¹ Pennsylvania, New York, and Maryland had funded the Continental certificates held by their citizens, issuing state certificates in exchange, and had also accepted Continental securities in payment for lands. They acquired $6.I million, $2.3 million, and $650,000 respectively. Several other states had acquired lesser amounts in similar fashion. See Ferguson, E. James, “State Assumption of the Federal Debt During the Confederation,” Mississippi Valley Historical Review, XXXVTII (1951), 416–22Google Scholar.

² Pennsylvania and New York did not fund all their large holdings, but returned some to the previous owners who funded them.

³ See Ratchford, B. U., American State Debts (Durham: Duke University Press, 1941), pp. 62–66Google Scholar , for subsequent developments; American State Papers: Finance, I, 26, 479, for discussion. A detailed account of the settlement is given in an unpublished doctoral dissertation by Whitney Bates, K., “The Assumption of State Debts” (University of Wisconsin, 1951), pp. 62, 193–231Google Scholar.

⁴ Hanna, Hugh H., Financial History of Maryland (Baltimore: The Johns Hopkins Press, 1907), pp. 28–31.Google Scholar

⁵ Maryland gave her former creditors current United States 6 per cent stock in exchange for the deferred and 3 per cent stocks they received.–Ibid. New York gave current 6 per cent stock for deferred.– Sowers, Don C., Financial History of New York State (New York: Columbia University Press, 1914), pp. 254–57.Google Scholar Pennsylvania issued additional stock to former creditors to cover the depreciation of their claims resulting from the deferred and 3 per cent stocks. About $360,000 was issued.–Raymond , Walters Jr, “The Making of a Financier: Albert Gallatin in the Pennsylvania Assembly,” Pennsylvania Magazine of History and Biography, LXX (1946), 261–66Google Scholar ; reports of the state treasurer appended to Journal of the Pennsylvania State Senate, I79I-1796.

⁸ Acts and Resolves of the Rhode Island General Assembly, February 1797, pp. 25–26.Google Scholar

⁷ , Ratchford, American State Debts, pp. 69–70Google Scholar ; Bullock, Charles J., Historical Sketch of the Finances and Financial Policy of Massachusetts (“Publications of the American Economic Association,” VII, No. 2, 1907), pp. 20–25Google Scholar.

⁸ , Ratchford, American State Debts, p. 68.Google Scholar

⁹ See quotations in Schachner, Nathan, The Founding Fathers (New York: G. P. Putnam's Sons, 1954), p. 120.Google Scholar

¹⁰ The federal securities received in exchange for $100 of state securities would have sold in the open market for about $67.00 in December 1790 and $80.00 in July 1791. See prices in Davis, Joseph S., Essays in the Earlier History of American Corporations (Cambridge: Harvard University Press, 1917), II, 340Google Scholar.

¹¹ See Nevins, Allan, The American States During and After the Revolution (New York: The Macmillan Co., 1924), pp. 519-22, 534Google Scholar ; Jensen, Merrill, The New Nation (New York: Alfred A. Knopf, 1950), pp. 319–21Google Scholar ; , Ferguson, “State Assumption of the Federal Debt …,” pp. 416-19, 421–23Google Scholar.

¹² See Gallatin, Albert, Sketch of the Finances [1796] in Writings, ed. Adams, Henry (Philadelphia, 1879), III, 131Google Scholar . Judging from pre-1789 experience, Massachusetts, Rhode Island, North and South Carolina, and possibly Georgia would have had difficulty with their debts in the absence of federal assumption. But, of these, all except North Carolina would have been helped by the settlement of accounts. See , Ratchford, American State Debts, pp. 42–59Google Scholar ; , Jensen, The New Nation, pp. 308–9Google Scholar ; , Bates, “Assumption of State Debts,” p. 31Google Scholar.

¹³ See American State Papers: Finance, I, 425, 427, 431 ; , Bullock, Finances of Massachusetts, pp. 19, 138Google Scholar ; Baldwin, Leland D., Whiskey Rebels (Pittsburgh: University of Pittsburgh Press, 1939). P- 78Google Scholar ; Dodd, W. F., “The Effect of the Adoption of the Constitution upon the Finances of Virginia,” Virginia Historical Magazine, X, No. 4 (1903), 368Google Scholar.

¹⁴ Pennsylvania subscribed $0.5 million of its stock to the Bank of Pennsylvania in 1793, bought $0.4 million more as an investment in 1795 and, in turn, subscribed that to the bank's capital in 1802-4 (sources in note 15). North Carolina subscribed its $40,000 of United States securities to a bank in 1812, and South Carolina subscribed $200,000 in 1819. Virginia's stock, amounting to $35,000, was transferred to an insurance company in 1803, possibly as a capital subscription. (Sources for these states listed in Table III.)

¹⁵ Papers of the Governors of Pennsylvania, 178$-1817, Pennsylvania Archives, Ser. IV, pp. 261, 349-50 ; Treasurer, State, Reports, 1791–1805Google Scholar . New York sold $1.4 million of United States stock in 1797 and was buying bank stock as the proceeds came in. When the remainder was sold in 1818, the state had begun the Erie Canal. In Connecticut, Delaware, New Jersey, and to some extent Maryland and Massachusetts liquidation of United States securities was accompanied by purchase of bank or other corporation stock. (Sources for Table 3.)

¹⁶ See below, p. 244.

¹⁷ See , Ratchford, American State Debts, pp. 67–68.Google Scholar

¹⁸ Ibid., pp. 78-79 ; , Hanna, Financial History of Maryland, pp. 40–45. One other payment arose out of pre-1789 accounts. In 1832 Congress authorized payment of $381,000 to reimburse Virginia for pensions paid to Revolutionary officers and provided for federal payment of future claims of that nature.–SeeGoogle ScholarUnited States Statutes at Large, IV, 563Google Scholar.

¹⁹ Miller, Edmund T., A Financial History of Texas (Austin: University of Texas, 1916), pp. 12–82. The population of the state was then about 136,000.Google Scholar

²⁰ lbid., pp. 118-20.

²¹ See ibid., pp. 121-23 ; Gouge, William M., The Fiscal History of Texas (Philadelphia, 1852), pp. 190, 204–5Google Scholar.

²² , Miller, Financial History of Texas, pp. 73-74, 128. On the extent of speculation, seeGoogle ScholarWilliams, Elgin, The Animating Pursuits of Speculation (New York: Columbia University Press, 1949), pp. 138–92Google Scholar.

²³ , Miller, Financial History of Texas, pp. 405, 416–21.Google Scholar

²⁴ Hibbard, Benjamin H., A History of the Public Land Policies (New York: The Macmillan Co., 1924), pp. 84–85.Google Scholar

²⁵ Ohio was to receive 3 per cent of the land proceeds in cash, to be spent for roads, while the other 2 per cent was to be spent by the federal government to build a road to Ohio from the East (this was the origin of the Cumberland Road). States subsequently admitted received either 3 or 5 per cent in cash, depending on whether they benefited from the Cumberland Road or not. Grants to five states were earmarked for education, the others for transportation. See , Hibbard, Public Land Policies, pp. 84–85Google Scholar ; Statement of Appropriations and Expenditures for Public Buildings, Rivers and Harbors, Forts, Arsenals, Armories, and Other Public Worlds, from March 4, 1789, to June 30, 1882, U. S. 47th Cong., 1st sess., S. Doc. 196 (1882).

²⁶ See below on defaults. In addition, Wisconsin was docked $101,000 for misappropriating that sum from the proceeds of federal land grants for canal construction. See Phelen, Raymond V., Financial History of Wisconsin (Madison: University of Wisconsin, 1908), pp. 455–59.Google Scholar

²⁷ Some approximate percentages of grant to total revenue are as follows: Ohio, 15 in 1810-20; Iowa, 20 in the late 1850's; Illinois, 7 in 1818-35; Missouri, 30 in 1831–36.– Bogart, Ernest L., Financial History of Ohio (Urbana: University of Illinois, 1912), pp. 118–19Google Scholar ; Biennial Report of the State Treasurer of Iowa, 1859Google Scholar ; James, F. C., Growth of Chicago Banks (New York: Harper and Brothers, 1938), p. 109Google Scholar ; Niles Register, XLIII, 387Google Scholar ; Primm, James N., Economic Policy in the Development of a Western State: Missouri, 1820-1860 (Cambridge: Harvard University Press, 1954), p. 85Google Scholar.

²⁸ Bogart, E. L., Internal Improvements and State Debt in Ohio (New York: Longmans, Green and Co., 1924), pp. 9–10Google Scholar ; , Primm, Missouri, 1820-1860, pp. 76-77, 86Google Scholar.

²⁹ See , Hibbard, Public Land Policies, p. 12Google Scholar ; American State Papers: Public Lands, III, 279–80Google Scholar. Georgia in turn paid part of the money back to the federal government to cover its quota of the direct tax. The rest went into expanded internal-improvement expenditures.– Heath, Milton S., Constructive Liberalism: The Role of the State in Economic Development in Georgia to 1860 (Cambridge: Harvard University Press, 1954), pp. 237-38, 371, 441Google Scholar . The federal government also paid $4.3 million direct to individuals to settle disputed land titles in this area.– Treat, P. J., The National Land System, 1785-1820 (New York: E. R. Treat and Co., 1910), pp. 355–66. On other transactions involving lands, see Hibbard, pp. 237-38, 269-71Google Scholar.

³⁰ See Ratchford, B. U., “The Settlement of Certain State Claims Against the Federal Government,” Southern Economic Journal, IV (1937), 53–75Google Scholar , on claims for the War of 1812; also White, Leonard D., The feffersonians (New York: The Macmillan Co., 1951), pp. 528–45Google Scholar.

³¹ , Ratchford, “Settlement of Certain State Claims …,” pp. 56-57, 74Google Scholar ; Walters, Raymond Jr, Alexander fames Dallas (Philadelphia: University of Pennsylvania Press, 1943), p. 223Google Scholar ; American Stale Papers: Finance, III, 174Google Scholar ; Virginia House of Delegates, Journal, 1824-1825, Documents Accompanying the Governor's Message, p. 12. An additional $1.3 million of claims for the War of 1812 were paid after 1860.–Ratchford, ibid., pp. 56-57.

³² Fankhauser, William C., A Financial History of California (Berkeley: University of California, 1913), pp. 311–13.Google Scholar

³³ See Seybert, Adam, Statistical Annals, pp. 513–14.Google Scholar

³⁴ American State Papers: Finance, III, 43, 219–20.Google Scholar

³⁵ For the Bonus Bill of 1817, see Annals of Congress, XXX (1817), 185–86Google Scholar ; A Compilation of the Messages and Papers of the Presidents, 1789-1897, ed. Richardson, James D., I, 584–85Google Scholar . For Clay's bill to distribute the proceeds of public-land sales among the states, see , Hibbard, Public Land Policies, pp. 179–83Google Scholar . For other proposals, see Annals of Congress, XXX, 933Google Scholar ; American State Papers: Finance, V, 501–5Google Scholar.

³⁶ See Bourne, Edward G., The History of the Surplus Revenue of 1837 (New York: G. P. Putnam's Sons, 1883), pp. 21–23.Google Scholar

³⁷ A detailed description of how the Treasury handled the distribution is given in Report of the Secretary of the Treasury …, in Relation to the Execution of the 13th and 14th Sections of the “Act to Regulate the Deposits of the Public Money,” Adopted June 23, 1836, U. S. 26th Cong., 1st sess., S. Doc. 14 (1839).

³⁸ North Carolina used $0.3 million to redeem bonds held by federal trust funds.–, Bourne, Surplus Revenue, p. 92.Google Scholar

³⁹ Ibid., passim.

⁴⁰ The first federal security-holding trust fund was established in 1796 for the Seneca Indians. In 1800, the Navy Pension Fund was established, followed by the Privateer Pension Fund in 1815. These funds combined owned about $1 million of securities in 1816-1832, mostly those of the United States. After 1832, the trust-fund device was greatly expanded for the benefit of the many Indian tribes that were moved west by the government. Since the federal debt was being extinguished, the older funds, as well as the new, were invested chiefly in state securities. For historical details and a list of source materials, see my unpublished doctoral dissertation, “Federal Finance and the American Economy, 1790-1860” (Princeton University, 1954), pp. 504-13, 520–21. Most of the purchases of state securities in 1836-38 were direct from the states, but in later years most were bought in the open market.Google Scholar

⁴¹ Compare this with total state borrowing of over $100 million in 1835-38.–, Ratchford, American State Debts, p. 79.Google Scholar

⁴² See McGrane, Reginald, Foreign Bondholders and American State Debts (New York: The Macmillan Co., 1935), pp. 23–40Google Scholar . This is the best survey of state projects and the financial difficulties attending them.

⁴³ Details of calculation and shares of individual states are shown in Report of the Secretary of the Treasury, Showing, …, the Amounts Paid and now Due to the State of Mississippi, with the Correspondence Relating Thereto, U. S. 28di Cong., 1st sess., S. Doc. 75 (1844).

⁴⁴ See the following protests: General Assembly of South Carolina, Report of the Committee on Federal Relations, on … the Distribution of the Sales of the Public Lands, U. S. 27th Cong., 2d sess., H. Doc. 101 (1842); Resolutions of the Legislature of Alabama on the Subject of the Act for the Distribution of the Proceeds of the Sales of the Public Lands, U. S. 27th Cong., 2d sess., H. Doc. 104 (1842); Preamble and Resolutions of the Legislature of Neui Hampshire, Declaring the Distribution Act, the Tariff Act, and the Bankrupt Act, to be Inexpedient and Unconstitutional, …, U. S. 27th Cong., 3d sess., H. Doc. 63 (1843). Virginia's share was paid to the “restored” (Union) government of the state in 1862.– Receipts and Expenditures of the United States, 1862, p. 88.

⁴⁵ The law exempted debtor balances of 1793 and the surplus “deposits” of 1837. On Maryland, see McMaster, John B., History of the People of the United States (New York: D. Appleton and Co., 1883–1913), VII, 5Google Scholar ; on , Arkansas, see Bonds of Arkansas Held by the United States, U. S. 51st Cong., 2d sess., H. Report 3314 (1890), p. 2Google Scholar.

⁴⁶ Letter from the Secretary of the Treasury, Transmitting Information …, Relative to the Two or Five Per Cent Fund with the State of Arkansas, U. S. 29th Cong., 1st sess., H. Doc. 47 (1845). The sums withheld were: Arkansas, $70,000; Indiana, $108,000; Michigan, $31,000. Illinois resumed payments in 1846, before any federal funds were withheld. Michigan resumed in 1854.

⁴⁷ See McGrane, Foreign Bondholders, passim, on programs of the various states.

⁴⁸ See Report [of] the Committee on Finance, to Whom was Referred Bill No. 10, “To Provide for the Surrender of Certain Bonds of the State of Indiana,” U. S. 33d Cong., 1st sess., S. Report 64 (1854). Indiana's account with the United States was finally settled in 1868.–See Letter from the Secretary of the Interior, Communicating, …, Information in Relation to Certain Indiana State Bonds, Held by Him as Trustee for Certain Indian Tribes, U. S. 41st Cong., 3d sess., S. Doc. 12 (1871).

⁴⁹ See , McGrane, Foreign Bondholders, pp. 245–64. The account was finally settled in 1898.–SeeGoogle ScholarBonds of Arkansas Held by the United States; U. S. Statutes at Large, XXX, 367–68Google Scholar.

⁵⁰ Further difficulties soon arose. In i860, it was discovered that $870,000 of securities had been stolen.–Report [of] The Select Committee, … in Relation to the Fraudulent Abstraction of Certain Bonds, Held by the Government in Trust for the Indian Tribes, From the Department of the Interior …, U. S. 36th Cong., 2d sess., H. Report 78 (1861). Soon afterward, about $2 million of the trust-fund securities were defaulted by seceding states.

⁵¹ Maryland and Virginia petitioned for refund of their grants in later years on grounds that the money was only lent, but they were unsuccessful.–See Payment of Certain Moneys Advanced by Virginia and Maryland to the United States, U. S. 60th Cong., ist sess., S. Report 480 (1908). The District of Columbia commissioners sold the stock lent to them at a discount of about 15 per cent. Maryland thereupon bought back $20,000 of it for $16,600. See American State Papers: Miscellaneous, I, 219-21, 245–46Google Scholar ; Bryan, Wilhelmus B., A History of the National Capital (New York: The Macmillan Co., 1914), I, 206Google Scholar.

⁵² The division of stock ownership in these canals was as follows ($000):

Includes $1.5 million invested by the cities of Washington, Georgetown, and Alexandria, D.C., taken over by the United States when it assumed their debts. Sources: Report [of] The Committee on Roads and Canals, to Whom was Referred the Application of the State of Maryland for a Surrender and Transfer of the Stock Held by the United States in the “Chesapeake and Ohio Canal Company,” U. S. 27th Cong., 2d sess., S. Doc. 313 (1842); Letter from the Secretary of the Treasury, Transmitting an Opinion by the Attorney Canal, U. S. 40th Cong., ad sess., H. Doc. 135 (1868); Hearings on HR 2077s, U. S. 60th General Relative to a Proposed Sale of the Stock Held by the United States in the Dismal Swamp Cong., ist sess. (1907).

⁵³ See Maxwell, James A., The Fiscal Impact of Federalism (Cambridge: Harvard University Press, 1946), p. 18.CrossRefGoogle Scholar