Assumption of Post-War State Debt Under Alexander Hamilton’s Financial Program

This document was for years on display as part of the permanent exhibit at the National Constitution Center on Independence Mall in Philadelphia

Following the Revolutionary War, the new nation, its member states, and a great many of its citizens were deeply in debt. By 1790 the national debt stood at $54 million, and collectively the state governments owed creditors $25 million. Secretary of the Treasury Alexander Hamilton estimated the combined state and federal debt to international investors at almost $12 million. In January of 1790, he published his “Report on the Public Credit”, in which he argued that the financial health of the nation was essential to its prosperity; and to achieve this end, he proposed that all debts were to be paid at face value, and the Federal government would assume all of the war debts owed by the 13 states and the state debts would be paid out of the federal treasury. But rather than just pay the debt load off, he recommended the consolidation of the debts into new securities (stocks, or what we would today consider bonds) with public revenues specifically pledged to pay their interest. States received these certificates of federal debt from the U.S. Treasury, and subscribers could obtain and trade these securities also. Holders received a 6% stock issue, interest starting in 1791 and payable quarterly, equal to 2/3 the principal due. The final 1/3 came in the form of another 6% certificate of deferred interest that would start in 1801. Another stock certificate of 3% covered the interest due from December 31, 1789 to December 31, 1794. Hamilton’s plan proved to be a great success, wiping out a huge debt without a crippling lump sum payment, establishing the credit of the United States both domestically and internationally, encouraging American business, and tying the wealthy class to U.S. government investments. Many people believe that Hamilton essentially established the American financial system, a remarkable achievement.

One of the biggest beneficiaries of Hamilton’s program of exchanging of debt for securities (a program which continued throughout his time as Treasury Secretary) was the state of Massachusetts, which had a particularly large wartime debt. Financial transactions pursuant to Hamilton’s program between the U.S. Treasury and that state required the approval of the Massachusetts governor, and he was obligated to seek the advice and consent of the Massachusetts Council. In 1794 the Governor was Declaration of Independence Signer Samuel Adams, and he sought such consent for a transaction that amounted to fully 37% of the state’s war debt. This document is a true copy from the Minutes of the Council reciting the precise terms of the transaction, and that the Council has approved. It is certified by Commonwealth Secretary John Avery. These prerequisites having been satisfied, Adams orders the Massachusetts Treasurer to receive the stock, appending his signature at the bottom.

Document Signed as Governor, In Council, Boston, October 17, 1794. “His Excellency laid before the Council a letter from Nathaniel Appleton Esq. dated October 6, 1794, enclosing a letter from the Comptroller of the Treasury of the United States, directing Nathaniel Appleton Esq. to place to the credit of Massachusetts the debt due from the United States, amounting to 1,498,561 dollars & 20 cents & to deliver certificates for the amount of each description of stock as the Executive shall direct – & asked their Advice. The Council took the same into consideration & therefore Advised that His Excellency direct Thomas Davis, Treasurer & Receiver General of this Commonwealth to apply to Nathaniel Appleton & receive of him the following: In funded 6 percent stock of the domestic debt bearing interest from 1st of January 1795 – $832,334; In deferred 6 percent stock of the domestic debt bearing interest from the 1st of January 1801 – $416,267; In 3 percent stock of the domestic debt bearing interest from 1st of January 1795 – $249,760.20. And to lodge the same in the Treasury Office…” The certification is below, and beneath that is the following order: “The Treasurer & Receiver General of this Commonwealth is hereby directed to execute the business referred to in the above Advice of the Council.”

This is the first document we can recall seeing that effectuates, at the highest level, Alexander Hamilton’s financial program. We obtained it from a private collection put together more than half a century ago. To say it is a rarity is an understatement.