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THE LIBRARY

OF

THE UNIVERSITY

OF CALIFORNIA
LOS ANGELES



£?fr



THE



FINANCIAL HISTORY



UNITED STATES,



FROM 1774 TO 1789



Emoracmg tfje ^moo of tfje American fceoolutfon.



BY

ALBERT S. BOLLES,

LECTURER ON THE LAW AND PRACTICE OP BANKING IN THE WHARTON SCHOOL

OF FINANCE AND ECONOMY, UNIVERSITY OF PENNSYLVANIA, AND

EDITOR OF THE " BANKERS' MAGAZINE."



THIRD EDITION.



NEW YORK:
D. APPLETON AND COMPANY,

1, 3, and 5 Bond Street.
1892.






301



\



Copyright bt
D. APPLETON AND COMPACT,

1879.



Copyright by

ALBERT S. BOLLES,

1884.



Collins Printing House,
705 Jayne Street.



HJ"
2.4-1

V.l



TO



WILLIAM P. ST. JOHN,

PRESIDENT OF THE MERCANTILE NATIONAL BANK OP
NEW YORK,

&$i& Ututfon 10 ©etitcateti

AS A MARK OF THE AUTHOR'S SINCERE
FRIENDSHIP.



PEEFACE.




The changes in the second edition are mostly in style. A
few facts have been added, derived from further investigation
of the documents in the Bureau of Rolls and Library, Depart-
ment of State, Washington.

The concluding volume, covering the period from the out-
break of the civil war in 1860 to the close of the refunding
operations in 1881, the author hopes to complete next year.

Philadelphia, August, 1884.



PREFACE TO THE FIRST EDITION.



The present work has been written with the belief that it
would serve a useful purpose. The early period of the finan-
cial history of the United States is treated only in the slightest
manner by Dr. Von Hock in his "Die Finanzen und die
Finanzgeschichte der Vereinigten Staaten von Amerika ; " while
the brief efforts of Breck, Schuckers, Bronson, and occasion-
ally a magazine-writer, are but little more than passing glimpses
of a great theme. Even Phillips, in his work upon Conti-
nental Paper Money, which is valuable in many respects, looks
at the subject from an antiquarian point of view, rather than
as a student of finance.

It is the intention of the author to trace the narrative, in
another volume, from 1789, when the Federal Constitution was
adopted, to the outbreak of the Civil War in 1860, and, in a
final one, from the latter period to the resumption of specie
pa}'ments. Each volume, therefore, will cover a clearly-defined
historical period, though, of course, every period of history is
necessarily linked to what has gone before as well as to the
time succeeding.

To write merely an abstract of the financial legislation
passed during the period included within this volume, inter-
spersed with comments, would have been an easy but not a
satisfactory task. To possess any interest or value, a finan-
cial history must trace the causes and consequences of the



X PREFACE TO THE FIRST EDITION.

legislation described. To do this, however, was difficult, as
the materials too frequently were very scanty and of poor
qualitj-. The author has sought to obtain information from
every source relating to the subject within his knowledge ; and
if, in some cases, the reader shall find the causes and conse-
quences of financial experiments not as fully set forth as he
desires, let him first consider whether any thing more could be
found relating to them, before finding fault with the author.

The idea of unity of proportion has been kept in mind in
the preparation of the work, which will explain why a few
chapters, especially the one upon the Legal Tender Laws of the
Revolution, were not extended beyond their present limits.

To Mr. C. A. Cutter, Librarian of the Boston Athenseum,
the author feels deeply grateful for the exceedingly liberal use
of books belonging to that association. This, he realizes, is a
feeble acknowledgment to make for such valuable assistance :
doubtless a far greater satisfaction may be derived from know-
ing, that, if the work possesses any value, its readers are
indebted to him for putting the author within convenient reach
of much of the material found within these pages. To Mr.
Robbins Little, Superintendent of the Astor Library, and to
Mr. Frederick Saunders, Librarian of the same, the author
would also express his heartiest thanks for the generous use
of the books of that noble institution. Nor would he forget to
acknowledge favors of a similar character on the part of the
officers of the New- York Historical Library.



CONTENTS.



BOOK FIRST.

FROM SEPTEMBER, 1774, TO THE FINANCIAL ADMINISTRA-
TION OF ROBERT MORRIS.

Paob
CHAPTER L

CONGRESS AND THE COLONIES 3

CHAPTER II.
Oeganization of the Treasury Department. ... 9

CHAPTER III.
The First Issue of Continental Money 24

CHAPTER IV.
Operations of the Board of Treasury, 1775-1777 ... 42

CHAPTER V.
Administration of the Board of Treasury, 1778 ... 55

CHAPTER VI.
Administration of the Board of Treasury, 1779 ... 71

CHAPTER VII.
Administration of the Board of Treasury, 1780 ... 90

CHAPTER VIII.
Administration of the Board of Treasury, 1781 . . .105



XU CONTENTS.

CHAPTER IX.
How Paper Money was received 117

CHAPTER X.
State versus Continental Issues 147

CHAPTER XI.
Counterfeiting 150

CHAPTER XII.
Limitation of Prices 158

CHAPTER XIII.
The Legal Tender Laws of the Revolution . . .174

CHAPTER XIV.
Taxation 190

CHAPTER XV.
Pledges and Arguments 206

CHAPTER XVI.
Speculation, Corruption, and Repudiation .... 210

CHAPTER XVII.
Foreign Loans 221

CHAPTER XVHL
Loan-Office Certificates 259



BOOK SECOND.

FROM MORRIS'S FINANCIAL ADMINISTRATION TO THE CLOSE
OF THE CONFEDERATION

CHAPTER I.
The Financial Administration of Roeert Morris . . 267

CHAPTER II.
Administration of the New Board of Treasury . . 333



BOOK I.



FROM SEPTEMBER, 1774, TO THE FINANCIAL ADMINISTRATION
OF ROBERT MORRIS.



FINANCIAL HISTORY



<



THE UNITED STATES.



CHAPTER I.

CONGRESS AND THE COLONIES.

The financial history of the United States is crowded
with financial experiments, unique in their nature, and
worthy of careful study. The principles of finance which
long and intelligent experience has declared to be sound
have been more frequently disregarded by the United
States than by any contemporary nation. Yet, on nearly
every ^occasion in the national history, men have appeared
who comprehended the exigency, and whose advice, if
followed, would have averted disaster. But measures
springing from incapacity or dishonesty often teach les-
sons not less impressive than measures displaying the
highest wisdom. It will not prove a profitless task,
therefore, to garner some of the fruits lying within the
field of inquiry, whether they were ripened under the
watchful eye of Morris, Hamilton, or Gallatin, or were
the product of less skilful and less honest husbandmen.

The object of the first Continental Congress was to

3



4 FINANCIAL HISTORY OF THE UNITED STATES. [1774.

obtain a redress of grievances, not separation from Great
Britain. The first important enactment regulated the
manner of voting, and provided that each Colony should
have a single vote in Congress. 1 The larger Colonies con-
tended for the exercise of more power, and yielded solely
because the occasion required immediate unanimity on the
part of Congress. This rule, thus early established, con-
tinued until the adoption of the Federal Constitution, in
1789, although every Colony was represented in Congress
by two or more delegates. Rarely were less than fifty
members present at all the more important sessions.

The only act beside this, requiring mention, prohibited
the importation of goods from Great Britain and Ireland
after the first of September, 1774. The same act further
provided, that, after the month of September the year
following, the exportation of all merchandise, &c, to
Great Britain, Ireland, and the West Indies, ought to
cease, unless the grievances of America were redressed
before that time. 2 The graver consequences of this legis-
lation were not foreseen , but they appeared early, and
gave rise to warm debate, and personal and sectional
bitterness.

The next May, delegates assembled from all the Colo-
nies except Georgia, whose representatives appeared be-
fore the close of the year. 3 They were chosen, in most
cases, by conventions of the people ; in a few, by the
popular branch of the Colonial Assembly. In still fewer
cases the choice of the Assembly was ratified by a con-
vention ; in some, the process was reversed. The authority
confided to these delegates usually was very limited,
1 Sept. 6. 2 Oct. 20. 8 Sept. 13.



1775.] CONGRESS AMD THE COLONIES. 5

and as Congress was endowed with no power beside that
conferred on members, until the Articles of Confederation
were ratified in 1781, 1 many an error sprung from this
cause. More than one delegate knew how to legislate
more wisely than he did, but was prevented by the Colony
he represented. 2 In order to get a clear idea of the power
of Congress, let us ascertain what authority was confided
by the several Colonies to their representatives who com-
posed this body.

The Assembly of Rhode Island believed that satisfac-
tory terms could be made with Great Britain ; conse-
quently, the instructions to her delegates were framed
with this end in view. They were authorized to join
with the commissioners, or delegates from the other
Colonies, and consult on proper measures to obtain a
repeal of the several acts of the British Parliament for
levying taxes on his Majesty's subjects in America,
without their consent, and to establish the rights and
liberties of the Colonies on a just and solid foundation,
agreeable to the instructions given them by the Gen-
eral Assembly. Connecticut endowed her delegates with
more general authority. They were to join, consult, and
advise with the delegates of the other Colonies in proper
measures for advancing the best good of all. The
New-Hampshire delegates were clothed with authority to

1 March 1.

2 "They had been elected, in part at least, by tumultuary assem-
blies, or bodies which had no recognized legal existence; they were
intrusted with no powers but those of counsel; most of them were
held back by explicit or implied instructions; and they represented
nothing more solid than the unformed opinion of an unformed people."
— Bancroft.



6 FINANCIAL HISTORY OF THE UNITED STATES. [1775.

consult and agree to all measures which Congress should
deem necessary to obtain a redress of American griev-
ances. The delegates from Massachusetts were empow-
ered to act in union with the delegates of other Colonies
in ordering such measures as should appear to them the
best calculated for the recovery and establishment of
American rights and liberties, and for restoring harmony
between Great Britain and the Colonies. New Jersey,
Pennsylvania, and Virginia appointed delegates without
saying a word concerning their authority. New Jersey
and Delaware required their delegates to report the
proceedings of Congress to their respective Assemblies.
Maryland and North Carolina went further ; the former
Colony giving her delegates authority to consent and
agree to all measures which Congress should deem
necessary and effectual to obtain a redress of American
grievances. She, moreover, bound herself to execute all
resolutions adopted by Congress. The delegates from
North Carolina were invested with the authority necessary
to make their acts done in behalf of that Province obliga-
tory upon any inhabitant thereof. The instructions given
to the South-Carolina delegates related only to a redress
of grievances ; while the representatives from Georgia
were empowered to join with the several delegates from
the other Colonies in all matters which should appear fit
for the preservation and defence of their rights and liber-
ties, and for the restoration of harmony, upon constitu-
tional principles, between Great Britain and America.

Such was the constitution of this unique body, whose
nearest resemblance was the confederacy of the Nether-
lands during the latter part of the sixteenth century,



1775.] CONGRESS AND THE COLONIES. 7

when waging her ever-memorable war with Spain. It
will be seen that Congress had no clearly-defined powers ;
the members, with only two or three exceptions, were
confined to a narrow sphere of legislation ; and until the
adoption of the Confederation, in March, 1781, the States
regarded themselves as masters of the situation, and never
hesitated to instruct their delegates whenever the occa-
sion seemed to require a fresh exercise of state tutelage
or discipline. With the unfolding of unexpected events,
Congress did indeed exercise a larger measure of power
than had been granted to any of the members ; yet they
always moved with great circumspection, clearly knowing
that their continuance as a body depended wholly upon
the will of the people. Thus the power of Congress was
not inherent, but directly conferred, and could be easily
abridged or withdrawn. Prior to the execution of the
Articles of Confederation, says Madison, 1 " The power of
Congress was measured by the exigencies of the war,
and derived its sanction from the acquiescence of the
States." When independence was declared, the States
enlarged somewhat the power of their delegates ; yet at
all times they were unable to exercise a commanding
authority, such as the occasion imperatively demanded
for fighting successfully the battle of independence, and
for stimulating the development and growth of an infant
nation. 2

Financially the Colonies were badly off; for they had
just liquidated the debts contracted in the French war,

1 Writings, vol. iv. p. 126.

2 See Hamilton's Letter to Duane, Sept. 3, 1780, Hist, of Eepub.,
vol. ii. p. 86.



8 FINANCIAL HISTORY OF THE UNITED STATES. [1775.

and in their treasury were only a few thousand pounds. 1
Before them was the prospect of stagnation or interrup-
tion of trade, and possibly warfare with Great Britain.
Neither Congress nor the Colonial Governments possi I
credit. Without alliance with other nations, with less
than twelve million dollars 2 in specie in all the Colonies,
and perhaps not half that sum, — such was the financial
condition of the country at the opening of the second
Continental Congress.

1 J. Adams's Works, vol. vii. p. 296.

2 Pelatiah Webster, Political Essays, p. 6, note c. Hamilton esti-
mated the "current cash in this country" previous to the war, specie
and paper, at thirty million dollars, of which sum eight millions were
specie (Works, vol. i. p. 228). Noah Webster affirmed that " ten mil-
lions of dollars in specie were supposed to be the medium in America
before the war" (Coll. of Essays, p. 133).



1775.] ORGANIZATION OF TREASURY DEPARTMENT.



CHAPTER II.

ORGANIZATION OF THE TREASURY DEPARTMENT.

To organize a department of government is always
difficult, even in a time of peace ; but the difficulty of
organizing the various departments of the American
Confederation was much greater, because the country
was enveloped in war with a powerful foe possessing a
well-disciplined army and a never-failing exchequer.
America was poor : the specie coming here quickly found
its way to Great Britain by the operation of a policy
long pursued and deemed wise by the mother-country.
The members of Congress were ignorant of legislative
proceedings, save in the small and partially-stifled Pro-
vincial Assemblies. The colonists had never administered
the affairs of state. How unreasonable, therefore, to
suppose them capable of organizing a treasury, war,
navy, and other departments, without many delays and
embarrassments! The several departments of the Brit-
ish Government were not the thought of the day: they
were the growth of centuries. The departments of the
Government of the United States were created more
rapidly, though not without trial and heavy cost, before
reaching their greatest efficiency.

The treasury department was organized earlier than
any other department of the government. By the genius



10 FINANCIAL HISTORY OF THE UNITED STATES. [1775.

of Hamilton, during the first administration of Washing-
ton its province was pretty clearly defined, and its mode
of conducting business practically established ; yet no one
can understand how it came to be thus organized, until he
has learned how the finances were administered during
the Revolution.

As independence was not at first debated in Congress,
and every one was seeking to find a peaceful solution of
the difficulties with Great Britain, the early financial
measures of that body were of a temporary character.
Committees were appointed to do specific things, to raise
money, to pay accounts, and the like, but not to do any
thing requiring much investigation, or outlay of money.
The method of devising measures through committees,
thus early adopted, has been continued to this day.

The first financial committee were appointed on the
3d of June, 1775, to prepare an estimate of the money
required to pay the expenses of Congress. This com-
mittee reported, four days afterward, in favor of issuing
bills of credit ; and their report was subsequently adopted.
On the 19th of July another committee were appointed,
to prepare an estimate of the expenses incurred by the
resolutions of Congress. Having failed to report as soon
as Congress desired, on the 6th of November a third
committee were chosen for the purpose, who, in addition,
were required to ascertain what money remained in the
treasury unapplied, and to form an estimate of the
public debts already incurred, and which were likely to
become due by the 1st of June the following year. This
committee lived until the 17th of February, 1776, when
a standing committee of five for superintending the



1776.] ORGANIZATION OF TREASURY DEPARTMENT. 11

treasury were appointed. The powers granted to them
were more specific and extensive than the powers that
had been delegated to any other committee : they were
required to examine the accounts of the treasurers who
had been appointed to receive funds from the Colonies,
and occasionally to report to Congress the condition of
the treasury ; to consider the ways and means for sup-
plying the army in Canada with gold and silver ; to em-
ploy and instruct proper persons for liquidating the
public accounts, including those of the paymasters and
commissaries in the Continental service, committees of
safety, and all others who had been or should be in-
trusted with the public money, and to report the con-
dition of such accounts to Congress ; to superintend the
emission of bills of credit ; and, lastly, to obtain from
the different assemblies and conventions of the United
Colonies the number of inhabitants in each Colony.

From time to time the powers of the committee were
enlarged, and the work of administering the finances was
systematized. They were authorized to employ clerks
for keeping and liquidating the public accounts, and to
provide books and a suitable office for their business.
Power was also given them to call upon the various
committees of Congress, assemblies, conventions, coun-
cils or committees of safety, Continental officers, and
private persons who had been or should be intrusted
with public money, for their accounts and vouchers, and
for such other materials and information as the commit-
tee deemed needful " in stating, checking, and auditing
the public accounts." l

1 Feb. 23.



12 FINANCIAL HISTORY OF THE UNITED STATES. [1776.

As the resolution conferring this power was deemed
too indefinite, more explicit resolutions were soon after
adopted. 1 A treasury office of accounts was instituted,
to be kept wherever the sessions of Congress should be
held, which was put under the direction and superintend-
ence of the standing Committee of the Treasury. An
auditor-general, also, together with a proper force of
assistants, was authorized for keeping the public accounts.
In respect to the presentation of accounts at this time, a
portion of them went to the Committee on Claims : but
all accounts and claims of articles the price of which
had been previously fixed by contract, or otherwise as-
certained by Congress, were liquidated and settled at the
treasury office, and reported to Congress for allowance,
and then passed, and entered at the place of liquidation.
All contracts, securities, and obligations belonging to the
United Colonies were lodged and kept in the treasury
office of accounts ; and any one receiving public money
was charged with the same in the books of the treasury
office ; and every warrant drawn therefor, previous to its
payment, was entered there, while entry was also made
upon the warrant itself by one of the committee of the
treasury, the auditor-general, or one of his assistants or
clerks. An exception, however, was made in those cases
where orders or warrants were issued by committees ap-
pointed by Congress to draw on the treasurers for par-
ticular purposes. These orders were paid directly, and
then charged to the committee who drew them, and
afterwards settled by Congress. Other financial resolu-
tions were now passed ; yet, as they were but little more

1 April 1.



1775.] ORGANIZATION OF TREASURY DEPARTMENT. 13

than an affirmation of previous instructions already de-
scribed, they need not be repeated.

Several names were given to this committee, though
the most common were the Board of Treasury and the
Treasury Office of Accounts. During the year 1776
five more members were added, making ten in all. 1

In respect to auditing and paying accounts, perfection
in these matters could not be expected in the beginning.
The first auditing board was composed of the delegates
from Pennsylvania, concerning whom it was resolved to
place ten thousand dollars in their hands for the purpose
of paying the expenses incurred in raising and arming rifle
companies, expresses, and other small charges of which
Congress had not been able to procure exact accounts. 2

As soon as Congress re-assembled in 1775, 3 the Penn-
sylvania delegates reported, that, on account of various
difficulties, they had not executed the duties assigned to
them, and desired that some members from other Colonies
where debts had been contracted might be added ; where-
upon five other persons were chosen.

Shortly afterward the committee made a report. 4 They
had drawn on the treasury for nearly twelve thousand
dollars to settle the accounts mentioned ; and, as only ten
thousand dollars had been previously placed at their
command, Congress voted an appropriation sufficient to
pa}" the balance. The committee having discovered other
outstanding accounts which they were not authorized to

1 Five persons were at first chosen ; June 18 two more were added ;
Sept. 23, two additional members were chosen, and a week later Hop-
kinson was added.

2 Aug. 1, 1775. a Sept. 14. * Sept. 25.



14 FINANCIAL HISTORY OF THE UNITED STATES. [1775.

liquidate, but which it was the duty of Congress to
settle, the discovery led to the appointment of a com-
mittee of accounts or claims, consisting of one member
from each Colony, to whom all accounts " against the
Continent" were to be referred, and who were to exam-
ine and report upon the same "in order for payment."
The appointment of this committee gave rise to a lively
discussion, which John Adams has reported in his diary.
When Sherman of Connecticut made a motion for the
appointment of such a committee, Harrison of Virginia
supposed it was a reflection upon the one which had
just reported concerning the public accounts, and he
exclaimed, "Is this the way of giving thanks?" Samuel
Adams, who seconded Sherman's motion, replied that he
meant no reflection upon the committee, and "was sorry
that the worthy gentleman from Virginia conceived that
any was intended; he was sure there was no foundation
for it." Another member, Paine, thought that justice
and honor required a careful examination of all accounts,
and how the public moneys were expended, "that the
minister would find out our weakness, and would foment
divisions among our people ; he was sorry that gentlemen
could not hear methods proposed to settle and pay ac-
counts, in a manner that would give satisfaction to the
people, without seeming to resent them." As this ex-
planation satisfied Harrison, he rapidly cooled, the motion
for the appointment of the committee prevailed, and, the
members having been chosen, the former committee were
directed to deliver to the new one all the books, accounts,
ami papers in their possession. 1

1 J. Adams's Works, vol. ii. p. 450.



1776.] ORGANIZATION OF TREASURY DEPARTMENT. 15

Their mode of adjusting accounts was to examine them,
and determine what was due, and report thereon to Con-



Online LibraryAlbert Sidney BollesThe financial history of the United States, from 1774 to 1885 (Volume 1) → online text (page 1 of 27)