1811 James Madison - Temporary Loans of 1810 and 1812

In the early years of our nation, every state of the union address contained a report of the federal government finances.   This was often included at the end of the address.   While the information is often just facts and figures, it gives us a glimpse of what was going on in the country at the time.

At the end of 1809, Secretary Albert Gallatin reported to Congress that the budget for 2010 could not be balanced unless Congress either cut military and naval expenses in half or authorize a loan to make up the deficit.   Congress responded by passing a bill on May 1, 1810 authorizing the secretary of treasury to negotiate a loan not to exceed the amount of debt which needed to be repaid in 1810.  The Secretary estimated this amount at $3,750,000.   On May 28th, the Secretary sent a letter to President Madison requesting approval of the the terms of the loan that he negotiated.  The loan was approved and executed.

At the end of 1810, Madison reported to Congress that the receipts into the Treasury ending September 30th, 1811 exceeded $13.5 million, more than enough to defray the current expenses, including the interest on the public debt and payments on the principal. Madison stated that his administration was able to pay down more than $5 million of the principle without renewing the loan authorized by Congress in 1810. In addition, the temporary loan that Gallatin negotiated in 1810 had also has been reimbursed.  The actual amount was only 2,750,000. 

But this wasn't all good news, Madison warned that because of the "situation of our commerce" (embargo wars with Great Britain and France) and the "extraordinary expenses which have and may become necessary" (preparing for war), deficits are expected in the coming year.  Therefore Madison urged Congress to once again authorize a new temporary loan.

"The receipts into the Treasury during the year ending on the 30th day of September last have exceeded $13.5M, and have enabled us to defray the current expenses, including the interest on the public debt, and to reimburse more than $5M of the principal without recurring to the loan authorized by the act of the last session. The temporary loan obtained in the latter end of the year 1810 has also been reimbursed, and is not included in that amount.

The decrease of revenue arising from the situation of our commerce, and the extraordinary expenses which have and may become necessary, must be taken into view in making commensurate provisions for the ensuing year; and I recommend to your consideration the propriety of insuring a sufficiency of annual revenue at least to defray the ordinary expenses of Government, and to pay the interest on the public debt, including that on new loans which may be authorized."

In 1812, on the eve of the declaration of the War of 1812, a new six percent loan was created.  11,000,000 was authorized to be borrowed. to be reimbursable any time after the expiration of 12 years.  

http://www.presidency.ucsb.edu/ws/index.php?pid=29453
http://founders.archives.gov/documents/Madison/03-02-02-0443
Niles' National Register, Volume 1 1811-1812, page 230
House Documents, Otherwise Publ. as Executive Documents: 13th Congress, 2d Session-49th Congress, 1st Session, Volume 2 page 554