 
 ularly those which had come forth under the 
 restrictive system, and during the war, and 
 which had owed their existence to the capital 
 and enterprise and skill of our own citizens. 
 
 The Government, as will have been ob- 
 served, had been accustomed to place its chief 
 reliance upon the duties on imports in order 
 to cover its expenses. These expenses were 
 now calling for a revenue of twenty-four mil- 
 lion dollars : of this sum, seventeen millions 
 were thrown upon the customs, leavmg seven 
 millions to come from internal duties and 
 taxes, and from the sale of public lands. The 
 new plan of revenue adopted after the close 
 of the war of 1812 was purposely constructed 
 to do away with the traditional usage of hav- 
 ing the income of the country fall altogether 
 or principally on the import duties. Congress
 
 128 AMERICAN FINANCES, 
 
 being governed in this action by the experi- 
 ence growing out of the late war. At that 
 critical juncture, it was found necessary, in 
 the midst, too, of great financial embarrass- 
 ment, to construct a new system of internal 
 taxation, and to seek out officials who might 
 work it with ability, and with profit to the 
 public service. As a consequence, a lack of 
 vigor marked the early movements of the war ; 
 while at the same time, the people had to 
 suffer a new, sudden, and most burdensome 
 increase in their money contributions. The 
 lesson of this experience was not forgotten : 
 hence, on the return of peace, a judicious pro- 
 portion of the existing taxation was sought to 
 be retained, thereby preserving a system of 
 revenue under which the internal resources of 
 the country might at once be called into ac- 
 tion, whenever its external commerce should 
 prove inadequate to the exigencies of the 
 times. Though adopted in 1816, this plan of 
 finance was abandoned in 1817 ; not, however, 
 without great opposition, even though its 
 revocation was demanded on the score of its 
 being actually superfluous, and still more on 
 the ground of certain pledges previously made
 
 i7Sg - 1S33. 1 29 
 
 by Congress. Even before the close of 181 7, 
 it had become manifest that the revenue de- 
 rived from imports and tonnage, and from the 
 sales of public lands, was fully adequate by 
 itself to meet all the expenses of the Govern- 
 ment. There was then the circumstance that 
 these internal duties, under a solemn promise 
 set forth in the Acts of 1813-14, were to con- 
 tinue in force no longer than one year after 
 the close of the war. This assurance it was 
 now in the power of Congress to comply with 
 in perfect safety, and it was the prevailing view 
 of that body that they ought to do so. These 
 reasons were accordingly held to justify a gen- 
 eral repeal of the internal duties, to take effect 
 after 1817. 
 
 The total revenue that accrued from Jan. 
 I, 1814, to Dec. 31, 1817, on account of these 
 internal revenues, exclusive of the direct tax, 
 amounted to more than seventeen million 
 dollars. The actual receipts for the same 
 period were upwards of fifteen million dol- 
 lars, upon which the expense of collection was 
 five and seven-tenths per cent. 
 
 The re-organization of the sinking-fund had 
 also its share in contributing to the settle-
 
 I30 AMERICAN FINANCES, 
 
 ment of the finances. A first important step 
 on the return of peace, was to relieve this 
 fund of the excessive charges which had been 
 thrown upon it ; and among these the char- 
 ging upon it of the principal and interest of 
 the Treasury notes had proved a special source 
 of inconvenience, particularly when their issue 
 came to reach the annual sum of eight and 
 ten million dollars. Thus, in the year 1814, 
 the multiplied engagements of the fund ex- 
 ceeded by more than five million and a half 
 dollars the actual receipts into the Treasury. 
 That it should at once be disencumbered of 
 this burden, was imperative. The method 
 made use of, as we have seen, was in the 
 funding of these notes on reasonable terms, 
 and in having them paid directly out of the 
 current revenue. This mode of procedure 
 chanced to be greatly accelerated by the enor- 
 mous increase of revenue for 18 16, during 
 which year not less than twenty-four million 
 dollars were applied to the reduction of the 
 public debt, not to speak of means to its fur- 
 ther reduction from a balance of upwards of 
 ten millions remaining in the Treasury, Jan. i, 
 18 1 7. The sinking-fund became thereby virtu
 
 ally relieved of the payment of the Treasury- 
 note debt, as also of such temporary bank 
 loans as had been likewise charged upon it. 
 Thus, within the space of two years from the 
 termination of the war, the Treasury notes 
 had either been returned in taxes, or sub- 
 scribed to the loan, or funded. 
 
 The Act of March 3, 18 17, marks the date 
 of the re-establishment of the sinking-fund. 
 Congress having in its preceding session 
 adopted the plan of revenue already mentioned, 
 and determined the expenses of a new peace 
 establishment. In every Act authorizing the 
 several loans which swelled the public debt so 
 enormously during the war, the faith of the 
 nation had been uniformly pledged to provide 
 special funds to pay the interest, and discharge 
 the principal, of such loans. That pledge was 
 now to be redeemed. A positive and fixed 
 appropriation of ten million dollars annually 
 was made to the sinking-fund, which vv^as to 
 be paid over out of the several proceeds of 
 duties on imported merchandise, of the tonnage 
 and internal duties, and of the sales of the 
 Western lands then belonging, or which might 
 thereafter belong, to the United States. This
 
 132 AMERICAN FINANCES, 
 
 money was vested in commissioners ; and it 
 was made the duty of the Secretary of the 
 Treasury to pay it over to them at such times 
 in each year as should enable them to meet 
 punctually and faithfully any of their engage- 
 ments in connection with the public debt. 
 
 The principal of the public debt amounted, 
 in the beginning of 1817, to about ;^i 10,000,000. 
 To this amount of principal, the sum above 
 appropriated bore nearly the same proportion 
 as the sum, assigned in 1804, to the fund, bore 
 to the principal of that date. Out of the ten 
 millions, $6,150,000 were needed to pay inter- 
 est, leaving $3,850,000 for reducing the princi- 
 pal of the debt, — an amount which would suffice 
 on a compound principal to pay off the whole 
 funded debt in less than eighteen years, if ap- 
 plied strictly and uninterruptedly. In addition 
 to this fixed and regular appropriation, thirteen 
 million dollars were set apart by the law, out 
 of the large revenue that accrued in 18 16, to be 
 applied during the year 181 7 to the redemption 
 of the debt : four millions of this amount, how- 
 ever, were to be considered as an advance on 
 account of the regular appropriation of the 
 sinking-fund for the year 18 18. Furthermore,
 
 1789-1835- 133 
 
 any surplus in the Treasury remaining unap- 
 propriated, after each session of Congress, for 
 the service of the current year, was also to be 
 expended in the reduction of the debt, when- 
 ever this could be done without reducing the 
 balance in the Treasury at the end of the year 
 below two million dollars. 
 
 It was judged unnecessary to include in the 
 form and scope proposed for the sinking-fund, 
 either temporary loans or Treasury notes ; as 
 these had nearly been paid or absorbed by the 
 loans effected previous to Jan. i, 1817. Nor 
 was the five-per-cent stock included which had 
 been issued in payment of the subscription by 
 the Government to the Bank of the United 
 States. This transaction amounted in fact to 
 no more than an exchange for the same amount 
 of the bank capital, and which was estimated 
 to produce an excess of dividends over the 
 interest payable on the stock which would 
 equal the reimbursement of the principal before 
 the term of the expiration of the charter, not 
 including therein the bonus of ^1,500,000 given 
 by the bank for the charter itself. To the 
 same category was consigned the stock created 
 by the compromise with the Yazoo claimants,
 
 134 AMERICAN FINA.XCES, 
 
 to the amount of ^4,000,000, which, however, 
 bore no interest. The payment of this stock 
 was charged upon the sale of public lands in 
 the Mississippi Territory. 
 
 Finally, we should observe that the working 
 of the sinking-fund was by the law of March 
 3, 181 7, greatly simplified. There were stand- 
 ing, at that date, on the books of the Treasury, 
 to the credit of the commissioners, thirty-four 
 millions of stock, of fourteen different descrip- 
 tions, while the interest payable thereon was 
 at seven different rates. This interest was 
 supposed regularly to accrue and to be paid, 
 when in fact its sole effect was to add to the 
 labors of the persons keeping the Government 
 accounts. It was now provided by the new 
 law, that all certificates of public debt, when 
 redeemed, should be destroyed, and that no 
 further payment be made upon them. Either 
 mode, it is true, had the same practical effect 
 as to the diminution of the national debt : still, 
 though the trouble saved in making up the 
 accounts might be of little moment, it was 
 thought not unworthy the wisdom of the Legis- 
 lature to simplify their })ublic statements, so as 
 to have them easily and generally understood.
 
 I78g-i835- 135 
 
 and to see that accounts plain in themselves 
 were not obscured by the introduction of an 
 useless fiction. 
 
 The application of all the large surplus rev- 
 enue to the reduction of the public debt, as 
 provided for in the Act of March, 1817, was 
 rendered possible by a special provision in the 
 charter recently granted to the Second Bank of 
 the United States. Every species of funded 
 debt was therein made free to be subscribed 
 to the capital of the bank ; and these subscrip- 
 tions were made payable one-fourth in gold and 
 silver, and three-fourths in funded debt. The 
 public stocks thus subscribed became redeem- 
 able according to the Government's pleasure, 
 and also at the rates subscribed ; that is to say, 
 the six-per-cent stock at par ; the three-per- 
 cent stock at 65 per cent of the par value ; the 
 seven-per-cent stock at \o6^-^^ per cent. Dur- 
 ing the year 181 7 there was paid, on account of 
 the interest and principal of the debt, the sum 
 of ^25,423,036.12, and ^21,296,306.04 in 1818. 
 But from the year 18 19 to 1823 inclusive, the 
 entire sum applied to reducing the debt fell 
 short by ^1 1,92 1,604.70 of the amount it should 
 have reached, had the full ten millions been
 
 136 AMERICAN FINANCES, 
 
 paid each year in principal and interest. 
 While, however, during these five years, it 
 sometimes happened that the amount of the 
 debt, redeemable under the terms relating to 
 it, would not have allowed, in the course of a 
 year, of the payment of so large a sum as ten 
 millions, even if the surplus funds in the Treas- 
 ury had been equal to it ; nevertheless, for the 
 sudden change in a prospect so flattering, in 
 the commencement of 1818, of a speedy extin- 
 guishment of the debt, the state of the public 
 revenues was responsible. The annual interest 
 was ever scrupulously paid, but the receipts into 
 the Treasury were found insufficient to make 
 up the entire appropriation of ten millions. 
 
 In 1 8 19, for the first time since the war, the 
 expenditures of the year had to be defrayed 
 entirely out of the established annual revenue. 
 The internal duties, it v/ill be remembered, 
 estimated at $2,500,000 per annum, were re- 
 pealed after Dec. 31, 181 7; and in the same 
 session of Congress, that the repeal was made, 
 the expenditures of the Government were in- 
 creased by three million dollars. The apparent 
 deficit produced by these Acts, for the service 
 of the year 181 8, was supplied by receipts from
 
 arrearages of the direct tax and internal duties, 
 and by a balance in the Treasury on Jan. i, 
 1818, of more than six million dollars. But, as 
 these temporary sources of supply were being 
 nearly exhausted, the expenditures of 18 19, 
 therefore, were of necessity thrown on its own 
 actual current receipts ; and, in fact, a deficit 
 which the great falling off in the receipts from 
 customs and other sources, was already threat- 
 ening, was only averted by a timely increase, 
 toward the close of the year, in the proceeds 
 from the sale of public lands, which exceeded 
 the estimated return by nearly two million 
 dollars. 
 
 But to cover the payments from the Treas- 
 ury for the service of the year 1820, a loan of 
 three million dollars was deemed requisite. 
 Under the discretionary joower conferred by the 
 Act of May 15 of that year, which authorized 
 this loan, two millions of it were obtained at a 
 premium of two per cent upon stock bearing 
 six-per-cent interest, redeemable at the pleasure 
 of the Government, and one million at par, 
 upon fivc-pcr-cent stock, which was not redeem- 
 able till 1832. 
 
 In 1 82 1 it was found necessary, as the de-
 
 138 AMERICAN FINANCES, 
 
 cline in the receipts from customs still con- 
 tinued, to negotiate another loan, and for five 
 million dollars. This sum was needed for the 
 twofold purpose of settling outstanding claims 
 upon the Treasury arising from appropriations 
 made in the preceding year, but still unsat- 
 isfied and unexecuted, and also of completing 
 the ways and means for the year 1821. This 
 money, in accordance with the terms of the Act 
 of March 3, was borrowed upon stock bearing 
 five-per-cent interest, and redeemable after 
 Jan. I, 1835. As this loan had been obtained 
 at a premium ranging from ^^-^ per cent to 
 8 per cent, — averaging ^y^-^ per cent, — stock 
 was issued to the amount only of ^4,735,296.30, 
 which, with the premium received, made up 
 the five million dollars. But, notwithstanding 
 the aid of this loan, charges remained upon the 
 revenue of 1821, which exceeded by nearly 
 fifteen hundred thousand dollars the available 
 balance in the Treasury on the ist of January, 
 1822. 
 
 Several causes concurred in bringing about 
 the great falling off in the revenue from imports 
 and tonnage in 18 19 and 1820. The high 
 prices of all exportable articles in the first years
 
 1789-1835- 139 
 
 of the peace down to the end of 1818, served to 
 introduce extravagance of every kind, particu- 
 larly in the consumption of foreign merchan- 
 dise. To this period of excessive and ruinous 
 importations, succeeded a term of great depres- 
 sion, which left the foreign commerce of the 
 country in a very languishing condition. The 
 sudden decline which now took place in all 
 exportable articles, not only checked the pur- 
 chase of foreign commodities, but made it also, 
 to a great extent, impossible to fulfil engage- 
 ments previously entered into. Merchants, of 
 course, ceased importing when there was no 
 demand ; but, more than that, they were even 
 compelled to reship their foreign merchandise, 
 in order, in this way, to avoid the payment of 
 the revenue bonds, given as security for the 
 duties. Hence the issue and payment of de- 
 bentures took place to an extent altogether 
 unusual and unlooked for. Even such bonds as 
 became due were not paid promptly, owing to 
 the difficulty in obtaining money. The con- 
 traction of the currency added its share also to 
 the general depression. The banks which, 
 during the suspension of specie payments, had 
 been excessive in their note issue, were recently
 
 140 AMERICAN FINANCES, 
 
 forced, by the large exportations of the precious 
 metals in 1818, to contract their discounts, so 
 as to withdraw a large portion of their notes 
 from circulation. The effect of this may be 
 best observed in the fact that the currency 
 which stood at about ^70,000,000 in 181 3, and 
 was raised to ;^i 10,000,000 in 18 15 and 18 16, 
 found its volume reduced by the close of 18 19 
 to 1^45,000,000, — a reduction of 59 per cent 
 within three years. Such an ordeal bore with 
 too heavy a weight on the community not to 
 impair the ability of individuals to discharge 
 their liabilities to the Government. As a con- 
 sequence, more than three million dollars' worth 
 of outstanding revenue bonds were in suit about 
 this time, of which a large portion never was 
 collected, by reason of the insolvency of the 
 debtors. 
 
 The tariff of 18 16, framed with a view to a 
 sufficient encouragement of domestic manufac- 
 tures, likewise occasioned a loss to the revenue, 
 as indeed it was expected to do. In this re- 
 spect its effect was now being fully felt. From 
 the year 18 18 to the year 1820, for example, 
 there was a fall in the importations of cottons 
 and woollens from ^24,804,188 to ^8,980,075,
 
 I78g-i835- 1 41 
 
 being a loss from these two fabrics of $15,824,- 
 113 in two years. Within the same period, 
 the duties from spirits fell from $2,646,186 to 
 $1,728,665, a difference of nearly a million 
 dollars. The tariff had been enacted during 
 the existence of the excise on home-distilled 
 spirits ; and for the protection of the domestic 
 article, an additional duty was imposed. The 
 excise was repealed, but the duty on foreign 
 spirits was continued ; so that the duty on 
 these last exceeded the entire value of the 
 domestic product. This circumstance tended 
 to decrease the consumption of foreign spirits, 
 and with it, of course, the amount of revenue 
 also. 
 
 The shrinkage, which occurred in 18 19 in 
 the returns from imports and tonnage, showed 
 a progressive decrease throughout 1820, and 
 reached its lowest point of depression in the 
 first quarter of 1821. In this latter year the 
 customs yielded but $13,004,447.15. It was 
 plain that the public interests now demanded 
 either that the revenue be augmented, or ex» 
 penditures diminished. As to the former alter- 
 native, it was conceived that the tariff might 
 be easily made more productive, were its rates
 
 142 AMERICAN FINANCES, 
 
 reduced ; but any such proposed reduction met, 
 of course, with a violent opposition from the 
 protected interests. On the other hand, a sys- 
 tem of internal duties was claimed to be gen- 
 erally odious and oppressive in its collection, 
 and was regarded also as falling principally on 
 the agricultural portion of the country, the 
 great moneyed capitalists escaping its opera- 
 tion. Since, then, nothing but a retrenchment 
 of the public expenditure was able to save the 
 people from internal taxation, Congress came 
 at last to decide upon this latter course. 
 Accordingly, we find that the expenditures of 
 the Government — those on account of the 
 public debt excluded — were now reduced from 
 the sum of $13,134,530.57 in 1820 (itself a 
 great reduction on previous years) to $10,723,- 
 479.07 in 1821, and to $9,827,643.51 in 1822. 
 In this way the expenses of the Government 
 were reduced, and made equal to its income. 
 During this year it was that a revival took 
 place in the foreign commerce of the country, 
 Vv^hich, from its favorable action upon the rev- 
 enue from imports and tonnage, relieved the 
 Treasury of all its embarrassment, yielding 
 besides an income sufficient for all expendi-
 
 1789-1835- 143 
 
 tures, and equal also to the full sinking-fund 
 requisition of $10,000,000. It was seriously 
 thought at one time to reduce this amount to 
 $8,000,000. Happily, not only was this con- 
 templated reduction not necessary, but, through 
 the increasing efficiency of the national re- 
 sources, the previous deficiency in the appli- 
 cation of the entire fund was more than made 
 good by the subsequent excess of annual pay- 
 ments on the principal of the debt, made from 
 the beginning of 1826 to 1828. 
 
 On the first days of the several years, 1825, 
 1826, 1827, and 1828, the great war debt be- 
 came payable at the will of the Government. 
 The amount of it yet unredeemed was $63,786,- 
 137.74. -^s this sum largely exceeded the 
 highest possible capacity of the sinking-fund, 
 during those four years, a series of efforts was 
 begun as early as 1822 to refund a portion of 
 this debt, with a view to its more equal dis- 
 tribution over a greater number of the years 
 succeeding. For such a plan, the time seemed 
 very propitious ; as the current value of the 
 five-per-cent stock issued recently by the Gov- 
 ernment was higher than that of the seven-per- 
 cent stock redeemable in 1825. Accordingly,
 
 144 AMERICAN FINANCES, 
 
 offers were made, under an Act of April 20, 
 1822, to exchange $26,000,000 of the stocks 
 redeemable in 1825, 1826, 1827, and 1828, into 
 a five-per-cent stock redeemable in this wise ; 
 viz., (i) as to the six-per-cent stock exchanged, 
 one-third on Jan. i, 1831, and one-third on the 
 same date in the years 1832 and 1833 ; and (2) 
 as to the seven-per-cent stock exchanged, on 
 Jan. I, 1834. Not more, however, than $56,- 
 704.77 were exchanged. And the failure of 
 the measure was attributed to a sudden rise, 
 during the year, in the rate of interest, caused 
 by a demand for capital to be used in commer- 
 cial enterprises. As this state of affairs con- 
 tinued during the year following, it prevented 
 any similar attempt being then made. 
 
 The balance in the Treasury on the ist of 
 January, 1824, reached the sum of $9,463,922.- 
 81. According to the existing terms of the 
 public debt, no portion of this balance, nor of 
 any surplus accruing during the year, coald 
 be applied to it before the ist of January, 
 1825. The principal of a large amount of the 
 debt, and that part, too, of it bearing the 
 highest rate of interest, becoming payable at 
 this latter date, it would have been inexpedi-
 
 I78g-i835- 1 45 
 
 ent to apply the resources at the disposal of 
 the Government meanwhile to any other ob- 
 ject than the payment of this debt. In order, 
 therefore, to obviate the general inconvenience 
 involved in the withdrawal of so large a sum 
 from circulation, only to lie idle in the vaults 
 of the banks, authority was given by an Act 
 of Jan. 22, 1824, to purchase at a premium 
 the outstanding seven-per-cent stock, which 
 amounted to ^8,610,000. These purchases, if 
 made prior to the ist of April, were to be at 
 the rate of two dollars for every ^100, in addi- 
 tion to the interest due at that date ; if made 
 between the ist of April and the ist of July, 
 they were at the rate of seventy-five cents on 
 every ^100, and interest to the latter date; 
 and if between the ist of July and the ist of 
 October, they were at par with interest to 
 Oct. I. After the ist of October the pur- 
 chases were at par, and accrued interest to 
 the date of purchase. It being very well 
 known in advance that the Government would 
 be in possession of ample means to redeem 
 the stock at its maturity, this arrangement 
 met with sufficient acceptance to accomplish 
 its purpose.
 
 146 AMERICAN FINANCES, 
 
 Other measures besides the above men- 
 tioned were passed in reference to the public 
 debt. Under the Acts of the 24th and the 
 26th of May, 1S24, there were negotiated two 
 loans of ^5,000,000 each with the United 
 States Bank at four and a half per cent, and 
 redeemable in 1832 and 1834 respectively. 
 One of them had for its object to discharge 
 the awards stipulated under the Florida treaty 
 of the 22d of February, 1819; while the other 
 was designed to pay such amount of the six- 
 per-cent stock of 1812 as might still remain 
 unredeemed, after all the means at the dis- 
 posal of the commissioners of the sinking- 
 fund during the year 1825 had been put into 
 requisition. As to these two loans, it is proper 
 here to observe, that besides the proposal of 
 th-e United-States Bank, which was the one ac- 
 cepted, various other offers had been received 
 for somewhat more than one-half of one of the 
 loans, and at rates varying between par and 
 four and a half per-cent premium, thus form- 
 ing an average premium of .97^ on the whole 
 amount offered. Notwithstanding, the propo- 
 sal of the bank for the entire amount of both 
 loans at par was considered as more advan-
 
 tageous to the Government, especially as it 
 was proprietor of one-fifth of its capital. Still 
 another Act, passed on the 26th of May, 1824, 
 authorized an exchange of ^15,000,000 of the 
 six-per-cents of 1813 into four-and-a-half-per- 
 cent stock, redeemable, one-half in 1833, and 
 the remainder in 1834. Not more, however, 
 than ^3,308,307.45 were exchanged. 
 
 On the 1st of January, 1826, there were 
 redeemable of the six-per-cent stock of 1813, 
 $19,000,000. The ordinary revenues of the 
 year were not adequate to the redemption of 
 more than ^7,000,000 of this sum, thus leaving 
 an excess of ;^ 12,000,000 unprovided for. In 
 order, therefore, to constitute a fund which, in 
 conjunction with the annual surplus means of 
 the Treasury, would pay off the nineteen mil- 
 lions redeemable in 1826, an Act of March 3, 
 1825, authorized an exchange of new stock 
 bearing four and a half per cent interest, and 
 amounting to $12,000,000, for a like amount 
 of the six-per-cent stock issued in 1813. The 
 redemption of this stock Avas thrown in equal 
 portions upon the years 1829 and 1830, — no 
 part of the public debt being payable in these 
 two years except the seven millions due to
 
 148 AMERICAN FINANCES, 
 
 the bank, and the three-per-cents ; but neither 
 of these two last was it advisable to redeem, 
 so long as stocks were outstanding bearing 
 a higher rate of interest. In the event of 
 failure to accomplish the object of the Act by 
 the proposed means of an exchange of stock, 
 a loan was authorized, as an alternative, which, 
 however, was not to differ from the preceding, 
 either as to amount, or rate of interest, or the 
 time of its redemption. A loan was thought 
 the more likely to succeed, even though fail- 
 ure should come to the exchange for the rea- 
 son that a loan would invite competition 
 among all the moneyed capitalists, and also 
 from the Bank of the United States ; whereas, 
 an exchange of stocks might easily have the 
 effect of confining the demand for the new 
 stock to the holders of the old, who, besides 
 constituting but a small portion of the capital- 
 ists, were the very persons interested in pre- 
 venting the accomplishment of the exchange. 
 The exchange, at all events, was first at- 
 tempted, and was effective to the amount of 
 only $1,585,138.88. Loan proposals were next 
 issued for what remained of the required sum, 
 but no offers were received. The Govern-
 
 1789-1835- 149 
 
 ment, it seems, had now to contend with a 
 rival suitor for the capital of the country ; for, 
 when lenders came to consider the short 
 periods of redemption held out by the Act, 
 they found that the rate of interest was too 
 much below that which capital might gain if 
 it were invested in commercial and manufac- 
 turing undertakings. 
 
 This attempt was the last that was made to 
 alter the terms of the public debt, so as to 
 change the period of its redeemability. The 
 time was no longer propitious. Both at home 
 and abroad, serious embarrassments had arisen 
 in the money-market, and these were more 
 likely to increase than diminish. Neither by 
 loan, nor by exchange, was it possible to effect 
 now a saving of more than one-half of one per 
 cent ; and this could prove, under the circum- 
 stances, of but little advantage to the Govern- 
 ment. From this time forward the surplus 
 means of the Treasury, as it accumulated, was 
 applied quarterly in partial payments towards 
 the redemption of the six-per-cent stocks ; and 
 in order to determine the persons whose stock 
 was to be paid at the end of each ensuing 
 quarter, lots were drawn at the Treasury In
 
 I50 AMERICAN FINANCES, 
 
 pursuance of this method, the debt was the 
 more speedily reimbursed, the expenditure on 
 account of interest became lessened, and pay- 
 ments were more equally distributed over differ- 
 ent years ; while it also suited the convenience 
 of the Government, and effectually guarded 
 against all possible accumulation of money in 
 the Treasury. 
 
 The term of the final extinguishment of the 
 public debt was now rapidly approaching. Al- 
 though the credit of this notable result is due 
 primarily to a faithful adherence to the provis- 
 ions of the Sinking-Fund Act of March 3, 18 17, 
 yet it will not be without interest to know that 
 the revenue that sustained its successful action, 
 was drawn almost entirely from the foreign 
 commerce of the country. Up to the present 
 time, many changes had been made in the 
 Tariff Act of April 27, 1816; and of these the 
 most important was the one inaugurated by 
 the Act of May 22, 1824, and which had for its 
 object to perfect what was known as the 
 "American System" for the protection of 
 domestic manufactures. An increase of duties 
 was effected by this tariff equal to about 7^^^ 
 per cent upon the entire amount of importa-
 
 J78g - 1835. 1 5 I 
 
 tions. But notwithstanding this large augmen- 
 tation of duties on imports, many of which 
 were prohibitory in their effect, the general 
 aggregate of the foreign trade itself was not 
 diminished, and the revenue therefrom contin- 
 ued even to increase. Nor did this increase 
 suffer any interruption from several subsequent 
 Acts (all passed prior to 1835), which gradually 
 reduced, and finally abolished, the duties upon 
 sundry articles, including among them such im- 
 portant commodities as coffee, cocoa, molasses, 
 salt, and tea. 
 
 Under such favorable circumstances, larger 
 and ever larger amounts were able to be applied 
 to the redemption of the public debt. The 
 disbursements exceeded sixteen millions in 
 183 1, and eighteen millions in 1832. While 
 these and previous important payments on 
 account of the public debt, and such others as 
 had to meet the current expenses of the Gov- 
 ernment, were being made, the large additional 
 sum of fifteen millions, or perhaps twenty mil- 
 lions besides, went to objects of internal 
 improvements, such as roads, canals, fortifica- 
 tions and arsenals, docks, i)ublic buildings, etc. 
 
 The public creditors, in tlicir unbounded
 
 1 5 2 AMERICAN FINANCES, 1789 - 1835. 
 
 reliance upon the faith and resources of the 
 nation, saw with regret the approach of the 
 time when their claims would be paid, and they 
 at least would have rejoiced in its postpone- 
 ment. But, with the people at large, the 
 extinction of the debt had become a favorite 
 and ruling object ; and, in obedience to their 
 wide-spread interest in the matter. Congress 
 hastened the event by every means in its 
 power, especially by a prudent economy in the 
 public expenditures. Before the close of the 
 year 1834, ample funds had been deposited with 
 the Bank of the United States, as Commissioner 
 of loans, to discharge all the public funded debt 
 then outstanding. 
 
 In 1835, the President, in his annual message 
 to Congress, was able to announce that "all 
 the remains of the public debt have been re- 
 deemed, or money has been placed in deposit 
 for this purpose whenever the creditors choose 
 to receive it. All the other pecuniary engage- 
 ments of the Government have been honorably 
 and promptly fulfilled ; and there will be a bal- 
 ance in the Treasury, at the close of the present 
 year, of about nineteen millions of dollars."
 
 INDEX. 
 
 Accounts, settlement of, be- 
 tween the States and United 
 States, 23. 
 
 Adams, John, minister to the 
 Hague, 3. 
 
 Albany, city of, 84. 
 
 Algiers, treaty with, 31. 
 
 American system, 150. 
 
 Amsterdam, 45 ; exchange on, 
 66. 
 
 Antwerp, 45. 
 
 Appropriations, permanent, 
 See Sinking-Fund. 
 
 Arrears of interest. See Inter- 
 est. 
 
 Auction, duty on sales by, 32, 
 103, 123. 
 
 Balances, State, nature of, 25 ; 
 settlement of, 26; not paid, 
 
 27, 73- 
 
 Balance in Treasury, 133, 137, 
 144, 152; accumulation of, 
 in Treasury, 145, 150. 
 
 Baltimore, city of, 84, 115, 116. 
 
 Bank of the United States, 
 chartered, 29, 118; notes 
 receivable for taxes, 29, 118; 
 Government subscription to 
 
 stock, 29, 133 ; capital, 29, 
 dividends, 29, t^j, 133; 
 bonus paid by, 133; cur- 
 rency of, 118; subscriptions 
 paid in public stocks, 135; 
 sale of stock, 48 ; loans from, 
 to the Government, 29, 46, 
 118, 146. 
 
 Banks, State, loans by, to the 
 Government, 78, 84, 117; 
 depositories of public loans, 
 78, 90 ; capital of, 92 ; pur- 
 chase of Treasury notes by, 
 81; circulation, 99, 106, 114, 
 117, 118, 139, 140; notes 
 taxed, 89; suspension of 
 sj^ecie payments by, 99, 106, 
 'J7> I39> depreciation of 
 circulation, 99, 114; notes 
 of, receivable for taxes, 119; 
 of New-England States, 99, 
 117. See Currency. 
 
 Barbary States, war with, 73. 
 
 Berlin decree, 74. 
 
 Bills of credit, 19, 24. 
 
 Bonds, revenue. See Revenue. 
 
 Boston, city of, 84, 98, 99, 105, 
 116, 118. 
 
 British debts, 71. 
 
 IS3
 
 154 
 
 INDEX. 
 
 Carriages, tax on, 32, 49, 89, 
 103, 123. 
 
 Charleston, city of, 84, 115. 
 
 Columbia, District of, 99, 102, 
 116. 
 
 Commerce, protection of, 50, 
 74 ; effect of embargo on, 
 76; state of, in 1812, 76; in 
 1813, 87; in 1816, 127; in 
 1820, 139; in 1822, 142. 
 
 Commissioners of sinking- 
 fund, 39, 54, 55 ; powers and 
 duties of, 40, 59, 60, 62, 132. 
 
 Commissions allowed on pub- 
 lic loans. See Loans. 
 
 Conditional subscriptions to 
 public loans. See Loans. 
 
 Confederation, the Govern- 
 ment of the, financial embar- 
 rassments of, I, 6, 12 ; reve- 
 nue system under, i, 20, 23, 
 
 30- 
 
 Congress, resolution of, in re- 
 gard to Revolutionary debt, 
 12. 
 
 Congressional pledges, 12, 52, 
 no, 128, 131. See Debt. 
 
 Connecticut, 26. 
 
 Constitution of the United 
 States, its origin, i ; conven- 
 tion for framing, 2 ; its rati- 
 fication, 2 ; provision of, in 
 regard to debts, 2 ; effect of, 
 on public credit, 11. 
 
 Contraction of currency. See 
 Currency. 
 
 Cotton goods, tariff on, 49, 
 124; effect of tariff on, 140. 
 
 Credit, public, influence of new 
 
 Constitution on, 2, 12; state 
 of, in 1789, 12; in 1812,77; 
 in 1814, 88, loi, 102 ; in 
 181 5, 109, III; after the 
 war of 18 1 2, 114. 
 
 Credit given on collection of 
 revenue. See Revenue. 
 
 Currency, contraction of, 81, 
 140; state of the, in 1814, 
 92, 106; in 1815, 114; after 
 the war of 1812, 118, 119; 
 disordered state of, 99, 106, 
 117, 118, 119; depreciation 
 of the, 114. See Suspension 
 of Specie Payments. 
 
 Current expenses. See Ex- 
 penses. 
 
 Customs. See Tariff Duties. 
 
 Debt, public, domestic debt, 
 resolution of Congress in 
 regard to, 12, 15; amount 
 of, 3, 1 1 ; nature of, 1 1 ; how 
 funded, 14, 16, 70 ; reduction 
 of interest on, 13, 17, 70; 
 advantages to creditors of 
 funding, 16, 18; beneficial 
 results of funding, 28; terms 
 changed, 13, 16, 64, 70; sub- 
 scriptions to, 18; amount 
 funded, 19; amount of in- 
 terest on, 30, 70; conversion 
 of, 9, 45, 48, 64 ; purchases 
 of, 30. 34. 36. 58, 62, 70, 
 145; laws regulating pur- 
 chases, 62 ; payment of, t,^, 
 
 34. 35. 37. 41. 49. 50. 58. 67, 
 68, 135, 149, 151; amount 
 of, in 1789,69; in iSt2, 71,
 
 INDEX. 
 
 155 
 
 73; in 1817, 132; in 1825, 
 143; increase of, 68, 71 ; de- 
 fault of interest on, 100 ; 
 war debt of 1812 becomes 
 payable, 143; efforts to re- 
 fund, 143, 147; extinguish- 
 ment of, 150, 152; pledges 
 in regard to, 12, 17, 31, 36, 
 39.41, 53, 54, 103, no, 131; 
 amount held in Europe, 66; 
 popular desire to pay off, 
 34, 152. See Surplus, Sink- 
 ing-Fund. 
 Debt, the French, 3 ; amount 
 of, 4, terms of, 5; contracts 
 concerning, broken, 6; pay- 
 ment of, 9; conversion of, 
 
 9. 43- 
 
 Debt, the Dutch, origin of, 5 ; 
 interest on, 4 ; amount of, 3, 
 5, 6, 7, 42, 55 ; terms of, 4, 
 42 ; attempted conversion 
 of, 43, 45, 53- 60, 66; pay- 
 ment of, 49, 53, 56, 60. 
 
 Debt, foreign, amount of, 3 ; 
 interest on, 30; status in 
 1795, 4-> 45- ^^^ Debt, 
 Dutch, French. 
 
 Debt, Spanish. See Spain. 
 
 Debt, Revolutionary, default 
 of interest on, i ; amount 
 of, 3, 69; terms of, 16; ar- 
 rears of interest on, 11, 16, 
 69 ; reduction of interest on, 
 17, 70; resolution of Con- 
 gress-concerning, 12. 
 
 Debt, public. See Sinking- 
 Fund, Interest, Loans. 
 
 Debts of the States. See States. 
 
 Deficit in revenue. See Rev- 
 enue. 
 
 Delaware, 25. 
 
 Direct tax. See Tax. 
 
 Discount on loans. See Loans. 
 
 Domestic manufactures. . See 
 Manufactures. 
 
 Duties, internal. See Internal. 
 
 Duties, tariff. See Tariff. 
 
 Duties on tonnage. See Ton- 
 nage. 
 
 Embargo, the, 74, 76; effect 
 
 of, on commerce, 76. 
 England, relations with, 31, 32, 
 
 74; war with, 68, 76; peace 
 
 with, 108 ; British orders in 
 
 council, 74; exchange on, 
 
 66. See Embargo. 
 Europe, negotiations of loans 
 
 in, 6, 97 ; amount of public 
 
 stocks held in, 66. See Debt, 
 
 Foreign. 
 Exchange, on Amsterdam, 66 ; 
 
 on London, 66. 
 Expenditures, current, amount 
 
 in 1791, 30; in 1795, zi; in 
 
 1S01-1802, 52; in 1802, 58; 
 
 in 1816, 127; reduction of, 
 
 in 1821-1822, 141. 
 
 Finance, plan of, in 1812, 77 ; 
 
 in 1814, 102, 105, 109; in 
 
 1S16, 124, 127, 128. 
 Finances, state of, in 1791, 28; 
 
 in 1812, 129; in 1814, 88, 99, 
 
 100, 105; in 1815, loi, 106, 
 
 109, III. 
 Florida Treaty. See Spain.
 
 156 
 
 INDEX. 
 
 Florin, value of, 7. 
 
 Foreign debt. See Debt. 
 
 France, difficulties with, 50, 
 52, 74. See Louisiana, Pur- 
 chase of. 
 
 France, king of. See King. 
 
 French debt. See Debt. 
 
 Funding Act of 1790, 13, 14, 16. 
 
 Furniture, tax on, 103, 122. 
 
 Georgia, State of, 26. 
 Ghent, treaty of, 108. 
 Great Britain. See England. 
 
 Harness, tax on, 103; revenue 
 
 from, 123. 
 Houses, tax on dwelling. See 
 
 Direct Tax. 
 
 Import duties. See Tariff. 
 
 Indian war, 31, 32. 
 
 Interest on public debt, rate of, 
 4, 5,7, 9, 14, 16, 17, 30, 51, 
 70, 78, 86, 91, 93, 113, 117, 
 137, 138, 146; on Treasury 
 notes, 82, 97, 107, 108. 
 
 Interest, arrears of, on Revo- 
 lutionary debt, amount of, 
 II ; how funded, 15, 16, 69. 
 
 Internal duties, system of 1792, 
 30; of 1794, 32; of 1813,88; 
 100 ; increase of, 49, 102, 
 III; revision of system m 
 1816, 122; reduction of du- 
 ties, 122; repeal of, 57, 122, 
 129, 136; revenue from, in 
 1795. 33; in 18 14, 89; in 
 18 1 6, 123, 136; reason for 
 retaining system after war 
 
 of 1812, 128; total amount 
 collected from, 129; resist- 
 ance to, 31 ; odious nature 
 of, 57, 142 ; payable in 
 Treasury notes, 100; oppo- 
 sition to repeal of, 128. See 
 War Taxes. 
 
 Internal improvements, 151. 
 
 Insurrection, the whiskey, 31. 
 
 King of France, support of, 
 in Revolutionary war, 4 ; 
 subsidy granted by, 4; re- 
 mission of interest on loans, 
 5 ; guarantees American 
 loans, 3. 
 
 Lands, tax on, 51. See Direct 
 Tax. 
 
 Lands, public, price of, in 1790, 
 34; sales from, in 1816, 123; 
 in 1819, 137 ; appropriated 
 to sinking-fund, 34, 131. 
 
 Legal-tender law, 106. 
 
 Licenses, tax on, 32, 89, 103, 
 123; repeal of. See Internal 
 Duties. 
 
 Livre, French, value of, 9. 
 
 Loans : First loan negotiated 
 in the United States, 51; 
 Louisiana loan, 61 ; reliance 
 on, during war of 1812, 77; 
 loan of eleven millions, 78, 
 of sixteen millions, 82, of 
 seven and a half millions, 
 88, 90; of twenty-five mil- 
 lions, 92 ; of ten millions, 
 93 ; of six millions, 95 ; 
 loan of 181 5, 112; object of
 
 INDEX. 
 
 157 
 
 loan of 181 5, 113; loan of 
 1820, 137; of 1821, 137; 
 discount on, 85, 91, 95, 96, 
 115, 117; premium on, 51, 
 137, 138; proposals solicited 
 to, 84, 90, 93, 113; condi- 
 tional subscriptions to, 86, 
 94; failure of, 48, 102, 105; 
 commissions allowed on, 83, 
 90, 94 ; loans in anticipation 
 of revenue, 32, 46 ; repeal of 
 Acts authorizing, 120 ; nego- 
 tiation of, in Europe, 97 ; 
 opposition to foreign, 6. 
 See Banks, Interest, Debt, 
 Treasury Notes. 
 
 London, exchange on, 66. 
 
 Loss of certificates of debt, 
 19. 
 
 Louisiana, purchase of, 61, 
 72. 
 
 Manufactures, taxation of do- 
 mestic, 103, 122; protection 
 of, 126, 150; state and his- 
 tory of, 1 26. 
 
 Market price of public stocks. 
 See Stocks. 
 
 Maryland, State of, 25. 
 
 Massachusetts, State of, 26. 
 
 Mediterranean duties, 74. 
 
 Napoleon, Emperor, 74. 
 
 National debt. See Debt. 
 
 New York, 25, 28, 84, 98, 99, 
 105, 115, 116, 117. 
 
 New-England States. Sec 
 Banks, Currency, Suspen- 
 sion of Specie Payments. 
 
 New Hampshire, State of, 26. 
 Non-intercourse Act, 75. 
 North Carolina, 25. 
 
 Officers, foreign, in Revolu- 
 tion, 10. 
 Orders in council, British, 74. 
 
 Payment of public debt. See 
 Debt. 
 
 Pennsylvania, State of, 25, 31. 
 
 Permanent revenue. See Rev- 
 enue. 
 
 Philadelphia, city of, 84, 98, 
 100, 105, 115, 116. 
 
 Pittsburg, city of, 115. 
 
 Plan of finance. See Finance. 
 
 Pledges of the revenue. See 
 Revenue, Debt, Congression- 
 al Pledges. 
 
 Postage, rates of, 103; re- 
 duced, 122. 
 
 Premium on loans. See Loans. 
 
 President of the United States, 
 discretionary powers con- 
 ferred upon, 50, 74 ; message 
 announcing extinguishment 
 of public debt, 152. 
 
 Price of public stocks. See 
 Stocks. 
 
 Property, total valuation of, in 
 18 1 4, 92. 
 
 Proposals for loans. See Loans. 
 
 Protection of domestic manu- 
 factures. See Manufactures. 
 
 Providence, city of, 84. 
 
 Public debt. See Debt. 
 
 Public lands. See Lands. 
 
 Public credit. See Credit.
 
 158 
 
 INDEX. 
 
 Purchase of public debt. See 
 Debt. 
 
 Redemption of public debt. 
 
 See Debt. 
 Reduction of public debt. See 
 
 Debt. 
 Refunding of public debt. See 
 
 Debt. 
 Regent of Tripoli, 74. 
 Repeal of loan Acts, 120. 
 Revenue, amount of annual, 
 
 i" 1795. 33; i" 1797, 49; i» 
 1802, 57; in 181 5, 103; in 
 1816, 123; state of, in 1794, 
 32; in 1808-1812, 75, 128; 
 in 1813, 88; in 1814, 102; in 
 1815, III ; in 1S16, 127; in 
 1819, 136; permanent, 31, 
 33, 103, 123; sources of, in 
 1795, 57, 123; increase of, 
 49, 102; deficit in, 32, 51, 
 75 ; in 1813, 88 ; in 1S14, 91, 
 loi, 102; in 1822, 13S ; 
 pledges of, 36, 46, 54, 103 ; 
 bonds, 139, 140; credit on 
 collection, 75, iii; effect of 
 Treasury-note issue on, 100, 
 112. See Tariff, Loans, 
 Surplus, Internal Duties. 
 
 Revolutionary war, expenses 
 of. See War. 
 
 Revolutionary debt. See Debt. 
 
 Rhode Island, 26. 
 
 Richmond, city of, 84. 
 
 Salem, city of, 84. 
 Salt, duty on, 89. 
 Short, William, financial agent 
 
 of the United States abroad, 
 8. 
 
 Sinking-fund, of 1792, 35; of 
 1795. 43; its provisions, t,-] \ 
 its defects, 44, 45, 53 ; of 
 1802, 56, 60 ; re-organization 
 of, in 1817, 129, 134; its 
 workings, 150; condition of, 
 in 1817, 129; appropriation 
 to, in 1792, 35 ; in 1795, 37. 
 in 1S02, 59 ; in 1803, 61 ; in 
 1817, 131, 143; appropria- 
 tion of surplus revenue to, 
 38, 133 ; simplification of, 
 134; state of, in 1821, 142. 
 See Commissioners of, 
 Treasury Notes. 
 
 Slaves, tax on, 51, 89. 
 
 Snuff, ta.x on, 32. 
 
 South Carolina, State of, 26. 
 
 Spain, debt to, origin of, 10; 
 settlement of, 1 1 ; purchase 
 of Florida, 74 ; Florida 
 treaty, 146. 
 
 Specie payments, suspension 
 of, 99, 106, 117, 139; effect 
 on operations of the Treas- 
 ury, 99. See Banks. 
 
 Specie, amount of, in United 
 States, 7, 77 ; exportation 
 of, 140. 
 
 Spirits, tax on, 30, 103 ; repeal 
 of, 122; effect of tariff on 
 importation of, 141. See In- 
 ternal Duties. 
 
 Spoliation on Commerce. See 
 Commerce. 
 
 Stamp duties, 50, 89. 
 
 States, debts of the, origin
 
 INDEX. 
 
 159 
 
 and nature of, 20 ; assump- 
 tion of, by the Federal Gov- 
 ernment, 20, 27 ; amount of, 
 22 ; how funded, 22 ; amount 
 funded, 23, 27 ; interest on, 
 30 ; apportionment of the 
 expenses of the Revolution- 
 ary war between the States, 
 23; policy in regard to, 21, 
 27. See Balances, State. 
 States, creditor, 26; debtor, 
 
 25. 73- 
 Stocks, market price of public, 
 
 13,35, 62, 63; in 1812, 77; 
 
 83; in 18 14, 95; in 181 5, 114; 
 
 in 1817, 121; in 1825, 143; 
 
 amount held in Europe, 66. 
 Sugar, tax on, 32, 89 ; revenue 
 
 from, \.\ i8i6, 123; repeal 
 
 of. See Internal Duties. 
 Surplus revenue, 30, 33, 34, 50, 
 
 70, 135, 149: appropriated 
 
 to sinking-fund, -^^ 133. 
 
 Tariff duties, first tariff, 30 ; 
 origin of, 30; increase of, 30, 
 32, 49, 50, 73, 124; during 
 war of 181 2, 77, 88, 125; 
 receipts from, in 1789, 30; 
 in 1802, 52; in 1819, 140; 
 increase of revenue from, 
 in 1800-1802, 52; in 1816, 
 122; in 1821, 142; decrease 
 of revenue from, in 1819, 
 137; in 1821, 141, cause of 
 decrease, 138, 140; the tariff 
 of 1816, 124; reduction 
 effected thereby upon war 
 tariff, 125; protective char- 
 
 acter of tariff of 1816, 126, 
 140; the tariff of 1824, 150; 
 changes in, 150; unstable 
 character of revenue from, 
 in 1S12, 88; effect of Treas- 
 ury notes upon, 100 ; credits 
 given on collection of, iii, 
 139; repeal of, on certain 
 articles, 151 ; effect of, on 
 importations, 140, 151 ; chief 
 reliance on, for revenue, 127, 
 129,150. See Mediterranean 
 Duties, Manufactures. 
 
 Tax, the direct, 51, 89; increase 
 of, 102; reduced, 123; re- 
 peal of, 123; revenue from, 
 123. 
 
 Taxes, war, 89 ; repeal of, 129; 
 pledges in regard to, 89, 12S. 
 
 Taxes, in what currency pay- 
 able, 29, 118; pledge of. See 
 Revenue. 
 
 Taxation, during war of 1S12, 
 76; system adopted in 181 2- 
 1814, 77, 102; inadequate 
 system of, 102; increase of, 
 102 ; reduction of, in 1816, 
 122; revision of entire sys- 
 tem of, external and internal, 
 in 1S16, 121. See Internal 
 Duties ; P'inance, Plan of. 
 
 Tender law, 106. 
 
 Territory, purchase of new. 
 See France, Spain. 
 
 Tonnage duties, 74, 78, 125. 
 
 Treasury notes, first issue, 79; 
 second issue, 86 ; third is- 
 sue, 9r, 97 ; fourth issue, 105 ; 
 fifth issue, 107 ; amount out-
 
 i6o 
 
 INDEX. 
 
 standing in 1814, 87, 98; in 
 1815, 112, 119; total amount 
 issued, 121; object in issu- 
 ing, 79; security of, 81, 98; 
 advantages offered to pur- 
 chasers of, 81, 106, 107; 
 new departure in the issue 
 of, 97, 105; terms of, 82; 
 charged upon sinking-fund, 
 82, 105; funding of, 104, 
 107, 112, 116, 119, 121 ; 
 receivable for subscriptions 
 to loans, 104, 107, 112, 116, 
 121 ; receivable for taxes, 81, 
 100, 112, 121 ; as a cur- 
 rency, 80, 97, 106, 107, 117, 
 119, 121 ; denomination of, 
 97, 107, 119; withdrawal 
 from circulation, 120, 131 ; 
 default in payment of, 100, 
 105 ; interest on, 82, 98, 107 ; 
 depreciation of, 100; effect 
 upon revenue, 100, 112. See 
 Sinking-Fund. 
 
 Treaty. See France, Louisi- 
 ana, Ghent, Spain. 
 
 Tripoli, regent of, 74. 
 
 United States, Bank of. See 
 
 Bank. 
 United States, Constitution of. 
 
 See Constitution. 
 
 Virginia, State of, 25, 
 
 War, Revolutionary, expenses 
 of, 20 ; apportionment of 
 expenses between the States, 
 
 23- 
 War of 181 2. See England, 
 
 Plan of Finance adopted 
 
 during; see Finance, Plan 
 
 of. 
 War taxes. See Taxes, Tariff. 
 Watches, tax on, 103; repeal 
 
 of, 122. 
 Washington, city of, 84, 115. 
 Whiskey insurrection, 31. 
 Woollen goods, tariff on, in 
 
 1S16, 124; effect of tariff on 
 
 importations, 140. 
 
 Yazoo claims, 133.
 
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