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Funding system, early.
On Aug. 4, 1790, an act was adopted for funding the public debt of the
United States.
It authorized the
President of the
United States to borrow $12,000,000, if so much was found necessary, for discharging the arrears of interest and the overdue instalments on the foreign debt, and for paying off the whole of that debt, could it be effected on advantageous terms; the money thus borrowed to be reimbursed within fifteen years. A new loan was also to be opened, payable in certificates of the domestic debt, at their par value, and in Continental bills of credit, “new tenor,” at the rate of $100 for $1. The act also authorized an additional loan, payable in certificates of the
State debts, to the amount of $21,500,000; but no certificates were to be received excepting such as had been issued for services and supplies during the war for independence.
For payment of the interest and principal on the public debt—the foreign debt having the preference, and then the
Continental loan —a pledge was made of the income of the existing tonnage and import duties, after an annual deduction of $600,000 for current expenses.
The faith of the
United States was also pledged to make up all deficiencies of interest.
The proceeds of the sales of Western lands then belonging to, or which might belong to, the
United States, were specially and exclusively appropriated towards the discharge of the principal.
For superintending these loans and for the general management of the public debt, the old Continental system of a loan-office commission in each State was continued.
The funding system was very beneficial to the country.
The result of its satisfactory operation on the business of the nation was the re-establishment of commerce.
See
finances, United States.
