Assumption of the State Debts

HISTORY OF AMERICAN CURRENCY. ASSUMPTION OF THE STATE DEBITS. 55 One of the first acts of the Federal Congress was to provide for the settlement of the outstanding accounts. $21,500,000 were apportioned to the States to assume their indebtedness, subscriptions being received in their paper at a discount, but as the federal debt at once rose in value, the transaction was very favorable to the holders of State obligations. The amount actually assumed was $18,271,814. At the same time the States were credited with advances made to the confederation, and charged their quota of its expenditure. Thus some appeared as creditors and others as debtors. The debtor States never settled the account. The creditor States were paid. The whole transaction was criticised by Mr. Gallatin * as unwise and wasteful. It met with much opposition, especially from the South, and there were always rumors of bargain in connection with this act and the removal of the capital to Washington.

* Sketch of the finances of the United States. 1796.