which being doubtful, left it also in doubt whether the £20,000 would be paid at maturity, and whether, unless the conditions were removed, Judge Young would not be required by Wright & Co. to refund the £10,000, and cancel the contract: In such an event, I was authorized by your Excellency to borrow money for the payment of interest, and to hypothecate bonds as security, until some other arrangement could be made.

On my arrival in New York, about the middle of May, I found the stock market so much depressed, as to leave no hope of negotiation on reasonable terms, especially as the payment of the July instalment of interest on any portion of our bonds was not yet certain. Our Fund Commissioner was there, and had fair prospects of meeting his share of the payments, if that of the Canal could be promptly arranged; and without it there would be very little use in his making an effort, since it was generally acknowledged, that a failure in either case would be deemed a failure in toto. Thus critically circumstanced, I proceeded immediately to Washington city, and made an application to Judge Young and Gov. Reynolds, for the £10,000 in their hands, and also for bills on Messieurs Wright & Co. for the £20,000 due in July. No definite answer was given as to the £10,000, but Judge Young, after a consultation with Gov. Reynolds, accompanied me to Philadelphia, for the purpose of endeavoring to induce the United States Bank, to forward, to their agent in London, a conditional bill for £20,000 on Messrs. Wright & Co. and guaranty, on the collateral security of State bonds, the payment of the European interest in the event of the bill not being duly honored. On my way to Washington I met in Philadelphia, with Col. Mather, President of our State Bank, then on his return from New York to Illinois, and prevailed on him to remain with and aid me until something decisive could be done. He united with me in urging Judge Young to appropriate the £10,000 in hand to the payment of the New York interest, expressing his opinion, that means having been provided for the American interest, the United States Bank, as holders of the London bonds, would readily consent to protect them. But the approval of the contract with Wright & Co. had been made conditional by your Excellency. It was therefore contended by Judge Young, that he was bound to hold the £10,000, subject to the order of Messrs. Wright & Co. should they reject the condition, and prefer, as they had a right to do, an abrogation of the contract. To obviate this objection, I proposed to Col. Mather to secure the State Bank of Illinois, and let her become responsible to Judge Young for the payment of the £10,000, if Wright & Co. should demand it to be refunded, which being acceded to, Judge Young promised to return immediately to Washington, to confer with Gov. Reynolds, and forward the result of their conference as early as practicable to New York, where Col. Mather consented to await their answer. The proposition in relation to the conditional bill was then made to the Bank of the United States, and rejected; but it was agreed by the President, that he would transmit the bill for collection, and furnish me with a letter to Mr. Jaudon, the agent of the Bank in London, which would, in all probability, insure the payment of the interest, even should the bill be dishonored.

Paper No. 8, is a copy of the Bill on Messrs. Wright & Co., for

£20,000, with the letter of advice, and the agreement of Mr. Dunlap, that no damages should result from non-payment.

On the 23d of May, Judge Young returned to Washington, to obtain the signature of Governor Reynolds to the bills, and to consult him in relation to the payment of the £10,000; and on the same day, Col. Mather and myself left Philadelphia for New-York.

Believing that no further difficulty could arise, I determined to embark for London, on the first of June; but on the 27th of May, I received letters from Judge Young and Governor Reynolds, positively declining either to part with the money in their possession, or to draw on Messrs. Wright & Co., in favor of Mr. Jaudon.

Papers No. 9 and 10, being copies of the letters referred to, will furnish the reasons of those gentlemen for declining any participation in the payment of interest.

This late and unexpected determination, rendered it highly important to the character of the State, and to the contractors on the Canal, who had appointed me their Agent, that some new negotiation should be attempted, without loss of time. The interest, payable in London, would be due on the first of July, and ought to be in place, and announced several days in anticipation. The steamer, British Queen, was to sail from New York on the first day of June, and no other steam ship until the first of the following month. It was evident, therefore, that remittances must go out in the Queen, or the interest be unpaid; and it was equally plain that a certainty of being dishonored in Europe, would at once so severely affect our credit at home, as to render any further effort unavailable. It was conceded, too, that unless the Canal interest could be paid in proper time, our Fund Commissioner would be unable to meet his engagements on the remainder of the State debt, which, otherwise, he would find no difficulty in doing.

Impressed with a conviction of the disastrous consequences that must flow from a failure to maintain the integrity of the State, one of which must be the prostration, for years to come, of the noblest enterprise in the Union; and believing it to be my imperious duty to avert so great a calamity, if in my power to do it, I unhesitatingly concluded to borrow money, at any reasonable rate of interest, until the Legislature could have an opportunity of determining on the proper course to be pursued. I still believed, that by going immediately to Washington, and placing the subject in its true light before Messrs. Young and Reynolds, I might succeed in prevailing on them, if not to part with the money in hand, at least to draw, conditionally, on Messrs. Wright & Co., for the £20,000, which I was confident could be made available in London. I proposed this course to Messrs. Nevins, Townsend & Co., who were deeply interested in our welfare, and, with the assistance of Col. Mather, obtained a promise from them to advance me $ 45,000, at six per centum per annum, for the payment of the interest coming due in New York, if I could succeed in obtaining the draft on Messrs. Wright & Co., and would proceed in the first ship for London, so as to secure the payment of the interest in that city. I accordingly left New York in the evening train of cars, and arrived in Washington the next morning, at eleven o'clock. Judge Young and Governor Reynolds still persisted in withholding the Bill on Messrs. Wright & Co., urging the absence of instructions from your Excellency,

but when I assured them that their continued refusal must certainly bring discredit upon the State, and that with the aid of their conditional draft on Messrs. Wright & Co., I could do without the £10,000, by borrowing money in New York, they concluded to draw, provided I would deposite in their hands two hundred thousand dollars, in State bonds, which I thought it best to acquiesce in, and on my way back, I left the Bill and letter of advice with the President of the United States Bank, who transmitted it to Mr. Jaudon, without delay.

Paper No. 11, is a copy of my letter to Messrs. Nevins, Townsend & Co., pledging a hundred State Bonds, as security for the payment of the New York interest; and Paper No. 12, is a copy of a letter I had the honor to address to your Excellency, on the first of June, in explanation of the transactions just described.

On the same day, I took passage in the steam ship, British Queen, and arrived in London on the 16th of the same month.

My first attention there, as in New York, was directed to the payment of the interest, which would fall due in fifteen days. Ten of the fifteen were spent in repeated interviews with Messrs. Wright & Co., in which I apprised them of your Excellency's conditional approval of their contract with Messrs. Young and Reynolds, and my letter from New York, recommending a withdrawal of the objectionable conditions. Having received no assurance from them that could be calculated on with certainty, Mr. Jaudon addressed them a note on the 25th of June, requesting a positive decision, in relation to the draft for £20,000; and on the following morning received an answer, which was communicated to me on the same day, and replied to on the next. Paper No. 13, is the letter to Mr. Jaudon, and Paper No. 14, is my answer. They resulted in the acceptance of the draft, which was paid at maturity, and the interest, amounting to £13,500, was of course promptly met. The remaining £6,500, with the exchange between London and Philadelphia, was passed to the credit of the Canal Fund, in the Bank of the United States, which institution was in advance to the Canal about $25,000, on account of interest.

Messrs. Wright & Co., having paid the £20,000, and decided to adhere to their contract, I wrote to Judge Young on the 30th of June, acquainting him of the fact, and requesting him to apply the £10,000, now unquestionably set at liberty, to the payment of Messrs. Nevins, Townsend & Co., as I was anxious to redeem the hypothecated bonds; and I also wrote to Messrs. Nevins, Townsend & Co., by the same ship, that the money borrowed of them would at once be paid by Judge Young. Why it was not then, nor since, paid, I have no knowledge. The bonds are still in pledge, and the debt has been renewed from October to the first of January, as per agreement with the lenders.

The punctual payment of the interest, both in New York and London, enabled me to go into market with the contractors' bonds. Messrs. Wright & Co. would neither buy nor make further advances, yet they rendered me every assistance in their power, particularly by inspiring the confidence of investors. After a careful examination of the value of public stocks in London, and having, through the friendly services of Mr. Jaudon and others, convinced myself that nothing would be gained by going to France or Holland, I entered into contract, on the 20th of July, with the distinguished house of Messrs. Magniac, Smiths & Co., of Lom

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bard street, for the sale of one thousand bonds of two hundred and twenty five pounds Sterling, each, at the rate of eighty-three pounds per hundred, payable, principal and interest, at the banking house of Messrs. John Wright & Co.; in consideration of which, and having become interested in our welfare, Messrs. Wright & Co. agreed to pay the Janúary interest, or dividends, on all Sterling Canal bonds, without regard to further sales under their contract with Messrs. Young and Reynolds. Paper No. 15, is a copy of a letter from Messrs. Wright & Co., and Paper No. 16, is a copy of one from Mr. Samuel Allinson, an American broker, of high standing in London, who had aided Judge Young, and whose services were very useful to me. These letters will show the state of the market, and the elevated character of the house to whomI sold. Paper No. 17, is a copy of the contract with Messrs. Magniac, Smiths & Co.; and Paper No. 18, is the copy of an agreement between the same parties, rendered necessary, in the opinion of purchasers, by the proceedings of our Legislature, at its last session.

By reference to the contract, it will be observed that the purchase money was to be paid in three instalments, to wit: £S6,750, on the 15th day of November, £50,000 on the 15th day of January, and £50,000 on the ⚫ 15th day of March; but as bills on London are almost uniformly drawn in this country at sixty days sight, the payments were so regulated that the first would be cash, on my arrival in New York, the second on the 15th day of November, and the last on the 15th day of January. Of the first payment, I received £1,000 in money, and a letter of credit to Messrs. Howland & Aspenwall, of New York, for £3,000, leaving a balance of £82,750, for which I took the obligation of Messrs. Magniac, Smiths & Co., payable, on the 15th of November, to Mr. Jaudon, agent of the Bank of the United States, who purchased it of me at the rate of four dollars and eighty-four cents per pound Sterling, and gave me a certificate of deposite for $400,510, payable to my order, in the city of New York. Bills were then, and after my return, plentiful in all the American cities, at six and a half per cent. premium, in specie funds, while the sale to the Bank of the United States will nett a fraction under nine, besides saving one per cent. commission, making, altogether, a saving to the State of about $14,000. Paper No. 19, is a copy of my letter to Mr. Jaudon, which will more fully explain the terms of the sale. cate of deposite was paid on presentation, but left in the same Bank, in The certifiNew York, till drawn for, in the course of disburseinents. For the other two payments of £50,000 each, I received a letter of credit, addressed to the Bank of the United States, and to Messrs. Nevins, Townsend & Co., authorizing either of them, or myself, to draw for those sums; and on my arrival in New York, I entered into an agreement with Messrs. Nevins, Townsend & Co., to transact the business. of the letter of credit, and also of the agreement. (See, also, Paper Paper No. 20, is a copy No. 21.)

Of the proceeds of the thousand bonds sold to Messrs. Magniac, Smiths & Co., the whole of the first and second instalments, and a part of the last, have been paid to the contractors. The remainder will be disbursed on the first of February next, when the transaction will be finally closed.

In answer to the inquiry from the Senate, "Whether, in the sale of bonds to the agent of the contractors, by the Governor, provision was

made to pay the State the difference of exchange between the United States and the place where said bonds are payable," I have the honor to state, that the whole of the exchange, already and yet to be realised, has been secured to the Canal Fund. I was not at liberty to do otherwise, unless in violation of a conviction that the true par value of a State bond is the precise amount that the State must pay to redeem it; and that the rate of interest on the money received must be no greater than that promised in the bond. As the agent of the contractors, I was authorised to sell bonds of a thousand dollars each, payable in New York, or of two hundred and twenty-five pounds Sterling each, payable in London, as, in my opinion, might best subserve their interests; and, with that view, I decided, after I arrived in London, on selling Sterling bonds, payable there, which brought eighty-three per centum; while dollar bonds, payable in the United States, would not have commanded more than seventy-three, if, indeed, they could have been sold at all.

The British coins, called Sovereigns, are real Pounds Sterling, and were formerly worth, in this country, by comparison with our coins, four dollars forty four cents and four mills, rating the dollar at four and sixpence Sterling; hence a thousand dollars would then have been exactly equivalent to two hundred and twenty-five pounds Sterling. But by an act of Congress, passed during the first Presidency of General Jackson, the standard of our coinage was so changed that a Sovereign, compared with our Eagles and Half Eagles, became intrinsically and legally worth about an average of four dollars and eighty-four cents, or nine per cent. more than before the change, and must continue to be so, as long as our present standard is adhered to. Bills on England, therefore, at the nominal rate of nine per cent. premium, is, in truth, at par; and, consequently, when over or under nine per cent. are above or below true par. It will be seen, from this fact, that a bond for £225, Sterling, payable in England, is a bond for the same number of Sovereigns, which evidently exceed a thousand dollars of our money, in the same proportion that four dollars and eighty-four cents, the present legal worth of a Sovereign, exceed four dollars and forty-four cents, the former worth; or, as a thousand and ninety dollars exceed a thousand. If, therefore, I had sold for the contractors, a thousand bonds of a thousand dollars each, payable in New York, with interest at the rate of six per centum per annum, a million of dollars in work on the Canal would have been par to the State, because a million of dollars would retire the bonds at maturity, and sixty thousand dollars pay the annual interest of six per cent. But I sold a thousand bonds of two hundred and twenty-five pounds Sterling each, payable in London, amounting to two hundred and twenty-five thousand Sovereigns, to repay which will require, not only a million of dollars, lawful money of the United States, but somewhere about ninety thousand dollars, in addition, by way of exchange, and the same rate of increase will attend every annual or semi-annual dividend of interest. Admitting the position to be true, as previously assumed, that the par value of a bond is what it will take to redeem it, dollar for dollar and pound for pound, the contractors must pay the State £225,000, in London, for the thousand bonds sold on their account, or a million of dollars, lawful money of the United States, with the actual exchange between London and New York; and this they have been required to do, as the annual report of