TO THE COMMISSIONERS OF THE TREASURY.
Amsterdam, March 29, 1788.
I cannot close my letter, without some observations on the transfer of our domestic debt to foreigners. This circumstance, and the failure to pay off Fiseaux’ loan, were the sole causes of the stagnation of our late loan. For otherwise our credit would have stood on more hopeful grounds than heretofore. There was a condition in the last loan, that, the lenders furnishing one third of the money, the remaining two thirds of the bonds should remain eighteen months unsold, and at their option to take or not, and that in the mean time, the same bankers should open no other loan for us. These same lenders became purchasers of our domestic debt, and they were disposed to avail themselves of the power they had thus acquired over us as to our foreign demands, to make us pay the domestic one. Should the present necessities have obliged you to comply with their proposition for the present year, I should be of opinion it ought to be the last instance. If the transfer of these debts to Europe meet with any encouragement from us, we can no more borrow money here, let our necessities be what they will. For who will give ninety-six per cent, for the foreign obligations of the same nation, whose domestic ones can be bought at the same market for fifty-five per cent.; the former, too, bearing an interest of only five per cent., while the latter yields six. If any discouragements can be honestly thrown on this transfer, it would seem advisable, in order to keep the domestic debt at home. It would be a very effectual one, if, instead of the title existing in our treasury books alone, it was made to exist in loose papers, as our loan office debts do. The European holder would then be obliged to risk the title paper of his capital, as well as his interest, in the hands of his agent in America, whenever the interest was to be demanded; whereas, at present, he trusts him with the interest only. This single circumstance would put a total stop to all future sales of domestic debt at this market. Whether this, or any other obstruction, can or should be thrown in the way of these operations, is not for me to decide; but I have thought the subject worthy your consideration.
I have the honor to be, with sentiments of the most perfect esteem and respect, Gentlemen, your most obedient and most humble servant,
TO GENERAL WASHINGTON.
Paris, May 2, 1788.