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420

DISCRIMINATION AMONG CREDITORS.

[CHAP. V.

diers, they had experienced something like justice by the bounty they had received.

It was urged that the original creditors had not asked for this relief, and that many of them would consider it dishonorable to receive it: that these new rights, if Mr. Madison's proposition prevailed, would present a further copious subject of speculation; and in thus aiming to benefit one set of creditors at the expense of another, a door would be opened to endless fraud, perjury, and litigation,.in the investigation of questions of original ownership. It was denied that the interference with the South Sea contracts applied to the present case, when the government is asked to annul its own contracts, of which they said no example could be adduced.

Mr. Madison offered replies to most of these arguments, and as to the last, he cited two instances in the history of Great Britain - one in the case of the Canada bills issued by the French government, in the war of 1756, which were subsequently redeemed by the British government at a reduced rate; and the other was a case in which those who had claims on the civil list in 1713, having sold them at a loss, were permitted to redeem them on repayment of the purchase-money and interest: which were cases exactly similar to the present.

Mr. Madison was partially sustained by Mr. Stone, who took an able but temperate view of the subject. The discrimination was supported by Messrs. Jackson, White, Page, and Lenay. Mr. Madison's proposition was lost by a majority of thirty-six votes to thirteen.

During this discussion, the liveliest interest was felt and manifested by the class of speculators who had purchased the public securities, often as low as two shillings and sixpence in the pound, and in some cases yet lower, and who, after the report of the Secretary of the Trea

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SPECULATIONS IN PUBLIC SECURITIES.

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sury, confidently looked forward to their rising from ten shillings, at which they were then selling, to par, or very near it. This party, considerable in point of numbers, and possessed of intelligence and influence, were indefatigable in their efforts, by means of the press, and by personally canvassing with the members, to gain a majority in Congress; and it was believed by many at the time, that, to ensure more votes, some of the members had been admitted as partners in purchases of public securities, and that the requisite funds had been advanced for them by large speculators. Even if these suspicions had little or no foundation, the vote of the House of Representatives was very far from being a just index of the public sentiment. A large part of the community, perhaps the largest, were in favor of some discrimination between the original creditors of the country, whose property or personal efforts had achieved the Revolution, and those who, taking advantage of the creditors' necessities, had bought up their claims at a most reduced price, and were now clamorous for a profit often from six to eight hundred per cent. Many are now living who recollect that, for several years after the question was decided, those who had thus enriched themselves were regarded with much of that odium which both our good and bad feelings concur to excite against extortioners of every description, grinding landlords, money-lenders, all those, in short, who exact what has the sanction of law but not of conscience.

It was not long afterwards that the yet more important question of assuming the State debts came under consideration, on which subject there was much more feeling than on the preceding question.

On the justice of paying these debts by the Federal government, it was properly urged that they had all

422

ASSUMPTION OF STATE DEBTS.

[CHAP. V. been incurred in consequence of the War of the Revolution, in which all had a common interest, and to which all ought to contribute, according to their ability and the benefit they had received. These, for want of a better rule, might be assumed to be according to the population of the States, estimated by the Federal ratio. The assumption was further recommended by other considerations. The General government having now the exclusive right to use the most productive sources of revenue, ought to relieve the States from a proportional part of their burdens that the same sum must be paid by the people, whether the debts were assumed or not, but the money could be more easily and economically collected by one government, and one set of officers, than by two: that it was calculated to raise well-founded discontent and complaints with the State creditors when they found, as many of them would find, that their claims, having equal merit with those against the Federal government, were inadequately provided for by the States: and that the claims of all those whose property or personal effects had contributed to the Revolution, being equally meritorious, ought to meet with the same share of the public favor and bounty, or, rather, the same measure of justice. Much stress was also laid on the hardship of continuing to impose on the States that were most heavily in debt, as Massachusetts and South Carolina, the burden of providing for these debts, until a settlement took place, when those States had also large claims against the United States; and that when a settlement did take place, complete justice could then be done to such States as had advanced more than their just proportion.

But on the other side it was urged that, admitting the debts contracted by the several States to be debts of the whole Confederacy, yet inasmuch as some of the States

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ASSUMPTION OF STATE DEBTS.

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had already provided for the payment of their own debts, and had actually in part paid them off, to assume the debts of those States which had not diminished theirs would be highly unjust to the first mentioned class, and would subject them to more than their just contribution. By way of preventing such injustice, it was therefore proposed that the accounts of the States with the General government, and with one another, should be adjusted before the assumption took place.

It was accordingly proposed that the assumption of the State debts should be confined to such parts only as appeared to be a surplusage of any sum which a State had advanced beyond its just proportion of the expenses incurred in the defence of the common rights. This surplusage to be ascertained on a liquidation of the account. After a debate of some days, this amendment was rejected in committee by a vote of thirty-two to eighteen.

It was then proposed by Mr. Madison, as likely to lessen the injustice and the dissatisfaction of some of the States, to take the debts of the States at the conclusion of the war, as the amount to be assumed, and that "the amount of the debts actually paid by any State to its creditors since a given day should be credited and paid to such State, on the same terms as the debts to individuals."

Mr. Madison's amendment was rejected by twentyeight votes to twenty-two.

The assumption was finally passed by a majority of five votes; but some other subjects having engaged the attention of Congress, the Secretary's report was not called up until the twenty-ninth of March, by which time the five members from North Carolina had attended. It was then moved to recommit the clause which provided

424

ASSUMPTION OF STATE DEBTS.

[CHAP. V.

for the assumption of the State debts; and this motion was carried by twenty-nine votes to twenty-seven.

The members from North Carolina were vehemently opposed to the assumption, as being very injurious to that State; and after a spirited debate until the twelfth of April, the question of assumption was negatived by thirtyone votes to twenty-nine.

Notwithstanding this vote, the proposition to assume was repeatedly renewed afterwards without success, until the twenty-first of April, when Mr. Sherman, of Connecticut, proposed specific assumptions in behalf of each State,1 to the amount of nineteen millions three hundred thousand dollars; which, however, was rejected.

Mr. Madison opposed the assumption in an elaborate speech,* in which he spoke of the injustice which would be done to Virginia by the assumption, though her contributions to the common cause had been, at least, equal to those of any other State.

The next day, the twenty-third of April, Mr. Ames moved that the Secretary of War lay before the House a statement of the troops and stores furnished by the several States during the war; which was carried. The report was made on the eleventh of May, which seemed to repel the proposition, that the advances of Virginia were superior to those of Massachusetts.

3

Three days later, the House adopted the principal provisions of Mr. Hamilton's report, except as to the assumption of the State debts.

On the twenty-fourth of May, the question of assumption was again brought forward by Mr. Gerry, who proposed assumptions of specific sums to each of the States, somewhat similar to the proposition made by Mr. Sherman.. II. Gales & Seaton's Debates, page 1586. 2 Ibid. page 1587. 3 Ibid. page 1619.

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