One of the first measures of the First Texas Congress was to authorize the president to negotiate a loan not to exceed five million dollars. The terms offered to lenders were 10% interest, and payment in not more than thirty nor less than five years. If any bank should become an original purchaser of the bonds, its notes would be receivable in payment of all public dues to the amount of the purchase. A purchaser had the privilege also of taking at any time the amount of his loan in land at the minimum government price. For the punctual payment of the interest and the final redemption of the loan, the public faith, the proceeds of the sales of public domain, and all taxes on land after 1838, were pledged.2 Two commissioners were sent to the United States to place the loan,, but they met with no success.1 In May, 1838, another act was passed modifying slightly the provisions of the first measure. It provided that the bonds should be written in such foreign languages as might be required and that the interest should be payable in such currency as might be stipulated. The public faith was the only security extended, but a supplementary act of January 22, 1839, pledged in addition as much of the revenues as might be necessary to meet the semi-annual interest. A sinking fund also was to be established, but in other respects the acts were alike.2 In January, 1840, provision was made for a sinking fund which was to be constituted of the proceeds from the sale of the public lands, or, should the public lands not be brought on the market, from other revenue. The fund was to amount to $300,000, although "nothing was to prevent the government from applying a larger sum.' It was to be used in purchases of the bonds at their market price, and, in order that the remotest contingency might be guarded against, it was provided that "should the premium reach fifty per cent beyond par, the holders shall be required on application of said agents to surrender and cancel the same on the payment of par value and said premium."3

1 The public debt is the real theme of Gouge's Fiscal History of Texas, but his work is incomplete in that it does not extend beyond 1851.

2 Act of November 18, 1836; Gammel, op. cit., vol. 1, pp. 1092-3.

In the fall of 1839 the commissioners succeeded in placing a part of the bonds with the Pennsylvania Bank of the United States. The amount obtained, for which 10% sterling bonds were given, was $457,380.4 With this advance as a testimonial that the republic enjoyed credit in the United States, one of the commissioners, General James Hamilton, went to Europe and visited the Hague, London, Paris, and Brussels. President Lamar reported in November 12, 1839, that the prospects of obtaining the full loan were "cheering and satisfactory," and the expectation of success undoubtedly led to its anticipation in an enlarged scale of expenditures. The loan was the one topic of exciting interest in the republic during 1840 and 1841, and what would be its disposition was a subject of much discussion. The plan of using the proceeds to establish a great national bank was perhaps the most popular.1 Success was indeed very near in the summer of 1841, for the banking house of Lafitte and Com-pany of Paris was on the point of opening its books to the flotation of the loan, when the French minister of finance came out in a semi-official note hostile to the proposition.2 Until 1843 hope was entertained by the Texas loan commissioners that the French government would aid in floating the loan. It was believed that mere recognition by France and England of the independence of Texas would enable Texas to get all the money she desired.3 The duties on French wines imported into Texas were abolished by proclamation for three years to win the favor of France, and France could have secured for her guarantee of a loan the commercial privileges which Texas had granted to the United States.4 Hope of securing the guarantee of the French government to the loan was given up in 1843. An opinion adverse to the guarantee was declared to the French government by M. de Saligny, the representative in Texas of that government.5 M. de Saligny's motives in rendering an adverse opinion have been questioned on account of the difficulty over the assault of his servant by Mr. Bullock, an Austin hotel keeper, and also on account of the failure of M. de Saligny to secure extensive land grants for himself and associates.1 The failure of Texas to place the loan anywhere would lead one to believe in the sincerity of M. de Saligny's opinion to his government.

1 Messrs. Gilmer and Burnley were the first commissioners. In 1839 James Hamilton was appointed commissioner to succeed Gilmer. President Houston in his message of Nov. 21, 1837, ascribes the failure of the commissioners up to that time to the unfavorable condition of the money market in the United States. See also Texas Diplomatic Correspondence, vol. 1, pp. Ill, 171, 196, 224, 225, 267.

2 Gammel, op. cit., vol. 1, pp. 1484-7; vol. 2, pp. 62-3. Texas Diplomatic Correspondence, vol. 1, p. 267.

3 Gammel, op. cit., vol. 2, pp. 230-233.

4 Report of the Auditor and Comptroller, December 27, 1849.

1 Telegraph and Texas Register, January 16, 1841; Gouge, op. cit, pp. 96-8. Gouge (p. 140) explains the loan by the Pennsylvania Bank of the United States as intended to aid General Hamilton's efforts in Europe, the idea of the bank being that the proceeds would be used to establish a national bank in Texas which would act in co-operation with the Pennsylvania institution. Also Texas Diplomatic Correspondence, vol. 3, p. 1287.

2 The terms of Lafitte and Company, the note of the French minister, and the communication of General Hamilton are published in the Telegraph and Texas Register, June 30, July 7, and July 28, 1841. See also extracts from French newspapers in Maillard, The History of the Republic, pp. 399-409.

3 Texas Diplomatic Correspondence, vol. 1, p. 413.

4 Texas Diplomatic Correspondence, vol. 3, pp. 878, 1283, 1285, 1287, 1336, 1405, 1406, 1433, 1410, 1422.

5 Ibid., pp. 1427, 1431.

The loan agents turned from France again to London, and Germany also was sounded, but all without avail.2 The panic of 1837 was a most inopportune event for the Republic of Texas, for it is probable that if there had been no panic the bonds of the republic would have been taken up in Europe by the optimistic buyers of American stocks. But the panic caused a tight money market for a long period; and the repudiation by some states of the United States of their obligations and the failure of the states to meet on time the interest payments on their bonds brought American securities into great disrepute among European investors.

The inability of the commissioners to sell any bonds abroad, the little success which attended similar efforts in the United States, and the failure of the government to meet its existing obligations led to the repeal in January, 1842, of the laws authorizing the five million loan,3 and in January, 1844, to a repeal of all laws authorizing the president to negotiate a loan either upon the public faith or upon the basis of the public lands.4

The principal and interest of the loan from the Pennsylvania Bank of the United States were $960,498 on July 1, 1850, at which date, according to the act of February 11, 1850, interest liability ceased.5 As this debt was secured by a pledge of import duties, it fell within the provisions of the acts of Congress of September 9, 1850, and February 28, 1855. In its act of January 31, 1852, Texas provided that this debt should be settled out of the $5,000,000 of United States bonds reserved in the United States Treasury on the basis of 87 45/100 cents on the dollar, this being the rating given it in the auditorial report of 1851. However, under the pro-rata arrangement proposed in the act of Congress of February 28, 1855, and accepted by Texas February 1, 1856, it was adjusted on the basis of 76 9/10 cents on the dollar.1

1 The correspondence between Saligny and the Texas government is given in Texas Diplomatic Correspondence, vol. 3, p. 1289 et seq. Gouge, op. cit., p. 111.

2 Texas Diplomatic Correspondence, vol. 3, pp. 1449, 1467, 1481.

3 Gammel, op. cit., vol. 2, p. 703. In his message of December 20, 1841, President Houston said: "We are not only without money, but without credit, and for want of punctuality, without character."

4 Gammel, op. cit., vol. 2, p. 954. In addition to the two five million loan acts, there were the act of December 10, 1836, authorizing the president to borrow $20,000; the act of January 22, 1839, authorizing a loan of $1,000,000, and the sinking fund act of January 14, 1840, which empowered the commissioners to issue bonds to the amount of seven million dollars, if necessary. See also Texas Diplomatic Correspondence, vol. 3, p. 1482.

5 Report of the Comptroller, 1855.

Another debt of the republic which was represented by bonds issued under the five million loan acts was the so-called naval debt. In accordance with the act of November 4, 1837, a contract was made in November, 1838, with Frederick Dawson, of Baltimore, for vessels which were received in 1839. The original contract price was $280,000, payable in one year, but double that amount if payment should not be made at maturity. Payment was not made at maturity, and the two 10% bonds of $280,000 each put up as a forfeit with the Girard Bank of Philadelphia were turned over to Mr. Dawson.2 In 1839, also, the Steamer "Zavalla" was purchased of James Holford and associates for $97,953.50, on terms similar to the Dawson purchase; and failure to pay at maturity resulted in the forfeiture of 10% bonds to the amount of $195,907. The principal of the naval debt with interest to July 1, 1850, amounted to $1,622,404.70.3 Texas rated this debt at fifty cents on the dollar, but as the bonds were secured by a pledge of import duties they were paid out of the $7,750,000 reserved in the United States Treasury on the basis of 76 9/10 cents on the dollar.1

1 Act of January 31, 1852; Gammel, op. cit, vol. 3, p. 916. Act of February 1, 1856; ibid., vol. 4, p. 227. Act of Congress of September 9, 1850; U. S. Statutes at Large, IX, ch. 49, p. 446. Act of Congress of February 28, 1855; ibid., X, ch. 129, p. 617. See also House Misc. Doc. No. 17, 33d U. S. Cong., 2nd Sess. Serial No. 807. A bill to make up the difference between what Texas acknowledged to be due and what was received was passed by the senate and house of the Sixth Legislature, but owing to a decision of the house that it required a two-thirds majority, the bill was lost. Governor Pease recommended in his message of November 2, 1857, the settlement of the difference ($101,383.14), and a bill was introduced, but the senate committee on the public debt recommended its indefinite postponement; Senate Journal, 7th Leg., p. 139.

2 Report of the Auditor and Comptroller, December 27, 1849, and November 12, 1851.

3 Report of the Comptroller, 1855.

The above bank and naval debts were what may be designated the "foreign debt" of the republic. There was, besides, a large domestic debt, which was also largely held by non-residents at the time of settlement.