NEW YORK INTRODUCTION

requisitions. New York would have to break faith with Congress. To
prevent this, paper-money committeemen proposed that the state "as-
sume" and "fund" the national debt held by New Yorkers. All national
securities would be exchanged for new state securities that would re-
ceive interest paid in paper money. The paper currency would be
backed by import duties and other taxes. By accepting paper money
for taxes, the state would ensure that the bills would remain buoyant.
After consideration, the committee recommended that E200,000 be
emitted-one-quarter to pay the interest on the state and the assumed
Continental debts and the other three-quarters to be loaned on real
estate mortgages.
Acting on the joint committee's recommendation, the Assembly ap-
pointed a committee on 21 January 1786, consisting of one member
from each county, to consider the best method for emitting paper
money and for redeeming public securities. On 23 February, the com-
mittee reported a bill providing for the emission of E200,000. "The
grand question" of whether or not the money should be legal tender
was put to an initial vote on 23 February, when the Assembly over-
whelmingly defeated the tender provision by a vote of 47 to 12. Real-
izing that a tender provision jeopardized the entire bill, paper-money
advocates proposed a compromise, making the currency legal tender
only in law suits, thus protecting hard-pressed debtors. The compro-
mise satisfied most assemblymen, and the bill passed on 6 March by a
sizable margin of 43 to 9.
To gain the governor's endorsement, and thus to assure passage of
the bill, several funding proposals were added. The entire state debt
was funded, while Continental loan-office certificates and "Barber's
Notes" (certificates issued for supplies furnished to the Continental
Army) owned by New Yorkers were also assumed by the state. Some
people wanted either a complete assumption or a complete separation
from the Continental debt. Clinton and the paper-money advocates,
however, realized the political potency of the partial assumption of the
federal debt. The state assumed only twenty-eight percent, or
$1,400,000 out of a total federal debt of about $5,000,000 held by New
Yorkers. The assumed federal debt was held by approximately half of
the state's voters. The unassumed $3,600,000 was owned by several hun-
dred wealthy New Yorkers, most of whom had little sympathy for Clin-
ton.64 The bill, in essence, converted large numbers of federal creditors
into state creditors; in the process their economic welfare was tied to
the state-not to the Confederation-and earned for the governor
their political gratitude.

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