had not been and could not be accounted for.*

The resolutions were adopted without debate, and shortly afterward long and exhaustive reports containing the required information were sent in. These reports gave a full exposition of Hamilton's views and motives in his management of the Treasury. Hamilton disposed of the most offensive imputation of all by

began; but for political reasons he omitted any mention of these facts in his speech. Yet while this was an attempt to lay at the door of Gorman, Wilson, and the Democratic party one of the most disastrous panics in history, no one has said that President Taft is "fit for any bad work, no matter how desperate." The fact that Lodge favors and fights for protection to the "infant industries " of the country does not give anyone the right to say he is in the pay of the "interests" or fit for, as the Democrats might term it, "bad work." But, on the other hand, if Lodge's opponents in stitute proceedings to ascertain if Lodge be in the pay of the "interests," they are not necessarily "desperate" characters in the sense that Lodge applies that term to Giles. The Senators who instituted the recent Lorimer investigation and voted for his expulsion (as Lodge did) were not "fit for any bad work" nor "desperate," though Lorimer was not at his first trial found guilty of tle charges made against him. Invective is not argument. The politics of that time were undoubtedly not as "refined" as at present, and it was probably the plan of the Anti-Federalists to oust Hamilton by attacking him in the spct which they thought most vulnerable.

* Annals of Congress, 2d Congress, 2d session, pp. 836-840; Schouler, United States, vol. i., p. 236.

For Tucker's account of this matter, see his Life of Jefferson, vol. i., pp. 401-405. "It seems probable," says Tucker, "that the secretary, having proved himself innocent of the more serious part of the charge, the common reaction in favor of those who have been unjustly accused, took place, and inclined men to acquit him altogether."

‡ American State Papers, Finance, vol. i., p. 192 et seq.; Annals of Congress, 2d Congress, 2d session, pp. 1198-1310.

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explaining the methods of bookkeeping in vogue in the Treasury Department. Of favoritism he fairly acquitted himself, and proved that his general loan operations had redounded to the credit of the government. The worse that could be inferred from his reports was that he had assumed authority without strict regard to the letter of the law, though this course had resulted in no real mischief to the country. It was evident, however, that the attack upon his reputation had angered him, for in conclusion Hamilton says: "Thus have I not only furnished a just and affirmative view of the real situation of the public accounts, but have likewise shown, I trust, in a conspicuous manner, fallacies enough in the statements, from which the inference of an unaccounted for balance is drawn, to evince that it is one tissue of error." Nevertheless, this did not end the discussion of the matter, for on February 27, Giles introduced nine resolutions containing charges against the Secretary.* In substance, these charged that Hamilton had failed to give Congress information at the proper time of moneys drawn from Europe; that, by applying the money borrowed to another object, he had violated the law of August 4, 1790, under which the money was borrowed; that he had drawn part of the money

For these resolutions and Jefferson's original draft, see Ford's ed. of Jefferson's Writings, vol. vi., pp. 168-171; Annals of Congress, 2d Congress, 2d session, p. 900; Benton, Abridgment of De bates, vol. i., p. 418.

the affairs of nations, in which there will be a necessity for borrowing;

That loans in times of public danger, especially from foreign war, are found an indispensable resource, even to the wealtiest of them.

And that, in a country which, like this, is possessed of little active wealth, or, in other words, little moneyed capital, the necessity for that resource must, in such emergencies, be proportionably urgent.

And as, on the one hand, the necessity for borrowing, in particular emergencies, cannot be doubted; so, on the other, it is equally evident, that, to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.

*

If the maintenance of public credit, then, be truly so important, the next inquiry which suggests itself is, By what means it is to be effected? The ready answer to which question is, by good faith; by a punctual performance of contracts. States, like individuals, who observe their engagements, are respected and trusted, while the reverse is the fate of those who pursue an opposite conduct. *

While the observance of that good faith, which is the basis of public credit, is recommended by the strongest inducements of political expediency, it is enforced by considerations of still greater authority. There are arguments for it which rest on the immutable principles of moral obligation. And in proportion as the mind is disposed to contemplate, in the order of Providence, an intimate connexion between public virtue and public happiness, will be its repugnancy to a violation of those principles.

This reflection derives additional strength from the nature of the debt of the United States. It was the price of liberty. The faith of America has been repeatedly pledged for it, and with solemnities that give peculiar force to the obligation. There is, indeed, reason to regret that it has not hitherto been kept; that the necessities of the war, conspiring with inexperience, in the subjects of finance, produced direct infractions; and that the subsequent period has been a continued scene of negative violation, or non-compliance. But a diminution of this regret arises from the reflection, that the last seven years have exhibited an earnest and uniform effort, on the part of the Government of the Union, to retrieve the national credit, by doing justice to the creditors of the nation; and that the embarrassments of a defective constitution, which defeated this laudable effort, have ceased.

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From this evidence of a favorable disposition given by the former Government, the institution of a new one, clothed with powers competent to calling forth the resources of the community, has excited correspondent expectations. A general belief accordingly prevails, that the credit of the United States will quickly be established on the firm foundation of an effectual provision for the existing debt. The influence which this has had at home, is witnessed by the rapid increase that has taken place in the market value of the public securities. From January to November, they rose thirty-three and a third per cent.; and from that period to this time, they have risen fifty per cent. more; and the intelligence from abroad announces effects proportionably favorable to our national credit and consequence.

It cannot but merit particular attention, that, among ourselves, the most enlightened friends of good government are those whose expectations are the highest.

To justify and preserve their confidence; to promote the increasing respectability of the American name; to answer the calls of justice; to restore landed property to its due value; to furnish new resources, both to agriculture and commerce; to cement more closely the union of the States; to add to their security against foreign attack; to establish public order on the basis of an upright and liberal policy;- these are the great and invaluable ends to be secured by a proper and adequate provision, at the present period, for the support of public credit.

The advantage to the public creditors, from the increased value of that part of their property which constitutes the public debt, needs no explanation.

But there is a consequence of this, less obvious, though not less true, in which every other citizen is interested. It is a well known fact, that, in countries in which the national debt is properly funded, and an object of established confidence, it answers most of the purposes of money. Transfers of stock or public debt, are there equivalent to payments in specie; or, in other words, stock, in the principal transactions of business, passes current as specie. The same thing would, in all probability, happen here under the like circumstances. * *

It ought not, however, to be expected, that the advantages described as likely to result from funding the public debt, would be instantaneous. It might require some time to bring the value of stock to its natural level, and to attach to it that fixed confidence, which is necessary to its quality as money. Yet the late rapid rise of the

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public securities encourages an expectation that the progress of stock, to the desirable point, will be much more expeditious than could have been foreseen. And as, in the mean time, it will be increasing in value, there is room to conclude that it will, from the outset, answer many of the purposes in contemplation. Particularly, it seems to be probable, that from creditors, who are not themselves necessitous, it will early meet with a ready reception in payment of debts, at its current price.

Having now taken a concise view of the inducements to a proper provision for the public debt, the next inquiry which presents itself is, What ought to be the nature of such a provision? This requires some preliminary discussions.

It is agreed on all hands, that that part of the debt which has been contracted abroad, and is denominated the foreign debt, ought to be provided for according to the precise terms of the contracts relating to it. The discussions which can arise, therefore, will have reference essentially to the domestic part of it, or to that which has been contracted at home. It is to be regretted that there is not the same unanimity of sentiment on this part as on the other.

The Secretary has too much deference for the opinions of every part of the community, not to have observed one, which has more than once made its appearance in the public prints, and which is occasionally to be met with in conversation. It involves this question: Whether a discrimination ought not to be made between original holders of the public securities, and present possessors, by purchase? Those who advocate a discrimination, are for making a full provision for the securities of the former at their nominal value; but contend that the latter ought to receive no more than the cost to them, and the interest. And the idea is sometimes suggested, of making good the difference to the primitive pos

sessor.

In favor of this scheme, it is alleged, that it would be unreasonable to pay twenty shillings in the pound, to one who had not given more for it than three or four. And it is added, that it would be hard to aggravate the misfortune of the first owner, who, probably, through necessity, parted with his property at so great a loss, by obliging him to contribute to the profit of the person who had speculated on his distresses.

The Secretary, after the most mature reflection on the force of this argument, is induced to reject the doctrine it contains, as equally unjust and impolitic; as highly injurious, even to the

The nature of the contract, in its origin, is, that the public will pay the sum expressed in the security, to the first holder or his assignee. The intent in making the security assignable, is, that the proprietor may be able to make use of his property, by selling it for as much as it may be worth in the market, and that the buyer may be safe in the purchase.

Every buyer, therefore, stands exactly in the place of the seller; has the same right with him to the identical sum expressed in the security; and, having acquired that right, by fair purchase, and in conformity to the original agreement and intention of the Government, his claim cannot be disputed, without manifest injustice.

The impolicy of a discrimination results from two considerations: One, that it proceeds upon a principle destructive of that quality of the public debt, or the stock of the nation, which is essential to its capacity for answering the purposes of money, that is, the security of transfer; the other, that, as well on this account as because it includes a breach of faith, it renders property, in the funds, less valuable, consequently, induces lenders to demand a higher premium for what they lend, and produces every other inconvenience of a bad state of public credit.

It will be perceived, at first sight, that the transferable quality of stock is essential to its operation as money, and that this depends on the idea of complete security to the transferee, and a firm persuasion, that no distinction can, in any circumstances, be made between him and the original proprietor.

The precedent of an invasion of this fundamental principle, would, of course, tend to deprive the community of an advantage with which no temporary saving could bear the least comparison.

And it will as readily be perceived that the same cause would operate a diminution of the value of stock in the hands of the first as well as

of every other holder. The price which any man who should incline to purchase, would be willing to give for it, would be in a compound ratio to the immediate profit it afforded, and the chance of the continuance of his profit. If there was supposed to be any hazard of the latter, the risk would be taken into the calculation, and either there would be no purchase at all, or it would be at a proportionately less price.

But there is still a point in view, in which it will appear perhaps even more exceptionable than in either of the former. It would be repugnant to an express provision of the constitution of the United States. This provision is, that “all debts contracted, and engagements entered into, before the adoption of that constitution, shall be as valid against the United States under it, as under the Confederation; " which amounts to a constitutional ratification of the contracts respecting the debt, in the state in which they existed under the confederation. And, resorting to that standard, there can be no doubt that the rights of assignees and original holders must be considered as equal.

The Secretary, concluding that a discrimination between the different classes of creditors of the United States cannot with propriety, be made, proceeds to examine whether a difference ought to be permitted to remain between them and another description of public creditors - those of the States, individually. The Secretary, after mature reflection on this point, entertains a full conviction, that an assumption of the debts of the particular States by the Union, and a like provision for them, as for those of the Union, will be a measure of sound policy and substantial justice.

*

There are several reasons, which render it probable that the situation of the State creditors would be worse than that of the creditors of the Union, if there be not a national assumption of the State debts. Of these it will be sufficient to mention two: one, that a principal branch of revenue is exclusively vested in the Union; the other, that a State must always be checked in the imposition of taxes on articles of consumption, from the want of power to extend the same regulation to the other States, and from the tendency of partial duties to injure its industry and commerce. Should the State creditors stand upon a less eligible footing than the others, it is unnatural to expect they would see with pleasure a provision for them. The influence which their dissatisfaction might have, could not but operate injuriously, both for the creditors and the credit of the United States. Hence it is even [to] the interest of the creditors of the Union, that those of the individual States should be comprehended in a general provision. Any attempt to secure to the former either exclusive or peculiar advantages, would materially hazard their interests. Neither would it be just, that one class of public creditors should be more favored than the other. The objects for which both descriptions of the debt were contracted, are in the main the same.

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Indeed, a great part of the particular debts of the States has arisen from assumptions by them on account of the Union. And it is most equitable, that there should be the same measure of retribution for all. There is an objection, however, to an assumption of the State debts, which deserves particular notice. It may be supposed, that it would increase the difficulty of an equitable settlement between them and the United States.

The principles of that settlement, whenever they shall be discussed, will require all the moderation and wisdom of the Government. In the opinion of the Secretary, that discussion, till further lights are obtained, would be premature. All, therefore, which he would now think advisable on the point in question, would be, that the amount of the debts assumed and provided for, should be charged to the respective States, to abide an eventual arrangement. This, the United States, as assignees to the creditors, would have an indisputable right to do.

*

The result of the foregoing discussions is this: That there ought to be no discrimination between the original holders of the debt, and present possessors by purchase. That it is expedient there should be an assumption of the State debts by the Union, and that the arrears of interest should be provided for on an equal footing with the principal.

The next inquiry, in order, toward determining the nature of a proper provision, respects the quantum of the debt, and the present rates of interest.

The debt of the Union is distinguishable into foreign and domestic.

The foreign debt, as stated in
schedule B, amounts to, prin-
cipal,..

Bearing an interest of four,
and partly an interest of
five per cent.

Arrears of interest to the last of
December, 1789

Making, together

$10,070,307 00

1,640,071 62

$11,710,378 62