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09/24/2013

October Auction to Feature Rare 1792 US Federal Bond


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The most highly prized stock and bond certificates signed by important people usually have a backstory, and the 1792 US Federal bond signed by George Washington, scheduled for auction on October 19th at the Museum of American Finance, is no exception.

In order to establish the national credit, and also to liquefy and reorganize the outstanding debt after the Revolutionary War, US Treasury Secretary Alexander Hamilton proposed the Plan of Assumption, to exchange all state debt for new US Treasury bonds, reflecting the struggle for independence as national, rather than local. All state debt instruments were to be exchanged at face value, and the numerous state obligations would receive one of only six new Treasury issues. This made the marketplace far more efficient as investor interest could be focused on only six issues. This bold plan was highly controversial, and resulted in a stalemate in Congress, resolved months later through a political agreement on a new location for the capital of the nation on the Potomac, in what was to become Washington, DC.

1792-Bond-2
 

The face of the 1792 George Washington Bond

The plan was extremely successful, and formalized the national debt, which was held by a broad cross section of the population, and in a few years this debt became one of the highest credits in the world. The new Treasury bonds were among the first securities traded on the New York Stock Exchange, another institution Hamilton encouraged. The Plan of Assumption was one of the crucial elements of Hamilton’s advanced financial infrastructure which created the environment for the rapid growth of the 19th century. This exceedingly rare bond is one of the most important objects in American financial history, and the first example of this instrument to be offered in public auction; serious interest is expected.

One of the first US Treasury bonds is dated January 17, 1792 (size 17 ¾”x 5 ½,”  Anderson US-195). The bond's seemingly odd denomination, $123.99, resulted from the exchange  formula used when Washington’s non-performing Virginia state bonds were  surrendered for US Treasury bonds.Exceedingly rare and part of the Copps Collection, only two others like it are known - one exhibited in the Museum of American Finance, and another at George Washington University Library.

1792-Bond

The reverse of the 1792 US Bond signed by George Washington.

Washington later sold this bond, and in the note on the verso asked that the proceeds be kept in his account at the Treasury, and then signed his name. Leaving his funds in the US Treasury was a very patriotic choice, as the government was in crisis mode dealing with the Whiskey Rebellion in western Pennsylvania.

The auction Saturday October 19 at 10:30 am is part of the annual Wall Street Coin, Currency and Collectibles Show, taking place at the Museum of American Finance, 44 Wall Street, New York City, October 17 – 19, 2013.  Museum admission is free for the Bourse weekend.

Show info: wallstreetbourse.com and 203-292-6819.
Auction Info: archivesinternational.com and 201-944-4800

–John E. Herzog is organizer of the Wall Street Coin, Currency and Collectibles Show and also founder of the Museum of American Finance and now its chairman emeritus. He has spent his life in the financial services industry. As a collector he has specialized in the financial instruments of the American Federal period, which made the creation of the United States possible. The Museum holds a major portion of his collection, and uses it in exhibits.

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