7

Of the Louisiana Purchase cost of $15 million, $11,250,000 had to be paid to France. This huge sum was financed mainly by Barings Bank in London and Hope & Co. in Amsterdam. The U.S. would faithfully service these bonds for decades, helping establish Uncle Sam as a credible credit risk. However, within eight years the U.S. was at war with Britain -- and Barings was in the capital of the enemy. Did the U.S. continue to pay bonds held by Barings? Did it send money to a financial institution in an enemy country? If not, how were payments made? If payments were not made during the war, were they caught up after the war -- and was there a provision for interest in that case?

9

This question was much harder to research than I expected - despite (eventual) availability of the Barings Bank Archive web site. What I was able to determine is that:

  • Barings Brothers forced a reduction in the Louisiana Purchase price, from 100M French Francs to 80M French Francs, because the original asked amount was greater than it was possible to finance.

  • Baring Brothers remained the official agent of the U.S. Government through the War of 1812, and financed it during that war.

  • Baring Brothers continued as dominant to its rivals in North America even after being surpassed in London itself by Rothschild's.

  • Baring Brothers held an overwhelming position in the financing of early U.S. railroads through most of the 19th century.

  • Baring explicitly requested, and received, permission from the British government to finance the issue - as the benefit of security for British North America was expected to outweigh any advantage gained by Napoleon from the Louisiana Sale.

In this case, to paraphrase Holmes from Sir Arthur Conan Doyle's Silver Blaze:

  • The complete absence of mention of any default or re-financing arrangement of the largest national financing in history to that date, combined with the continuance of the relationship between the Federal government and Baring Brothers, very strongly suggests that all payments continued on schedule for the entire lifetime of the bonds.

Or more bluntly, I find it inconceivable that a default or refinancing of this debt could have completely disappeared from the historical record.

  • Were all the payments do via paperwork and credits? Actual physical shipments of coins across the Atlantic ocean would have been difficult during a war between the USA and the UK. – MAGolding Jun 26 '18 at 5:18
  • @MAGolding: I read a couple of chapters of an old treatise on the early merchant bankers researching this - and it basically confessed that no-one knows how either Barings or Rothschilds transported much of their assets across the Atlantic. Either trade secret, or still classified in the Admiralty office. Recall though that by late 1814 the New England states were on the verge of secession over the war. Smuggling British ships in and out of Boston would likely not have been difficult. – Pieter Geerkens Jun 26 '18 at 5:29

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