Cabinet Opinions on the Resolutions Concerning Arrearages in Soldiers’ Pay
Editorial Note

This, as Alexander Hamilton stated, was “a case of inconsiderable magnitude.” In respect to the sum of money involved, this was a correct appraisal. At the close of the previous session of congress, the secretary of the treasury had been called upon to furnish estimates of funds needed for the civil list, for the department of war, and for satisfying unpaid warrants drawn by the board of treasury. The estimates were provided two days later and were at once referred to a committee composed of Wadsworth, Smith of Maryland, and Smith of South Carolina, the first and the last being loyal supporters of the secretary. On the same day Wadsworth reported the appropriation bill. Although the house had not requested Hamilton to estimate the unpaid warrants issued by the former superintendent of finance, he had supplied such estimates to the amount of $93,463, chiefly for supplies furnished the American prisoners during the war. Wadsworth included this item in his bill, but the house promptly eliminated it. Among the unpaid warrants issued by the board of treasury were thirteen for $40,040 in favor of paymasters of regiments of the Virginia and North Carolina lines for arrearages of officers and privates who had served in 1781 and 1782. The payments, to be made in specie, were provided for in Hamilton’s estimates and were included in the appropriation act that passed both houses on the last day of the session.1 The sum involved was less than one-fifteenth of the total amount appropriated by Congress for the operating expenses of government.2 But the importance of the issue did not lie in the sum involved. It lay in the fact that it brought about the first open, direct, and uncompromising collision between the secretary of the treasury and the secretary of state and that each officer responded to the challenge in a thoroughly characteristic manner. This, therefore, was a case symbolic of all that was to follow. The natures of the two men could be gauged by this episode if no other evidence of their opposing philosophies of government existed.

On 7 May 1790 Theodorick Bland, a Virginia representative respected for his character if not for his intellectual prowess, declared to the house of representatives that “in consequence of obtaining (as is supposed) a surreptitious copy, from a public office, of the names of officers and soldiers in the Virginia and North Carolina lines … to whom arrears of pay were ordered to be made by a law passed the last session of Congress, some persons had fraudulently procured assignments of pay, for a consideration much below their value.” The statement was cautious, revealing less than Bland knew, but it was indubitably an allegation of fraud or collusion existing somewhere in an administrative office. He thereupon moved that the secretary of war be directed to publish in the newspapers of the two states accurate lists of all officers and soldiers, with the information that payment of all arrearages would be made to them, “or, where dead, to their legal representatives … and that no claim of any assignee, under any transfer or power to receive the same, be admitted as valid to entitle any person to receive any part of the said arrears,” except under the same procedure that had been adopted for the payment of invalid pensioners.3 The motion was committed to Bland of Virginia, Williamson of North Carolina, and Burke of South Carolina. The designation of the last-named was perhaps the cause of a transformation that took place in Bland’s proposition, turning what had begun as a simple effort to correct a fraudulent abuse into a barb aimed directly at the secretary of the treasury. For Hamilton, who believed that those charged with the handling of public finances should take care to be regarded as Caesar’s wife, this now became a direct challenge.

For few exceeded Ædanus Burke in the violence of his hatred for the secretary of the treasury. Only a month before Bland’s resolution was introduced, Burke had made such an extreme personal attack on Hamilton in the house of representatives as to cause many to believe that a duel was inevitable. So many became concerned in that episode, so Maclay declared, that it was likely they would “really make the fools fight.”4 In various parts of the country, indeed, the rumor had spread that the duel had been fought and that Hamilton had fallen.5 Burke was also an old enemy of the Cincinnati, and the fact that the charge of fraud on private soldiers was brought forward at this particular moment must have inflamed the South Carolinian. For Bland’s motion came while the house was discussing the claim of Baron Steuben—a claim that was advanced under Hamilton’s protection just as the earlier “settlement” had been. Maclay in the senate called the baron’s bill a “perversion of reason, perversion of right,” and would not have granted a farthing because he felt, with better justice than he knew, that Steuben had long since been amply compensated. The contest between what Maclay called Hamilton’s tools and the independent part of the senate ended in the grant of a pension to the Prussian almost equal to the sum of all of the pensions established under the previous government. But the resultant public outcry was so vociferous that Hamilton felt obliged to defend his own course in sheltering the claim.6 His anxiety for justice to this persistent claimant, however, seemed to many to display a favoritism that stood in sharp contrast to the secretary’s apparent slowness in paying the arrearages due old soldiers and their widows. This feeling was sharply reflected in the resolutions reported by the committee.

As reported, the first resolution included the soldiers of the South Carolina line along with those of the two states to the northward, but this addition was later struck out.7 The committee report provided: (1) that the president be requested to transmit to the governors of the states a complete list of officers and privates who were entitled to arrears, annexing thereto the sums due each individual and requesting the governors to make known “in the most effectual manner” that such arrears would be discharged on proper application; (2) that the president be requested to cause the secretary of the treasury to take the necessary steps for effecting payment out of the appropriation voted by Congress 29 Sep. 1789; and (3) that the secretary of the treasury, in cases where payment had not been made “to the original claimant in person, or to his representative, be directed to take order for making the payment to the original claimant, or to such person or persons only who shall produce a power of attorney, duly attested by two Justices of the Peace … authorizing him or them to receive a certain specified sum.” Obviously, the target had been more precisely defined and the barb sharpened, especially in the second resolution. Bland had not hinted at the office wherein the surreptitious copy of lists of soldiers’ names had been obtained and made available to speculators. He had not, indeed, so much as mentioned the secretary of the treasury or his department. Now, however, the resolutions implied that Hamilton had been dilatory in making payment of funds appropriated eight months earlier—appropriated not for an estimated total, but to cover particular warrants already issued to regimental paymasters for sums specified in each instance in the secretary’s own report.8 The point was underscored when the committee substituted for Bland’s allusion to an act of the preceding Congress the precise date on which it was passed. It was still further emphasized when the committee recommended that the president be requested to require his secretary to carry out the mandate. On a later date such a frontal attack would be interpreted by Hamilton and his supporters in Congress as the equivalent of a request to the president to ask for his resignation. On this occasion, however, Hamilton chose to ignore the challenge.

The third resolution was the one that evoked the most intense opposition in the house, in the senate, and in the opinion that Hamilton drafted urging Washington to veto the measure. The principal objection to this was twofold. In the first place, Bland had called for the attesting of the claim to be made under the same procedures employed in the case of invalid pensioners: that is to say, by certification on the part of the district federal courts. By transferring this duty to justices of the peace, the committee’s resolution emphasized the importance of attestations procured in the vicinity of the claimant and it may have carried incipient partisan implications as well, since the district courts were all occupied by federalists. In the second place, the committee’s resolution called for the designation of the exact sum to be paid, whereas Bland’s proposition had not. The intent of the third resolution was thus quite plain: so far as possible, it was intended to prevent a fraud practised on innocent persons. In the house a motion was made to commit it in order that a bill might be brought in, but this effort was defeated. In the senate where the contest over this resolution was hard-fought, Maclay declared that it was merely “directory to our own officer [the secretary of the treasury], and had nothing to do with the proceedings of courts. Soldiers had entered into contracts, the resolves … defaced writings or tore the seals from obligations.” Any amendment to eliminate the sum to be paid, the place of payment, and the manner of attestation, he declared, was merely a modification to protect those engaged in “the late speculation.” Such was the expression that Maclay employed in the summary of his own remarks in the senate, but in his diary he added a flat assertion that “the most villainous and abandoned speculation took place last winter from the treasury.” Neither Maclay’s emphasis nor his allusion to the legislative power to tear the seals from contracts was likely to convert senators to his position. For it is clear that the argument he was contending against in the senate was in essence that of Hamilton: that is, that if fraud had entered into the contract, the proper redress lay with the courts. Indeed, the issue was almost lost in the senate, for the final vote on the amendment was evenly divided. Adams broke the tie. For once, Maclay said, “our Vice-President voted right, and gave it against the amendment.”9 The dilemma that Adams had faced was only transferred to the president when the opinions of Hamilton and Jefferson came to him.

Hamilton chose to assume that Congress had acted upon “vague suggestions, loose reports … and problematical testimony.” He thought it probable that in some cases “undue advantages had been taken.” But in his opinion this scarcely justified legislative interposition which contravened public faith, was retroactive in application, and invaded the contractual rights of individuals. This was a spirit that had produced the constitutional injunction against the impairment of contracts, a provision that had been not least among the things recommending the Constitution to “the more enlightened part of the community.” As Hamilton knew very well, this was a spirit that Washington abhorred, and in a powerful passage the secretary pointed to the intermeddlings with private contracts by state legislatures in the years preceding that had been “extensively felt, and seriously lamented.” Faced with an implied but grave legislative impugning of his own conduct, Hamilton chose to attack Congress rather than defend himself. With characteristic audacity he implied that the measure was only a stab in the dark, based on insubstantial foundations. If there was an instance of fraud, he assumed it to be between private individuals whose rights could be ascertained only by the judiciary. The inference that this had been made possible through collusion or fraud in his own department whereby some individuals obtained advance information he declined to draw, ignoring it altogether. His attack was centered upon the nature of the third resolution. Its provisions, he declared, were “at variance with the rules of property, the dictates of equity, and the maxims of good government.” His powerful argument rested at last upon those “great principles that constitute the foundations of property.” Washington must have been given pause as he read this almost persuasive argument, supported as it was by the adroit political suggestion that a veto could scarcely be over-ridden and that a salutary example might be set without offending more than a small part of the community. He, too, cherished principles designed to protect the sanctity of contracts, and he was also disposed to respect the legislative will. But something in the nature of the dilemma caused him to turn to Jefferson for further advice.10

As the second paragraph of his opinion proves, Jefferson had the advantage of Hamilton: the opinion of the secretary of the treasury was in his hands when he composed his own. His argument is not an independent analysis of the resolutions, but a direct rebuttal of that of Hamilton. It has been described as resting upon a narrow legal theory to the effect that the conveyance of a debt not in possession is void, a doctrine that “had never been adopted in equity.”11 This is a misconstruction. In the first place, the question whether the doctrine had been incorporated in the principles of equity is irrelevant. Jefferson argued that such a conveyance was invalid under Virginia law, not at equity. Second, the essence of his argument was its denial of Hamilton’s assertion that the resolutions were retroactive in effect. All else was mere proof to show that they were not. Each man rested his case on broad principle, but Jefferson confined himself to proving that Hamilton had misconceived the applicability of one principle on which both were agreed. As to the remedy for such frauds as may have existed, Hamilton placed the burden for seeking redress upon the original claimant, Jefferson upon the assignee.

This symbolic clash must be viewed in two related but differing contexts. On the elevated plane at which these two diametrically opposed views were expressed to the president in the hope of converting him to one or the other position, the episode may be regarded as a genuine discussion of principles of law and government. In this light each man revealed in characteristic terms his ingrained attitudes toward the problems of state. But the discussion, of course, was not carried on in a vacuum. The manner of employing power was at stake, and thus the full meaning of the two documents here presented can be grasped only when related to the realities that produced them. An examination of them in that context, in all of its causes and ramified consequences, has never been made with an effort to apply systematic, critical analysis to the pertinent evidence. Because of the plain tendency of this evidence, such an examination cannot be avoided. But to present at this point the tortuous unwinding of the evidence would create as serious a distortion as if it were omitted altogether. It would magnify the lesser context so much as to obscure the meaning of the two documents in their more abstract but more important matrix. The discussion of this evidence will therefore be relegated to an appendix in the next volume.

Here, however, Washington’s significant silence must be noted. It can scarcely be supposed that he was persuaded to approve the resolutions solely by Jefferson’s technical argument and by a general disinclination to use the veto power. For the case presented to him by the secretary of state amounted almost to a challenge to ask for further proof of the alleged frauds. Whereas Hamilton had dismissed the allegations as being based on rumor or suspicion, Jefferson began his statement as a lawyer would, with an unadorned, unqualified presentation of what he regarded as established facts that had formed the basis of legislative action. Unlike Hamilton, who had chosen not to note what Congress had clearly implied, Jefferson pointed not so much to alleged frauds between individuals as to evidence of collusion in an office of the administration. He did not present it as inference but as fact that, through some instrumentality of the administration, lists of names of soldiers and of the sums due them had become “known to certain persons before the souldiers themselves had information of it.” This was the essential point that Jefferson placed at the very beginning of his statement of the case, and it was a point that Hamilton had wholly ignored. From this platform he launched an argument intended to win the president’s support for a measure whose object was both to prevent such abuses and to serve as a warning against official laxness or worse. His argument ended with a statement embracing both aims. It could scarcely have been put in stronger words: “it is honorable to enforce a salutary principle of law, when a relinquishment of it is sollicited only to support a fraud.”12 The obvious intent of this remarkable passage was not merely to convey to the president that Jefferson knew fraud to exist, but also to manifest his belief that Hamilton himself knew it—indeed, that this was the sole reason for the request that the veto power be exercised.

Washington could scarcely have avoided grasping the meaning of the very precise words. He pondered the two opinions for four days and then affixed his signature of approval, breaking a resolute tie precisely as Adams had done in the senate. The record is silent concerning Washington’s own view of the episode. But he must have realized that the secretary of state, employing a strategy no less bold than Hamilton’s, had transformed the question over the exercise of the veto power into one about the countenance presumed to have been given to collusion in a government office. Had the secretary of the treasury knowingly sheltered such an abuse in his department in a way that touched the public honor? Did the secretary of state possess proofs of the facts that he so confidently stated, of the hint so clearly expressed? Washington must have been deeply troubled by the possibility of a public airing of this divisive conflict in his administration, with the dangerous consequences that might flow from them should a scandal be uncovered in government. This was no time, as Hamilton had suggested, to bring matters of perplexity or anxiety to the front: the assumption of state debts and the residence question were approaching a critical juncture. In the face of the dilemma, Washington maintained silence—a silence arguing eloquently that he feared his secretary of state was not engaged in making irresponsible assertions.

There is no evidence that Hamilton initiated an investigation or that Washington asked for one. A few months earlier Hamilton had declined to answer an inquiry from Henry Lee on the ground that it might have been improper for him to do so. He added: “But you remember the saying with regard to Caesar’s wife. I think the spirit of it applicable to every man concerned in the administration of the finance of a country. With respect to the conduct of such men, suspicion is ever eagle-eyed. And the most innocent things are apt to be misinterpreted.”13 Later he would react promptly and proudly to clear himself of any action by the legislature that implied “a supposition that there has been undue delay or negligence on the part of the Secretary of the Treasury.”14 Bland’s resolutions as revised by the committee had implied such a supposition, and the incident of “inconsiderable magnitude” might have been confined to that dimension had he or the administration taken the path to which those resolutions and Jefferson’s opinion pointed. This was not done, and the ultimate significance of the episode for Hamilton could only be multiplied. Thus the first cabinet conflict was in truth symbolic and, for him, tragic. For the solution he chose at last was not an escape from the dilemma but only a closing of the door to rational discussion. This is another reason for relegating an analysis of the second context of the two opinions to another place.15

At this juncture Hamilton was in desperate need of Jefferson’s support in the matter of assumption of state debts. He could not well afford to take umbrage at Congress for what had been implied. The fact is that Jefferson possessed another advantage over Hamilton in this initial encounter. Had Washington requested it, he could have supported the strong allegations made in his opinion.