Loans.

Loans.

York till the 1st of April, 1792, when a branch of the Bank of the United States began to operate in that city, which is the reason of the sum in the Bank of New York bearing so near a proportion to that of the Bank of the United States, and so far exceeding the Bank of North America. By this time, also, the balance of the proceeds of Foreign bills had been passed to the account of the Treasurer, yet still remaining in deposite in the Bank of New York.

These views of the state of the public cash are conformable to the Treasurer's statement of halfmonthly balances, accompanying my Letter of the 13th instant.

The same statement will show that a proportion of the public deposites has continued, since the 1st of April, 1792, in the State banks-in those of North America and New York down to the end of the period which that statement embraces. From these details, the following inferences are deducible:

THIRD QUARTER of 1791.
Six per cents. from
Three per cents., from
Deferred,

17s. 10d. to 21s. 3d. 9s. 9d. to 12s. 5d. from 9s. 9d. to 12s. 10d. As early as the 6th of August, the six per cents. had a temporary rise to 21s., but, by the 16th, they had fallen to 20s., on the 20th, they had risen to 20s. 6d., and were sometimes above that rate, but never lower during the rest of the quarter.

That, as far as any advantages may have accrued from the deposites, on account of the Foreign bills drawn prior to April, 1792, they accrued substantially to the Banks of North America and New York, not to the Bank of the United States, or to its branches. That, in transferring the pecuniary concerns of the Government from the pre-existing banks to that of the United States and its dependencies, a cautious regard has been paid to the convenience of the former institutions, and the reverse of a policy unduly solicitous for the accommodation of the Bank of the United States has prevailed. Indeed, so much has this been the case, that it might be proved, if it were proper to enter into the proof, that a criticism has been brought upon the conduct of the Department, as consulting less the accommodation of the last-mentioned institution than was due to its relation to the Government and to the services ex-Deferred, pected from it.

But further examination will demonstrate another point, which is, that none of the establishments in question have received any accommodations which were not in perfect coincidence with the public interest, and in the due and proper course of events.

This examination will be directed towards two objects-one, the state of the Treasury at the commencement of each quarter, during the years 1791 and 1792; the other, the state of the market in regard to the prices of stock during the same years.

These periods are selected because they afford the truest criterion of the state of the Treasury, from time to time, being those at which the principal public payments are made, and for which it is necessary to be prepared by intermediate accumulations.

The state of the Treasury at the periods in question was as follows:

In the year 1791year

January i

March 1

June 1
October 1

$569,886 55

As early as the 23d of July, the three per cents. had reached 12s., and were sometimes higher, but never lower during the rest of the quarter.

On the 23d of July the deferred also reached 12s., and afterwards rose to 12s. 6d.

FOURTH QUARTER of 1791. Six per cents., from 20s. 4d. to 22s. 4d. Three per cents., from 12s. 2d. to 13s. 8d. 11s. 8d. to 13s. 6d. The prices were lowest in the early, and highest in the latter part of the quarter.

from

During the whole of the month of December, the deferred was at 12s. 8d. and upwards, the greatest part of the time at 13s.

FIRST QUARTER of 1792.
Six per cents., from
Three per cents., from
Deferred,

21s. Od. to 25s. Od. 12s. 6d. to 15s. Od. 12s. Od. to 15s. Od. The low prices were, in the last ten days of

March.

from

SECOND QUARTER OF 1792.

from

Six per cents.,
Three per cents., from
Deferred,

to 20s. Od. 22s. 6d. 12s. Od. to 13s. 9d. from 11s. 6d. to 13s. 4d. THIRD QUARTER OF 1792.

Six per cents., from
Three per cents., from
Deferred,

21s. Od. to 22s. 3d.

12s. 4d. to 13s. 6d. from 12s. 3d. to 13s. 7d. FOURTH QUArter of 1792.

373,434 53 Six per cents., from 20s. 2d. to 21s. 9d.
533,638 24 Three per cents., from
662,233 99 Deferred,
from

12s. 3d. to 13s. 6d. 11s. 10d. to 13s. 6d.

Loans.

In October, the deferred was at the highest. The lowest prices were in the month of December.

which has been mentioned, as proper to regulate the arrangements of the Treasury.

But two circumstances operated against a further investment-a sudden rise of prices, and a state of temporary disorder in the two principal mercantile scenes of the country, (occasioned by the excessive speculations that had preceded,) which admonished the Treasury to be cautious in its disbursements.

This view of the subject is derived from a statement of prices, pursuant to actual purchases and sales, furnished by a dealer of this city, respectable for his intelligence and probity, combined with the accounts from time to time published in the Gazette of the United States. The papers marked (A x) and (B y) are transmitted for the more particular information of the House on this head. It results from the foregoing view of the subThe market prices of stock no doubt varied at ject, that, as far as any extraordinary sum may other places; at some may have been higher, at appear to have remained unemployed in the banks others lower. At Philadelphia, too, it is believed a longer term than was desirable, it proceeded es-. that small sums were obtainable at particular pe-sentially from a state of things which did not perriods, from necessitous individuals, below the mit its employment, and is in no degree attribuprices in the statement. table to that spirit of favoritism towards those establishments, or any of them, which has been imagined, as the solution of appearances not rightly understood and much overrated.

But there is good ground of reliance that it is substantially a just representation of the state of the stock market during the periods to which it refers.

The state of the Treasury from the first of January to the first of October, 1791, may be said to have been at its proper level, exhibiting none, or an inconsiderable excess beyond the sum which has been mentioned as necessary to be there, and concerning which a further explanation has been promised, and will be given in the course of this Letter. The public purchases in August and September, 1791, amounted to $349,744 99.

The only question, then, of which the matter is susceptible is this: Was not the state of things that did take place to have been foreseen, so as to have influenced the drawing for a proportionably less sum?

This question may safely be answered in the negative.

The bills, the proceeds of which contributed to constitute the excess, which remained unemployed during the two quarters, were drawn in May, 1791. In that month, the highest prices of stock were 17s. 2d. for six per cents., 9s. 2d. for three per cents., and 9s. 3d. for deferred.

No reasonable anticipation, at this juncture, of the progressive rise of stock could have carried it in so short a time to the height which it attained, or beyond the limits within which purchases were deemed advantageous. The rapid and extraordinary rise which did ensue was, in fact, artificial and violent, such as no discreet calculation of probabilities could have pre-supposed. It, therefore, cannot impeach the prudence or expediency of having made provision, on a different supposition, for an extension of purchases.

In the last quarter of the year 1791, beginning with the month of November, and the first quarter of the year 1792, there appears to have been an excess of some magnitude in the Treasury, being from about $250,000 to about $450,000. Taking the first quarter of 1792 as the truest criterion, (which it certainly was, because, at the expiration of that quarter, the payment of interest on the assumed debt began, and was to be provided for,) the real excess ought to be considered as $250,000, with the addition of about $80,000 then in the Bank of North America, from the proceeds of Amsterdam bills, beyond the advances of the Bank for the public service, which had not been passed into the Treasurer's account. It is The proceeds of the bills which were drawn proper to remark that the course of importations subsequent to May, only began to be collected about Occasions large receipts in the latter part of each the beginning of February, and continued in colyear, which circumstance contributed to the ac-lection until the 29th of March. On the 2d of cumulation in question. February, the sum received amounted to no more than $13,431 33.

From the last of November to about the 21st of March, an investment of the excess on hand in purchases was impracticable.

To enable the House to understand what is meant by saying that purchases were impracticable during that period, it is necessary to add, that the prices of stock exceeded the limits which the Commissioners of the Sinking Fund had prescribed to themselves. Indeed, a large proportion of the time those prices were manifestly artificial, and such as predicted a great fall not far distant. The delay incurred was accordingly well compensated by the prices at which investments were afterwards made.

From the 21st of March to the 25th of April, purchases were effected to the extent of $242,688 31 in specie; within $80,000 or $90,000 of what could have been spared, consistently with the rule

These last bills were drawn when the rapid rise of stock commenced, and were sold upon a credit of three months. It was a natural conjecture that a rise so sudden and violent could not be of long duration, and that a declension would shortly succeed, which would afford an opportunity of purchasing with advantage, and render the intervention of public purchases advantageous, in more than one respect. The event fully corresponded with the anticipation.

With regard to the bills drawn in April last, it has been stated that they were directed to be sold upon a credit of six months; that those drawn in July, August, and October, were made payable, one moiety in two, the other moiety in four months. Hence, with a moderate allowance for delay in the sales, the period contemplated by the arrange

Loans.

ment for the commencement of receipts was the month of October, that for their consummation the month of February.

The inducements to the drawing of these bills have been stated. The present examination has relation merely to the question whether the Bank of the United States, by premeditation of this Department, or subsequent omissions, had enjoyed any undue advantage from the deposites of the proceeds of the bills at the end of the year 1792, the point of time to which this inquiry has reference.

The proposition itself has not yet received the decision of the House.

Another ground upon which the suggestion of mismanagement and undue concession to the interest of the banks has been founded, respects the Domestic Loans which have been obtained. Those of them which have been made of the Bank of the United States are represented as unnecessary, tending to afford an emolument to that institution, for which the United States had no equivalent advantage.

It will conduce to a correct judgment of this The statement which has been made as to the matter to resume a point already touched upon, time the moneys received to that period had re-and to add here the further illustrations of it which mained in deposite might alone be relied upon as have been promised, to wit: that it ought to be a a sufficient answer. If delinquency can be attach- general principle to have constantly in the comed to the non-employment of one or two hundred mand of the Treasury, at its different places of dethousand dollars for a few weeks, in the money posite, a sum of about $500,000-a principle, too, operations of a nation, it implies a minuteness of which must be understood with reference to the responsibility which could never be encountered beginnings of the quarters of a year, when the with prudence, and never will be fulfilled in prac-chief public payments are made and making. tice. The distractions of attention incident to a The following observations will apply generally great and complicated scene of business, would to the balances which appear at the commencealone disappoint the expectation. ment of each quarter. The greatest part of the But I have more than this to offer upon the pre-interest for the preceding quarter will have been sent occasion. The opportunity for investing the then deducted, but a part is always in a different moneys on hand, during the period in question, situation. was not favorable. This was experienced by the The payment of interest upon a Public Debt, at Treasurer, in his endeavors to invest the fund thirteen different places, is an operation as difficult arising from the interest on the purchased Debt. and complicated as it is new. In carrying it into There was no part but the deferred which could execution, it is of necessity to lodge, for some time be had at all within the limits prescribed. Seve- previous to the expiration of each quarter, at seral indications of an approaching season more ad- veral of the Loan Offices, drafts of the Treasurer vantageous for purchases were discernible, and a for the sums estimated to be necessary at those better employment of the money than at the then offices, with blanks for the direction, and with liprices presented itself to the option of the Legisla-berty to the respective officers to dispose of them ture. This mode of employing it formed, in my upon different places, as a demand accrues. This mind, part of a general plan for the regular re-arrangement has an eye to two purposes-to avoid demption of the Public Debt, according to the right reserved to the Government. The one per cent. which might be saved was regarded as one means of constituting the proposed annuities.

large previous accumulations at particular points; to facilitate the placing of the requisite sums where they are wanted, without the transportation of specie. The allowing of the drafts to be disposed of on several places, gives larger scope to a demand for them, and renders them more easily saleable. But it is a consequence of this, that a part of the drafts are often not placed and brought into the accounts of the Treasurer until some time after the expiration of the quarter. The fund for them of course appears on hand until the transaction is completed."

Accordingly, on the 30th of November last, pursuant to a reference of the 22d of that month, and connected with the plan of redemption contemplated, I submitted to the House of Representatives a proposition for applying the moneys in question towards discharging the Debt which the Government owes to the Bank, and upon which an interest of six per cent. is payable. This was manifestly, at the time of the proposition, the most Connected with the circumstance of paying the profitable use that could be made of the fund. It interest upon the Public Debt at different places is has been already stated that it would produce a this further consequence: the transfers continualsaving, if extended to the whole two millions, worth ly going on from one office to another render it to the Government an annual sum of twenty thou-impossible to know at any moment when provissand dollars-equal to a capital of four hundred thousand dollars.

ion for the payment of interest is to be made, what sum is requisite at each place. Estimate must supply the want of knowledge; and, to avoid disappointment anywhere, the estimate must always

This proposition tended to accelerate the employment of the moneys on hand, in a way the most beneficial to the Government, and, conse-be large, and a correspondent sum placed in the quently, to shorten the duration of the advantage to the banks of holding them by way of deposite. I submit it to the candor of the House, whether it be not full evidence that there was no disposition on my part to prolong to those institutions a benefit at the expense of the Government.

power of the Commissioners. This circumstance alone requires an extra sum at the different places of payment, which ought not to be computed at less than $50,000.

Again: the sums payable on account of the Civil List, at the end of each quarter, which amount to

Loans.

The propriety of these deductions appears to have been objected to, by anticipation, on two grounds-one, that the bills deposited answer all the purposes of cash, and ought to be credited as It is presumed to be a clear principle that the such, on the receipt of them; the other, that "there Treasury ought to be always ready to face such is a regular and constant influx of moneys into the arrears as may be claimed at every instant or with- Bank, by the operation of these bills, and that it is in any short period. An hour's distress or em- not very material whether a bill lodged in the barrassment, to make good a public payment, al- Bank to-day should be paid to-day, provided someready due, would be baneful to public credit. It thing like the same sum should be paid in consehas been a uniform maxim of the present adminis-quence of a bill lodged in Bank one or two months' tration of the Treasury never to risk such distress or embarrassment.