Speculation in the Revolutionary Debt: The Ownership of Public Securities in Maryland,1790

Abstract

Historians have taken it for granted that the Revolutionary, debt was fairly well concentrated before it was funded in 1790, but they have not been able to support this view with concrete evidence. Most of the people living at the time thought the same thing but were likewise unable to prove it. The truth could not be known until Hamilton's funding operation assembled the securities that made up the debt. Under the act of 1790 a new federal loan was instituted. Various kinds of securities representing unpaid claims against the government were taken as subscriptions and the possessors given new federal stock. As nearly all the old securities came in, the government had full information about the transfer and ownership of the Revolutionary debt. The details, however, were not made public. Later, a succession of fires in the treasury destroyed nearly all the central records. Documents now existing, though voluminous, are scattered, incomplete, and hard to interpret. Historians have not made much use of them. For this reason, the ownership of the debt, which was a question in 1790, is a question still.

After Johnny Came Marching Home: The Political Economy of Veterans’ Benefits in the Nineteenth Century

“…In the meantime, however, many officers and enlisted men had sold their securities to investors at heavy discounts. E. James Ferguson (1954) studied what happened in Maryland, the state with the best-preserved records, and found that about 52 percent of the securities issued to Maryland's soldiers had been acquired by the State of Maryland because they could be used to satisfy state debts. Of the 48 percent that remained in private hands about 82 percent had been transferred to private investors at a price that might have been, according to Ferguson (1954, 41), 20 to 40 cents on the dollar.…”

Debt as Power

“…Desperate for money to pay taxes or afford their livelihood in a period of economic depression, many soldiers and widows sold their certificates to wealthy speculators at what was often an extreme discount. While the debates are not definitive, there is considerable evidence to suggest that what made matters worse was the knowledge that an organized force of propertied interests were going to vie for a national government with the power to tax in order to meet the revolutionary debt and hold democracy at the state level in check because of debtor relief programs and the desire to overcome the scarcity of currency through the issuance of paper money (Ferguson 1954;Bogin 1989;Mann 2003: 176;Holton 2004;Wright 2008). While some of the war debt was capitalized to weaken the British Empire by enemies from France, Spain, and the United Provinces, the overwhelming majority of debt issues from the revolutionary period were owned by domestic social forces (Davies 2002: 467).…”

“…13 However, there is strong evidence to suggest that most of the debt repayments did not go to the initial holders of the debt but to a small number of speculators who concentrated government securities in their own hands by buying up claims at considerable discounts. This was done in the anticipation that a central government with the power to tax would eventually come to fruition and pay back the debt at face value (Ferguson 1954;Mann 2003: 176;Wright 2008: 124). There is little doubt that one of the chief concerns of the men who met at the Philadelphia Convention was how to finance the debt accumulated during the war (Wright 2008: 81).…”

Debt as power

“…Desperate for money to pay taxes or afford their livelihood in a period of economic depression, many soldiers and widows sold their certificates to wealthy speculators at what was often an extreme discount. While the debates are not definitive, there is considerable evidence to suggest that what made matters worse was the knowledge that an organized force of propertied interests were going to vie for a national government with the power to tax in order to meet the revolutionary debt and hold democracy at the state level in check because of debtor relief programs and the desire to overcome the scarcity of currency through the issuance of paper money (Ferguson 1954;Bogin 1989;Mann 2003: 176;Holton 2004;Wright 2008). While some of the war debt was capitalized to weaken the British Empire by enemies from France, Spain, and the United Provinces, the overwhelming majority of debt issues from the revolutionary period were owned by domestic social forces (Davies 2002: 467).…”