Domestic Debt.

House of Representative, February 22, 1790.

Mr. SMITH, (of South Carolina.) The Constitution itself was opposed to the measure, (discrimination of the domestic debt;) for it was an ex post facto law, which was prohibited in express terms. The transference of public securities was lawful at the time these alienations were made; an attempt therefore to punish the transferees, is an attempt to make an ex post facto law, by making that unlawful which was lawful at the time it was done; it alters the nature of the transaction, and annexes the idea of guilt to that which, at the moment of commission, was not only perfectly innocent, but was explicitly authorized and encouraged by a public act of Congress. By that act, those who had money were invited, to purchase of those who held securities; and now they were called upon to punish the purchasers who bought under that invitation. The Constitution restrains the states from passing any law impairing the force of contracts: a fortiori, is the legislature of the Union restrained? What all example to hold up to the judiciary of the United States! How could they annul a state law, when the state would be able to plead a precedent on the part of Congress? The right of property was a sacred right; no tribunal on earth, nor even legislative body, could deprive a citizen of his property, unless by a fair equivalent, for the public welfare. The purchaser was vested, by the sale, with an absolute right to the full amount of the security, and it was beyond their authority to divest him of it. They might, indeed, by an act of power, declare that he should be paid only half; but his right to the other moiety would not be extinguished.

The present Constitution, which is a mild one, met with considerable opposition. Had it been rejected, the public securities would never have been paid.

It was the surest policy of governments to adhere strictly to their plighted faith, when it was in their power to do so, even should such-strict adherence work an injury to some part of the community. This was the practice of nations in the case of a treaty, which, when made by competent authority, they considered themselves bound to observe, although they {406} deemed it disadvantageous to them, lest a refusal should deter other nations from treating with them in future. It is by this line of conduct that public credit can alone be supported.

Mr. MADISON. The constitutionality of the proposition had been drawn into question. He (Mr. Madison) asked whether words could be devised that would place the new government more precisely in the same relation to the real creditors with the old. The power was the same; the objection was the same: the means only were varied.

If the gentlemen persisted, however, in demanding precedents, he was happy in being able to gratify them with two, which, though not exactly parallel, were, on that account, of the greater force, since the interposition of government had taken place where the emergencies could less require them. The first was the case of the Canada bill. During the war which ended in 1763, and which was attended with a revolution in the government of Canada, the supplies obtained for the French army in that province were paid for in bills of exchange and certificates. This paper depreciated, and was bought up chiefly by British merchants. The sum and the depreciations were so considerable as to become a subject of negotiation between France and Great Britain at the peace. The negotiation produced a particular article, by which it was agreed by France that the paper ought to be redeemed, and admitted by Great Britain that it should be redeemed, at a stipulated value. In the year 1766, this article was accordingly carried into effect by ministers from the two courts, who reduced the paper, in the bands of the British holders, in some instances as much as seventy-five per cent. below its nominal value. It was stated, indeed, by the reporter of the ease, that the holders of the paper had themselves concurred in the liquidation: but it was not probable that the concurrence was voluntary. If it was voluntary, it shows that they themselves were sensible of the equity of the sacrifice.

The other case was of still greater weight, as it had no relation to war or to treaty, and took place in the nation which had been held up as a model with respect to public credit. In the year 1715, the civil list of Great Britain had fallen in arrears to the amount of 500,000. The creditors who had furnished supplies to the government, had, instead of money, received debentures only from respectable officers. These had depreciated. In that state they were assigned in some instances; in others, covenanted to be assigned. When the Parliament appropriated funds for satisfying these arrears, they inserted an express provision in the act, that the creditors who had been obliged, by the defaults of government, to dispose of their paper at a loss, might redeem it from the assignees by repaying the actual price, with an interest of six per cent., and that all agreements and covenants to assign should be absolutely void. Here, then, was au interposition on the very principle that a government ought to redress the wrongs sustained by its default, and on an occasion trivial when compared with that under consideration; yet it does not appear that the public credit of its nation was injured by it.


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